In the current market where Universal Service Fund fees have reached historical highs, providers are looking for ways to use their data to have an impact on cutting down their customer’s costs.
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.
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.
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.
"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.
It's no question that the Universal Service Fund (USF) has proven it's value in creating an all-inclusive broadband network. However, the rising costs of USF fees have caused many industry professionals to call for a change in how service providers contribute to the fund.
In our regulatory work, we're often shocked at how many providers don’t know that there are ways to cut their overall USF contribution to be a fraction of what it is now.
To give a brief overview of the USF, it’s split between four separate funds;
- Low-income Lifeline fund
- Rural Healthcare fund (RHC)
- E-Rate: For Schools and Libraries
- High-cost fund
In February 2018, an up and coming VoIP service provider contacted us about performing a USF traffic analysis before their next quarterly filing. With the 'Safe Harbor' rate set at 64.9% and the quarterly contribution factor increasing to an all time high of 19.5%, D3 Unified Communications decided it was time to explore the option of performing a traffic study.
Within 1 week, we had a data sample from D3 and provided a free high level estimate of what their actual PIU would be if we completed the traffic study. Our quick analysis on the data estimated that their actual PIU would be less than half of the 'Safe Harbor' rate of 64.9%. The decision to perform the traffic study became an easy one to make as the savings were very evident.
The proposed USF Contribution Factor for 4th Quarter 2017 is 18.8%.
The FCC recently announced that the proposed Federal Universal Service Fund ("USF") contribution factor for the 4Q of 2017 will be 18.8%. This is a significant increase from the 3Q rate of 17.1% and the highest contribution factor in the history of the USF.
What Should You do?
In case you haven’t seen the latest information released from the FCC, the Office of Management and Budget (OMB) has put their final stamp of approval on the Rural Call Completion Order. While conversations around the order have been swirling since late 2013, the OMB approval means that all long distance voice service providers must take action by April 1, 2015.
Advanced Technologies & Services, Inc. (ATS), a leading provider of operations and business support systems (OSS/BSS) for communications providers, announced it has added four new clients to its Universal Service Fund Traffic Study service.