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FCC Seeks Help in Revising USF Contributions

The FCC has asked the Federal-State Joint board on Universal Service for input on how to modify the contribution methodology for the Universal Service Fund. That is the fund, paid into by telecoms and ultimately by their customers, to subsidize deploying communications services in areas where there is not a business case for it.

The FCC voted back in 2012 to reform the demand side of the fund, but did not take action on the contribution side, instead seeking input, and getting it, on the need to revise how the money is collected, particularly from states where they put in more than they get back.

The FCC put out a Further Notice of Proposed Rulemaking in 2012 seeking comment on who should contribute, how the contributions should be assessed and how to make the the system more fair.

One of Congress' issues with the program is that it is a cross-subsidy, with contributions from telecoms in some states far outweighing the USF subsidies coming into them.

The goal of the reform is to reduce the administrative burden on industry and the FCC, avoid arbitrage of the system — making similar services subject to similar contributions — and update the calculations of the payments to reflect a changing marketplace. The contributions had been based on a land-line phone dominated world going increasingly wireless and broadband.

It now wants the joint board to look at the record those comments created and, keeping only to the issues raised in the proceeding — raising new issues would likely require a new proceeding or more comment — focus on issues impacting the role of the states.

"When the Commission implemented the Telecommunications Act of 1996, it chose to assess [USF] contributions based on end-user revenues," said the FCC. "Since that time, however, network convergence and technological innovation have transformed the telecommunications industry, and the contribution system has become increasingly complex and difficult to administer."

The board was established to make recommendations on implementation universal service provisions in the 1996 Telecom Act. IT will be a bit of a case of the FCC advising the FCC, since three of the five commissioners — Mignon Clyburn, Jessica Rosenworcel and Ajit Pai — are members of the board.

Commissioner Michael O'Rielly said he supported the referral, but warned about using contribution reform to justify increasing the size of the fun.

"Over the past few years, the Commission has undertaken significant reforms to how universal service support is distributed, but has not addressed how such funding is collected from carriers and, ultimately, from American ratepayers, who are already paying fees of approximately 16% on their phone bills to sustain the current subsidy system," he said. "Moreover, because there is no overall cap on the universal service fund, the spending reforms are putting increased pressure on an ailing contributions system. Accordingly, I will support this referral."

"As we start down this important path, however, I would caution that contributions reform should not be seen as a backdoor way of increasing the size of the universal service fund or imposing new fees on the Internet. For example, I would be concerned by any effort to assess IP addresses. I hope that the Joint Board, and ultimately the Commission, will consider reforms that modernize contributions without inhibiting broadband investment or imposing additional burdens on the consumers that pay to support universal service."

Not surprisingly, the National Association of Regulatory Utility Commissioners, which had recommended the referral, was happy. 

“[T]hese are exactly the kinds of decisions Congress had in mind when it created the Joint Board in the first place. The Joint Board process ensures that the agency will receive expert recommendations from the States officials closest to the consumers affected by changes to the Universal Service program," said NARUC Committee on Telecommunications chair Chris Nelson. "We look forward to working with the Board and the FCC as this process continues.”