ETC Regulation Stifles Broadband Expansion

By: Laurel Duggan

Innovation has driven transformative change in telecommunications. The government is struggling to keep up. As communications providers expand into unserved areas, a regulation written a full decade before the invention of the iPhone is slowing them down and driving up their costs.

The Universal Support Fund (USF) aims to make communications services universally available by offsetting companies’ operating expenses in underserved areas. This includes high-cost regions, low-income consumers, rural healthcare centers, and schools and libraries.

The Eligible Telecommunications Carrier requirement (ETC), written in 1996, restricts USF support to specifically designated companies. In order to earn ETC designation, a communications provider must go through a burdensome government review process and meet minimum standards for voice service and broadband. This means that broadband-only programs—which were designed as an affordable option for underserved populations—are barred from receiving USF support. Broadband-only programs deliver vital services efficiently and affordably, but they cannot be expected to compete with USF-subsidized companies in unserved regions.

“If taxpayer dollars are to be used to connect the unconnected, they must be used in the most efficient, pro-competitive way possible. That means no overbuilds, connecting the unconnected, and efficient use of available funds,” notes Katie McAuliffe, Executive Director of Digital Liberty.

“When more providers compete in a reverse auction to serve unserved areas, everyone wins. More participation at auction means lower bids from providers to build out. With lower bids for the available USF funds, taxpayer dollars are used more efficiently and more areas of the country that are unserved are likely to receive coverage.” 

Communications companies look very different today than they did twenty-four years ago. The ETC requirement, initially aimed at quality control, has become anticompetitive and ultimately restricts broadband access in unserved areas. As is often the case, government-mandated quality standards have produced limited options for low-income consumers, many of whom are happy to pay less for broadband-only service.

The ETC barrier arbitrarily limits USF eligibility; too few firms can afford to compete. By removing it, the FCC could encourage competition and drive down broadband prices. 

The Expanding Opportunities for Broadband Deployment Act, introduced in the House by Representative Butterfield, would eliminate the ETC requirement and extend USF eligibility to broadband-only providers. It would also simplify the process of proving eligibility for the program. The resolution has been sent to the House Committee on Energy and Commerce. 

Internet access has allowed Americans to work, learn, and stay connected during the pandemic. But there is a digital divide which limits employment and educational opportunities for those with poor connectivity. It is past time for regulatory agencies to eliminate anticompetitive standards and adapt their rules to the modern telecommunications market.

Photo Credit: Asian Development Bank