Beginning July 3, 2018, rate-of-return carriers (RLECs) will no longer be required to contribute to the Universal Service Fund (USF) based on revenues derived from providing DSL or any broadband-related services, thanks to an Order voted on at yesterday’s FCC Open Meeting. Most RLECs offer broadband by selling regulated broadband transmission service, considered a “telecommunications service,” to non-regulated ISPs. The Order, a forbearance from the established rules, was made in response to a petition filed by NTCA and USTelecom last year.
According to the Order, this forbearance will be effective for the third quarter 2018 and will begin July 3, 2018, to coincide with the 2018 access charge tariff filings’ effective date. To implement the ruling, the Order extends the third quarter Form 499-Q revision deadline for those RLECs affected from June 15, 2018 until July 2, 2018. It also directs USAC to accept any late-filed forms until that date and delegates authority to the Wireline Bureau to waive any rules or administrative requirements as necessary.
Prior to this ruling, the only RLECs exempt from contributing to USF for broadband-related services were those that elected A-CAM and offered broadband as a “detariffed retail” or “private carriage” service. As those carriers offer broadband directly to the end user, there is no “telecommunications service” involved in the provision of broadband. Therefore, these carriers already have been exempted from the original contribution requirement. In the Order, the FCC cited this disparity and found that there was no reason to continue to treat certain RLECs differently than others solely because some no longer offered broadband transmission service as a separate component.
The FCC also found that the ISPs (affiliates or subdivisions of an RLEC) that pay the Federal Universal Service Charge (FUSC) imposed by the RLECs usually pass those charges on to their broadband end users in some form or another. This places them at a disadvantage with their competitors. The FCC concluded that forbearing from the obligation to contribute for all RLECs “levels the playing field” and allows them to compete more effectively with other broadband providers.
Of particular note, lower fees to consumers and the impact on USF were highlighted in statements accompanying the order. Chairman Pai cited the associations’ petition as stating that consumers “could see savings of $7.00 or more on their monthly bills,” while Commissioner Carr noted that the ruling is “expected to cut around $5 to $10 off of a family’s monthly bill for broadband.” Commissioner O’Rielly, used the opportunity to restate his opposition to expanding the base of USF contributors to include broadband users and stated that the most significant aspect of the ruling was that the FCC doesn’t “tax the Internet.” On the other hand, Commissioner Rosenworcel, while supporting the decision, noted that by taking this action, the FCC “foregoes roughly $40 million in funding for broadband in rural America.”
If you have any questions regarding the Order or its implementation, contact John Kuykendall, Brian Sullivan, or Steve Meltzer in JSI’s Maryland office at 301-459-7590 or your company’s cost consultant.