Troubling Trend in USF Spending

Image of Chart showing USF and TRS Outlays and Chart showing USF Disbursements

Chart 1 shows the FCC’s actual outlays for the Universal Support Fund (USF) and Interstate Telecommunications Relay Services Fund (TRS) up to now and the future spending projections through the year 2024 as estimated by Congressional Budget Office (CBO), the nation’s official budgetary scorekeeper. Chart 2 shows the growth within USF disbursements, which have been the primary driver of the growth seen in Chart one[1]

Under the current structure, the programs are usually scheduled to grow to $10 billion in 2015 and steadily boost thereafter to reach $11 billion within 2024. Most of that growth will continue to be attributable to USF.[2]This means that within 2024, the funds will be more than 21% larger than they were in 2013 and, in those 11 years, the funds will spend an extraordinary $13 billion more than they would have if funding had been kept at 2013 levels. Importantly, this flight just represents present circumstances. Put simply, it does not assume that the Commission will make any programmatic changes that would more increase spending.

In fairness, USF’s past growth must not be too surprising for close fans. It is a culmination of various past Fee decisions that have had the effect associated with increasing the overall size of the Account. For example , to make precise some of the former implicit financial assistance necessary to ensure continued communications provider in high-cost areas, the Fee phased out certain intercarrier compensation (ICC) charges over time and replaced all of them, in part, with new USF funding. Meanwhile, the Fund grew significantly after the Commission allowed multiple companies to obtain high-cost funding in the exact same areas (a policy that ended after 2011) and again when the agency added wireless phones in order to USF’s Lifeline program.

So what do CBO’s USF projections mean for the average American? They represent an ever growing strain on their pocketbook. That is because the FCC—through an entity called the Universal Service Management Company (USAC)—simply estimates what will be needed to cover the planned expenditures for the USF programs, assesses phone system providers, and this cost is inevitably passed on to consumers in the form of a charge on their phone bills.[3]Given the fund’s projected growth, we must be increasingly sensitive to the problems that this fee creates and make an effort to limit the amount of any increase.

That is why I am concerned about this aspect of the upcoming reforms towards the E-Rate program. To be clear, I fully support modernizing E-Rate in order to reflect the current needs of college students in the 21st Century. For too long, the Fee has funded functions that no more make sense (e. g., long distance phone service and paging) which has detracted through funding the broadband needs associated with schools and libraries. Meanwhile, numerous educational entities seeking needed E-Rate dollars are often deterred by unwanted hurdles in the current system, which should be streamlined. Finally, we should greatly enhance transparency and do far more to prevent waste materials, fraud and abuse so that all of E-Rate dollars go toward benefitting students and library patrons.

The solution to any E-Rate problems, however , cannot simply be a quilt call to further increase overall USF spending. Doing so would only exacerbate the spending increases already expected. If we believe that more E-Rate spending is necessary now or in the future, then we should make the firm commitment right now to stabilize USF by tallying to offset this new spending by reducing spending elsewhere. It will be very tempting to take the easy path today and leave the difficult funding consequences to a future Fee. But , that would not be real management or good stewardship of the American people’s trust. Instead, I hope that we will use this opportunity to make the responsible decision to live within a reasonable yet limited budget, just as American family members do every day.

[2] TRS now accounts for around $800 million and is subject to certain inflation and efficiency adjustments. See Telecommunications Relay Services plus Speech-to-Speech Services for Individuals with Hearing and Speech Disabilities , Structure and Practices of the Video Relay Service Program, CG Docket Nos. 03-123, 10-51, Order, DA 14-946 (CGB rel. June 30, 2014).

[3] Similarly, the TRS administrator quotes the funding requirements for TRS based on proposed compensation rates for that TRS programs and the projected management expenses. Consumers ultimately pay an extra fee on their phone bills.

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