FCC Reforms Federal Universal Service Program and Seeks Comment on Further Proposed Changes

CLIENT MEMORANDUM FCC REFORMS FEDERAL UNIVERSAL SERVICE PROGRAM AND SEEKS COMMENT ON FURTHER PROPOSED CHANGES The FCC recently adopted an order (“Order”) in which it established interim measures to address concerns about the short-term viability of the federal Universal Service Fund (“USF” or 1“Fund”). The Commission also issued a Further Notice of Proposed Rulemaking (“Further Notice”) seeking comment on additional modifications to the contribution methodology that would convert the current revenue-based assessment methodology to one based on connections or telephone numbers. The universal service contribution system is being reevaluated in large part because of changes in the telecommunications marketplace since the current assessment program was instituted in 1997. USF contributions are currently determined by calculating a percentage of all interstate and international end-user telecommunications revenue. Many at the FCC are concerned that the pool of interstate and international telecommunications revenue is shrinking because of, among other things, substitution of traditional interexchange service for wireless and Internet-based services. In addition, the bundling of telecommunications and non-telecommunications products makes it difficult to distinguish between telecommunications and non-telecommunications services for purposes of determining contribution obligations. At the same time, the total annual federal USF disbursements have ...