December 15, 2021 – The Federal Communications Commission (FCC) has issued a Notice Of Inquiry (NOI) on the future of the Universal Service Fund (USF).[1] Comments are due on or before January 18, 2022. Reply comments are due January 31, 2022.

**UPDATE** FCC Extends Comment Deadlines For Notice Of Inquiry On The Future Of The Universal Service Fund

January 4, 2022 – The FCC’s Wireline Competition Bureau has extended the comment and reply comment deadlines by 30 and 45 days, respectively, for the FCC’s Notice Of Inquiry (NOI) on the future of the Universal Service Fund (USF). Accordingly, comments are due on or before February 17, 2022, and reply comments are due March 17, 2022.

The FCC released the NOI on the future of USF because of a Congressional command in the recently enacted Infrastructure Investment and Jobs Act.[2] Nearly all of the attention on the Infrastructure Act is focused on the federal funding for new broadband infrastructure, which is “the largest ever federal investment in broadband, totaling approximately $65 billion.” However, in the new law, Congress directed the FCC to commence a proceeding to evaluate the Infrastructure Act’s impact on the goal of bringing high-speed broadband services to all Americans. Congress also required the FCC to submit a report to Congress on the FCC’s options for improving its ability to achieve universal access to broadband services in light of the provisions in the Infrastructure Act. In other words, Congress wants the FCC to answer these two questions – how will all of this new funding affect the USF, and how should it impact future decisions about USF support.

Below is a summary of the primary issues teed up for comment by the FCC in the NOI, and the specific issues related to the USF High-Cost Program.

Universal Service Goals for Broadband

To set broadband universal service goals, the FCC proposes to use the following: universal deployment; affordability; adoption; availability; and equitable access to broadband throughout the United States. The FCC’s report to Congress will focus on making recommendations for FCC and Congressional actions that will help achieve these goals. And, the FCC wants comments in response to the NOI to focus on how the Infrastructure Act’s broadband provisions may impact the FCC’s ability to achieve them. In general, the FCC is seeking comment on the following general issues:

• Should the FCC consider additional or alternative broadband universal service goals for the purposes of its report to Congress?

• How should the FCC measure progress toward the goals?

• Should the FCC’s universal service goals for broadband evolve over time?[3]

Impact Of Broadband Funding Provided By Other Federal Agencies

The Infrastructure Act contains funding for the FCC’s Affordable Connectivity Program and creates other new programs to be implemented by NTIA (i.e., the BEAD Program, State Digital Equity Capacity Grant Program and its federal counterpart, and Middle Mile Infrastructure Grant Program), the Department of Homeland Security (Local Cybersecurity Grant Program), and RUS (Distance Learning, Telemedicine, and Broadband Program). The FCC requests comment on how other federal agency programs should inform FCC decision-making and analysis with respect to the Congressional report and broadband universal service goals:

• Are there any other provisions in the Infrastructure Act or any other recent legislation that constitute “legislation that addresses the broadband universal service goals” that the FCC should consider in the NOI proceeding?[4]

• To what extent is it possible for the federal agencies responsible for supporting broadband deployment (i.e., FCC, Department of Commerce, and Department of Agriculture) to align their goals, application and reporting processes, and project requirements?

• Do the FCC’s goals for universal deployment, affordability, adoption, availability and equitable access differ significantly from the goals of other agencies, and if so, how?

• How should the FCC’s Congressional report on USF account for differences in other federal agencies’ broadband programs? How should the report account for the relationship between projects to be funded by the Infrastructure Act and those funded by USF?

• How will the existence of other federal agency programs that are complementary to the FCC’s USF programs impact the FCC’s universal service broadband goals?

• How can the FCC cooperate with other federal agencies to prevent unnecessary duplication of broadband funding? Are there measures the FCC can take to further its goal of ensuring that finite support is used efficiently and complementarily? How can the FCC harmonize funding to a single provider, for example, receiving grant funding for deployment from NTIA’s BEAD Program and also receiving funding for operating expenses and maintenance from the USF High-Cost program?[5]

USF Programs & Broadband Goals

All of the USF support mechanisms provide funding for broadband service in some way: the High-Cost Program supports both fixed and mobile broadband networks (construction and ongoing expenses); the Rural Healthcare Program provides support for broadband connectivity to rural healthcare providers; the E-Rate Program provides support to schools and libraries for access to high-speed broadband services; and the Lifeline Program provides support to low-income consumers for broadband services. In general, the FCC is seeking comment should the universal service support programs continue to evolve in light of the Infrastructure Act, without reducing the Congressional mandate to achieve universal service goals for broadband.[6] Comment is requested on the following:

• How can the FCC best evaluate the effectiveness of the existing USF programs in achieving broadband universal service goals?

• Are the current USF programs achieving the proposed broadband goals? If so, how?

• What obstacles, if any, stand in the way of accomplishing the broadband universal service goals?

• Should the FCC evaluate USF program performance, and if so, how?

• How should the FCC account for the role that non-permanent programs created by Congress in response to the COVID-19 pandemic (EBB, ECF, and the COVID-19 Telehealth Program) have played in supplementing the USF programs?

The FCC is requesting comment on the data it currently uses or should use to inform its decisions on USF support programs:

• What data (from providers, participants, and other entities) should the FCC use to evaluate and improve USF program performance?

• Would the benefits provided by the collection of any additional data
  outweigh the increased burden on program participants?

• Are there ways for the FCC to minimize data reporting burdens while still improving the quality of the USF data collected?

• Regarding the USF program data currently collected by the FCC, is there a need to standardize data collection either within or across USF programs?

• Should the FCC, to the extent possible, establish uniform guidelines for collecting, organizing, and storing data across USF programs?

• How should the FCC balance the potential benefits from increased access to program data with the need to maintain confidentiality of Personal Identifiable Information (PII)?

Proposed Recommendations For Future FCC Action Related To The USF High-Cost Program

In the second portion of the NOI, the FCC proposes options for improving the FCC’s effectiveness in achieving its universal service broadband goals in light of the Infrastructure Act. The proposals cover the High-Cost Program, Lifeline and the Affordable Connectivity Program, E-Rate and the Emergency Connectivity Fund Program, the Rural Healthcare Program, and the issue of sustaining all of the USF programs. Below is a summary of issues teed up by the FCC that cover the USF High-Cost Program.[7]

High-Cost Program In General – The FCC is seeking comment on the impact of the Infrastructure Act on the USF High-Cost program:

• What changes, if any, should we consider to the High-Cost program in light of the Infrastructure Act and other recent developments?

• Are there changes that should be made in light of the additional funding provided by the Infrastructure Act?

• How can we best coordinate the High-Cost program with the programs created by the Infrastructure Act to achieve our universal service goals, particularly the deployment of broadband to 100% of the people in the U.S.?

• What role will the High-Cost program have in the future given the evolving level of universal service?

• What data should be collected from recipients of the program, and how should this data collection take place?

• How can we protect against waste, fraud, and abuse in the High-Cost program, particularly in light of the Infrastructure Act?

The BEAD Program’s Impact On The High-Cost Program – The Infrastructure Act directs NTIA to create the Broadband Equity, Access, and Deployment Program (BEAD Program), which will allocate $42.45 billion to states for grants “to bridge the digital divide.” Individual states will receive $100 million to award grant funding to broadband projects that will provide service to unserved locations, then to underserved locations, and next to community anchor institutions. Broadband projects funded by BEAD must provide low latency service with download speeds of at least 100 Mbps and upload speeds of at least 20 Mbps, offer service to all locations in the project area, and offer at least one low-cost service option for eligible subscribers. The FCC notes that while the BEAD Program will focus on deploying new broadband infrastructure, after BEAD-supported networks are constructed, providers will incur ongoing operating expenses as well as some capital expenses. In the NOI, the FCC requests public comment on the following issues related to the relationship between the BEAD program and high-cost USF support:

• Given that the networks deployed with funding from the BEAD program and other Infrastructure Act programs will still incur operational costs, particularly in the most difficult to serve areas, should the FCC consider modifications to the High-Cost program to further support ongoing operating and maintenance costs of recently constructed broadband facilities to ensure that rates remain reasonably comparable?

• Should the Commission coordinate with the BEAD Program to ensure that newly constructed networks have ongoing support? At what point would support be necessary, if at all?

• In light of the BEAD Program, how should the FCC approach next steps for the RDOF program or any successor program?

• In light of the 100/20 Mbps service standard in the BEAD Program, should the FCC reconsider its service requirements for future High-Cost support?

• In what ways should the FCC allocate high-cost USF funding in the future, including reverse auctions? Are there other incentive-based, competitive methods for allocating funding that would be effective and efficient? Are there other distribution methodologies that the FCC should consider?

• What impact should the BEAD Program have on the FCC’s approach to high-cost support for mobile broadband?

Sustaining The Universal Service Program – USF Contributions

At the end of the NOI’s section on potential recommendations for future FCC action, there is a request for comment on sustaining the universal service program – USF contributions.[8] This has been a hot topic lately in the debate about universal service, which has been intensified by a growing push for reform. The USF is funded by telecommunications companies remitting a percentage of their end user revenues derived from interstate telecommunications services. That base of funding has been on a consistent decline for the past decade. The percentage that telecom carriers must pay – the USF contribution factor – is calculated four times a year. It hit a record high of 33.4 percent in the second quarter of 2021. Since the FCC’s NOI is on the future of the USF with respect to the distribution side, it’s understandable that the supply side should be considered. Accordingly, the FCC “requests comment on proposals to improve the stability of the quarterly USF contribution factor.”

Additionally, the FCC is seeking comment on issues raised in comments submitted with respect to the proposed universal service contribution factors for the fourth quarter of 2021 and the first quarter of 2022. This refers to the comments and objections filed by a group led by Consumers’ Research and Cause Based Commerce, Inc. The group has also challenged the legality of the first quarter 2022 USF contribution factor and the FCC authority to approve it in a Petition For   Review at the U.S. Court Of Appeals For The Fifth Circuit. They filed a challenge to the fourth quarter 2021 USF contribution factor with the Sixth Circuit. Here are the issues from the Consumers’ Research comments and objections on which the FCC has requested public comment:

In particular, we seek comment on the assertions that (1) section 254 of the Communications Act unconstitutionally delegates Congress’s legislative and taxing power to the Commission, (2) the Commission has violated the Constitution by delegating Congress’s legislative and taxing power to USAC, (3) the appointment of USAC’s board of directors by the FCC Chair violates the Constitution’s appointments clause or (in the alternative) exceeds the Commission’s statutory authority, and (4) the Commission violated the APA and the Federal Register Act by adopting a new contribution factor for each quarter without conducting a notice-and-comment rulemaking proceeding or publishing the contribution factor in the Federal Register.[9]

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[1] Report on the Future of the Universal Service Fund, WC Docket No. 21-476, Notice Of Inquiry, FCC 21-127 (Dec. 15, 2021), https://docs.fcc.gov/public/attachments/FCC-21-127A1.pdf.

[2] Infrastructure Investment and Jobs Act, Pub. L. No. 117-58, Section 60104 (Nov. 15, 2021), https://www.congress.gov/bill/117th-congress/house-bill/3684/text.

[3] NOI at ¶¶ 18-19.

[4] NOI at ¶ 22.

[5] NOI at ¶ 27.

[6] NOI at ¶ 20.

[7] NOI at ¶¶ 30-32.

[8] NOI at ¶¶ 44-45.

[9] NOI at footnote 124.