Wednesday, December 16, 2020

MEDIA ADVISORY: USF Contribution Factor Tops 31% and May Be Nearing a Tipping Point

The following statement may be attributed to Free State Foundation President Randolph May:

On December 14, the FCC’s Office of Managing Director announced that the Universal Service contribution factor for Q1 2021 will be a record 31.8%. This record amount is a result of a continuing drop in interstate and international revenue, The steady increase over time in the amount of the USF "tax," which is the surcharge added to every consumer’s telecom bill for interstate and international calls, is shocking and ought to receive far more widespread attention that it has. This consumer tax — because that is exactly the economic effect of USF surcharge — is regressive because, perversely, it negatively impacts low income subscribers who can least afford to pay it more than higher income subscribers who can.


It ought to be clear that USF surcharge increases can't go on too much longer without reaching a tipping point — that is, the point at which many more current subscribers will rapidly abandon services subject to the tax. When that happens, the current USF regime, like the proverbial house of cards, may come tumbling down. What this means is that it is time for Congress to tackle comprehensive USF reform, including especially consideration of replacing the contribution surcharge mechanism with direct congressional appropriation to fund USF programs. This would be a more sustainable, transparent, and efficient way to support the USF programs, such as Lifeline, that are deemed necessary in the public interest.