IMPORTANT DEVELOPMENTS IMPACTING STATE USF FEES: Oklahoma and Missouri Recently Announced Changes Impacting State-Level USF Contribution Obligations of Communications Service Providers

The Public Utility Division of the Oklahoma Corporation Commission recently announced sweeping changes to the Oklahoma universal service fund (“OUSF”) that will immediately impact all communications service providers doing business in the state. At the same time, the Missouri USF assessment suspension has been extended through September 30, 2022. As of November 1, 2021, all local, long distance, wireless, and interconnected Voice over Internet Protocol (“I-VoIP”) providers serving Oklahoma customers are required to pay OUSF assessments based on the number of provided connections, and most contributing carriers are now obligated to report monthly instead of annually. This is a dramatic, yet not surprising, departure from the traditional revenue-based USF contribution mechanism created by the Federal Communications Commission (“FCC”) and incorporated by most states into their universal service programs.

As we recently reported, Oklahoma is not the only state that has begun experimenting with alternatives to revenue-based USF contribution methodologies. Some states, among them Maine, Maryland, Nebraska, New Mexico and Utah, have already adopted numbers or connection-based contribution regimes, while California is currently considering such a shift.

Oklahoma’s Connection-Based Regime

Oklahoma’s new, connection-based universal service funding system is effective as of November 1, 2021, and applies to all “contributing providers.” The OUSF statute defines “contributing provider as “providers, including but not limited to: providers of intrastate telecommunications, providers of intrastate telecommunications for a fee on a non-common-carrier basis, providers of wireless telephone service and providers of interconnected Voice over Internet Protocol (VoIP).”[1] The reporting instructions expressly clarify that both fixed and nomadic I-VoIP providers must contribute. They define fixed VoIP as “able to be used at only one location” and nomadic VoIP as “able to be used at multiple locations.”

The initial OUSF contribution factor has been set at $1.14 per connection. All providers earning at least $50,000 in annual Oklahoma intrastate retail revenue are required to report monthly the number of connections provided on the last day of the reporting period that allow access to the public switched telephone network in Oklahoma, and pay the related assessment. Providers with less than $50,000 in annual Oklahoma intrastate revenue still have the option to report and remit their contributions annually. Finally, providers with stable Oklahoma intrastate retail revenue may seek authorization from the OUSF administrator to report quarterly if they meet strict eligibility conditions. Retail telecommunications revenues do not include revenues derived from the following types of services and charges:

  • Wholesale transactions, including access charges paid by or to a local exchange carrier and interconnection charges paid by or to a cellular provider.
  • Services consisting primarily of the creation of artistic material or other information that is later transmitted over telecommunications equipment, including information services.
  • Mobile radio and one-way paging services that do not have an electronic interface into the PSTN. Typically, these services require the paged person to go to a telephone to respond to the page.
  • Telecommunications services provided inside a company’s proprietary network.
  • Sales and rentals subject to the sales and use tax, including sales and rental of telephone equipment.
  • Inside wire installation, billing and collection, or maintenance services sold to customers.
  • “Yellow pages” advertising.
  • Payments between aggregators and operator service providers.
  • Video services.

The number of qualifying connections must be calculated based on the applicable definition(s) of connections as utilized for reporting on FCC Form 477, regardless of whether or not the Contributing Provider is required by federal law to directly report on FCC Form 477.

Missouri USF Assessment Suspension

The Missouri USF assessment has been suspended for all communications providers since January 1, 2020, and the suspension has been extended through September 30, 2022. The initial suspension order implies that the reason for the suspension, at least in part, is to help carriers focus on providing Lifeline support to low-income customers. As the FCC has been gradually phasing out federal Lifeline support for voice-only plans, Missouri has been expanding state Lifeline subsidies to ensure that residents who are unable or unwilling to adopt emerging technologies retain access to basic telecommunications service. Recently, however, the FCC paused its planned elimination of voice-only federal Lifeline support, which may lead the Missouri Public Service Commission to revisit whether to suspend the state USF assessment beyond September, or perhaps even consider whether to lift the suspension sooner.

As Oklahoma and Missouri have shown, the time for USF reform is now. As such, communications providers should be vigilant in order to keep up with the increasingly dynamic regulatory fee landscape. Our firm’s USF experts stand by ready to assist your company in this endeavor. If you have any questions or concerns about recent USF developments or your company’s reporting and remittance obligations generally, please contact Jackie Neff at jrn@commlawgroup.com or (703) 714-1314.

[1] 17 O.S. § 139.102(9).

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