In testimony before the Senate’s Committee on Commerce, Science & Transportation, FCC Commissioner Kathleen Abernathy said more fundamental reform may be necessary to ensure the sustainability of universal service funding in the long term. The universal service funds support carriers that provide services in high-cost areas ($3.2 billion in annual cost), supports services to schools and libraries (the e-rate program, $2.25 billion), and provide discounts to ensure low-income consumers have access to basic phone service ($647 million). Currently, federal universal service contributions are assessed only on interstate revenues, which have been shrinking due to falling prices and wireless substitution. Another important trend has been the increase in bundled service plans with buckets of flat-rate, any-distance minutes. Abernathy said this trend makes it difficult to isolate revenues from interstate services and the problem is likely to get worse. In December 2002, the FCC adopted several measures to stabilize universal service funding, including increasing from 15% to 28.5% the safe harbor provision that wireless carriers may use to determine the interstate portion of their revenues. However, Abernathy said these measures may not be enough and the FCC is now considering additional proposals. These proposals include a Wireline Broadband measure that would assess contribution obligations on facilities-based providers of broadband Internet access services.
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- Last year, wireline long distance companies contributed 63% of the universal service fund, while local exchange carriers and wireless carriers make up the rest.
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In July 2002, the FCC received a recommendation that no new services should be added or removed from the definition of services supported by “universal service.�? The main issue under discussion had been whether advanced or high-speed services should be included within the list of core services supported by a federal universal service fund. A Federal-State Joint Board on Universal Service, which was composed of three state regulatory commissioners and three FCC commissioners, found that no new service satisfies the statutory criteria of the Communications Act of 1934. The Board concluded that the public interest would not be served by expanding the scope of universal service at this time. The Board reasoned that high-speed service is not “essential�? to consumers because online resources are available by voice telephone, dial-up connections and in public libraries and schools. Moreover, a substantial majority of consumers so far have chosen not to subscribe to high-speed services where they are available.