In an initiative launched on April 30, 2012, the Federal
Communications Commission ("FCC") is seeking comment on
substantially reforming its Universal Service Fund
("USF") contribution methodology. USF contributions
are currently remitted by communications providers and currently
are calculated based on revenue information provided by providers
via quarterly submissions of FCC Form 499-Q and annual submissions
of FCC Form 499-A. The FCC's action, which took the form of a
Notice of Further Proposed Rulemaking ("Further Notice"),
will likely result in major changes to the USF contribution factor,
currently assessed at an alarming 17.4% of a provider's
revenues.
Under various FCC proposals, some providers that are currently
exempt from USF contributions may be assessed USF for the first
time, while other providers that currently contribute to USF may
become exempted from USF contributions or have their assessed
contributions lowered. Current exempt companies that may be
required to contribute to the USF include:
Broadband Internet Access Service Providers.
Wholesale Providers.
International Only Providers.
Enterprise Communications Service Providers (dedicated IP, VPN,
WAN).
Text Messaging Providers (including SMS and MMS).
One-Way VoIP Providers.
Machine-to-Machine Service Providers (offering smart meter,
smart grid, remote health monitoring, and remote security,
etc.).
Prepaid Calling Card Distributors and Retailers.
Free or Advertising-Supported Services
The companies (or services) that are currently assessed USF
contributions, but could experience lower USF contributions (or
possible exemption) include:
Resellers (non-facilities-based).
Prepaid Calling Card Providers.
Telematics providers, paging providers, wireless prepaid plans,
and family wireless plans.
The methodology of how USF contributions are calculated may also
change. Currently, a revenue-based system is utilized, but the FCC
seeks comment on a number of possible changes to that system,
including whether contributions should be made on all
telecommunications revenues, instead of only on interstate and
international revenues. Additionally, the FCC proposes to
incorporate a value-added approach that would eliminate the
wholesaler USF exemption and possibly extend USF requirements to
prepaid calling card distributors and retailers.
As alternatives to the revenue-based system, the FCC proposes
two other potential systems which could drastically affect the
amount communications providers contribute to the USF. One proposed
system would be based on the number of connections. Under a
connections-based system, providers would be assessed based on the
number of connections to a communications network provided to
customers. Providers would contribute a set amount per connection,
regardless of the revenues derived from that connection. Under
various proposals, there would be one standard monthly assessment
for certain kinds of connections, typically provided to
individuals, and a higher standard monthly assessment for higher
speed or capacity connections, typically provided to enterprise
customers.
The other proposal is a numbers-based system. Under a
numbers-based system, in its simplest form, providers would be
assessed based on their count of North American Numbering Plan
phone numbers. There would be a standard monthly assessment per
phone number, such as one dollar per month, with potentially higher
and lower tiers for certain categories of numbers based on how
these numbers are assigned or used. The monthly assessment per
number would be calculated by applying a formula based on the USF
demand requirement and the relevant count of numbers, however that
term is defined.
Significantly, the Further Notice proposes changes that could
affect how companies pass through USF fees to their
customers. One proposed rule would require the customer's
invoice to indicate how the USF line item on the customer's
bill is calculated. If adopted, this rule could require the invoice
to indicate what portion of the customer's bill is subject to
the USF assessment. Another proposal would require disclosure
at point-of-sale of the amount of USF assessment that will be on
the consumer's bill. Lastly, the FCC seeks comment on a
complete prohibition of recovering USF assessments from customers
via a USF line item.
Public comment in the proceeding is due 30 days after
publication of the Further Notice in the Federal Register, and
replies are due 60 days after publication in the Federal
Register.
1. Thomas K. Crowe is a Washington, D.C.-based attorney
specializing in communications legal/regulatory matters. He can be
reached at (202) 263-3640, via e-mail at firm@tkcrowe.com or
through the firm's website at www.tkcrowe.com
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
Specific Questions relating to this article should be addressed directly to the author.
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