USF Factor to Rise to 17.9%, Will This Finally Lead to Contribution Reform?

Posted on December 5, 2011 by Steve Augustino

This is starting to sound like a broken record.  Once again, the USF contribution factor is poised to make a big jump upward to a new record high.  Once again, we wonder here whether this will finally be the time that the FCC moves forward to reform the contribution side of the USF.  With the volatility and high rates, one must wonder whether the current mechanism can satisfy the requirement that the USF fund be "specific, predictable and sufficient."

Here's the bad news:  according to a prominent USF analyst, the FCC will soon announce a first quarter 2012 contribution factor of 17.9%.  This is an increase of over 2.5% from the current factor and by far is the highest that the USF rate has ever been. 

As usual, our calculations come courtesy of telecommunications consultant Billy Jack Gregg, of Universal Consulting.  Mr. Gregg notes that overall demand for the funds increased by $298 million over the fourth quarter of 2011, with every fund showing a net increase in demand.  The Low Income fund has more than doubled since 2008, with more eligible persons receiving service from wireless ETCs. 

On the contribution side, Mr. Gregg notes that the interstate telecommunications revenue base continues to decline, with projected revenues approximately $72 million less than in the fourth quarter.

The new record high contribution factor creates even more compliance, litigation and reporting issues for telecommunications carriers. Carriers should closely review their methodologies for reporting USF revenues on the Form 499-A and for recovering USF contributions from end users. At an 18% contribution factor, the costs of over or under reporting USF are significant.  In addition, the 18% contribution factor will bring more previously de minimis carriers into the fund and will exacerbate the consequences of exceeding the LIRE threshold for international carriers.   These carriers should review their calculations to be sure they are not subject to USF contributions.

REMINDER: You can track the official USF contribution factor through the links in our Resource Center. Go to "Universal Service Links" on the right hand side of the page.

 
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USF Roller Coaster: First Quarter Contribution Factor to be 15.5%

Posted on December 3, 2010 by Steve Augustino

One month ago, we reported on Universal Service demand levels that suggested a significant increase in the USF Contribution Factor.  Yesterday, the revenue figures came in low.  As a result, the 1Q 2011 contribution factor is predicted to be a record 15.5 percent.  This is even higher than the increase we expected last month.

As usual, our projections come courtesy of telecommunications consultant Billy Jack Gregg, of Universal Consulting.  The summary of Mr. Gregg's calculations is available here.  This will be the fourth quarter out of the last five where the USF factor changed (plus or minus) by at least 1.2 percentage points from the previous factor, raising the question whether the Fund meets the statute's "predictability" standard.

REMINDER:  You can track the official USF contribution factor through the links in our Resource Center.  Go to "Universal Service Links" on the right hand side of the page.

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USF Roller Coaster, Part 2: Contribution Factor Predicted to Return to Nearly 15 Percent

Posted on November 3, 2010 by Steve Augustino

As we have covered in this blog (see here and here), the Universal Service Fund contribution factor has bounced between 12 and 15 percent for the past year or so.  Yesterday, telecommunications consultant Billy Jack Gregg predicted that the USF factor is in for another significant increase -- to a near-record level of 14.7% for 1Q 2011.  This would be the fourth quarter out of the last five where the USF factor changed (plus or minus) by at least 1.2 percentage points from the previous factor.   This hardly seems to satisfy the "predictability" standard for the Fund. 

Mr. Gregg, of Universal Consulting, has kindly allowed us to post his calculations here.  He notes:

Assuming that the contribution base is the same as for the fourth quarter of 2010, the USF assessment factor for the first quarter 2011 will rise from 12.9% to 14.7%, the second highest assessment factor in history. USF revenue projections are due out in a month.

Mr. Gregg attributes the increase primarily to projected USF demand of $2.212 billion -- the highest amount in history -- based on increases in the High Cost Fund and the Schools and Libraries Fund.

 

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Could the USF Contribution Factor Top 15%?

Posted on March 4, 2010 by Steve Augustino

The Universal Service Contribution factor has been increasing recently, but could it top 15%?  That is the prediction of Billy Jack Gregg, an analyst who studies the USF fund.  If it does, the cries for USF reform should grow even louder, just at the time that the FCC is announcing USF support for broadband in its National Broadband Plan.  Perhaps even -- or especially -- end users will object to being assessed what amounts to a 15% tax on their telecommunications purchases.  (Disclaimer:  technically, the USF is not a "tax"). 

This prediction stems from a routine filing made by the Universal Service Administrative Company (USAC).  USAC is required to submit to the FCC a quarterly estimate of the revenues and obligations of the Federal Universal Service Fund.  USAC submitted its most recent projection on March 2, 2010.  Billy Jack Gregg of Universal Consulting, who regularly analyzes USF issues, predicts based on this report that the 2Q 2010 USF contribution factor will be 15.3%, yet another new high.  Mr. Gregg has kindly agreed to allow us to post his projections here.  His chart of the USF contribution factor over time graphically displays the staggering increases in the fund the past 10 years. 

The FCC will not release its proposed USF factor for another week or so.  But history suggests that Mr. Gregg's projections will be pretty close.  This also may be a good time to remind contributors that any revisions to your 2Q 2010 499Q are due by March 18.  After that date, you will be assessed USF on the revenues you have projected, at the applicable USF contribution factor for the quarter.

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