Authors: Johannes Bauer and Jean Hardy
2026-02-16
We continue our reflections on the state of digital policy with an assessment of broadband universal service policy and media policy. The Telecommunications Act of 1996 affected both policies and set them on a new course. It properly recognized the need to put universal service policy on a new footing that was compatible with the envisioned competitive marketplace, and it recognized the overarching importance of connecting schools and libraries. However, universal service policy went awry in the subsequent implementation of the law. The Act also accelerated the process of media deregulation that began gradually in the 1970s. It set the stage for subsequent measures by Republican and Democratic FCC Chairs to further relax national and local media ownership limits. These measures increased the variety of content and contributed to both higher-quality and lower-quality content. They also resulted in higher media concentration, more distinct media polarization, and temptations for government interventionism in media.
Broadband Universal Service
The experience with the pro-competitive model adopted in the Telecommunications Act of 1996 demonstrates the strengths and weaknesses of unleashed market forces to achieve universal service goals. It also shows that the best legislative plans may not work if implementation is initially fast but gradually becomes beholden to stakeholder pressure and policy inertia. Opening markets to competition unlocked massive private sector infrastructure investment in the decades after the Act, but much of it benefited urban areas and did not reach rural and remote locations. Competition in rural and some urban areas was limited until the recent emergence of fixed wireless access and Low Earth Orbiting (LEO) satellite broadband. Both high investment expenses and weak competition contributed to higher broadband prices in rural areas and lack of affordability, especially for low-income households, even though price differentiation and low-income plans mitigated some of the problems.
Congress understood that competition would not extend service to all locations, particularly in rural America, and to all user groups equally fast. Legislators were particularly concerned about bringing Internet access to schools and libraries. Policymakers realized that competition required replacing the historical system of securing universal service via internal cross-subsidies with new mechanisms that were compatible with competition. Consequently, Section 254 instructed the FCC to institute a federal-state joint board on universal service and gave the agency the power to implement its recommendations. Congress saw universal service as an evolving level of telecommunications services and established a framework for the development of rules governing contributions and uses of funds. In addition, Section 706 instructed to FCC to review regularly whether all Americans benefited from the development of advanced telecommunications capability.
Based on these provisions, the FCC established a separate organization, the Universal Service Administrative Corporation (USAC), to administer four programs (high-cost, low-income, E-rate, rural health care providers). The funding model, using a fee on traditional telecommunications services, was pragmatic but would soon be outdated. Because telecommunications were changing, the revenue base on which contributions were assessed declined rapidly and, consequently, the contribution factor increased from 5.7% in 1998 to 37.6% in the first quarter of 2026. Moreover, despite evidence showing the existence of significant digital divides as early as in the mid-1990s, policy in the wake of the Act was driven by strong trust in market forces. During the Bush Administration, the FCC considered progress toward advanced connectivity satisfactory. The Joint Board did not see a need to support broadband access until 2010, and then the adjustments were insufficient.
Two crises, the financial meltdown of 2008 and, a decade later, the COVID-19 pandemic dramatically showed the shortcomings of that vision. By 2022, more than 12 million US households, about 9.5% of the total, still lacked broadband Internet access service, a disadvantage that inflicted tremendous costs on individuals and society. Pandemic relief programs, especially the Emergency Broadband Benefit (EBB) and Affordable Connectivity Program (ACP) provided effective demand-side relief, but these programs were expensive and administratively cumbersome. ACP, probably the most effective program thus far to close digital divides, ran out of funds in 2024 and was not renewed. A streamlined version would go a long way to address persistent universal service issues.
Congress sought to overcome access digital divides in the Bipartisan Infrastructure Bill of 2021, which appropriated $42.5 billion for the Broadband Equity Access and Development (BEAD) program and support for digital equity programs, in a massive effort to close the remaining connectivity gaps. The Internet for All program was admittedly complicated by the patchwork of connectivity gaps, the dispersion of the locations that remained unconnected, and the heterogeneity of conditions at the unserved and underserved locations. Even so, the program was implemented by NTIA with high planning and administrative overhead. By the end of 2024, only three states (Louisiana, Nevada, Delaware) had completed their planning.
Other states were in the process of finalizing plans, but the Trump administration took the slow progress as a pretense to suspend implementation. All existing state plans had to be rescinded, and digital equity funding, planned to be complementary to the infrastructure investment, was cancelled. Restructured program rules promulgated in June 2025 forced all states back to the drawing board to conduct a “benefit-for-the-bargain” round and eliminate many requirements related to environmental and equity goals. Implementation was delayed by at least another year. The technological neutrality requirement, although generally desirable, in combination with the instruction to minimize subsidy needs, resulted in a much larger share of fixed wireless and satellite connections in the final deployment plans. Although these technologies may experience sufficient technological progress to meet future demand, their scalability is uncertain and may cause future connectivity challenges.
It is encouraging that BEAD is finally moving into the implementation phase. The private and societal costs of not being connected to high-speed Internet are high, and its detrimental effects are prolonged by the long planning period. The administration claims that the restructured program has saved the taxpayer $21.5B, but this number is not defensible. In 2025, when states conducted the revised bidding process, less than half of the locations on which the initial BEAD allocations were based needed funding. A large part of the reduced subsidy costs is due to the smaller size of digital access divide. The restructured program rules contributed marginally to lower subsidy needs, but the bulk of the lower expenses was due to the lower number of unserved and underserved locations.
Which leads to a pending unresolved issue: uses of the difference between the BEAD allocation, made in 2022 based on preliminary data, and the actual subsidy needs (commonly referred to as “non-deployment funds”). Although the administration backpedaled its initial threat to claw back these funds, it has sent mixed signals on any conditions that might be imposed on allowed uses. The Infrastructure Law envisions broad directions for use of any non-deployment funds for purposes, such as workforce development, that complement the expected positive effects of the infrastructure investment. In December 2025, the White House issued an Executive Order which made access to the funding contingent on having AI-friendly state policies. NTIA conducted several stakeholder listening sessions early in 2026 only to announce on March 6 that the release of guidelines for the use of funds would be delayed further.
The bigger issue plaguing universal service policy is that the framework for implementing the vision of the Telecommunications Act of 1996 that universal service is an evolving concept is broken. Universal service policy essentially establishes the minimum quality of connectivity that should be available on a ubiquitous basis and then designs supply and demand-side programs in support of these goals. In a fast-paced technological environment, there will always be inequalities between locations that have the next generation of capabilities available before they diffuse more broadly and are considered essential. Section 706 established a process for the FCC to make these assessments, but that process has become highly politicized. Updates in the minimum service that should be available should be based on a horizon scanning process to establish forward-looking goals rather than a slow-moving update to minimal connectivity.
Media Interventionism
By lifting cross-ownership rules and increasing ownership limits, the Telecommunications Act of 1996 accelerated the process of media deregulation that had begun during earlier administrations. Digitization and media convergence spawned numerous new media channels that offered an increasing diversity of content. Intensified competition and new business models, such as reliance on targeted behavioral advertising, undermined traditional media models, and triggered a wave of media consolidation. As predicted by media economics, companies relieved from rules requiring balanced reporting and public interest programming, started to generate content for subsets of audiences rather than the public. These business models strengthened the formation of media habits and media diets that included only a subset of sources and eventually contributed to audience fragmentation, often sorted by political ideology and identity.
Recent efforts influence the choices of certain media players must be seen in the context of this increasing media fragmentation. More partisan content has tempted administrations to rely on provisions of media law to take issue with content disseminated by disliked outlets and media personalities. Such efforts brush up against the free speech protections of the First Amendment, particularly if they are not applied in a balanced way across the media spectrum, as illustrated by recent attempts to invoke the equal time rule. That rule dates to the Radio Act of 1927. It requires that stations that grant a political candidate airtime provide comparable time to competing candidates upon request. The rule contains an exception for news that has historically been granted on a case-by-case basis. The rule has been criticized for limiting free speech, but it becomes particularly questionable if applied in a seemingly partisan way.
Such media interventions are not new, and they also happened under previous administrations. The Trump administration has a history of being adversarial with the broader media landscape. From the early days of his initial run for the 2016 presidency, the President and allies have routinely used terms such as “fake news” to cultivate a distrust in news and television media. This behavior was accompanied by complementary rhetoric and attacks on social media companies and other tech platforms that he charged with censoring him, perpetuating a left-wing bias in online spaces, and rigging the 2020 election in favor of his opponents. While the current administration has so far had a rosier relationship with tech companies during the President’s second term, largely due to the acquiescence of many tech leaders, the actions that his administration has taken to intimidate and control media have reached an extent that we see them as a central defining policy moment for the contemporary media and information policy landscape.
One of the very first actions of the incoming administration was to implement significant changes to press operations in the White House, including introducing a rotating seat system that replaced traditional arrangements. This gave the administration greater control over which journalists from which media outlets were present for things like press briefings and limited access for outlets that the President saw as being more critical of him. This shift was a norms violation rather than a change in any type of rules for media access but signals a departure from decades of those norms around press access and transparency.
This antagonism toward media extended beyond shifting norms of engagement to direct threats against individual media personalities. In September of 2025 after making a satirical comment about the death of Charlie Kirk, Jimmy Kimmel was suspended by ABC and derided for his comments by President Trump, alongside other late night television hosts (e.g., Stephen Colbert, Jimmy Fallon). Although the show was soon reinstated, the President made many comments throughout this period supporting regulatory actions and legal repercussions for media outlets at the time who he saw as being biased.
This action, alongside others, signals an increasing willingness of the administration to instrumentalize the FCC for political aims. Under new Chairman, Brendan Carr, the FCC has repeatedly launched formal investigations into all major broadcast networks except Fox. In January of 2025, Carr reinstated complaints against ABC, CBS, and NBC that the FCC under Biden had dismissed. As mentioned above, Chairman Carr also opened an investigation in CBS’s “60 Minutes” based on their interview with Vice President Kamala Harris, which Trump accused of being manipulated in an effort to swing the election. In February and March, the FCC opened investigations into NBC, ABC, and Disney over their internal diversity, equity, and inclusion policies. These actions represent an unprecedented use of the FCC’s licensing power to threaten broadcasters based on their editorial choices, with Democratic FCC Commissioner Anna Gomez warning that broadcasters report being “afraid to air programming that is critical of this administration, because they’re afraid of being dragged before the FCC.”
Lastly, the administration has pursued an aggressive agenda to eliminate federal funding for public broadcasting, with the complete defunding of the Corporation for Public Broadcasting (CPB). This effort, and the successful closure of the CPB, threatens the existence of PBS, NPR, and hundreds of local public media stations that serve communities, particularly rural areas, where commercial media outlets have dramatically reduced their presence. Beyond funding cuts, administration officials have characterized public media as inherently biased and suggested that government should not be in the business of supporting journalism, despite public broadcasting’s mandate to serve underserved audiences and provide noncommercial educational content. The dismantling of public media infrastructure would represent the loss of a critical information source for millions of Americans who rely on these outlets for local news, educational programming, and emergency information.
A generic review of media rules that goes beyond the limited scope of the Quadrennial Review (which focuses on the local radio rule, local television rule, and the dual network rule) would be desirable. Ideally, that process would invite a broad range of stakeholders to discuss media policy and the meaning of public interest in an increasingly heterogeneous media ecosystem.
Reach out with reactions to Johannes M. Bauer (bauerj@msu.edu) and Jean Hardy (jhardy@msu.edu) or email the Quello Center (quello@msu.edu).
To be continued in the coming weeks with comments on AI Policy, Digital Innovation, Digital Equity, Institutional Reform, and more. For the first part of commentaries see https://quello.msu.edu/the-state-of-digital-policy-successes-failures-and-unintended-consequences-of-the-telecommunications-act-of-1996/.