A recurring message at NTCA’s 2023 RTIME was the importance of educating policymakers that the current unprecedented capital expenditures in broadband will be for naught if sustainability is not part of the plan. Sustainability, in this context, means the ability to operate and maintain a given network on an ongoing basis.
Even though new networks have a lower total cost of ownership than older copper technology, the costs per subscriber to operate and maintain a network that has only a few connections per mile can be significantly higher than an urban network with hundreds of connections per mile. Additionally, the cost of connecting rural communities via mid-mile networks is another significant cost not needed in an urban area (stay tuned for another RTIME interview with a former RUS administrator that touches upon that topic).
Among other things, the 23-year-old USF (Universal Service Fund) is the Congressional-mandated mechanism for leveling the playing field between high-cost rural and urban telephone networks.[1] In the above interview, NTCA Executive Vice President, Mike Romano, estimates that its rural members would have to double their prices if USF did not exist.
USF’s Moment in Time
What 1990s-era legislation did not anticipate was the decoupling of the service from the network and the convergence of services onto a common Internet Protocol network. Because the USF contribution factor is based on a service, instead of the underlying network connection, the percentage has had to increase with the decline of traditional landline telephones.[2] As a 32.6% charge on top of the monthly telephone bill, the USF contribution factor may be in the death spiral that was predicted more than a decade ago.
Romano points to a 2021 study suggesting that a broader contribution base that would include all broadband connections would amount to about a 4% monthly price increase to the consumer. Romano echoes RTIME panelists when he suggests that edge providers (e.g., Google, Facebook, Netflix, etc.) are also potential sources of USF revenue.[3]
In addition to USF’s current challenge with its funding model, there is a court case with the potential to instantly disrupt USF. Romano believes that USF will pass constitutional muster. The Congressional Research Service suggests that,
“To the extent Congress wants to avoid disruptions to the USF that may come from a ruling adverse to the FCC, it could amend Section 254 to insulate the USF further from nondelegation challenges by imposing clearer guidelines for the FCC’s and USAC’s USF funding activities.”
Regardless of the outcome of Consumers’ Research versus the FCC, Romano and NTCA with the help of its members will continue to advocate for USF to ensure the networks being built today are sustainable decades into the future.
Notes
[1] USF also supports telephone service for low-income customers, rural health care, and schools and libraries.
[2] The USF rate was 5.7% when it launched in Q2 2000.
[3] Another approach is to assess a one-time fee on the sale of any object that could potentially communicate over a network. See Radical Idea to Restructure USF Funding.
ViodiTV coverage of NTCA’s RTIME 2023 courtesy of Calix.