Texas has long maintained the Universal Service Fund to subsidize network phone service in rural areas where it is harder to provide. While the fund does not directly subsidize broadband, the internet service often runs on the same phone service network. Credit: Verónica G. Cárdenas for The Texas Tribune

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As he campaigns in rural Texas, Beto O’Rourke is accusing Gov. Greg Abbott of stifling efforts to improve broadband internet access there, even after Abbott prioritized the issue in the regular legislative session earlier this year.

O’Rourke, a Democrat who announced in November he is running for governor, has started criticizing the Republican governor for vetoing a bill in June that would have helped replenish the Universal Service Fund, which supports telecommunications and internet services for more than 1 million rural Texas households. Abbott argued the bill “would have imposed a new fee on millions of Texans.”

The bipartisan supporters of the legislation say it was badly needed to help shore up revenue for the fund, which relies on a surcharge on in-state voice calls and has been bleeding money for years. The less revenue the fund has, the less money it has to reimburse providers, making service harder to maintain and more costly to provide in far-flung areas of the state.

“It’s another example of how Greg Abbott is causing inflation, especially for rural communities in Texas that are already struggling with higher prescription drug prices, higher gasoline prices,” O’Rourke said while campaigning last week in Lubbock. “Greg Abbott is really hurting these rural communities.”

On Tuesday, O’Rourke published a newspaper op-ed on the issue, saying it is “part of a broader trend of state leaders turning their backs on rural communities.”

Abbott’s campaign responded to O’Rourke by touting the progress made on expanding broadband access after the governor made it an emergency item at the start of the regular session. Abbott spokesperson Renae Eze said in a statement that the governor “signed 6 broadband reform bills, including appropriating more than $500 million, to significantly expand broadband access throughout Texas, especially in rural areas.”

The main piece of legislation to pass was House Bill 5, which set up a state broadband office to identify areas of need and coordinate funding for them.

But those bills that Abbott championed are a separate issue from the Universal Service Fund, according to industry experts and the GOP author of the bill that Abbott vetoed.

“While [House Bill 5] was important … it is a different subject entirely from universal service,” said Mark Seale, executive director of the Texas Telephone Association.

The funding from House Bill 5 can support upgrades or expansions, but the Universal Service Fund maintains the current telecommunications infrastructure, Seale said.

Texas has long maintained the Universal Service Fund to subsidize network phone service in rural areas where it is harder to provide. To do so, it charges a 3.3% assessment, or tax, on voice calls made within the state, landline and cell, that providers pay and then pass on to consumers. However, the fund has depleted as Texans make fewer voice calls and wireless companies change their billing methods, allocating more charges toward data and away from voice. That has led to an estimated $10 million shortfall in the fund per month starting last January, according to providers.

While the fund does not directly subsidize broadband, the internet service often runs on the same phone service network.

The bill vetoed by Abbott sought to modernize the fund by redefining a “high-cost rural area,” a definition that supporters say has become outdated and covers places that are no longer rural. The bill also would have expanded the fee to include Voice Over Internet Protocol — calls made online via programs like Skype or FaceTime. Seale said VOIP calls make up less than 10% of total connections in Texas, but applying the fee to them would mark progress in generating more revenue for the fund.

Abbott balked at the latter part, saying in his veto message that the “only meaningful change” would have been “to expand the number of people paying fees.”

“I think the veto was unfortunate because it provided another opportunity for the Universal Service Fund to catch up, and certainly it’s a very important issue in rural Texas,” said the bill’s author, Rep. John Smithee, R-Amarillo. “But it’s not one of those situations that I think is beyond help.”

Smithee and other rural lawmakers have maintained that the Public Utility Commission has the power to modernize the fund if it wants to, though it so far has declined to act. That is despite a 2020 recommendation by PUC staff to raise the surcharge.

Smithee expressed hope that the utility commission would reconsider lawmakers’ pleas now that it has new membership, a result of the fallout from the February power-grid crisis.

The PUC’s inaction is the target of a lawsuit that a group of Texas phone companies and co-ops filed earlier this year. A state appeals court heard oral arguments in the case earlier this month.

In the meantime, O’Rourke wants to make Abbott take responsibility for the veto.

O’Rourke has long talked about making rural areas more connected to the rest of the state, but his focus on the bill that Abbott vetoed represents a more targeted message as he seeks to keep Abbott in the hot seat. In his first weeks as a gubernatorial candidate, O’Rourke has been running a campaign much more focused on the incumbent than he did against U.S. Sen. Ted Cruz in 2018.

The issue also gives O’Rourke a fresh way to appeal to rural voters, whom Texas Democrats say they desperately need to do better with to win statewide.

Politically, allowing the Universal Service Fund bill to become law could have opened up Abbott to attacks that he was imposing a tax on more Texans, a dangerous charge especially in a Republican primary. And sure enough, one of Abbott’s primary challengers — former state Sen. Don Huffines of Dallas — has been a vocal opponent of the Universal Service Fund.

Huffines introduced a bill in 2017 that would have phased out the USF tax over five years.

​​“To be perfectly clear, residents of Dallas and our surrounding communities are being taxed to provide hard-line phone service to rural Texans,” Huffines wrote to constituents at the time. “While everyone should probably have access to some kind of basic phone service, this tax and redistribution of wealth is the wrong way!”

A spokesperson for Huffines’ gubernatorial campaign said that remains his position on the fund.

The Texas Tribune

The Texas Tribune is the only member-supported, digital-first, nonpartisan media organization that informs Texans — and engages with them — about public policy, politics, government and statewide issues.

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