Federal Communications Commission Chairman Ajit Pai has proposed a new spending cap on the FCC's Universal Service programs that deploy broadband to poor people and to rural and other underserved areas.

Pai reportedly circulated the proposal to fellow commissioners on Tuesday, meaning it will be voted upon behind closed doors instead of in an open meeting. Pai has not released the proposal publicly, but it was described in a Politico report Wednesday, and an FCC official confirmed the proposal's details to Ars. Democratic FCC commissioners and consumer advocacy groups have criticized Pai's plan, saying it could harm the FCC's efforts to expand broadband access.

The FCC's Universal Service system's purpose is to bring communications service access to all Americans and consists of four programs: The Connect America Fund, which gives ISPs money to deploy broadband in rural areas; Lifeline, which provides discounts on phone and broadband service to low-income consumers; the E-Rate broadband program for schools and libraries; and a telecom access program for rural health care providers.

Pai's plan suggests an $11.4 billion annual cap on the total cost of the four programs, which is more than current spending but would put an upper bound on what the program could spend in the future. The cap would be indexed for inflation, FCC Commissioner Michael O'Rielly wrote on Twitter.

Budget cap is “overdue,” O’Rielly says

O'Rielly, a Republican, complained that "early critiques" of the plan came from people who "hav[en't] read it," but the Republican-controlled FCC hasn't made it public. O'Rielly's office told us they're hoping to get the proposal released publicly soon, but it's up to Pai to decide whether a proposal he has circulated to other commissioners is made public before it has been voted on. The FCC's list of items on circulation was updated today to include the proposal, referring to it as a plan for "Universal Service Contribution Methodology," but provides no description beyond those four words.

O'Rielly said in a statement to Ars that he already voted to approve the proposal. Pai could get it passed 3-2 if he gets a yes vote from Brendan Carr, the other Republican in the FCC's three-member Republican majority.

We asked Pai's office for details on his proposal, and we contacted Commissioner Carr's office about whether he supports the plan today. We'll update this story if we get any responses.

"Adopting an overall spending cap for the Universal Service Fund, as proposed in the recent circulation item, is both overdue and incredibly needed," O'Rielly told Ars. "The commission must inject fiscal responsibility into the USF [Universal Service Fund] by establishing an upper boundary of how much we are willing to take from hardworking American consumers who support the program through higher fees on their phone bills."

All four Universal Service programs are paid for by Americans through fees on their phone bills. Broadband services aren't subject to the same fees, even though Universal Service programs are now mainly for expanding broadband access.

Pai's proposal suggests an overall cap on spending across the four Universal Service programs, an FCC official who is familiar with the proposal told Ars. But Pai's plan doesn't propose any meaningful changes to how Universal Service Fund surcharges are assessed to Americans, the official said.

Imposing Universal Service fees on both telephone service and broadband could expand the base of people contributing into the fund, potentially lowering the average cost for each person. But adding a government fee to broadband service would be controversial and may require Congressional approval.

Cap could harm low-income Americans

Pai's plan is a Notice of Proposed Rulemaking (NPRM), one of the first steps in a rulemaking process. If approved, the NPRM would ask the public for comment on a series of questions related to Universal Service spending. After receiving comment, Pai would decide whether to seek a commission vote on a final proposal.

"The measure seeks comment on what the cap should be, including whether it should be set at $11.4 billion, the sum of all USF program budgets in 2018," Politico wrote.

The budget is higher than actual spending. "Actual disbursements from the fund were about $9.6 billion" in 2018, Politico wrote.

But spending could rise to the cap level under certain circumstances. Lifeline, for example, had 10.7 million low-income subscribers in 2017, even though 38.9 million American households met the program's low-income requirements. If there's a large increase in poor people seeking Lifeline support, the FCC could have a hard time providing subsidies for all of them if program spending is capped.

Three of the four Universal Service programs already have caps, but Lifeline has a budget that can be exceeded instead of a strict cap.

Pai previously proposed a cap on Lifeline spending in 2017 and has tried to make it more difficult for poor people to claim the subsidies. Separately, Pai's attempt to take certain Lifeline broadband subsidies away from tribal residents was blocked by a federal appeals court last month.

Pai's new proposal, in addition to proposing an overall Universal Service funding cap, encourages debate on the effectiveness of the Universal Service programs and asks the public how the FCC should prioritize spending in the event that a future spending cap is reached, the FCC official who talked to Ars said.

Democrats blast Pai’s plan

The FCC's two Democratic commissioners, Jessica Rosenworcel and Geoffrey Starks, both criticized the plan in statements to Ars.

"The FCC's proposal flies in the face of the agency's own rhetoric about bridging the digital divide," Rosenworcel said. "It threatens to cut off broadband in rural areas, limit high-speed Internet access in America's classrooms, shorten the reach of telemedicine nationwide, and foreclose opportunity for those who need it most."

Starks said Pai's proposal "would necessarily pit hospitals, schools, libraries, students, patients, and millions of Americans who lack broadband—in both rural and urban areas—against one another for these funds."

"It is incredible to me that the commission would consider an item proposing to limit our ability to fund our Universal Service programs, which support broadband buildout and adoption in this country, at the same time that we have before us a broadband deployment report riddled with significant and unresolved allegations of inaccuracies and overstatements," Starks also said.

Starks was referring to a major error found in Pai's annual broadband deployment report. Pai initially claimed that new data shows his deregulatory policies are boosting broadband deployment, but even the modest gains cited by Pai relied partly on the claims of one ISP that acknowledged submitting false broadband coverage data to the FCC. With the error removed, Pai's data seems to show that 21.3 million Americans lack access to fixed broadband with speeds of at least 25Mbps downstream and 3Mbps upstream. Other research has found that 68 million Americans have either Comcast or Charter as their only choice for 25Mbps/3Mbps broadband service.

Because of the FCC's poor data, it isn't clear "who in this country has broadband and who does not," Starks continued. "This relentless desire to claim victory despite overwhelming evidence that much work remains to be done is counterproductive to good policymaking... Putting an arbitrary limit on the amount of money that we can spend at this stage is premature [and] runs counter to the goals and obligations imposed on us by Congress."

The National Hispanic Media Coalition said that for people "struggling with poverty and disconnectedness," Pai's plan "would add a layer of uncertainty to the only federal program that ensures that they maintain access to telephone or wireless broadband services... Arbitrary budget cuts to Universal Service Funds will disconnect Americans who are starving for digital opportunities, especially in unserved and underserved communities that Latinos call home."

Consumer advocacy group Public Knowledge said Pai's plan "is just another signal that the commission's current leadership has chosen to severely weaken the FCC's long-standing universal service mission."

Sen. Ed Markey (D-Mass.) also slammed Pai's proposal, telling Politico that "any effort that could harm classroom learning, broadband deployment, rural health opportunities, or connecting more individuals should be shelved and never considered again."