Good afternoon, everyone. If i could have your attention. I know youre all enjoyingour lunch. How is everyone doing . Good . Good. Really, really great day so far and a great morning. A lot of great speakers and we are so, soape and its been prey much a a filled room all day. We are very grateful. My name is lindsay, im an attorney and policy manager here at incompas. Im here to introduce the next panel. So our next panel will be reforming the universal service fund, which is everyones favorite topic. So its entitled reform of the universal service fund, how tied stable fund. So i would first like to introduce economist who is a principal at the bridal group who will explore a recent study on the best step for to stabilize the usf. And then followi presentation we are thrilled to have john hendel out politico here will moderate a discussion as as incoming president angie to further discuss with four. With that i will give the stage to you. ■j hello . Everyone. I know how will feel to be in the limelight because it seems viable in the past, like you know, thats what weve all been talking about. And last y august, september the bridal group, battle group, my other aper on taking a look at usf and the funding and the best sources Going Forward. We hav talking about what sort f various ways that were economically feasible in the best possible ways and thats what it how this paper came about. So we like to characterize obama is like an open Research Problem on one h you have the basement a contribution base going down and that increase the contribution factor. N opening more and more every day. Couple of decades ago the contribution factor was somewhere if you look at some projections, by 2027 its going to be 50 . Not anything, calls for action and in the question is what next . How do we figure out what is thd u. S. Usf which is such an Important Program . And when were taking a look at th a economist, when we think of first subsidence and program one of the things we think about is why to subsidize a . The first thing that comes to mind is an externality, meaning it is something that the private actors dont take into account when they are making a decision, that something more than the positive externality that is a greaterux benefit and, therefor, that other funny mechanisms that need to step in to fill that hole. Ly what usf is. Its not just about deploying hard to serve areas. Its also about this externality the all americans and not just sort of a few of them in a few places. And there are wellrespected ideas in economics that talks about how do you find subsidies . The three broad principles that usual economist will talk about is one that youre your e needs to be fairly broad. Two, from which the externality is being generated. And that this st of the specter you should look towards to fund a lot of this subsidy. And the third one is whatever you do, that fee or tax ideally has to be as sort of least distortion or as possible. It ry pattern of consumption of consumers. And guided by these three mechanisms for which this could be funded. You know, that he could be placed on broadband providers. ■w placed on things that digital revenues or edge providers and not to give a spoiler alert but basically what we came out was that if you put this usf on broadband providerst distortion or way of getting funding for this program. So why do i say that . So think about first wide usf was actually, what the intent was. Historically, the intent was to telecom medications as possible and hence of course Voice Services, right . Currently Voice Services are only about ten or 11 whereas b. Most of the funding sickos in 2020 what i 6065 of the funding went to broadband. Therefore, this is a sector that is generating the externality. Ths a sector that when the subsidies are flowing to an extensive reason to look at Historical Context that this is a sector that you should put the fee on come sort of the u. S. Fp. The second leg of this isi talked about was it has to be broadbased and nondiscretionary. So when we talk about somethi ct we think about is how sensitive is a good . Typically you people so ideally a tax or if he should be placed on a product that is inelastic, meaning its not pricesensitive. If you place a tax a consumer will not change their choice of not wish means you are not for broadband it is usually an inelastic good and if you do place ac on broadband it will t choice. One thing that it think i want to very clear about, no matter where you place place the tax on edge providers, you can place the factor broadband. Somehow or the other theconsumef a price increase. It could be under usf miller could be on some of the products which digital advertising■ ■ is being a factor some of the product. The price increase will happen. It could be direct. It be indirect. There is no basg to tax thats going to completely ensure consumers against the price increase. Now the question is how much, right . If you put on broadband is been a lot of talk about theres going to be a fairly large price increase, you know, quantities between like to business costs. Just put in context, the problem itself is mor c that. You have to figure out there of course are winners and losers, right . Those people Voice Service their bills might decrease. They are not paying asf c. Nothing like 35 on their voices. Countering that, if you dout broadband, what with sp is the contribution factor goes down to 4 from 40 to 4 as a command ie of decreased to 4 under broadband bill, on your and then a slight increase under broadband bill. Inured to see where they fall in which part of the consumers are ot as simple as this is what an average number is there is more complex than that. I t would like to leave everyone with is even in terms of the pricing, we need to look at we t of look at the providers and inviting the funding versus sort of tech■3 and edge before i thik collectively policymakers to make a determination of where ultimately the Consumer Impact is going to be. And in terms of people also talked about people on broadband it might be a progressive tax versus putting it in other services. The commission and other policymakers have ways of ensuring that the low income consumers are not hurt, things like wifi program where you could exempt some of t■ he l coe taxes. It doesnt have to be one broad policy that addresses there can be a a portfolio of policies that gets us to a good outcome for usf. Thank you. [applause] thank youor issues, paroma. Okay. [inaudible] great, thanks. Taking all of that, i want to turn to you, angie, and asked why he think this can come to head now. I think web Service Funds dominating telecom in in a we havent in a long time. Weve also heard about a lot of the Reform Efforts for many years now. O a head in 2024 do you think . And actually coming to head for a while. If you look at the litigation that ensued several years ago, really challenging the u. S. It was based upon the very high contribution factor thats being driven by Telecom Revenues decline as more of the providers allocate their revenuent the broadband basket which doesnt pay in as compared to telecom. In addition, there was a significant effort by many of us in the room with the u. S. Forward coalition to really look at whats the right way for thet has to address this really high contribution factor . We did see this fact to rise a short time. I like to describe the folks i was actually at the fcc working for commissioner clyburn when i got the call. The u. S. F contribution factor just hit 10 . What are you going to do . Right . And as a staffined her office ae head of the joint board on unicef, i was like i dont know what were going to do. What do we do . It turnsut the really good book to recommend. We need to broaden the base. The commission did hav a notice of proposed rulemaking seeking comment on how to broaden the base and a a proposed a couplf different methodologies, and one of them was to add broadband revenues into the base. What weve seen a carhe National Broadband plan at the fcc thought would happen, and that is more consumers and businesses rely on as compared to Voice Services which are the Traditional Telecom services that are the combination, hikvision factor, a coalition to came together their bully for the first time agreed on a path forward for the sec to act and then the litigation as well really taking off this group to represent consumers saying that the unices unconstitutional, this rate is too high, court, you need to rein in the fcc is essentially what the cases have been about. They filed in multiple circuits and that kept the sec very busy defe many of the consumer groups also who have been defending the usf quite busy. Its the combination of all those factors that have driven and the need for usf reform. Lastly i should probably just say the infrastructure act that ■grants significant funding to ensure every consumer gets connected to broadband now and this is on top ofther funding that came during covid as well as the rescue plan funding that joey is working■j on. Its close to 100 billion thats been invested in broadband and the United States as result o these various funding mechanism, and conquer scented fcc we need to evaluate how much u. S. F we will indeed Going Forward. So that, too, i think has addd to this conversation about what is needed, how much money do we need for u. S. F annually to everyone getsand. One of the biggest want to make sure touch over the fertile Connectivity Program and what that role is in this debate because i know that something would a lot about today. About, commissioner starks talked about. Thats something to talk about earlier. Its not funded of universal service fund butearing its come same conversation probably Going Forward, i wanted to ask how you see that connection come is acp longterm going to become part of usf . Is a something were seen as the inevitability after he can to talk about the legislation to appropriate a few more billion dollars for acp. But after that is it that potentially in the usf conversation . Doesnt need to happen next . Really on during Covid Congress recognized there was a signif consumers were not connected to broadband like we wanted them to be. Its something we have been preaching when i was at the fcc formally time not only do we have to provide the ability to have Network Connect everyone but have to be able to afford it. This became apparent during■÷ covid, that of a lot of families that still just could not afford broadband. I mean, weve all heard the stories,ht, of teenagers and schoolchildren going to the parking lots of mcdonalds and taco bells at the library at night to get connected to wifi so they could this is why we saw congress start the emergency broadband benefit, which became the acp, t infrastructure act and more quote Permanent Program but not funded forever. We saw congress say we are going to appro the economists will tell you like the least distortionary way to pay for all of this is for the u. S. Treasury to pay for it. This is aoo conquers was funding the affordable Connectivity Program but obviously they need has been so over 23 million households take this program, that now the funding is about to run out and we havent even allocated the bead funding get and they were intended to work handinhand. We also commissioner starks give a revenue stream in, essentially guarantees low income consumers can afford it, right, which also helps t build more affordable, the bead dolls will stretch further. This is really, really Important Information as to how we have come how we make broad been more affordable for everyone. But as the acp dollars go away, right, and aoing awayt, heard tg away by may. Its going to be done. What do we did . We need congress to move. Incompas has endorsed the acp extension act. 7 billion of funding at the fcc would have immediate access to to be ableo kee all of these families connected. This has got to be the way forward. Its the only piece of legislation that has any st as s and getting signed by the president. I know there are some who think that usf reform can happen in the next six weeks, and had to tell you thats just not going to happen. Usf reform is like rewriting the 1996 telecom act. So guys i worked on the 94 telecom act, didnt pass and 94, right . I was a young law student back how many congresses into the 96 act we were at that point might before actually pastor is going to te o complete the reform use f and are a lot of different equities. Weve been urging congress, you cannot rely on the usf reform effort is it acp. You have got to give the financing for acp so we can keep the program going. And yes, we continue to talk usf reform. One thing was also seen in the last couple of months is the sec beginning to sketch out look like a little bit. The chairwoman, chairwoman of the sec Jessica Rosenberg himself has written to the health in january can talk about rosenworcel the acp could be added to u. S. F and look at some of the different types of ways you cservice and what thatn and what that would mean for consumers. She put an emphasis in the letter on what would these different scenarios mean f consumer bills. Paroma, i want to turn back to you because i was curious i saw this letter from the sec chairwoman. What jumped out at you when looking through this, and what role do you see Something Like that playing Going Forward as congress and of the folks are trying to can wrestle tgh on soe tough topic . I think thats a great question because, and its be d, evaluating various mechanisms. However, i think would be and ei am biased, but great to have all the economys in the oea and sec involv where there really evaluating all the different strands of this. So taking a very sort measured look at what will biased you come what will the real effects. Various constituencies and find a consumers . What was sort of edge providers who put the fees on the edge providers versus tech guys, what will that do . It would be good to see a more sort of even keeled report that was focused on the economics and not on, its probably easier generally to put fees on say big tech where even if prices are raised and direct to consumers, its that directly on your bill, so might easier and more palatable but only at the end of the day whether tmic impacts and where the harm is thats it think what we need to take a look at. It would be great for the fcc to do sort of an indepth study on all of these mechanisms before taking a policy decision. What i i find interesting t her letter is i think she was do that kind of an indepth analysis. She asked for congress to give her the authority to do the indepth analysis. So i think there is a recognition and the leadership of the fcc that theres a lot they dont know and what the mark i be based upon the different ways you can expand the base. One of the thing i wanted to be sure to ask about was the usf working group resume in capitol hill, that is been a big developer in the last year. Youve got a couple of members of that speaking i believe later despite the difficulties of use f reform that is a group that speaking those conversations. Curious what youre hoping to see out of that this year. Where do you feel that effort is to and what are the things youre watching for when thinking about that . Curious if either of you have any thoughts . We were very fortunate that we had the opportunity to go in very early on incompas filed comments into working group, and then we had an opportunity to sit down and talk to them. This followed testimony that decade before the commerce committee, the subcommittee, where they announced they were doing the working group. I know the been doing a lot of groundwork and talking to a l p. I suspect they are working quite hard to him up with the framework. Whats going to be really important is there are many different equities at usf, right, and as an agent before touching one part of usf may be difficult enough but when you potential are changing lots of things that usf there are going to many, many parties that will have a lot to say and then whether or not something that could be a complete revision of usf can make it all through both congress, both houses congress and get signed by the president. I think its going to take a lot of time and will require a lot of political will in order for. A lot of evaluation probably of the different programs with the new usf as well. This been a lot of talk about theon i feel like youve also seen an appetite out there for kind of looking at those different programs, how theyre working, espe part of that discussion. Is there any future combination like the Lifeline Program for instance, per eifert folks bring that up in recent weeks. I think youre right about that. There are for the different programs in your scepter i dont have a view industry can make all four of them. How many of you think you can in allour of them . Thats pretty good. More than i thought, right . And so as part of this review different programs and potentially what changes may be needed. One of the things that we emphasize when we were talking with the working group o four programs this that have significant amount of investment thats been made by congress through appropriations which is the least market distorted way to find thanks. There needs to be a very indepth review of whats needed Going Forward. Like where have we now build connectivity that we can rely upon for Affordable Service and it also how much funding is needed if any for Ongoing Operations of networks have been paid for, right . So these are hard questions. This is not easy stuff to figure out and will require the fcc to relyo a lot more indepth analysis, and wed really like to see in this effort on the use f reform group more guidance to the fcc of how they should go about in looking at this and money making sure were using mt and most effective way. Are you holding out hope of a legislative package moving the shoe . I knowen together and are looking through all that now but speeded its highly unlikely. More likely my daughter is going to graduate from lsu in may than s for the use f reform. You touched aboutappropriatis about that for certain programs. I i wanted to put forward the ia of what if more of use■ of funding was moved to the appropriations process . What would that mean . We have seen that over the last few decades. Paroma, do you want to consider that a little bit . I know you look deep into where this funding is coming from, consider only showpieces in different ways. What would it mean if you were to move more of usf itself into the appropriations process through capitol hill . Which clearly is fraught with lots of different issues, lots of different spending battles,wr the lack of a better word, but just curious what that would mean in youration when thinking about some of that. Leaving the political issues aside, considering the fact that if this was an easy to do then doing this through appropriations would actually be very ideal. Going back to so something i said about the subsidies are, the externalities are for the entire society as a whole. Its not just one person or one enterprise that is benefiting from it and, therefore, getting this funding to appropriation and least distortionary thing that we could do. But granted, its a thing to do and, therefore, we sort of take a look at the other rows for funding. When you look at how we prioritize ensuring that the income consumers will have food access healthcare, we actually have programs that Congress Funds to ensure those things happen. So when you have policymakers, and to do believe we seen a real shift by policymakers in the last decade to a decade and a half where theres recognition onides of the aisle that broadband is no longer just a luxury. It is actually a a necessity. S appointment and be prepared for that appointment if you dont have broadband. Sure, you can still call the doctorsice but theyre going to send you a link. I just went through this, to fill in all the information come appointment. Tiple times if you Everybody Needs access to that, right . I look at what my children have gone through in t college now. And even early on in the educational experience we needed access to broadband as a family so that they could do the research and do their homework. But even now its even more necessary than ever bhqor fudens online education. And earlier on in the day we werecial intelligence is really changing anything and i thought my low natively great point about how the study showed that students who get oneonone tutoring really benefit from that. Her scores go up higher. D outly gives them the ability to a oneonone tutoring, so tutoring with the ai smart enough knows what they need and knows what to emphasize. Guess what . You need Broadband Access to artificial intelligence. Our Society Needs this. So congress being engaged in this during covid was great. Drink infrastructure act great. But do we need a more Permanent Program just likeh, step program to make sure people dont go hungry in the United States when they dont have enough money . It is well worth congress to be discussing is most appropriate y Going Forward and how this helps every, the whole economy across the bo important for everyone to realize is the significant savings that the government attains in the varisro comes to the delivery of health care and delivery of health care to low income consumers, to the li we need a much broader perspective i think that what ive been hearing people talk about this issue. So thank you for bringing that be a lot more discussion throughout this year Going Forward and lots of wrestling with some of the species but i think we might be at get us some of this and deathly something i will be looking for to covering more of in the next few months and we will see without lance as by yo. Thank you. [applause] cspan has a number of podcasts for you. Listen to bestselling nonfiction authors and influential in afterward podcaster on q a here wideranging conversations with nonfiction authors and others were making things happen. 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