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FCC Prepared to Lighten Rural Telco USF Contributions

Randy Sukow May 17, 2018

Chairman Ajit Pai says that rural telephone companies are paying an unfair “broadband tax” and that the FCC plans to eliminate it. He indicated in a blog post yesterday that the Commission during its June 7 open agenda meeting, will consider an order to forbear from imposing universal service fund (USF) contribution requirements for rural incumbent local exchange carriers’ (LECs’) broadband access transmission services.

The goal, Pai says, is to reduce the cost of broadband internet services for rural subscribers. Carriers pass universal service expenses on to consumers on their monthly bills.

“The FCC has consistently declined to impose USF contributions obligations on broadband Internet access service.  In English, that essentially means we don’t tax broadband,” Pai said.  “But rural carriers that offer certain broadband transmission services are uniquely required to contribute to the USF on the revenues from those offerings.  Again, in English, this essentially means rural companies [hence their customers] have to pay broadband taxes that others don’t have to pay.”

NTCA, The Rural Broadband Association and US Telecom filed a joint petition a year ago seeking for relief. The petitioners asked for “targeted, temporary forbearance” for rural LECs offering broadband transmission on a common-carrier basis for cost-recovery purposes. Other broadband providers that are not common carriers do not pay that contribution fee. NTCA and USTelecom asked for forbearance pending more comprehensive, overall contribution reform.

“We conclude that exacting contributions from small, rural carriers for a component of their broadband internet access service is not so necessary,” the Commission says in a draft of the forbearance order released today. “If anything, imposing that obligation on a limited group of rural providers of this service is in itself ‘unreasonably discriminatory’ because it raises the prices of consumers in rural areas served by these small carriers. This is exactly the opposite of the statutory command.”

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