FCC To Raise USF Collections, Triggering Calls for Reform
A hefty increase in the amount of money telecom carriers, and ultimately consumers, must contribute to the Universal Service Fund beginning in April has triggered renewed calls by industry groups for USF reform. The FCC late Thurs. raised the so-called “contribution factor” -- the proportion of interstate and international revenue that telecom carriers must donate to the fund -- to 11.7% from 9.7% for the 2nd quarter, starting in April. The industry money goes to USF subsidies.
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The higher percentage reflects increased money going into subsidies in rural areas and lower industry revenue to pay for it, according to FCC statistics. The revenue base dropped from $18.5 billion first quarter to $18 billion 2nd quarter. Subsidies in all USF programs rose about $13 million in the 2nd quarter. The high-cost fund, which subsidizes rural telephony, rose $20 million quarter to quarter but other USF programs, such as the E-Rate fund, dropped a bit or remained stable.
The increase shows the “urgent need” to change the contributions system to one based on telephone numbers, rather than revenue, said the USF By The Numbers Coalition. “Collecting funds for the USF based on… revenues is unstable and harmful to small business and residential consumers,” said a coalition spokesman. Industry contributions generally are passed onto consumers as line-items on their bills. “The existing revenues-based system is unfair because it forces some consumers to pay more than others for the same services and burdens low-income and rural consumers in particular,” said the group, which represents wireline, wireless and cable interests.
Verizon, which supports reverse auctions to give out subsidies, portrayed the latest figures as a wake-up call to regulators. “It adds momentum to reform efforts on both the contributions and distribution sides,” said Vp Kathleen Grillo. The increase explains why Verizon supports “steps to stabilize the fund and place reasonable limits on its growth,” she said.
“One reason for this significant increase is the growth in the number of wireless carriers receiving funds from the USF, said Keep America Connected, a coalition of rural incumbent LECs. “In 2006, wireless [competitors] received close to $1 billion in universal service support, and it is forecast that they will receive more than $2 billion in support by 2009,” said Lisa Zaina, exec. dir. of the Independent Telephone & Telecom Alliance, a coalition member. The FCC should tighten eligibility requirements for competitive rural telecom companies, she said.
“This just affirms what everyone expected would happen,” said a Washington telecom attorney. “A rise in the contributions factor was anticipated for quite awhile,” he said: “It doesn’t strengthen the call for USF caps or reverse auctions because there’s already strong debate.”