Some members of the ISP-Wireless list say that if the FCC rules that Wi-Fi providers must pay into the USF, that will subsidize ILEC competition while others believe that if they contribute to the USF, they'll get the money back from rural schools.

[March 21, 2002]

On the ISP-Wireless list in March, PL inquired,

"I just heard that the FCC may require wireless broadband providers to contribute to the Universal Service Fund. Any thoughts on this?"

MA followed up with a crucial point of clarification:

"What is the USF? I know I pay money to it every month on my phone bill, but I don't know what it is."

A number of respondents offered explanations:

[MV noted] "It's supposed to subsidize phone services to rural and/or under-served areas."

[PL added] "The USF goes to what is commonly referred to as E-Rate. School systems each year file for access to E-Rate funding, which is used for specific infrastructure projects."

[RR complained] "Because we have lots of dialup lines, we make large contributions to the USF. This tax is then given to groups like the local school district, so they can install wireless to provide free Internet access to government agencies that would otherwise be customers of ours."

PL warned that applying this to wireless will inevitably increase costs:

"If the FCC passes this ruling, then you, as providers of Internet access, will have to begin collecting USF fees from your users. It will certainly add complexity to your year-end accounting as well as force you either to eat the added cost or to increase fees."

Others suggested that it could get even worse:

[TW observed] "It's designed such that, if there is an 'existing service' available to provide connectivity, then that service is the one that must be used with USF funding. Thus, if Verizon offers service, the school system is not allowed to use the subsidy just to purchase radios for their county-wide network, which would eventually result in less income for Verizon. It's a nasty little piece of legislation written to favor the ILECs."

[JP agreed] "In Maine, Verizon overcharged the customers by millions, so the PUC made them set up all schools with free 56 Kbps frame relay. Verizon used this project to build a frame relay network for the whole state, from which they have obvious commercial gain. They also built an ATM network for schools to connect together for distance learning, which was just a ploy to get even more E-Rate dollars into their pockets. They charge the schools big bucks for it, knowing that the schools pay for it with E-Rate money. Before this, Verizon didn't do ATM in Maine."

[EG added] "So if we end up paying into the USF, that basically means that we will pay ILECs to compete for our customers? Ouch: that hurts."

JT had a more optimistic perspective on things:

"The way it's supposed to work is to take money from well-served areas and redistribute it to rural areas where the costs are higher. If they make fixed wireless broadband providers pay into it, I hope all of us hold our hands out, since most of us are providing service in rural areas!"

— End