On April 8, the House Commerce Committee voted 50-1 to pass the Rural Broadband Act of 2025 – HR 2399. The bill would require the FCC to establish a vetting process for future applicants for future high-cost universal service program funding for deployment and supporting broadband Internet access services. The purpose of the vetting process is to ensure that subsidies go to entities that are capable of fulfilling their universal service obligations.
The Rural Broadband Act has been introduced in prior Congresses. My blog post from February 16, 2023, describes a bit more about the bill as it was introduced in the 118th Congress by Senators Shelley Moore Capito and Amy Klobuchar.
This bi-partisan legislation appears to be a reasonable measure to help prevent money collected from U.S. consumers via surcharges – effectively, "USF Taxes" – being misspent and wasted. The House of Representatives should give HR 2399 an up-or-down vote.
Meanwhile, the need for an overhaul of the Universal Service Fund is still pressing. As Free State Foundation President Randolph May and I explained in our August 2023 comments to the Universal Service Reform Working Group: "Reform of the USF subsidy system is urgently needed because the system is outdated and no longer fiscally sustainable." The existing universal service regime was established in a voice-centric 1990s context, with a broader contribution base and much smaller sized fund than today with a dwindled base and a bloated annual distribution amount of $7 billion to $8 billion. As a result, the USF Tax has continued to climb, and the most recent proposed quarterly contribution factor increase will raise the USF Tax to 36.6%.
Notably, the constitutionality of the contribution mechanism of the USF was the subject of oral arguments before the Supreme Court on March 26 of this year. Regardless of the Court's verdict on the constitutionality of the USF's contribution system, economic realities require reforms. One possible reform is switching from the USF Tax to appropriations by Congress. Another reform option is expanding the contribution base to major Internet websites that benefit the most from universal broadband connectivity. Those ideas were among the many topics discussed at the Free State Foundation's Seventeenth Annual Policy Conference – #FSFConf17 – held on March 25, 2025, in Washington D.C. Video of the conference panels, keynote addresses, and keynote conversations are available online.
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