FCC Overhauls Telecom Subsidy

Federal Communications Commission adopts interim measures to maintain universal service fund

December 16, 2002

2 Min Read

WASHINGTON -- The Federal Communications Commission (FCC) today modified the current revenue-based system for the assessment and recovery of universal service fund (USF) contributions. The universal service fund provides support and discounts to ensure that high quality, affordable telecommunications service is available to all Americans. The specific interim measures adopted today, which will ensure the near term sustainability of the USF, include:

  • Increasing from 15 percent to 28.5 percent the current interim safe harbor that allows wireless carriers to assume their telecommunications revenues are interstate.

  • Basing USF contributions on projected, collected end-user interstate revenues, instead of the current historical, gross-billed revenues. This change will improve competitive neutrality among the contributing carriers.

  • Prohibiting carriers from including a mark-up above their USF contribution if they choose to recover their contributions costs through a phone bill line item.

Although the interim measures adopted today will improve the current revenuebased system, the Commission noted several market and technology trends affecting the long-term viability of the current USF system. These trends include the increased availability of bundled service packages that make it difficult to differentiate interstate revenues from intrastate revenues and to distinguish between telecommunications and nontelecommunications service products, and the increased consumer substitution of wireless and Internet-based services, which are contributing to a decline in the assessable revenue base. In recognition of these marketplace and technology changes, the FCC also adopted a Notice seeking comment on further reforms to its contribution methodology. In particular, the FCC seeks comment on additional modifications to the revenue-based system and on the following three connection-based contribution systems as long-term solutions:

  • 1. A proposed contribution methodology that would impose a minimum contribution obligation on all interstate telecommunications carriers and a flat charge for each end-user connection depending on the nature or capacity of the connection. 2. A proposal to assess all connections based purely on capacity. Under this proposal, the contribution obligation for each end-user connection would be shared between access and transport providers. 3. A proposal to assess providers of switched connections based on their working telephone numbers.

Federal Communications Commission (FCC)

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