Ending Big Tech’s Free Ride on USF: Reforming the Universal Service Fund to Serve Consumers and America
US internet companies Alphabet, Meta, Apple, Amazon, Microsoft, and Netflix (“Big Tech”) derived an estimated $58 billion – $115 billion in revenue in 2023 from users connecting to the internet through the Universal Service Fund (USF) and the now-ended Affordable Connectivity Program (ACP). With each new household connected, Big Tech earned on average $1515 in 2023. Some 5 million businesses in USF-funded areas drove an average of $19,000 per firm to Big Tech in 2023, some $95 billion. Altogether, Big Tech enjoyed $58 billion – $210 billion from consumers and enterprises in USF-funded areas.
Strand Consult’s report “Ending Big Tech’s Free Ride on USF: Reforming the Universal Service Fund to Serve Consumers and America” is the third in a series of reports by Strand Consult examining broadband networks and investment challenges in USA, following the reports Broadband Cost Recovery: A Study of Business Models for 50 Broadband Providers In 24 US States and Middle Mile Economics: How streaming video entertainment undermines the business model for broadband.
While profiting significantly from the $9 billion USF, Big Tech does not contribute to the program. Instead, the USF is funded from fees collected on traditional voice subscriptions, which are disappearing. To fund USF, a surcharge of 36 percent of the subscription cost is added to the bill for certain telecom services. This charge is born mainly by elderly persons on fixed incomes. However Big Tech could fund the USF at a rate below 1 percent because of the growing profitability and revenue its services for cloud, software and advertising. Moreover, as new households and locations come online in USF-funded areas, Big Tech’s annual revenue could grow with an additional amount of as much as $35 billion annually. In fact, many of Big Tech’s services are probably already eligible for USF assessment as they incorporate telecommunications and require an FCC license.
Unfortunately, some Big Tech firms assert self-provision exemptions to systematically avoid USF obligations. In addition, Big Tech avoids compensating most broadband providers for use of their networks. Big Tech generates more than 60 percent of total internet traffic on US broadband networks and occupies most of America’s bandwidth, creating significant downstream costs for broadband providers which remain unrecovered. Strand Consult has yet to find broadband providers which have profited from increasing Big Tech’s traffic on their networks. Rather, broadband providers experience increasing competition from new technologies and falling broadband subscription prices, making the case for network investment difficult
Meanwhile 25 percent of internet traffic is Big Tech’s advertising, an element which consumers neither request nor control, and yet, increases with all internet traffic at 20-30 percent yearly. Broadband subscribers pay the same for advertising data as the data they request, an anti-consumer policy norm implemented by Big Tech lobbying.
Policymakers increasingly recognize that the status quo is no longer acceptable and that Big Tech’s free ride on USF must end.
Strand Consult´s report ”Ending Big Tech’s Free Ride on USF: Reforming the Universal Service Fund to Serve Consumers and America” describes proposed reforms to modernize USF, how to incorporate financial contributions from Big Tech and thus reduce cost to consumers, and how such reforms benefit Big Tech and the US economy as more locations and people are connected.
