Chairwoman Rosenworcel's Response to Senator Lujan Regarding Proposals to Modify the Contribution Base for the Universal Service Fund

On Dec 12, 2023, Sen Ben Ray Luján (D-NM) wrote to Federal Communications Commission Chairwoman Jessica Rosenworcel requesting input on proposals to modify the contribution base for the Universal Service Fund (USF). Specifically, he requested information about potential impacts of three mechanisms to reform the USF contribution system: (1) expanding the contribution base to assess broadband revenues; (2) expanding the contribution base to include edge providers; and (3) expanding the contribution base to include digital advertising. As Congress considers much-needed updates to the programs funded by the USF, "we must ensure that the Fund has a sustainable funding model to address our ongoing and future needs.," Sen Luján wrote. On Jan 12, Chairwoman Rosenworcel replied noting that since Congress last directed the FCC  to establish the current contribution framework in 1996, "there have been revolutionary changes in how we communicate, with the need for a broadband connection eclipsing the home telephone as need-to-have service." She agreed that "any reform to the contribution system must result in a sustainable funding model and also fully consider the current telecommunications marketplace and the potential cost burdens on consumers." 

• The FCC  anticipates that expanding the type of revenues used to fund USF to include revenues from mass market broadband providers, in addition to the revenues from the current telecommunications contributors, is estimated to expand the contributions base to $250 billion, an increase of an additional $220 billion in revenue above the current base of approximately $33 billion.  As a result, the Commission estimates the contribution factor would drop substantially, to approximately 3.3 percent, assuming the current size of all USF programs.  For reference, the contribution factor in the first quarter of 2024 is 34.6 percent.  This change, however, would actually lead to an increase in the monthly broadband bills paid by the average household. In fact, it would double the typical payment from an average USF line item of around $2.00 on consumer telephone bills to a combined total of approximately $4.00 on monthly broadband and telephone bills.
• Expanding the contribution base to include edge providers would require congressional action authorizing the FCC to assess edge providers for USF purposes. This approach would expand the the contribution base by approximately $2.3 trillion on top of the current base of approximately $33 billion. But consumers could potentially face rising costs for certain edge services, particularly those that directly bill consumers. 
• Expanding the contribution base to include digital advertising would expand the contribution base to approximately $250 billion. This would result in a contribution factor of approximately 3.3 percent, assuming current USF demand.  Unlike the expansion focused on broadband revenues, the FCC anticipates that assessing digital advertising revenue would lead to a decrease in USF fees on monthly household telephone bills to approximately $0.30 (30 cents), because data indicates that an assessment on digital advertising is less likely to be passed on to consumers.