Universal Service Fund – How It Could Change and the Effects on Cooperatives
In your Cooperative’s quest to better educate members about the Universal Service Fund (USF), this blog will focus on how the fund is being utilized, how it could be changing and how that change may affect HTC.
To learn more about what exactly the USF is, visit my previous blog here.
The USF helps with sustainability.
There is so much federal money being distributed for broadband expansion that the USF gets lost in the shuffle. So, with all these recent opportunities for funding available, why is the USF still important to your Cooperative?
Broadband is about more than just building networks – that’s just the beginning of the large investment that’s required. While grants provide for the first step of the process, the USF does that as well, but also takes it further by helping to sustain those networks for years to come.
Specifically, we believe the USF should continue to be utilized to support growth, foster investment for critical upgrades, and help offset operational expenditures associated with network maintenance. That enables us to keep rates low and advance our network so that our members have the highest quality of service at the most affordable price.
From an industry perspective, for rural carriers like HTC, the USF is a major financial resource that benefits members. If the USF went away, your Cooperative would remain viable, but future network growth, Capital Credit refunds and service rates could all be impacted.
The USF may be changing.
What’s next with the USF? That’s quite possibly the multi-million-dollar question.
Congress and Federal regulators have been mulling over options for how the USF is calculated (contribution reform) and how it’s distributed. Right now, USF only comes from traditional phone revenue from all providers across the country, with no contribution from broadband. This means USF contributions come from voice lines, fax lines and long distance. These are all services that are evaporating. With less revenue as the basis to support the aggregate demand of the USF, yearly assessments on that revenue have continued to climb to unsustainable levels.
A lot of conversation has been centered around the possibility of assessing edge providers (think streaming, gaming, and social media companies). The reason behind this is that they use the largest share of bandwidth on our networks, but don’t pay HTC a dime.
A great analogy for this is that edge providers are like 18 wheelers riding on the highway. The difference is they never stop to pay a toll or submit taxes to support the very infrastructure that’s designed for their usage. There have also been discussions around adding broadband revenues to the contribution formula.
Some interest groups are even advocating for the complete discontinuance of USF, in a case that could make its way to the Supreme Court. Boiling these options down to the basics, the cost of broadband service is either borne fully by the service rates you pay or also with the help of USF support (in whatever way it may be reformed). This has been the model that has keep rates affordable for many decades.
As part of a cooperative, it’s important that our members understand:
- HTC’s not-for-profit status is a unique benefit that allows us to refund profits to members and reinvest in our state-of-the-art network. USF allows us to maximize these investments and refunds each year.
- HTC is working hard to protect member interests to continue to do the best, and right, thing for all. This includes participating in conversations in Washington, DC around this issue.
- If less than favorable changes happen with the USF, this would mean a decrease in revenue for the Cooperative, which might influence HTC’s growth, network build-out and overall long-term strategy.
Thankfully, nothing is changing right now. But these are things we all need to be cognizant of, as we don’t know when a change may come or what it could entail.
While we strive to engage in a way to greatly advocate for our members on a national level, it is as equally important to remain transparent to our members on how important these topics are to our current and future strategy.
Make sure to stay turned here to the HTC blog for future discussion about USF and what may be on the horizon regarding changes to the fund and how it could impact HTC and cooperatives like us.
