The FAIR Contributions ACT: What’s Next in USF Funding?

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2021 has been a busy year in a variety of ways, so you’re forgiven if you haven’t heard about an important new piece of legislation called the “Funding Affordable Internet with Reliable (or FAIR) Contributions Act” that just started its journey from bill to law in the US Senate. The stated purpose of the FAIR Contributions Act is to change how the FCC assesses USF (Universal Service Fund) contributions, which could have far-reaching implications for our industry.

USF was established to ensure “universal service,” which originally meant that everyone who wanted telephone service at their house could have it. It worked so well that, by the mid 1990s, there were very few places you could go and not find universal telephone service (I’m looking at you, Mink, LA). So, in 1996 Congress and the FCC shifted the focus of USF from universal telephony to universal broadband.

Given how much we depend on broadband today, that shift seems downright prescient, until you consider that they only shifted the uses, but not the sources, of funding. The FCC still assesses USF contributions “from providers of telecommunications, based on an assessment on their interstate and international end-user revenues.” In simple terms, the FCC is still funding USF on fees collected from legacy telecommunications services (like home and mobile phone service) and diverting those fees to programs that expand broadband.

If that seems unfair or shortsighted, congratulations, you’ve gotten to the heart of the FAIR Contributions Act without even reading it! Replacing telecommunications as a source of USF funding is not as straightforward as you might hope. While broadband might seem like a natural target, most folks (from end users to regulators and legislators) are of the opinion that Internet services (and to some extent the Internet at large) should be “tax free” zones.

This puts the FCC in a bit of a quandary; they need billions of dollars in funding to maintain the current USF-based programs. If they can’t realistically rely on either legacy telecommunications or newer broadband end-user revenues, where can they turn for those kinds of revenues? Is there a funding source that either leverages or is adjacent to broadband services which isn’t already paying hefty fees to the FCC?

If you guessed Big Tech, then you’ve seen through the FAIR Contributions Act entirely. Since the vast majority of broadband utilization is now driven by streaming media services – whether we’re talking about OTT streaming services like Netflix, vMVPDs like Sling, FASTs like Pluto, or traditional YouTube videos –the FAIR Contributions Act is putting them on notice that they might be required to contribute their “fair share” to USF. And that could have serious implications for those services, and for their consumers, including broadband service providers.

Looking for ways to get your FAIR share? At Ronin Technology Advisors we have some thoughts. We’ve helped several service providers create strategies and execute investment plans to reach rural broadband subscribers. Give us a call and let’s see how we can help you stay ahead of the pack with innovative approaches to traditional challenges. hello@roninpbr.com or 303.678.1844.

Rob Johnson, VP of Products and Platforms

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Our team has over twenty-five years of experience building and deploying network services, and transforming organizations into recognized market leaders.  Give us a call and let’s see how we can help you.
hello@roninpbr.com or 303.678.1844

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