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Reform Of Discrete USF Contribution Regime Problems Must Be FCC's Priority

The American Cable Association urged the Federal Communications Commission to fix identified problems with the current Universal Service Fund (USF) contribution system while continuing to collect data and information on the harms and benefits of expanding the base to include broadband before deciding on the best course of action going forward.

"ACA believes the FCC should take full advantage of this opportunity to relieve smaller contributors and potential contributors of the burdens of compliance under current regulations. Meanwhile, before fundamentally changing the current regime by expanding the assessable base or altering the collection methodology, the FCC needs to gather additional and sufficient evidence," ACA President and CEO Matthew M. Polka said.

ACA set forth its views in reply comments filed August 6 with the FCC as part of the agency's broad effort to overhaul the USF program, including the contribution system that has traditionally relied for funding on a percentage of interstate end-user revenues of telecommunications companies. This percentage, called the contribution factor, is roughly 16% and viewed by many as unsustainably high.

In terms of setting priorities, ACA urged the FCC to recognize that the current contribution regime is too complex and often produces arbitrary outcomes, resulting in onerous burdens on contributors and potential contributors.  As a result, the current regime is neither sustainable nor competitively neutral. In the first round of comments, virtually all commenters agreed on the need for a simpler, less burdensome system.

ACA also stressed in its reply comments that the current system has a host of discrete problems that do not involve altering the base or methodology.  To that end, ACA said the FCC should consider:

  • Increasing the de minimis threshold from $10,000 in annual contributions to $200,000 in annual assessable revenues;
  • Permitting smaller contributors to elect to rely on the prior year's traffic study when preparing Form 499-Qs and require only one traffic study filing per year in connection with the Form 499-A;
  • Clarifying that it is not necessary to file a traffic study when a VoIP provider determines its jurisdictional allocations by measuring 100% of its traffic for the reporting period, which is actual interstate revenue and not a statistical sample; and
  • Revisiting and revising downward the VoIP safe harbor for allocating interstate/intrastate usage to reflect the fact that interstate usage of cable operator voice services is usually far less than the 64.9% allocation adopted six years ago.

In a concern shared by other broadband communications providers, ACA said it was premature to expand the assessable base to include broadband Internet access service because it may harm adoption, innovation, and network expansion. ACA also opposed adopting an assessment that would increase with faster tiers of service.

"There are simply too many unknowns for the FCC to leap to make broadband service assessable and to make any assessment increase with higher-performing tiers of service, especially if such an assessment discourages adoption and the deployment of networks with higher-performing broadband services," Polka said.

Elsewhere, ACA urged support for allowing providers to include USF as a separately identifiable surcharge on consumers broadband bills, saying it would be useful for consumer understanding and education. But ACA said it would be confusing, expensive and complicated if broadband access providers were required to provide a detailed breakdown of how the surcharge was calculated. ACA said it made more sense to require the Universal Service Administrative Company (USAC) to verify the accuracy of providers' surcharges.


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