USF Rates at Historical High: Steps for Managing the Impact to Your Telecom Budget

Leo Berz

For those of you who pay for telephone or communications lines, you’ve seen rising fees with USF rates climbing over the past several years. While these fees are still likely a small part of your overall telecom spend, they can add up, and it’s good to know what they are and why you are paying them. The Universal Service Fund (USF) was established in 1997 by the Federal Communications Commission (FCC) as part of the Telecommunications Act of 1996. Under FCC guidelines the Universal Service Administrative Company or USAC was created to administer this fund for the following purposes:

HIGH COST
This support ensures that consumers in all regions of the nation have access to and pay rates for telecommunications services that are reasonably comparable to those in urban areas. The FCC revised this fund in November of 2011 under the new name Connect America Fund which will subsidize the expansion of Broadband and Wireless networks between 2012 and 2018.

LOW INCOME
This support, commonly known as Lifeline and Link Up, provides discounts that make basic, local telephone service affordable for more than 7 million low-income consumers.

RURAL HEALTH CARE
This support provides reduced rates to rural health care providers for telecommunications and Internet services so they pay no more than their urban counterparts for the same or similar telecommunications services.

SCHOOLS & LIBRARIRES
This support, commonly referred to as E-rate support, provides affordable telecommunications and Internet access services to connect schools and libraries to the Internet. This support goes to service providers that provide discounts on eligible services to schools, school districts, libraries, and consortia of these entities.usf-chart

USF rates currently apply to all voice and most data telecom services and are adjusted on quarterly basis as determined by the USAC to meet the anticipated fund expenses and overhead for that specific time period. As depicted in the table to the right, USF rates are currently at historically high levels and will likely remain high for the remainder of 2012.

While taxes and regulatory fees are inevitable, you can take the following steps to manage the impact to your budget:

  1. These fees can vary by two or more percentage points quickly. It is important to identify rate changes as soon as possible and adjust your budget accordingly.
  2. When shopping for new services, have bidders identify current USF changes (along with other regulatory fees) on a line item basis. Not all providers collect this fee, and this could have a significant impact on the true cost of ownership.

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