NTCA, Cartesian Release New Report on the Business Case for USF

As the FCC and Congress assess potential updates to the federal Universal Service Fund (USF), NTCA-The Rural Broadband Association partnered with global consulting firm Cartesian to release a new report to highlight the critical role the USF plays in sustaining rural connectivity and ensuring affordable broadband and voice service in rural communities that otherwise lack a business case for investment.

The USF helps to ensure telecommunications and broadband services are available and affordable for all Americans, supporting critical access for schools, libraries, rural health care, low-income households and rural high-cost areas. Without the USF, it is difficult to make a business case to invest in many rural areas, to sustain networks once they are built, or to keep service rates affordable.

Highlights of the study conducted by Cartesian, "Universal Service - Sustainability and Business Cases for Rural Connectivity," include:

• Without high-cost USF support, the sustainability of existing rural networks and services would be called into question. If USF support were eliminated, operating margins associated with the delivery of services over existing networks built in fulfillment of universal service would become unsustainable. Moreover, once the costs of maintaining and upgrading networks over time to keep pace with consumer demands are factored in, negative cash flows would pose even greater risks to ongoing service delivery and affordability. For example, a 40% reduction in USF support would prevent operators from sustaining operations on existing networks, threatening the long-term viability of broadband access in rural areas.
• High labor costs present a substantial challenge. Labor costs make up about 50% of network operating expenses. With rural labor costs rising faster than inflation, operator margins will continue to shrink, especially where support fails to help address such impacts.
• Funding cuts would threaten rural connectivity and put local economies at risk. Because USF support is targeted to the areas that need it most, the loss of USF support could force operators to discontinue or scale back services being delivered today. This could have a significant impact on essential services, education and commerce, exacerbating the digital divide and leaving many communities unserved or underserved.

"As network demands increase and operating costs rise, the Universal Service Fund continues to serve a vital role in sustaining rural networks and ensuring affordable access to broadband and voice services," said NTCA CEO Shirley Bloomfield. "This report highlights just how delicate the balance is for robust, reliable, and affordable rural connectivity and how important it is for policymakers to take into account market dynamics and sustainability when making decisions. If USF support were cut dramatically or eliminated, the business case for rural connectivity would become even more challenging, and rural communities could lose access to the voice and broadband services they have become increasingly dependent upon for education, health care, and commerce."

"Cartesian is proud to have partnered with NTCA and its members to evaluate the role of Universal Service Fund in sustaining rural communications networks," said Cartesian Principal Ted Chan. "This study shows that USF is fundamental to the delivery of affordable services in rural communities and is critical to account for the economic realities of operating in such areas. This underscores the importance of maintaining stable, predictable funding to safeguard connectivity in rural America."