On June 12, the FCC announced that the tax paid by consumers on all interstate and international traditional voice telephone calls to support the Commission’s Universal Service Fund (USF) will increase to 34.4% from 32.8%.
I understand that the FCC insists on calling this tax a “contribution factor.” That’s fine if you prefer euphemisms to more precise usage of the English language. It’s like saying that compelling Internet service providers to adopt, within certain tightly prescribed limits, an “affordable low cost” service option is not “rate regulation.”
Call it what you will – tax or contribution factor – it’s going up again. At 34.4%, it’s now a third of the price of the telephone call itself. To put this figure in perspective, in 2000 the tax was 5.6%; in 2005, 10.2%; in 2010, 12.9%; in 2015, 16.7%; and in 2020, 27.1%.
You can detect a troubling pattern here, right?
As the number of contributors who make traditional voice telephone calls shrinks and the size of the subsidies which comprise the USF increase, or even remains stable, the tax necessary to support the subsidies continues its inexorable rise. This is not a sustainable paradigm.
I’ve been arguing for reform of the universal service system put in place by the FCC after the Telecommunications Act of 1996 for two decades. At least now, even if belatedly, there is more widespread agreement that the current regime is broken and needs to be meaningfully reformed to reflect the realities of today’s digital communications marketplace.
A bipartisan group of Senate and House lawmakers has been working for many months now to come up with a proposal to replace the current regime with a new one. They need to think boldly.
Along with Seth Cooper, I submitted extensive comments on August 25, 2023, to the bipartisan congressional Universal Service Fund Working Group explaining the need for fundamental reform and detailing what those reforms should be. Likewise, we’ve submitted extensive comments and reply comments in connection with the FCC’s own latest proceeding to examine the future of universal service.
While those extensive comments should be consulted for complete recommendations, here I will just highlight a few key points:
· A reformed universal service system must be based upon principles of transparency, fiscal discipline, and political accountability.
· Ideally, universal service requirements, when properly sized to reflect needed fiscal discipline, should be funded through periodic multi-year direct congressional appropriations.
· If not funded through multi-year congressional appropriations, Congress should consider the feasibility of imposing some form of contribution requirement from major Internet platform providers that benefit so greatly from the advanced broadband networks to which they presently are not required to support.
· Subsidies to support access for low-income persons should be continued through a voucher system akin to the Affordable Connectivity Program but with considerably stricter eligibility criteria and heightened safeguards to prevent waste, fraud, and abuse.
This latest increase in the tax imposed on traditional voice telephone calls should be a further impetus – as if a further impetus should be needed! – to get on with the important task of meaningfully reforming the existing universal service regime.
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