The FCC's Future of the Universal Service Fund Report | Citizens Against Government Waste

The FCC's Future of the Universal Service Fund Report

Agency Comments


Federal Communications Commission

Washington, D.C.

In the Matter of Notice of Inquiry on the Report on the Future of the Universal Service Fund

WC Docket No. 21-476

Comments of

Thomas A. Schatz


Citizens Against Government Waste

February 16, 2022

Citizens Against Government Waste (CAGW) is a private, nonprofit, nonpartisan organization dedicated to educating the American public about waste, mismanagement, and inefficiency in government.  On behalf of the more than 1 million members and supporters of CAGW, I offer the following comments regarding the Notice of Inquiry on the Report on the Future of the Universal Service Fund (WC Docket No. 21-476).

 CAGW has been calling for reforms to the universal service fund (USF) due to waste, fraud, abuse, and mismanagement in the program and to reduce the “hidden tax” found on their telephone bills, known as the USF fee.  Congressional support for the USF was made clear at a September 6, 2017, Senate Commerce, Science and Transportation Committee hearing regarding the “Risk of Waste, Fraud, and Abuse in the Federal Communications Commission’s Lifeline Program,” which is funded by the USF fee.  Then-Chairman John Thune (R-S.D.) stated that “the bipartisan principle of universal service have [sic] been the bedrock of our nation’s communications policies for more than 80 years, and programs that efficiently and prudently further the goal of universal service have contributed greatly to our nation’s economy, and to the safety and well-being of Americans.”[1]  Given this strong commitment to the USF, USF funding must be allocated to where it is needed most, and the methodology by which the overall program receives funding should be revamped to reduce the burden on ratepayers who pay for the program through fees attached to their telecommunications bills.

The Telecommunications Act of 1996 created the current USF funding mechanism to help provide telephone service to areas of the country that are hard to reach (High Cost); rural health care; schools and libraries (E-rate); and low-income support (Lifeline and Linkup).  The funding is administered by the Universal Service Administrative Company (USAC) and increases to the contributions are approved by the FCC.  The current structure is a “hidden tax” born by customers of telephone services.  Only Congress can impose a federal tax on citizens across the nation, and in setting up the USAC and the contribution factor that adjusts the fees paid by these consumers, it has abdicated this taxing authority to unelected bureaucrats.

When the FCC first started tracking the USF contribution factor in 2000, the contribution factor was set at 5.66 percent.  As the number of landlines and paging services decrease and other services provided to Americans increase, revenues and expenses for the USF fund rise as well.  While it took more than 10 years for the contribution factor to increase from its initial 5.66 percent to 12.9 percent, and then another eight years to increase to 20.1 percent, over the past three years the contribution factor reached an all-time high of 33.4 percent in the second quarter of 2021, dropping down to 25.2 percent for the first quarter of 2022.[2]

CAGW continues to be concerned about abuse of the programs funded through the USAC and other initiatives to get consumers connected to broadband.  During the September 6, 2017, hearing, Jeffrey A. Eisenach, Ph.D., testified about the endemic problem with waste, fraud, and abuse of the Lifeline program.[3]  In his testimony, he stated that, “It should be noted that the FCC’s mismanagement of the Lifeline program is not an outlier.  The universal service program has been rife with waste, fraud and abuse throughout its history.”[4]  He continued, “Reviewing the FCC’s high-cost programs in 2008, the GAO found that:  the ‘FCC has not established performance goals or measures’ for the program; ‘while some internal control mechanisms exist… these mechanisms are limited and exhibit weaknesses that hinder FCC’s ability to assess the risk of non-compliance;’ ‘the carrier certification process exhibits inconsistency across states that certify carriers;’ and, ‘carrier audits have been limited in number and reported findings, and carrier data validation focuses primarily on completeness, not accuracy.’”[5]

While the National Verifier has helped to reduce waste, fraud, and abuse in the Lifeline program, it has not been foolproof.  On December 13, 2021, Sens. Roger Wicker (R-Miss.) and John Thune (R-S.D.) and Reps. Cathy McMorris Rogers (R-Wash.) and Robert Latta (R-Ohio) sent a letter to the FCC asking for more information after an FCC Office of Inspector General (OIG) report found that some providers were falsely claiming some “households had children attending schools participating in the National School Lunch Program’s Community Eligibility Provision (CEP) in order to obtain EBB funds.  The OIG found that in some CEP schools, the number of households enrolled in EBB based on students attending that school far exceeded the number of students actually attending the school.”[6]

As the EBB program transitions to the Affordable Connectivity Program (ACP), CAGW urges the FCC to reevaluate the criteria being used to determine eligibility, including ensuring that the National Verifier and other tools available are maximized to proactively eliminate waste, fraud, and abuse in the program before benefits are issued.

At a time when an increasing number of Americans are giving up their land lines in favor of mobile only or digital only services, the current funding mechanism for the USF is unsustainable.  It is past time for Congress to reevaluate the funding mechanism used to supply universal service and ensure that if this program is to continue it can do so in the most cost-effective way possible without additional financial burdens on consumers and taxpayers.

The request for comment identifies funding available for broadband from the Infrastructure Investment and Jobs Act of 2021 (IIJA).  However, since at least 2018, several broadband funding initiatives are in place that have contributed toward bridging the digital divide. 

In 2020, the FCC launched the Rural Digital Opportunity Fund (RDOF) and announced that approximately $20.4 billion will be disbursed over 10 years to bring fixed broadband and voice services to unserved rural communities across the country.[7]  This program is a reimagining of the Connect America Fund portion of the High Cost program, aimed at more efficiently moving resources to where the funding is needed most, and has provided significant incentives and private sector commitments to build new networks in unserved communities.

The Department of Agriculture’s Rural Utilities Service (RUS) Broadband ReConnect (ReConnect) program has distributed more than $1.5 billion in funding, with $853.9 million awarded in FY 2020.[8]  In October 2021, RUS issued its Notice of Funding Availability (NOFA) evaluation criteria for Round 3 of the ReConnect, which in addition to announcing the application process for round 3, included preferences for governmental or quasi-governmental entities and entities who agree to unrelated policy requirements like net neutrality.[9]  Given the need to reach unserved communities quickly, such preferences add little to no value to resolving the ultimate problem in reaching High Cost areas of the country, and could serve as a deterrent for future funding bids.

The Consolidated Appropriations Act, 2021 appropriated more than $5 billion for broadband-related issues, including the Emergency Broadband Benefit (EBB) program which was established with $3.2 billion; the Secure and Trusted Communications Networks Act which received $1.9 billion to help replace telecommunications equipment from untrusted suppliers; the Broadband Infrastructure Program, which got $300 million to help fuel fixed broadband deployments in unserved communities, and the Connecting Minority Communities Pilot Program, to which $285 million was allocated to help historically black and tribal educational institutions, minority-serving businesses and nonprofits purchasing broadband connectivity and equipment.[10]

The American Rescue Plan Act of 2021 (ARPA) provided $350 billion for state, local and tribal governments with so much flexibility that all or part of it can be spent on broadband infrastructure.  ARPA also gave $10 billion to the Capital Projects Fund for states to use for projects like broadband infrastructure deployments and created the $7.2 billion Emergency Connectivity Fund to help schools and libraries purchase broadband devices like hotspots, routers, and tablets. 

On November 15, 2021, the Infrastructure Investment and Jobs Act of 2021 was signed into law.  This massive infrastructure spending package included $65 billion for broadband improvements including $42.45 billion allocated toward a new Broadband Equity, Access and Deployment (BEAD) program; $14.2 billion for the Affordable Connectivity Program (ACP); $2.75 billion for a Digital Equity Program; $2 billion for a Tribal Broadband Connectivity Program; $2 billion for the Rural Utilities Service Distance Learning, Telemedicine and Broadband Program; and $1 billion for new Middle Mile grant program.[11] 

In addition, during a Facebook Live interview on February 1, 2022, FCC Commissioner Brendan Carr indicated that while approximately $80 billion is needed to connect everyone across the country who is unserved, there could be as much as $800 billion that can be used for broadband deployment in the pipeline.[12]  It is critical that this massive funding for broadband infrastructure be spent effectively and efficiently, and Congress and state governments must ensure that appropriate oversight and performance metrics are in place.

The First Quarter Contribution Factor report projects that the High Cost program will cost $994 million in the first quarter of 2022.[13]  Other programs show a significantly lower cost, with the Schools and Libraries Program at $573.39 million; the Lifeline Program at $206.10 million; and the Connected Care Program at $8.33 million.[14]  The Rural Health Care program is expected to fall within its budget caps and is listed as $0.  However, given the sizable amount of broadband funding authorized by Congress over the past two years, it is worthwhile to consider whether the High Cost program should be eliminated or drastically reduced in scope with other federal programs having adequate resources to ensure that High Cost unserved areas of the country can be connected. 

On February 3, 2022, CAGW filed comments with the National Telecommunications and Information Administration (NTIA) of the Department of Commerce relating to grants funded by the IIJA.  In those comments, CAGW reiterated its concerns about funding being used to overbuild existing broadband networks, and strongly urged NTIA to focus funding on areas of the country that are truly unserved by broadband at a minimum standard of 25/3 Mbps.[15]  CAGW urged NTIA “to use a technology and vendor neutral approach to all funding under the IIJA, and for that matter, all other funding for broadband programs, including NTIA’s existing Broadband Technology Opportunities Program (BTOP).  All grant applicants should be treated equally based on how well they can provision broadband to those who are currently unserved or underserved.”[16]  In addition, CAGW noted that “Broadband funding should not be saddled with restrictions unrelated to the objective of connecting unserved and underserved communities, like the Department of Treasury’s final rule on using the $350 billion available for state and local government infrastructure projects in the American Rescue Plan Act (ARPA), which prioritizes investments in fiber-optic infrastructure and ‘support for broadband networks owned, operated by, or affiliated with local governments, nonprofits, and co-operatives.’[17][18]

For future funding of the USF, there are at least two noticeable proposals.  The first is to impose an access tax on technology companies that use internet advertising revenues as part of their primary business model instead of the USF fee on consumers’ telephone bills.  The second recommendation is to have Congress appropriate funding for the USF as part of the regular appropriations process.  However, Congress and the FCC must first evaluate whether funding the various programs within the USF are necessary at all given current funding through other federal programs that will similarly meet these requirements, and then determine a new structure for the USF for the future.

The first proposal is an unfair and unequal tax on one of the most vibrant sectors of the economy to the benefit of all other sectors.  It would be passed on to consumers just like the contribution factor is currently added to telephone bills, noting as well that such fees are regressive, disproportionately impacting lower-income individuals and families.

An appropriation for the USF through the Department of Commerce could ensure continued funding for the program.  However, the appropriation’s process in Congress is severely broken, with legislators passing the appropriations bills on time in only fiscal year 1977, 1989, and 1995 in the 47 years since the 1974 Budget and Impoundment Control Act was signed into law.  Instead, Congress has become heavily reliant on passage of continuing resolutions (CRs) to ensure the government is able to continue operating until an appropriations bill is passed.  However, under the restrictions of a CR, new appropriations for programs like the USF cannot be initiated.  CRs also undermine the effectiveness of agencies by creating delays and raising costs for multi-year projects like broadband deployment through the USF.

Another option for the USF is to restructure the current program to create greater accountability for waste, fraud, and abuse, and ensure that the funding mechanisms for each of the four program areas are adjusted based on current available broadband funding levels across all federal agencies stemming from the funds already available through the various bills that have allocated potentially hundreds of billions of dollars for broadband deployment.

CAGW appreciates the FCC’s consideration of these recommendations as the FCC finalizes its report to Congress on the Future of the Universal Service Fund.

[1] Senate Committee on Commerce, Science and Transportation, Addressing the Risk of Waste, Fraud and Abuse in the Federal Communications Commission’s Lifeline Program,” Hearing, September 6, 2017,

[2] Federal Communications Commission, Contribution Factor & Quarterly Filings – Universal Service Fund (USF) Management Support, Public Notices on Proposed Contribution Factors,

[3] Jeffrey A. Eisenach, Ph.D., Testimony before the Committee on Commerce, Science and Transportation, U.S. Senate, September 6, 2017, [link to testimony here].

[4] Ibid.

[5] Ibid.

[6] Committee Leaders Question FCC After Findings Reveal Fraudulent Enrollment in Emergency Broadband Benefit Program,” Senate Committee on Commerce, Science, & Transportation, U.S. Senate, December 13, 2021,

[7] Universal Service Administrative Company, “Rural Digital Opportunity Fund,”

[8] Diana Goovaerts, “Finding the money: A US broadband funding guide,” Fierce Telecom, December 31, 2021,

[9] U.S. Department of Agriculture, Rural Utilities Service, ReConnect Program, Broadband Evaluation Criteria,

[10] Ibid., Diana Goovaerts, “Finding the money: A US broadband funding guide.”

[11] Ibid.

[12] Deborah Collier, “Federal Funds for Broadband Must Not Be Wasted,” The WasteWatcher, Citizens Against Government Waste, February 7, 2022,

[13] Federal Communications Commission, Proposed First Quarter 2022 Universal Service Contribution Factor, CC Docket No. 96-45, December 13, 2021,

[14] Ibid.

[15] Citizens Against Government Waste, “CAGW Files Comments to NTIA on Infrastructure Investment and Jobs Act Broadband Program,” February 3, 2022,

[16] Ibid.

[17] U.S. Department of Treasury, “Coronavirus State & Local Fiscal Recovery Fund:  Overview of the Final Rule,” January 2022, p. 39,

[18] Ibid., Citizens Against Government Waste, “CAGW Files Comments to NTIA on Infrastructure Investment and Jobs Act Broadband Program.”

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