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Wednesday, July 11, 2012

Rural Broadband: The Roles of the Rural Utilities Service and the Universal Service Fund

Angele A. Gilroy
Specialist in Telecommunications Policy

Lennard G. Kruger
Specialist in Science and Technology Policy

Since the initial deployment of broadband in the late 1990s, Congress has viewed broadband infrastructure deployment as a means towards improving regional economic development, and in the long term, to create jobs. According to the National Broadband Plan, the lack of adequate broadband infrastructure is most pressing in rural America, where the costs of serving large geographical areas, coupled with low population densities, often reduce economic incentives for telecommunications providers to invest in and maintain broadband infrastructure and service.

Historically, the federal government has provided financial assistance to give telecommunications providers the capital to invest in rural telecommunications infrastructure and to maintain an adequate return on their investment. Currently, there are two ongoing federal vehicles which direct money to fund broadband in rural areas: the broadband and telecommunications programs at the Rural Utilities Service (RUS) of the U.S. Department of Agriculture, and the Universal Service Fund (USF) programs under the Federal Communications Commission (FCC).

While both the RUS and USF programs share some of the same goals (e.g., improving broadband availability and adoption in rural areas), the two programs are different with respect to their funding mechanism, scope, and emphasis. For example, RUS grants and loans are used as upfront capital to invest in broadband infrastructure, while the USF provides ongoing subsidies to keep the operation of telecommunications and broadband networks in high cost areas economically viable for providers. Another key difference is that the RUS programs are funded through annual appropriations, while USF is funded through mandatory contributions from telecommunications carriers that provide interstate service, and is not subject to the annual congressional budget process.

Both programs are currently at a pivotal point in the 112th Congress. The statute authorizing the Rural Broadband Loan and Loan Guarantee program was significantly modified in the 2008 farm bill, and may be addressed once more in the 2012 farm bill. Meanwhile, the USF is undergoing a major and unprecedented transition through a series of reforms being developed by the FCC, and Congress has adopted an oversight role with respect to those reforms. In shaping and monitoring the future evolution of these programs, Congress is assessing how best to leverage these programs to ensure that the goals of the National Broadband Plan—including universal broadband service by 2020—are met to the greatest extent possible.

Date of Report: June 29, 2012
Number of Pages: 23
Order Number: R42524
Price: $29.95

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