Rural Telcos Lobby FCC to Expand Contributor Base as Part of USF Contribution Reform


With last year’s reforms to the Intercarrier Compensation regime and Universal Service Fund (“USF”) distribution system, moves which clearly shifted the policy focus from the switched telephone network of today to the Broadband networks of tomorrow, the Federal Communications Commission (“FCC”) now stands poised to tackle the sticky issue of how to pay for these reforms. Although the FCC has yet to announce the much-anticipated USF Contribution Reform Notice of Proposed Rulemaking (“NPRM”), powerful lobbies are already hard at work seeking to influence the Commission; none has been more active than the National Telecommunications Cooperative Association (“NTCA”), a trade group representing the interests of rural, independent telephone companies.

As the ink was still drying on the ICC/USF Reform proceedings, NTCA was already busy softening up the FCC with a rash of Ex Parte meetings, phone conferences and written submissions detailing the associations positions in support of retaining the current revenue-based USF contribution system and significantly expanding the base of contribution-eligible revenue to include revenue from broadband Internet Access, non-Interconnected VoIP, and text messaging services.  These positions were recently reiterated in the January 10th Ex Parte submission linked here:

NTCA argues that the size of the USF is not the problem and that the real issue is the dwindling size of the telecommunication service revenue base subject to contribution requirements.   According to NTCA, the FCC has ample authority and good reason to expand the scope of contribution-eligible services revenue to include broadband Internet Access, non-Interconnected VoIP, and text messaging services revenue and argues that expansion of the contribution base will all but resolve concerns regarding the growth of the Fund.

In specific reference to non-Interconnected VoIP, NTCA states:

[t]he question with respect to assessment of such services is merely a definitional one, rather than a jurisdictional one.  The current rule defining interconnected VoIP illogically results in assessment for those services that offer the ability to place  and receive calls.  This definition makes little sense, however, in the context of a USF program that seeks to support the networks upon which traffic rides.  On a “per session” basis, the fact that data may be flowing in one direction or two (or the fact that a session could only be initiated from or received by a given station) is irrelevant to the burden placed on the network by the session as it occurs or the benefit derived by the user. Such disparity also promotes regulatory gamesmanship, where providers can structure functionally equivalent offerings to evade contributions obligations.

We urge all clients to review NTCA’s Ex Parte in its entirety and to actively monitor activity in WC Docket No. 06-122 and CC Docket No. 96-45 over the coming days and weeks.  With the USF Quarterly Contribution Factor at an all-time high of 17.9% during Q1 2012 and pressures — internal and external — continuing to mount, the FCC is likely to take action in the near future.  Yet as NTCA’s actions demonstrate, waiting around until the FCC acts is not a pre-requisite to ensuring your company and your industry segment’s voice is heard on what is certainly one of, if not the single most important regulatory issue of the past decade and one which is likely to impact the communications industry for decades into the future.

If you are interested in participating in the upcoming USF Contribution Reform rulemaking proceeding and would like to begin formulating strategies and policy positions, please contact Jonathan Marashlian at or by telephone:  703-714-1313.

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