Hill Group Seeks New USF Revamp Feedback; Digital Ad Tax Called Best Alternative
The recently relaunched bipartisan congressional working group studying a USF legislative revamp is seeking a new round of stakeholder comments about how to proceed and has opened a portal for submissions, Senate Communications Subcommittee Chair Deb Fischer, R-Neb., said Friday. Meanwhile, the Digital Progress Institute said in a white paper Thursday that USF's current contribution mechanism is “unsustainable” and “horrendously inefficient.”
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Comments to the congressional USF working group are due Sept. 15, Fischer's office said. The portal says the working group “seeks comments from stakeholders across the country to explore the current state of the Fund, and assess proposals for the Fund’s modernization and reliable support of voice and broadband services into the future -- particularly following” the U.S. Supreme Court’s June ruling in Consumers’ Research v. FCC that the USF’s funding mechanism is constitutional ruling (see 2506270054). The working group previously sought stakeholder feedback and drew calls from Free Press and others to use a USF revamp to make the FCC’s now-lapsed affordable connectivity program permanent (see 2308280061).
Fischer, a working group co-chair, said she’s “committed to working toward a long-term solution for [USF] and the communications services it supports. With our comment portal now open, I look forward to reviewing feedback with the goal of closing the digital divide for unserved and underserved communities across America.” House Commerce Committee Chairman Brett Guthrie, R-Ky., and other lawmakers told us they feel less pressure to quickly reach an agreement on legislative recommendations since the Supreme Court's Consumers’ Research ruling (see 2507030051).
The most promising alternatives to the USF status quo involve imposing a tax on digital services, Pepperdine University economist Jim Prieger said in the DPI-commissioned white paper. “If the policy goal is to shield consumers from the tax burden, then taxing digital advertising is likely the best option,” the paper said. “With this option, consumers would likely bear only a small share of the direct tax burden.”
While some economists and other commentators argue for funding the USF through general tax revenue, “most of that comes from personal income, which is already heavily taxed,” it said. Though the tax rate would be relatively low, "the marginal cost of public funds would be high. Appropriations are only half as damaging to consumer/worker welfare in terms of deadweight loss, but the lost benefits still represent a high degree of tax inefficiency.”