The proposed Universal Service contribution factor will exceed 20%. It will be 20.1% for the fourth quarter of 2018, according to a new FCC public notice. An FCC spokesperson confirmed that it is the highest ever. And it means that just over one-fifth of every dollar that users spend on interstate and international telecom services (essentially long-distance voice services) will go toward the Universal Service Fund (USF) program.
The USF contribution factor has been creeping up for years. Back in 2012, we reported that the contribution factor had reached a then-whopping 17.4%.
This situation has occurred, even though the FCC has essentially capped the budget for all four Universal Service Fund (USF) programs, because the revenues that carriers collect from voice services have been declining. At one time the USF was primarily a voice-focused program but as it has transitioned over the years to focus on broadband, the contribution base has not been adjusted accordingly.
The Universal Service Contribution Factor
A logical question is why we are using voice revenues to pay for a program that is increasingly broadband-focused.
Carrier groups – including competitive carrier association Comptel (now INCOMPAS), NTCA–The Rural Broadband Association and ITTA, which represents mid-size companies — suggested broadening the contribution base to include broadband service revenues several years ago, but the idea went nowhere.
Politically, the suggestion that the pool of revenues against which the contribution factor is collected should be expanded to include broadband seems to be a non-starter, with parties as diverse as Republican FCC Commissioner Michael O’Rielly and consumer group The Free Press arguing against it.
Opponents express concern that broadening the base would cause consumer bills to increase, even though the total amount of money collected should be the same, given a capped budget. Instead of voice consumers footing the entire bill, broadband customers would foot part of it, which seems only fair given that the money increasingly is going toward broadband networks and services.
It’s a frustrating topic, because when people only hear one side of the story, expanding the base sounds like a bad idea.
In the meantime, don’t be surprised if the Universal Service contribution factor continues to climb even higher. But keep in mind that the total amount of money being collected will change very little, if at all. And think about asking policymakers why the government continues to expect voice customers to foot the entire bill for broadband.
Details about the new Universal Service contribution factor can be found in this press release.