A new study commissioned by INCOMPAS concludes that the Universal Service Fund contribution base should be expanded to include broadband internet service providers (ISPs), but not streamers and other edge providers.
INCOMPAS members, which include streamers Amazon and Netflix, as well as Google, Meta and Dish Network, have been pushing the Federal Communications Commission to add ISPs to those who pay into the fund.
Universal Service Fund reform is expected to be on the FCC’s agenda given the decrease in traditional wireline phone service on which the contribution base is built.
INCOMPAS is all for the FCC tackling the fund’s contribution base, so long as it is focused on ISPs.
“[I]ncluding broadband internet access revenues is the most efficient way to drive down the contribution factor, stabilize the Fund, and correct its distortionary impact,” INCOMPAS president Angie Kronenberg said. “It is also a solution that can be acted upon immediately by the FCC.”
And while some are pushing the FCC to make edge providers pay into the fund given that they wouldn’t have a business without the access to advanced communications the USF is meant to ensure, the study takes issue with that approach.
“We find that various other proposals to include certain edge providers [in the USF contribution base] would arbitrarily increase market distortions and are not in line with economic principles,” the report said. “In addition, these proposals also assert, without reliable evidence, that fees levied on edge providers will not be passed down to consumers. We find that economic principles and empirical trends in the industry suggest otherwise.”
The report argues that since consumers already pay for broadband infrastructure via their ISP bills, making them pay an edge provider subsidy, which would ultimately be passed on to them in some form, would constitute a double payment that could discourage broadband use.
The report conceded that some streaming congestion could result in rural broadband providers incurring increased capital expenses, which is why some argue edge providers should have to pay into the subsidy. But it does not concede that congestion is happening, and even if it is, it does not justify making edge providers pay into the fund.
Besides, it said, ”congestion externalities in the context of streaming are only a potential problem in high-cost areas and in most other geographies, as discussed above, they can be and have been resolved through private negotiations and contracting.“
