Universal Service Fund  

CTIA Position:

CTIA believes the federal universal service system should be modernized to provide efficient levels of support for the services that consumers demand, namely mobile and broadband services. The existing universal service system, with its emphasis on legacy wireline voice technology, is in danger of becoming more of a hindrance than a help if it is not modernized soon.

Reform of the universal service system should be competitively neutral and ensure the ubiquitous deployment of mobile broadband services, which provide the benefits of broadband to the home and to the person. At the same time, the Universal Service Fund (USF) should be no bigger than necessary to achieve the goals outlined by Congress.

CTIA believes that policymakers should rely on private investment and competition to the greatest extent possible for the widespread deployment of modern communications services, but recognizes that universal service support will be required to deliver services to certain consumers and areas. The federal universal service fund – which will make outlays of $8.7 billion in 2010 – is paid for by consumers and is intended to ensure that consumers in rural areas, low-income consumers, schools, libraries and rural healthcare providers have access to affordable and high-quality telecommunications and information services. In implementing the universal service provisions of the Communications Act, the Federal Communications Commission (FCC) should continue to be guided by the principle of “competitive neutrality” which ensures that consumers will be able to access the services of their choosing.

Key Points:

• Adopt Long-Term Reforms That Are Competitively Neutral and Ensure Adequate Support for Mobile and Broadband Services. The FCC and the National Broadband Plan correctly recognize that consumer demand for mobility and broadband services is increasing rapidly. Reform of universal service should direct scarce public resources toward the services that consumers demand. Consumers are embracing mobile broadband faster than any other broadband platform. Mobile broadband services and devices, with their ever-increasing capabilities, are providing Internet access to individuals in novel and expanding ways. In this way, the mobile platform is delivering broadband availability to individuals who may otherwise not have it.
• Rely on Competition and Consumers to Determine USF Support. The FCC has recognized that the current universal service system does not reflect market realities. It favors incumbent wireline networks while largely ignoring consumer demands for more wireless communication, Internet protocol-enabled, broadband and other information services that operate without regard to jurisdictional boundaries. Reform of this system should seek to minimize distortion of the competitive market. CTIA supports market-driven reforms to curb demand for universal service subsidies, increase accountability and encourage efficiency.
• Adopt a Numbers- and Capacity-Based Contribution Methodology. Consumers are currently paying universal service fee charges based on how much interstate telecommunications service they use. This revenue-based system is outdated, inefficient and relies on obsolete distinctions. Under CTIA’s numbers- and capacity-based proposal, consumers would be assessed universal charges based on the number of telephone numbers they have and, in the case of many business customers, the number and capacity of end-user connections they purchase.
• Equitable and Non-Discriminatory Contributions and Withdrawals. Currently, wireless consumers contribute more than 43 percent of the USF. Yet, as a result of the artificial cap on support for mobile services, wireless consumers only draw a fraction of this amount from the federal fund. The policies do not reflect the tectonic shifts in consumer preference that have occurred since the universal service programs were first established. There remains a huge inequity even as more consumers are demanding wireless services. Everyone should pay their fair share of universal service, and the funds should be distributed in an equitable and non-discriminatory manner that recognizes consumer demand.
• Commit to Efficient Deployment of Networks in Rural America. The current support mechanism for distributing universal service funds to high-cost, rural areas is administratively complex, guarantees profits for incumbent wireline networks (ILEC) and promotes inefficiency. These problems result in a bloated fund that does not effectively target appropriate levels of support to those living in high-cost, rural areas. In many cases, this denies consumers in rural areas the benefits of competitive choices enjoyed by consumers in urban areas because the mechanism continues to support outmoded technology rather than competitive mobile and broadband applications. CTIA urges the FCC to adopt both short-term and long-term reforms that advance the National Broadband Plan’s goals for ubiquitous mobile broadband coverage and global mobile broadband leadership. Indeed, CTIA is committed to market-oriented reforms that will drive down the cost of universal service and better target services for support.

Last Updated: January 2011