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FCC Changes Universal Service Fund (USF) Rules


Since all 10-10 services listed are now charging a similar percentage amount for the Universal Service Fund (as of April 2003), USF charges have been deleted from the dollar amounts shown in the call-time cost comparison tables.

Original Tip from December 2002

  • Wireless (Cell) Phone Charges to Increase
  • Long Distance related Charges to Decrease

On December 13 the Federal Communications Commission (FCC) made changes that will affect most people's phone bills starting April 1, 2003. Many users of wireless phones will see their Universal Service Fund (USF) line item nearly double each month. For example, the fee on a $50 per month plan increases from about 55 cents to $1.04. If you're saying "What the heck is a USF fee?", read item number 7 on my 10-10 Q&A page.

Users of interstate and international long distance on plain old wireline phones may see a decrease in USF charges. How you are affected depends on the service being used. Through March 31, telephone companies have the flexibility to charge you almost any way they want. As of April 1, 2003, FCC regulations provide that "carriers may not mark up universal service line item amounts above the contribution assessment rate."

Long distance carriers have been paying the FCC 7.28% of their revenue for out-of-state calls. The FCC has based contributions on six month old numbers. With some phone rates declining and some companies losing customers, your carrier may have been charging you as much as 11.5% this year. New rules base contributions on "a percentage of projected collected, instead of historical gross-billed, interstate and international end-user telecommunications revenues."

Flat amounts have penalized light users, but no more!

The FCC Order emphasizes that a carrier cannot bill any individual customer more than the contribution percentage times the charges for their own calls. At first I was worried about a possible loophole. Currently, flat amounts penalize consumers that make few phone calls. The Order states, "Contributors will also have the flexibility to express the line item either as a flat amount or a percentage But after the FCC cites an example from my own comparison tables on page 26...

"Under one carrier's surcharge, a customer that makes a $0.19 one minute call would be charged a $1.20 (or over 600%) universal service fee. For examples of such practices visit http://www.1010phonerates.com."



...the order very specifically protects consumers with this language on page 27:

"So, for example, if the contribution factor is 7.28 percent, a carrier's federal universal service line-item cannot exceed 7.28 percent of the total amount of the interstate portion of charges for telecommunications service on each customer's bill. Likewise, if a carrier chooses to express its federal universal service line-item charge as a flat amount, that amount may not exceed the interstate telecommunications portion of the bill times the relevant contribution factor."



Some of the services I compare on this site will have to change policy to conform. 10-10-297 and 10-10-457 will not be able to charge users a flat $1.12 USF fee unless they're billed at least $15.38 worth of applicable calls. 10-10-636 and 10-10-811 will not be able to add a fixed 75 cents in with the percentage charge. I'll be contacting those companies in case they have differing interpretations.

Will there be a new charge on your phone bill?

Carriers will be allowed to recover any administrative or other costs they currently recover in a universal service line-item through their customer rates or through another line item."

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