Universal Service

Background

The goal of universal service is to provide essential telecommunications services to all consumers at rates that are just, reasonable, and affordable. All consumers should receive service that meets their daily needs at a reasonable price. And no one should have to forgo other necessities, such as medicine and food, in order to use necessary telecommunications services. Still, this goal recognizes that just and reasonable rates may still be unaffordable for some consumers.

Telecommunications—for more than 80 years the US government has considered universal service a national goal. The Telecommunications Act of 1996 sought to ensure that all consumers could purchase advanced telecommunications and information services at rates that are just, reasonable, and affordable.

As communications technologies advance, the commitment to universal service becomes more important than ever. High-quality broadband networks have the potential to make the world more accessible to all Americans by erasing the distances between rural and urban communities. Connective technology provides pathways to economic and social activities that people consider vital for leading comfortable and meaningful lives. Such technological advances can greatly expand opportunities for people of all income levels and in all locations to stay in contact with one another. Therefore, when consumers have access to affordable, high-quality communications services, everyone benefits.

All 50 states, the District of Columbia, Puerto Rico, and the US Virgin Islands have established some type of universal service fund (USF). At the federal level, the Telecommunications Act of 1996 directs the Federal Communications Commission (FCC) to treat universal service as an “evolving level of telecommunications services.” That is, the act instructs the commission to periodically update the definition of universal service to “account [for] advances in telecommunications and information technologies and services” that have “been subscribed to by a substantial majority of residential customers.” In November 2011 the FCC explicitly named ubiquitous broadband service as a universal service goal.

Growth in the USF—the federal USF subsidizes service to high-cost areas, low-income consumers, schools, libraries, and rural health care facilities. The total amount of USF disbursements has increased from $1.8 billion in 1997 to nearly than $9 billion in 2016.

One reason for the dramatic growth in the federal USF is the increased number of companies with “eligible telecommunications carrier” status. Carriers with this status are qualified to receive universal service funding. Because the total available pool of USF monies has not kept pace with the growth in disbursements, the monthly universal service fee on consumers’ bills—also referred to as a contribution factor—has increased significantly. The universal service fee has risen from approximately 5 percent in 1998 to nearly 18 percent in 2016.

Reforming the USF—in March 2016 the FCC overhauled the universal service program, including the Lifeline program, which provides discounted service for consumers of low incomes (See section below, Assistance Programs—Lifeline). The ruling expanded the USF’s support mechanism in order to include voice and broadband service in the Lifeline program.

Energy—lawmakers have not yet adopted a universal service policy to protect consumers of household energy services. Yet the need for a universal energy-service policy is evident, particularly during difficult economic times. During times of high energy prices and price volatility, the size of home energy bills can increase dramatically, sometimes leading to the accrual of past-due penalties that place many households at risk of disconnection. Public health, safety, and welfare are compromised when customers are unable to pay energy bills and utilities respond by disconnecting service. Arrearages also affect utilities’ financial health. In states that have opened retail energy markets to competition, consumers are more at risk. However, in most of these states, regulation ensures the option of standard offer service (also known as “provider of last resort service” or “default service”) at stable rates.

The reporting of uniform collection data would help make programs and policies more effective in ensuring safe, reliable, and adequate utility services. To undertake such analysis would require regular, comprehensive compilation of uniform billing and arrearage data for residential customers. Such standards and measures do not exist at present. A minority of states does gather some collections data, but not all do so in the same manner. As a result, the data that are available cannot easily be aggregated, and state-by-state information is too incomplete to allow meaningful nationwide comparisons and analysis.

Universal Service: Policy

Basic services for all

In this policy: FederalState

Policymakers should ensure that everyone has affordable and reliable access to essential communications services, including voice and broadband.

Distributing universal service funds among states

In this policy: Federal

Policymakers should ensure that universal service funds are distributed fairly and equitably among the states.

Determining the size of the universal service fund (USF)

In this policy: FederalState

Regulators should use forward-looking (i.e., efficient) cost models to determine the size of the USF.

Limiting growth in the USF

In this policy: Federal

Federal policymakers should conduct a thorough audit of all service providers that receive high-cost funding.

Universal service support to providers

In this policy: FederalState

Federal and state regulators should apply rigorous standards in designating eligible telecommunications carriers to ensure that only fully qualified carriers capable of and committed to providing universal service receive support.

Federal policymakers should require fair and equitable universal service contributions from all providers of telecommunications or information services that benefit from the public network and universal service programs and that compete with existing universal service contributors.

Policymakers should apply a revenue-based methodology to determine a provider’s contribution to the preservation and advancement of universal service.

Policymakers should ensure that all carriers recover their universal service contributions in a manner that is fair and equitable to all consumers, including those with low incomes.

Public communications points

In this policy: LocalState

Policymakers should encourage the deployment of Wi-Fi kiosks and other innovative technologies to replace aging payphone infrastructure and otherwise ensure that public communications access points are available where needed for public health, safety, or welfare.

Energy services

In this policy: FederalState

Federal and state policymakers should ensure that essential energy services are affordable and available to all households.

Federal and state policymakers should establish a definition of “universal service” for the energy industry that is similar to the one in the Telecommunications Act of 1996. The definition should specifically state that rates must be just, reasonable, and affordable and that energy assistance programs should be available to households with low incomes.

Regulators should periodically collect and report uniform data on arrearages, disconnections, and reconnections from all electric and gas utilities to determine the effects of market conditions, higher energy prices, weather conditions, and utility and regulatory policy and practices on customer health, safety, and welfare.