Monday, June 13, 2005

FCC Launches Inquiry into Universal Service Fund

The FCC launched a formal inquiry into the management, administration and oversight of the Universal Service Fund, which helps provide affordable phone service in rural areas, fund Internet access and telecommunications equipment in the schools and libraries, bring telemedicine services to rural areas, and assist low-income families with their phone bills. Since 1997, the Universal Service Administrative Company, or USAC, which administers the fund, has disbursed approximately $30.3 billion from the fund.

Money collected for the USF has been declining for some time. The FCC has been considering changes to the way it collects money for the USF. Currently consumers pay a percentage of their long distance service bill each month. The FCC is considering switching to a monthly flat fee based on telephone numbers.

With its new inquiry, the FCC is seeking comment in the following areas:

  • Managing the Program: The Commission is exploring ways to simplify and streamline the management of the program. In particular, the Commission tentatively concludes that a multi-year application process for telecommunications services for the E-rate and Rural Healthcare programs would simplify the process in a way that still guards against potential abuse. The Commission also seeks comment on, among other things, reducing or consolidating application forms and adopting deadlines and other criteria to provide certainty to program applicants.

  • Improving Oversight: The Commission seeks comment on the effectiveness of existing efforts to protect the fund against potential misuse. The Commission tentatively concludes that more aggressive debarment procedures are necessary to safeguard the fund and seeks comment on ways to improve the debarment rules. In addition, the Commission seeks comment on establishing independent audits for certain USF beneficiaries and contributors and seeks comment on what rules would help ensure that any audits are effective and fair. The Commission is also seeking comment on establishing rules for recovering USF monies that were not used in accordance with program rules.

  • Administrative Structure: The Commission is examining the effectiveness of the existing administrative structure and seeks comment on whether any rule changes are needed to ensure the USF is administered in an effective, competitively neutral way.

  • Performance Measures: The Commission is seeking comment on establishing performance measures to assess the effectiveness of the program.
  • Every year, the nation's universal service fund (USF) pays out approximately $673 million for low-income programs and about $3.0 billion to support high-cost rural services.

  • In February 2005, a group of consumer organizations called the "Keep USF Fair Coalition" filed a "Fair Share Plan" for Universal Service Fund (USF) collection with the FCC. he coalition argues that under the current revenue system, high volume long distance users pay the most, while those who use less pay less. It believes the new system under consideration would shift the burden of paying for Universal Service to those who use the system the least.

    The "Fair Share Plan" proposes to expand the USF contribution base to include all revenues derived from telecommunications, including services using VoIP. It proposes to establish a contribution factor cap to be applied to the revenue-based approach; carriers would still be assessed based on revenues up to that cap amount, and would still have the right to charge their end users a USF recovery charge not to exceed the percentage they are charged. The balance of the funds needed to support USF would come from a numbers-based charge.

See also