The Role of Telecommunications in the Federal Universal Service Fund
Telecommunications companies operating in the United States are subject to the Federal Universal Service Fund (USF), a program administered by the Federal Communications Commission (FCC). The USF aims to promote access to telecommunications services for all Americans, regardless of location or economic status. It is funded through contributions from telecommunications service providers—the USF funds four programs – High-Cost Program, Lifeline Program, Schools, and Libraries Program. Telecommunications companies may be subject to contributions to one or more of these programs based on the services they offer and the areas they operate in.
Telecommunications companies are required to contribute to the USF based on a percentage of their interstate and international revenues. This contribution is known as the Universal Service Fund Fee. It is calculated as a percentage of a company’s end-user telecommunications revenues. The rate varies but typically ranges from 15.5% to 33%. FUSF surcharges may be passed through to the final user of the telecommunications services.
Fee Collection and Reporting
All telecommunications companies are required to contribute to the USF fund. Companies providing telecommunications services to retail customers, either to other businesses or residential, must register with the FCC and file the necessary forms. Each quarter, the FCC sets a contribution factor, which is a percentage of interstate and international revenue, that each contributor is required to contribute. Telecommunications companies are responsible for quarterly collecting and submitting USF fees to the FCC.
The fees are typically passed on to consumers as a line-item charge on their telephone or broadband bills. Contributors to the USF fund must file FCC form 499Q quarterly to report and project their quarterly revenue. Additionally, companies must report their annual revenue on FCC form 499A filed by April 1st of every year.
The USF charge is typically applied to most telecommunications services, including wireline and wireless telephone services, broadband internet services, and certain other communication services. Companies that are not generally considered telecommunications providers may still be subject to the FUSF contributions due to the very broad definition of telecommunications services. Many services, such as private-line telecommunications and VoIP services, have multiple reporting and allocation issues and/or methodologies to consider.
At Source Advisors, we help companies understand their FUSF reporting responsibilities and assist in reporting and remitting the fees. If you have any questions or would like to get more information, please get in touch with a Source Advisors professional to answer your questions.