USTelecom Highly Critical of FCC in Calling for Universal Service Contribution System Overhaul


On March 29, 2012, USTelecom, the trade association representing AT&T, Verizon and other incumbent carriers, filed a sharply-worded ex parte letter with the Federal Communications Commission (“FCC”).  In it, USTelecom  implored the FCC to fix the broken system for determining Universal Service Fund (“USF”) contributions.  USTelecom criticized the current revenue-based contribution methodology as outdated, inequitable, wasteful, and inefficient and pressed the Commission to move ahead with the consideration of a “Connections-Based” contribution model that more accurately reflects the migration away from traditional telecommunications services towards an all broadband network.  Recognizing that any major overhaul of the USF contribution system would take many months, if not years, USTelecom urged the Commission to enact more immediate reforms to the current revenue-based USF contribution system to ensure fairness and alleviate the marketplace uncertainties caused by years of unresolved appeals of USAC audit decisions.

If you have ever pounded your head against a wall after struggling to understand the Form 499 instructions or grappling with USAC regarding your company’s compliance with USF reporting and contribution requirements, we urge you to read USTelecom’s ex parte letter, which is available here:

USTelecom Ex Parte Letter

Echoing the sentiments expressed in The CommLaw Group’s recent law review article, “THE MIS-ADMINISTRATION AND MISADVENTURES OF THE UNIVERSAL SERVICE FUND: A STUDY IN THE IMPORTANCE OF THE ADMINISTRATIVE PROCEDURE ACT TO GOVERNMENT AGENCY RULEMAKING,” USTelecom’s ex parte letter shows little restraint in attacking the Commission for allowing USAC to create and enforce substantive “rules” through the Form 499 instructions, often times in violation of the Administrative Procedure Act:

“….There is, by now, no question that the Form 499A Worksheet Instructions matter—and they matter a lot.  Because the USF contribution factor is so significant, how contributors report their revenues and the specific decisions they make in filling out the Form 499 drives market behavior.  Regrettably, in the past the Commission has used changes in the Form 499 instructions to put in place substantive requirements without adherence to standard notice and comment procedures under the Administrative Procedures Act.”

USTelecom goes on to highlight several areas of concerns previously brought to the FCC’s attention by the Ad Hoc Coalition of International Telecommunications Companies (“Coalition”), a grassroots movement organized by The CommLaw Group for the purpose of advancing common sense reforms to the USF program.  The Coalition for long has been pushing hard for USF contribution reform and has three petitions pending before the FCC since 2009.

One area where the Coalition has been particularly active deals with the Carrier’s Carrier Rule, which governs the relationships and duties of Wholesalers and Resellers.  In the same vein as USTelecom’s recommendation, the Coalition has urged the FCC to provide contracting wholesalers and resellers of telecommunications with timely and available information regarding their contribution duties in a real-time database so that USF assessments can be made without uncertainty or discrimination and in a manner that promotes compliance with federal rules and the goals of universal service.

With powerful lobbies now making their voices heard, it seems only a matter of time before the FCC undertakes the long-overdue task of reforming the USF contribution system.  Yet as USTelecom recognizes, any fundamental reforms are unlikely to take hold for many months, if not years.  This makes it all the more important for aggreived industry participants to make their voices heard now and show support for USTelecom’s clarion calls for both short and long-term reforms.

If you are interested in expressing your support for the reforms being proposed by USTelecom and would like our assistance determining the most appropriate way, please contact Jonathan Marashlian at

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