In a Perspectives from FSF Scholars published last Friday, Free State Foundation President Randolph May expressed his disappointment that the FCC's Report on the Future of the Universal Service Fund (Report) did not "go further than it did … in articulating a likely 'end state' for the USF's High Cost Fund."
As the Report does acknowledge, Congress has earmarked "billions" for broadband, an "unprecedented amount." However, it does not follow that money to its logical and inevitable conclusion: a near-term reality in which every location in America has access to a broadband connection – and in which the High Cost Fund therefore is no longer needed. And it exacerbates that lapse by failing to acknowledge nearly $9 billion in Department of Treasury subsidy grants publicized prior to the Report's adoption. The Report's failure to account for all of the known sources of federal funds necessarily casts doubt on its conclusions as to the future relevance and need for the agency's existing universal service programs, especially the High Cost Fund.
As I noted in a March 2022 Perspectives, however, the American Rescue Plan Act (ARPA) created two separate grant programs administered by the Department of Treasury, the State and Local Fiscal Recovery Funds (SLFRF) and the Coronavirus Capital Projects Fund (CPF), that combined make available a whopping $360 billion – some of which will be used for broadband. That uncertainty demands real-time accounting and close interagency coordination, a point that Mr. May and I emphasized in comments recently submitted to the FCC.
Arguably the best way to define the "end state" for the High Cost Fund, which subsidizes the construction and maintenance of broadband infrastructure in rural areas, is in terms of dollars. That is, the actual amount of money needed to extend broadband infrastructure to every location in the U.S. currently unserved. Generally speaking, the moment when federal subsidies reach that specific financial target is the moment when the goal of the High Cost Fund has been achieved.
Regrettably, the Report does not include such a number. However, the Biden White House, after first asking for $100 billion, in May 2021 did concede that with $65 billion – that is, the very amount that Congress included in the IIJA – "we can still achieve universal access to affordable high-speed internet."
Whatever that total – and, given inflation, it is conceivable that the final price tag may be higher than $65 billion – the other side of the equation is the cumulative amount of federal money allocated. Given the fact that Treasury has at its disposal far more ARPA money than required to supplement NTIA's BEAD and middle-mile coffers (to say nothing of the countless other federal broadband subsidy programs), it is essential that the FCC coordinate with Treasury, in addition to NTIA and the Department of Agriculture, on a running tally.
To its credit, the Report does reference some non-IIJA sources of federal broadband subsidies. Two examples: the ReConnect Program administered by the Department of Agriculture's Rural Utilities Service ($4.8 billion to date) and NTIA's Broadband Infrastructure Program ($288 million).
However, it effectively ignores ARPA's $360 billion – concluding that "we agree with the majority of commenters who caution that the Infrastructure Act will not achieve all of the universal service goals for broadband, and as such, the Commission should not abandon its universal service programs" (emphasis added).
Keep in mind, the relevant statutory language in the IIJA directs the Commission to "submit to Congress a report on the options of the Commission for improving its effectiveness in achieving the universal service goals for broadband in light of this Act and the amendments made by this Act, and other legislation that addresses those goals" (emphasis added). As such, the Report's narrow focus on the IIJA not only paints an incomplete picture of progress, it also runs afoul of congressional intent.
To be sure, the Report does point out that "there are billions of dollars more that are available for broadband programs now being implemented by … the Department of Treasury" and that "other recent legislation delivered unprecedented broadband funding to … Treasury." The Commission also commits, appropriately, to "extensive" and "continued close coordination with other agencies" and highlights the interagency agreement among the Commission, USDA, NTIA, and Treasury announced on May 12, 2022.
But prior to the Report's release, the White House and Department of Treasury publicized nearly $9 billion in disbursements from the $350 billion SLFRF Program and the $10 billion CPF – money that the FCC does not even mention in its report. Moreover, that number certainly will increase over time: As Treasury noted in a July 14, 2022, Press Release:
A key priority of the [CPF] is to make funding available for reliable, affordable broadband infrastructure and other digital connectivity technology projects. In addition to the $10 billion provided by the CPF, many governments are using a portion of their State and Local Fiscal Recovery Funds (SLFRF) toward meeting the Biden-Harris Administration's goal of connecting every American household to affordable, reliable high-speed internet.
A June 2022 Fact Sheet released by the White House proclaims that "[t]he American Rescue Plan has already spent or committed more than $25 billion to invest in affordable high-speed internet and connectivity" – a statement that assumes 100 percent of the CPF's $10 billion will be used for broadband.
Limiting the discussion to those grants in fact made prior to the Report's adoption, however, results in the following list of Administration announcements:
- Per the White House Fact Sheet referenced above, "[e]ven without full reporting in, state and local governments have committed more than $8 billion in investments [from the SLFRF] toward expanding affordable digital connectivity, through construction of affordable and high-speed broadband infrastructure and providing assistance to households for Internet access and digital literacy."
- In a June 2022 Press Release, Treasury announced grants from the CPF to four states to the tune of $582.8 million: Louisiana ($176.7 million), New Hampshire ($50 million), Virginia ($219.8 million), and West Virginia ($136.3 million).
- In addition, that Press Release revealed that, as of July 21, 2022, Treasury had made 72 separate grants from the CPF to 76 different Tribal governments, with each receiving $167,504, for a total of over $12.73 million.
- In a July 14, 2022, Press Release, Treasury announced an additional $356.9 million in awards from the CPF to four states: Kansas ($83.5 million), Maine ($110 million), Maryland ($95 million), and Minnesota ($68.4 million).
All told, Treasury announced $952.43 million in grants from the CPF prior to the Report's adoption. Combining that amount with the "more than $8 billion in investments" out of the SLFRF heralded by the White House results in nearly $9 billion, a substantial step toward the High Cost Fund's "end state" not even mentioned in the Report.
In sum, the Report's failure to account for these receipts inevitably casts doubt on its conclusions as to the future relevance of the USF, especially the High Cost Fund.
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