Universal Service Fund Contribution
Who must contribute to the Federal Universal Service Fund?
How does the USF contribution system work?
What types of service providers are subject to contribution requirements?
Are there any service providers exempt from any USF Contribution requirements?
How does The Commpliance group assist telecommunications service providers with USF contribution requirements?
Who must contribute to the Federal Universal Service Fund?
Under the Telecommunications Act of 1996, Congress established a program to support the development of affordable, nationwide telecommunication services, commonly referred to as “universal service.” To fund this program, the Act requires that all providers of interstate telecommunications and telecommunication services contribute a percentage of their interstate and international revenues to support the concept of universal service through the Universal Service Fund (“USF”).
The Federal Communications Commission (“FCC”) is charged with the statutory responsibility for oversight of the universal service program. However, the FCC has delegated to the Universal Service Administrative Company (“USAC”), a Delaware nonprofit corporation, responsibility for the collection, management, investment and disbursement of the funds. USAC ultimately disburses these Funds to schools, libraries, health care providers, low-income consumers, and subscribers in high cost areas to subsidize the cost of telecommunication services. As the primary entity delegated with the responsibility of collection and dispersion of USF revenues, telecom businesses will encounter the USAC regarding all issues of filing, filing deadlines or other compliance matters, more often than they will the FCC.
Once collected, USF contribution provides support and discounts for:
1) telecommunications services for consumers who live in high-cost and rural areas;
2) telecommunications services for low-income consumers;
3) telecommunications services, Internet access and internal connections for schools and libraries; and
4) telecommunications services for rural health care providers.
How does the USF contribution system work?
USAC collects quarterly interstate and international revenue information from providers on the Quarterly Telecommunications Reporting Worksheet (Form 499-Q) four times each year and submits aggregate information on a quarterly basis to the FCC. USAC uses this information to calculate the expected contribution factor. The FCC reviews the data and establishes the contribution factor for the upcoming quarter.
Using this information, providers calculate the amounts they will owe for USF. Providers generally build this factor into their billing systems if they choose to recoup this amount from their customers. At the beginning of the quarter to which the contribution factor applies, USAC bills all contributors for the amounts due based on the contribution factor. These invoices will change on a quarterly basis to reflect changes to the contribution factor, and revenues reported by the carrier.
The billed contributions are due from the providers one month after they are billed. This allows USAC to have the money on hand before the first quarter disbursements are made at the end of February, March, and April for the first three months of the quarter (January, February, and March). This is repeated for each quarter.
What types of service providers are subject to contribution requirements?
Under the FCC’s broad contribution mandate, all providers of interstate telecommunications services are subject to USF contribution requirements. This includes all local exchange carriers (“LECs”), long-distance carriers (“IXCs”), international carriers, wireless carriers, and, most recently, Interconnected VoIP Service Providers (see Interconnected VoIP for more information).
According to the FCC, a contribution eligible service provider’s contributions are assessed as a percentage of their interstate and international end-user telecommunications revenues. Currently, wireline interexchange companies contribute 63% of the universal service fund, with the remainder coming from local exchange companies and wireless companies. Providers currently decide for themselves whether, how, and how much to recover these costs from their customers; most recover USF contribution costs through line items on customer telephone bills.
Before providing telecommunications service and recouping USF contributions from end-users, all service providers should evaluate their payment obligations. Service providers that are inclined to ignore this process in hopes that the FCC will ignore them should be forewarned: the FCC has imposed significant fines in recent years on entities that failed to file and make required USF contributions Recent Orders and the Commission’s staff have emphasized that the FCC’s enforcement efforts in this area will increase.
Are there any service providers exempt from any USF Contribution requirements?
While all qualifying interstate telecommunications service providers are required to report and contribute to the USF, over the history of the Fund, the FCC has established certain contribution exemptions for carriers providing a minimal amount of interstate telecommunications services. For instance, the FCC has established the de minimus exception to contribution duties for carriers who will contribute less than $10,000. The FCC has also exempted certain amounts of international traffic, under the limited international revenue exemption (“LIRE”), from contribution. And, the certain providers of wholesale telecommunications service, or resellers, are eligible to pass through USF contribution under the “carrier's carrier revenues” exemption.
One thing all of these examples highlight is the important need for telecommunications service providers to evaluate the legal ramifications affecting USF contribution decisions, especially as the FCC and state regulatory agencies continue to modify, expand, and stringently enforce USF contribution requirements.
How does The Commpliance group assist telecommunications service providers with USF contribution requirements?
Since the Fund was created by the FCC, regulatory consulants at the Commpliance Group have provided expert legal advice to a wide variety of telecommunications clients about USF contribution. Our regulatory specialists have developed detailed experience with every aspect of the USF contribution system and has a thorough understanding of the most valuable steps for saving both time and expense when reporting USF contribution. With the assistance the Compliance & Reporting Service, The Commpliance group’s “prompt, professional, and practical” representation ensures that all clients are not subject to excessive contribution requirements or onerous filing demands.
Our company's representation is not limited to simply filing Form 499s with the FCC. We continue to update and advise clients on the changing nature of the USF regulatory regime and, most importantly, how these changes influence service providers’ contribution responsibilities.
- Obtaining a 214 License
- Registering with the FCC
- Customer Proprietary Network Information ("CPNI")
- Interconnected VoIP
- Universal Service Contribution
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