Agency votes not to apply USF contribution rules

The FCC has voted not to apply rules that make certain small rural broadband providers pay into the Universal Service Fund based on their broadband customers, a move billed as helping close the rural divide, lower consumer broadband costs, and perhaps put to rest questions of whether the FCC will start making ISPS pay into the USF based on their broadband service.

Those smaller, rate-of-return rural carriers are the only ISPs that have been required to pay into the Universal Service Fund (USF) subsidy program based on their broadband subs.

"Over the years, the FCC has consistently declined to impose Universal Service Fund (USF) contribution obligations on broadband Internet access services," said FCC chair Ajit Pai. "But under our current rules, one and only one class of broadband providers — rural carriers that offer certain broadband Internet access transmission services — are required to contribute to the USF based on those offerings. In other words, these small, rural carriers — which serve areas that are already among the most difficult and expensive to serve — have to pay broadband taxes that their competitors don’t. And these small, rural providers have no choice but to pass those taxes on to their customers, who as it is tend to have less ability to pay than their urban counterparts."

Commissioner Michael O'Rielly also hopes the vote will send the wider signal that the FCC is not going to start making ISPs pay into the USF fund, which is used to subsidize advanced communications, which now primarily means internet access, in rural and hard-to-reach areas.

Related: D.C. Must Help Close Rural Digital Divide

Pai said removing the USF contribution obligation from the rural carriers would help close the digital divide by lowering the price of service to consumers, as well as leveling the regulatory playing field.

ISPs pass along government subsidy obligations to their customers. Pai said the savings could be $7 per month or more on monthly internet service bills.

“Many rural broadband providers are faced with extraordinary deployment costs and regulations," said USTelecom president Jonathan Spalter. "The Commission’s decision today will help ease those burdens and incent providers to continue investing in — and connecting — communities in every corner of the nation.”

Commissioner Jessica Rosenworcel generally supported the item, but had a bone to pick.

"While I think this is the right call today, I also believe it’s time for some basic math," she said. "By granting this forbearance, we forego roughly $40 million in funding for broadband in rural America. Add to this the $55 million in lost interest income that the FCC just gave up by shifting universal service bank accounts without even a vote, and you have nearly $100 million in universal service funds that have disappeared. So I don’t just worry that our high-cost universal service system is complicated. I worry that despite our noble rhetoric about closing the digital divide in rural America, we are draining this agency of the funds necessary to do so.”