Industry Leader in Telecom Data Analytics and Revenue Assurance

The State of Telecommunications

With the world adjusting back to normalcy post-pandemic, 2022 was another booming - and some would say a hectic year for telecom. The momentum from the increased dependency on broadband has continued to reflect on the growing telecom market. Broadband and Telecommunications are entering a new landscape of competition as the demand for faster speeds and higher data consumption continue to force telcos to adapt to new technologies. With that, both CAF and ACAM testing is in full swing now that pre-testing has finished for CAF recipients.

As of writing this, hundreds of broadband providers across the country are testing their high-cost networks as a requirement for Connect America Fund (CAF) Performance Testing.

Although CAF tests originate from the subscriber's home networks, these tests are assessing more than just the last-mile and individual homes since their internet relies on regional and backbone networks too. 

The fourth quarter's contribution factor has been announced to be 28.9 percent. How exactly does that  affect your USF fees for this quarter? Let’s do the math. 

The wheels are turning on USF reform, and recently the FCC took small steps forward by asking Congress for authority to expand the contribution pool. 

USF reform has been a talking point for years without much progress done by the people in power. As it stands, communications providers contribute to the USF based on their interstate and international voice revenues, which is mostly VoIP and Wireless. This is assessed against the Contribution Factor - a percentage calculated by the FCC each quarter to ensure they meet their needed funding goals.

With the recent push for government broadband spending, the number of competing providers in previously uncontested areas is on the rise. Every small to mid-sized provider is aware of this, but many still don’t have a way to proactively prevent churn and retain customers.

Data analytics used to be a buzzword that many thought was only in reach of the big players in telecom. As new approaches to data in broadband become more available, CSPs are taking the necessary steps to turn their data into meaningful analytics, while others are playing catch up to not fall behind. 

In this blog, we’ll go over the ways we’ve been leveraging data with our Event Storage and Analytics Platform (ESAP) modules to help providers with churn and marketing support, and detect fraud using analytics. 

In February, WISPA urged the FCC to update its Universal Service Fund (USF) programs to better accommodate small broadband-only providers who deliver needed internet access to millions of Americans in high-cost areas and in the digital divide.

Each quarter hundreds of small communications providers in America overpay their USF Fees. A volatile contribution factor, along with a high Safe Harbor rate are to blame.

The federal government has been investing big-time into nationwide broadband access for underserved communities. With the passage of the American Rescue Plan Act (ARPA) and the Infrastructure Investment and Jobs Act (IIJA), state governments are beginning to develop plans to connect local communities with high speed, affordable broadband. 

Historically, broadband funding has been distributed and managed by federal entities such as the USAC, with programs such as the Connect America Fund, which dispersed funds directly to internet providers. This time, state governments are managing grants and making sure that their local communities have access to high speed and affordable broadband. 

Time after time, carriers contact us about wanting to do something to lower their skyrocketing USF Fees.

Some carriers may feel like they are at the mercy of an endless cycle of a volatile contribution factor that has risen drastically in the past decade -from 15.5 percent in the first quarter of 2011 to 31.8 percent in 2021.

A solution that carriers overlook is their ability to reduce their Federal USF tax by means of a Traffic Study.

By using the Safe Harbor Rate, you can be spending twice as much as you should on USF Fees when filing your 499s. With the deadline for carriers to submit their 499As around the corner, the time to complete a Traffic Study is now.

Here's a direct quote from a recent USAC Webinar;

The best (easiest) time to switch from using the Safe Harbor percentage to traffic studies is with the 1st quarter filing of the year ... Keeping methodology consistent for all quarters simplifies annual revenue reporting on the applicable Form 499-A due the following April.

These spikes in USF fees can be managed by ditching the Safe Harbor rate when you file your 499s, and instead performing a traffic study.

Earlier this month, the NTCA- otherwise known as the Rural Broadband Commission, filed a petition for waiver requesting the Wireline Competition Bureau (Bureau) to extend the aid provided by the previous December 2020 Waiver Order. The Rural Broadband Commission explained in the petition that broadband providers continue to face challenges such as supply chain issues as a direct result of the Covid-19 pandemic.

The main requests of the NCTA were as follows;

• The Commission should continue to allow A-CAM/RBE/Alaska Plan carriers to only pre-test 70% of the USAC-selected sampled locations for the first two quarters of 2022
• Extend the “simple” waiver request for A-CAM/RBE/Alaska Plan carriers
• Extend the pre-testing period for A-CAM/RBE/Alaska Plan carriers

"A person doesn’t know how much they have to be thankful for - until they have to pay taxes on it."

Whether you’re a large ILEC, or a small rural voice provider, with every 499 submitted to the FCC carriers and their customers contribute a percentage of their international or interstate calls to the USF. While the USF has proven it’s importance with the introduction of rural broadband support and other funding grants, there’s an ongoing dilemma in regards to how carriers contribute to the USF.

Much of this dilemma stems from the FCC’s Contribution Factor and Safe Harbor Rate that many providers default to using to file their 499s.