Frieden, Rob


Nearly every nation in the world has a government mandated program aiming to make telecommunications service more widely available and affordable. Universal service funding subsidies have garnered popular support largely based on the shared view that society and individuals benefit from progress in achieving ubiquitous and affordable access, initially to voice telephone service. Technological developments and changes in consumer requirements have generated support for expanding the universal service mission to include broadband access to the Internet, and to identify a growing number of subsidy beneficiaries, now including schools, libraries, healthcare facilities, telephone companies operating in high-cost areas, and people with low incomes. This Article summarizes the history and structure of the universal service funding in the United States with an eye toward identifying matters warranting immediate reform. The expansion of the mission to include affordable and widespread access to broadband service has added significant cost, complexity, and incentive to secure funding through fraudulent acts. Telecommunications carriers can lawfully pass through universal service funding requirements directly to subscribers, many of whom now question the efficacy and efficiency of the funding process. For the first quarter of 2023, consumers paid a 32.6% surcharge on telecommunications services, but incurred no contribution obligation when providing broadband Internet access and other data services. “Compassion fatigue” has encouraged litigation challenging whether the Federal Communications Commission (“FCC”) has clear statutory authority to impose the functional equivalent of a tax on consumers and to delegate management of the collection and distribution of funds to a private company. This Article evaluates the validity of such claims especially when the Covid-19 pandemic highlights the essentialness of broadband access. Additionally, congressional legislation, enacted in 1996, codified the universal service mission and required the FCC to act. This Article also evaluates several different types of universal service funding reform proposals with an eye towards identifying their marketplace impacts. Most proposals recommend expanding the categories of universal service contributors to spread the burden more equitably that in turn would reduce the subsidy cost now exclusively borne by telecommunications service subscribers. New categories of subsidy contributors include federal income taxpayers, any venture assigning telephone numbers to subscribers, broadband carriers delivering data to and from subscribers, platform intermediaries, such as eBay, Facebook, Google, and Twitter, and creators and aggregators of content, such as Amazon Prime, Netflix, and YouTube. The Article concludes with an assessment of what reforms can possibly occur in the short term.



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