House Republicans Propose Capping FCC’s Universal Service Fund

Rudy Takala | March 19, 2015 | 1:09pm EDT
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House Communications & Technology Subcommittee Chairman Greg Walden (R-OR). (AP photo)

( – House Communications and Technology Subcommittee Chairman Greg Walden (R-OR) released draft legislation Tuesday that would cap the Federal Communications Commission's Universal Service Fund (USF) at $9 billion per year, decreasing it by more than 25 percent from its current level of $12.1 billion.

The fund, which is paid by utilities to finance universal service access, has increased 45 percent from 2008, when it was $7.2 billion. The increase was 3.5 times the rate of inflation since President Obama took office.

Utilities affected by the fee pay into the USF at a rate of 16 percent of revenue they receive from end-user telecommunications customers. On a typical phone bill of $45, that equates to $7.25 in added costs per month for consumers.

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The FCC voted in February to reclassify Internet service providers as a Title II utility, with reassurances they would not be required to pay into the USF.

However, on Tuesday, FCC Chairman Tom Wheeler conceded that it was possible that such a tax could be imposed in the future as a result of the reclassification.

The Republican bill, which reauthorizes the FCC for the first time in 25 years, also denies the agency’s request for a budget increase.

The legislation would reauthorize the FCC at its current funding level of $339.8 million for the next four fiscal years. It would also authorize appropriations for spectrum auctions at the current level through 2022 and create an independent inspector general at the FCC who could not be fired by the chairman.

Walden’s bill does not conform to a request made by FCC Managing Director Jon Wilkins at a hearing before the committee earlier this month to increase the agency’s budget to $505 million. Wilkins said a budget hike was necessary because the FCC was suffering from a lack of sufficient funding.

“Flat funding has led to staff reductions,” he said. “We already are undergoing an attrition-driven workforce restructuring process in many of our bureaus.… [and] limited funds have delayed many improvements and threaten to cost us more each day that we are unable to move ahead.”

Wilkins also requested that the FCC be permitted to transfer an additional $25 million out of the USF to pay for its management.

But Walden responded by saying that the fact that it would take another $25 million simply to manage the USF raised “significant questions about the FCC’s budget and the ever increasing size of the Fund.”

“The Committee remains concerned with several aspects of the Commission’s expanding budget,” according to a March 16 memo accompanying the draft legislation by the committee’s majority staff.

“First, the sheer size of the Commission’s request warrants additional scrutiny. For the first time ever, the Commission is requesting more than $500 million dollars to support its ongoing operations. Even adjusted for the rate of inflation, this far surpasses the amount the FCC needed to conduct its work when it was arguably its busiest: implementing the Telecommunications Act of 1996.

“Second, the Commission’s request to support personnel associated with the Universal Service Fund by transferring money out of the Fund would move these costs away from the Commission’s annual appropriation.

“Moreover, it does not appear that the Commission has shown any corresponding reduction in the personnel costs of the other bureaus it intends to fund through its USF request. This is particularly troubling because the Commission is authorized under current law to expand the size of the Universal Service Fund to meet the Funds’ obligations," the memo stated.

All five FCC commissioners appeared before Walden’s committee on Thursday to discuss the proposed budget, as well as the agency’s oversight and transparency.

Related: FCC Chairman Concedes Future Internet Tax Is Possible After All

Related: FCC's Request for Record Budget Greeted by Congressional Skepticism

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