FCC USF Budget Draft NPRM Asks Questions on Cap That Concern Some

Commissioner Mike O'Rielly is the FCC point person on this item, officials said. He pressed for such a review previously, so it makes sense that the agency under Chairman Ajit Pai is acting now, noted ITTA President Genny Morelli. The 2011 order that allowed high-cost USF to be used for broadband and not just phone service had a seven-year budget plan that has expired, she and others noted. Other associations didn't comment.

Officials said this document has momentum since Pai and O'Rielly approved it, so it could be adopted soon. The agency declined to comment.

Adopting a USF overall spending cap as the new item discusses "is both overdue and incredibly needed," O'Rielly said in a statement. "The Commission must inject fiscal responsibility into the USF by establishing an upper boundary of how much we are willing to take from hardworking American consumers who support the program through higher fees on their phone bills." He has voted for the document and said he looks "forward to a robust record that will result in a final cap in the very near future.”

“The FCC’s proposal flies in the face of the agency’s own rhetoric about bridging the digital divide," said Commissioner Jessica Rosenworcel in a statement. "It threatens to cut off broadband in rural areas, limit high-speed Internet access in America’s classrooms, shorten the reach of telemedicine nationwide, and foreclose opportunity for those who need it most.”

Commissioner Geoffrey Starks finds it "incredible" the agency "would consider an item proposing to limit our ability to fund our Universal Service programs, which support broadband buildout and adoption," and as a draft broadband deployment report is "riddled with significant and unresolved allegations of inaccuracies and overstatements" (see 1903060034), he said in a statement. "We cannot currently claim with any confidence to know who in this country has broadband and who does not. This relentless desire to claim victory despite overwhelming evidence that much work remains to be done is counterproductive to good policymaking." An "arbitrary limit" of spending now "is premature, runs counter to the goals and obligations imposed on us by Congress, and would necessarily pit hospitals, schools, libraries, students, patients" and consumers lacking high-speed internet "against one another for these funds," he added. Commissioner Brendan Carr, who is in Kenya, didn't comment.

Among questions said to be in the draft NPRM are whether, if the budget is exceeded, the USF's four programs should be compared with or weighed against each other to decide what limits might apply to keep spending in line. The item also is said to ask about combining the tranches for rural healthcare and for E-rate. The document doesn't ask about changing contributions to USF, officials said.

'Hard Choices'

"It's hard to argue against" examining the budget issues, said Morelli of ITTA, which has price-cap and rate-of-return telco members including CenturyLink, Cincinnati Bell and TDS. "The commission is going to have to make some hard choices" if spending exceeds caps, she said: "The commission’s goal is to have universal broadband available and there is not nearly enough money in the budget today to see that to fruition."

The most recent USF funding year was forecast by the White House to have had total disbursements roughly 15 percent below the $11.4 billion budget cap. Nonetheless, some worry that if USF spending rises, breaching the cap could require hard decisions on what sort of expenditures to pay for in the fund's four areas of high cost, E-rate, rural healthcare and Lifeline. The high-cost and E-rate portion budgets for the latest funding year, which includes at least some of 2018, each were around $4 billion, with another roughly $2 billion for Lifeline and almost $600 million for rural healthcare, an agency official noted.

The Schools, Health & Libraries Broadband Coalition wants the commission "to reject" capping USF programs. "More effective" methods include the FCC getting "more 'bang for its USF buck' by eliminating silos and allowing applicants to apply for multiple USF programs in a single application," said SHLB Executive Director John Windhausen.

Instead of asking about a USF cap, examine "how can we make the most efficient use of these universal fund dollars to solve the digital divide and the homework gap," Windhausen told us. He said a relevant section of the Telecom Act says the agency should provide sufficient funding to achieve universal service goals, specific to all USF programs other than Lifeline. "I don’t think the FCC should prejudge what the right number should be without doing a more thorough investigation of what it would cost to get everybody connected" by government-subsidized networks for those who wouldn't be able to buy nonsubsidized high-capacity and high-speed service, Windhausen said.

The commission is "finally exploring overall cap on USF spending," O'Rielly tweeted. He added, "To clarify, USF cap item proposes 2018 AUTHORIZED level ($11.42B) not DISBURSEMENT level. IF adopted after comments, it would mean NO cuts to four existing programs and is indexed for inflation. Save the hyperbole for something else."