USF Contribution Factor to Top 20 Percent in Q4 2018

For the first time in history, the Federal Communications Commission’s (“FCC”) Universal Service Fund (“USF”) contribution factor will likely top twenty percent (20%) in the fourth quarter of 2018. The FCC’s Office of Managing Director proposed a contribution factor of 20.1 percent for the fourth quarter, and if the FCC takes no action on the proposal within fourteen days, which it rarely does, the proposed rates will be deemed approved.

A rising USF contribution factor is nothing new for service providers that contribute to the USF. Contribution factors typically remained below thirteen percent until 2010, and over the past two years, the contribution factor has hovered between seventeen and twenty percent, but the contribution factor had never surpassed twenty percent, until now apparently.

The rising contribution factor underscores the importance of compliance for telecommunications providers. Typically, USF fees can be passed through to a provider’s customers; however, if a provider fails to contribute to the USF or incorrectly underpays its USF contribution, the provider cannot retroactively impose USF fees on an end user. Therefore, providers that fail to contribute to the USF on revenue subject to the contribution factor risk paying more than twenty percent of their telecommunications revenue to the FCC out-of-pocket if caught failing to contribute. That would be in addition to potential penalties for missed filings, interest on late payments, and possibly even FCC enforcement forfeitures.

If you have any questions about your company’s compliance with its FCC regulatory fee obligations, please contact, Jonathan Marashlian at jsm@commlawgroup.com

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