It's Official: First Quarter 2012 USF Contribution Factor Rises to a Record High 17.9 Percent

Posted on December 14, 2011 by Steve Augustino

 As we warned over a week ago, the USF contribution factor is rising to a new record high of 17.9%.  The Commission made it official late today, releasing this Public Notice announcing the new contribution factor for the first quarter of 2012.  The nearly 18 percent factor is by far the highest contribution factor in the history of the universal service fund.

One aspect of the new factor deserves special mention.  For years, the FCC has employed a Limited Interstate Revenue Exemption (LIRE) for calculation of the contribution obligations of carriers with significant international revenues.  This rule, also known as the "88/12" rule, provides that if a carrier's interstate revenue is less than 12% of its total interstate + international revenue, then the carrier pays USF only on its interstate revenue (and no USF on its international revenue).  The rule was put in place in response to a court decision that found that USF assessments which exceed a carrier's gross domestic revenue are unlawful.  

The current LIRE threshold is set at 12% of total revenues.  Every quarter in which the USF contribution factor exceeded this 12% threshold, the FCC has included an invitation to carriers to petition for waiver of the LIRE threshold if their contributions would exceed their gross domestic revenues.   No carrier has yet taken the Commission up on this invitation.  However, with the spread between the LIRE and the USF contribution factor now nearly 6%, we expect that there may be a few carriers whose percentage of interstate revenue falls between the LIRE threshold and the USF contribution factor.  If so, we invite those carriers to contact us to discuss filing a petition for waiver with the FCC.

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New USF Form Announced; Audio Bridging Changes Headline the Revisions

Posted on February 23, 2010 by Steve Augustino

UPDATED -- FORM 499 RELEASED

The FCC's Wireline Competition Bureau announced the new FCC Form 499A today.  This form, which must be used to file the April 1 annual revenue report, includes several potentially significant changes.  Audio bridging providers (conference service providers) and those close to the de minimis threshold are most affected.

As of COB yesterday, only the announcement was available.  The 499A itself will be released today and I will update this post when it is available.   UPDATE:  The new Form 499A is available here.

Follow the jump for a discussion of the changes.

According to the public notice, the primary changes are:

* several revisions regarding the obligations of stand-along conferencing providers to pay USF. The FCC added a check box for audio bridging providers, updated their "who pays what" chart to include audio bridging and added a description of audio bridging providers. Last year, the FCC mistakenly referred to audio bridging providers as "telecommunications service providers" and then quickly corrected that error.  I will be checking to see if the new guidance is consistent with the Calling Card Classification Order.  UPDATE:  The form confirms that audio bridging providers offering service on a non-common carrier basis are only subject to USF, and not TRS and other funds.  However, on p. 29 (fn 47) the instructions again mistakenly refer to audio bridging as "telcommunications services." 

* adjusted the de minimis estimation factor and the circularity factor to account for the new 14% USF contribution factor. This is a sure sign that a USF factor in the 14% range is here to stay.  Important Note:  The FCC did not adjust the "Limited Interstate Revenues Exemption" (LIRE) threshold, even though the USF factor now exceeds the threshold.  Thus, there is a possibility that a carrier's interstate revenue percentage will exceed 12% but the carrier will still pay more in USF than its total interstate revenues.  Such a result was declared unlawful by the 5th Circuit Court of Appeals in 1999.

* "added more specific language, consistent with the body of the text" to require CMRS and interconnected VoIP providers to submit traffic studies if they are not relying upon the safe harbor percentage of interstate calling. The filing obligation (not a prior approval requirement) has existed for some time, but compliance with it was low. I expect this will be an area for enforcement inquiries this year.

More when the Form is released. Stay tuned.
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