On July 21, three Republican members of the Senate Commerce Committee announced the introduction of legislation that could revitalize the Universal Service Fund (USF) via contributions from so-called edge providers such as YouTube, Netflix, and Google.
With the Funding Affordable Internet with Reliable (FAIR) Contributions Act, Senator Roger Wicker (MS), ranking committee member, along with Senators Shelley Moore Capito (WV) and Todd Young (IN), would have the FCC consider the viability of an approach first articulated by Commissioner Brendan Carr in a May 2021 Newsweek op-ed.
As Mr. Carr explained, the USF's reliance upon steadily decreasing "telecommunications" revenues, through a monthly tax on bills for traditional voice offerings, is "now hopelessly outdated" and "on the verge of collapse."
The facts bear this out. Once below 6 percent, the USF contribution factor (that is, the rate at which consumers are taxed) surpassed 30 percent for the first time shortly before Mr. Carr wrote his op-ed. Not long thereafter, it rose even higher – 33.4 percent – for the second quarter of 2021. The proposed contribution factor for the third quarter of 2021 did dip slightly, but only back to the first-quarter level that gave Mr. Carr pause: 31.8 percent.
The reason the contribution factor continues to rise is no mystery. Consumers today use traditional telecommunications services far less – and Internet-based offerings far more. Rather than continuing to ratchet up the burden on the former, Mr. Carr instead proposed that "[w]e should start requiring Big Tech to pay its fair share."
Simply put, the anachronistic and unsustainable USF mechanism regressively taxes the dwindling user base of "telecommunications" services in large part to subsidize high-speed Internet service in high-cost areas. Edge providers utilize broadband infrastructure to generate billions and billions of dollars in revenues — without any obligation to help pay to close remaining digital divides.
In the words of Mr. Carr, "Big Tech has been enjoying a free ride on our internet infrastructure while skipping out on the billions of dollars in costs needed to maintain and build that network…. It is time to end this sweetheart deal. Big Tech should stop passing its costs onto the American people."
In a series of tweets at the time, FSF President Randolph May argued that Mr. Carr "makes a persuasive case" and that his "proposal deserves serious consideration."
More recently, Justin (Gus) Hurwitz, a member of the Free State Foundation's Board of Academic Advisors, asserted that, in the context of the ongoing congressional infrastructure funding debate, "[be]fore we decide how much to spend on [universal service] we should discuss, as Commissioner Carr rightly suggests, who should pay for [it]."
Senators Wicker, Capito, and Young clearly agree.
The FAIR Contributions Act, among other things, would require the FCC to:
- Seek input from the public "on the feasibility of collecting USF contributions from internet edge providers" and prepare, within 180 days, a report detailing its conclusions;
- Consider possible revenue sources;
- Evaluate the fairness of both the current system and one in which Big Tech contributes;
- Determine the feasibility of requiring such contributions;
- Estimate the impact on Tribal, low-income, and elderly populations; and
- Identify any statutory changes that may be required.
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