FCC Commissioner Michael O’Rielly: Increases In One USF Program Must Be Paired With Offsets From Another

In a speech before the American Enterprise Institute on April 19, 2018, Federal Communications Commission (FCC) Commissioner Michael O’Rielly offered a new approach to setting the amount of annual funding for each universal service fund (USF) support mechanism.

First, Commissioner O’Rielly noted that at present, the FCC has authorized spending of approximately $11 billion for universal service. That $11 billion amount covers disbursements from all four programs – the high-cost fund, the Lifeline program, the schools and libraries support mechanism (E-Rate program), and the rural health care program. According to USAC’s 2017 annual report, however, actual disbursements for all four USF programs totaled $8.85 billion (the prior year’s disbursements totaled $8.75 billion). In other words, there is another $2 billion out there floating around. That $2 billion difference between authorized spending and actual disbursements, according to Commissioner O’Rielly, “could be shifted amongst the four programs.”

Commissioner O’Rielly then considered USF funding increases in general, concluding that “it is time to institute the practice that any further increases in one program must be paired with offsets from another.”

Continuing, Commissioner O’Rielly noted that, historically, FCC proposals to increase funding for any one USF support mechanism have never been opposed by stakeholders from the other programs. Describing this phenomenon, he said “[t]here seems to have been an informal détente amongst different program stakeholders such that increases to one program are not opposed – or even commented on – by stakeholders from another program.” Well, why would they? Why would an E-Rate stakeholder oppose additional funding under the high-cost program? Where would that get them, and how would that help their position? It wouldn’t.

Now if Commissioner O’Rielly’s “offset proposal” is ever adopted, then you would see stakeholders from each of the four USF programs opposing funding increases unrelated to their own program. This is Commissioner O’Rielly’s USF zero sum game – any increase in one program should result in an equal decrease to one or more other programs.

For any FCC proceeding considering an increase in USF funding, Commissioner O’Rielly wants to see stakeholders from the support mechanism that would receive the increase weigh in on why their program is more deserving of an increase in funding to the detriment of the other three programs. Likewise, he believes stakeholders from the USF programs that would not receive the increase should weigh in with comments opposing it. Why is it better to spend money on Lifeline instead of E-Rate; why should the FCC increase the high-cost fund, and so on and so forth. According to FCC Commissioner O’Rielly, this type of “discussion and analysis” is needed to best determine whether a particular program deserves additional funds.

These remarks, of course, should come as no surprise since Commissioner O’Rielly has consistently supported limits on USF spending throughout his tenure at the Commission. It’s become his single focus with respect to universal service issues. But, it’s disappointing. Commissioner O’Rielly believes USF recipients only ever want more support and that’s what has stuck in his mind after years of universal service reform proceedings:

Over the past several years, the Commission has conducted ongoing proceedings on each of the four programs – High-Cost, Lifeline, E-rate, and Rural Healthcare – to update our rules and ensure that they support broadband service. Not surprisingly, commenters in each of the proceedings have used these opportunities to advocate for more funding.

Commissioner O’Rielly is never afraid to share his outside the box thinking on how to rein in USF spending, or how to address other policy issues. This “offset” proposal, though, is one to forget. It reads like an attempt to turn USF support recipients and stakeholders against each other. Let’s get USF stakeholders at each other’s throats – that will really let us know whether a funding proposal is a good idea. Will any stakeholders actually do this? We may soon see if anyone besides those in the audience was actually listening to his speech. The FCC is set to receive comments on its proposal to increase high-cost funding for legacy rate-of-return carriers. Will any stakeholders from the Lifeline, E-Rate, or rural healthcare programs weigh in to oppose increasing high-cost support? It’s highly unlikely. But, if anyone takes him up on his suggestion, it will be interesting to see how they do it.