Regulatory Alert: Cap on USF Fee Charged to End Users

Seal of the United States Federal Communicatio...

Seal of the United States Federal Communications Commission. (Photo credit: Wikipedia)

In a footnote to WC Docket No. 13-76, adopted and released March 26, 2013, In the Matter of July 2, 2013 Annual Access Charge Tariff Filings (establishes procedures for the 2013 filing of annual access charge tariffs and Tariff Review Plans) the FCC reminds carriers of the requirement to apply FCC rule 47 C.F.R. §54.712 where applicable.

The footnote references 47 C.F.R. §54.712 :

Contributor recovery of universal service costs from end users.

(a) Federal universal service contribution costs may be recovered through interstate telecommunications-related charges to end users. If a contributor chooses to recover its federal universal service contribution costs through a line item on a customer’s bill the amount of the federal universal service line-item charge may not exceed the interstate telecommunications portion of that customer’s bill times the relevant contribution factor.

We believe that some contributors to federal USF that want to recover their contribution costs through a line item on a customer’s bill are going to have a problem complying with this Rule. We can think of two circumstances that may place a carrier in violation of this Rule:

  1. If a carrier has tariffed a Subscriber Line Charge (SLC) in their FCC interstate access tariff and bills it to their end users monthly that revenue is considered Interstate revenue. Carriers should ensure that the amount they are charging customers as a USF contribution recovery fee does not exceed the tariffed SLC charge times the current USF contribution factor (17%). The current 17% relevant contribution factor is higher than it was in past years so carriers should look at this again as the contribution factor changes.

For example, if your SLC charge is $4.00, then the most you could charge for a USF fee to end users based upon that amount is $4.00 X 17% = $0.68. So do the math and compare your USF recovery fee to 17% of your SLC charge. If the USF recovery fee exceeds that amount you have a problem, which will be discussed below.

  1. Some CLECs opt to not tariff or bill its end users a SLC charge. Until recently, USAC required that these CLECs to impute a SLC charge for USF 499 reporting purposes and to report the revenue as 100% interstate revenue.

However, recently the FCC informed USAC that they could no longer require CLECs to impute the SLC and report it as interstate revenue. This means that CLECs that do not have a SLC charge in their access tariff, and who do not expressly charge a SLC on the bill do not have any customer revenue that can be explicitly assigned to the interstate jurisdiction absent measuring interstate long distance usage. In such a case, the CLEC can’t bill a USF recovery fee to a customer who doesn’t make any interstate long distance calls. And they can only charge a USF recovery fee up to 17% of whatever a customer does spend for interstate long distance calling.

This creates a dilemma for carriers who find themselves in either of the two circumstances mentioned above. How does one bill the USF fee to customers since every one of them has a different amount of Interstate usage?

One thing that is important to remember is that the FCC does not mandate that a carrier bill its end-user customers a USF contribution recovery fee. It is optional for a carrier to recover its USF contribution from its end users. In other words, a carrier may treat its USF contribution as an expense.

We believe this footnote was included in the March Order for a reason, that the FCC suspects there are carriers who are violating the rule. So you can expect USAC to be auditing contribution recovery fee calculations in the near future.

So, if you are in violation of this rule, what are possible solutions for getting back into compliance?

  1. Decide to not bill the USF surcharge to your customers and pay USAC out of your own pocket (not recommended).
  2. If you tariff and bill a SLC charge today you can increase it to make it large enough to cover the USF contribution (assuming your SLC is not capped).
  3. If you don’t tariff and bill a SLC consider putting one in your access tariff. This would require breaking it out on the end user bill as a separate line item. However, note that by doing this you would be increasing the amount of your USF contribution paid to USAC if you are a contributor. Or, if you are not a contributor today it could make you into one.
  4. Increase your local rates by an amount that would cover the USF contribution. This is probably the best solution, except for possible competitive consequences. However, if you discontinue the USF fee and raise rates by the same amount you will not be increasing the customers’ bills overall.
  5. Pass the USF fee onto only those customers who have enough interstate long distance usage to cover the USF fee. The trouble with this idea is that it is hard to do correctly and it also means you would be charging the largest USF fee to those who make the most long distance. That is probably not a great idea from a competitive perspective.

We recommend you review the USF fee you are billing customers and ensure it passes the FCC “test”. If you need help to do this review please contact Terri Firestein at (301) 788-6889.

Regulatory Alert: Annual Access Charge Reform Tariff Filings Coming Due

Seal of the United States Federal Communicatio...

Seal of the United States Federal Communications Commission. (Photo credit: Wikipedia)

The second year of access reform is here again and most LECs and CLECs will need to file revised access rates by July 1. However, you should be aware that many State Commissions have their own requirements and time frames that need to be addressed in advance of the FCC’s date. As an example, the Public Utilities Commission of Ohio is directing that all affected ILECs and CLECs file the appropriate intrastate tariff amendment application or letter of compliance on or before May 1, 2013. This alert is to warn that in many states you are not going to have the luxury of waiting until July 1 to file your rates.

These filings are due to FCC Report and Order (WC Docket No. 07-135) which adopted a transitional intercarrier compensation restructuring framework for both intrastate and interstate interexchange and reciprocal compensation telecommunications traffic. In its recent March 26, 2013 release (WC Docket No.13-76) the FCC established procedures for the 2013 filing of annual access charge tariffs and Tariff Review Plans (“TRP”) for price cap ILECs, rate-of-return ILECs and CLECs that benchmark rates to price cap or rate-of-return ILECs. The Order sets an effective date of July 2, 2013 for the July 2013 annual access charge tariff filing. The Order establishes May 17, 2013 as the date that price cap ILECs must file their short form TRP. Affected ILECs and CLECs may make their tariff filings on either a 15 or 7 day notice (prior to the effective date) therefore affected ILECs and CLECs filing on a 15 day notice must file on June 17, 2013 and those filing on a 7 day notice must file on June 25, 2013. All filings must be made using the FCC’s Electronic Tariff Filing System (“ETFS”).

You also need to be aware that as part of the annual access charge tariff filing carriers will need to include the universal service charge contribution factor for the third quarter which begins on July 1, 2013. Note that in accordance with 47 C.F.R. § 54.712 of the FCC’s rules “…if a contributor chooses to recover its federal universal service contribution costs through a line item on a customer’s bill the amount of the charge may not exceed the interstate telecommunications portion of that customer’s bill times the relevant contribution factor.”

If you need help with these filings let us know. CCG also offers a service we call Regulatory Compliance where we notify our clients each year of every regulatory filing they need to make. It’s affordable and a great way to make sure that you meet all of your regulatory filing requirements.  Call Terri Firestein at CCG if you need help or want more information. She is at (301) 788-6889.