Universal Service reform: by the numbers

The FCC is gearing up to make long-awaited Universal Service reforms promised before year-end. To put potential reforms in context, Connected Planet thought it would be useful to recap some of the numbers that are so critical to understanding the situation.
7 million: Approximate number of U.S. households that cannot get broadband today, according to the FCC, largely because they are in sparsely populated rural areas that are especially costly to serve. The number of people involved is estimated at between 14 million and 24 million.

Approximately two-thirds of these homes are in areas where the incumbent is a large price cap carrier, according to the FCC. The remaining homes are in areas served by rate of return carriers. In a joint proposal, price cap and rate of return carriers have each proposed their own plan for how funding should be distributed to bring service to parts of their territories where broadband is not currently available (CP: Rural carrier associations confirm agreement with large carriers on broadband USF funding).

The FCC is seriously considering the joint proposal—although cable and rural wireless companies say the proposal favors incumbent telcos (CP: Cable and wireless associations protest proposed USF reforms).

$4.5 billion: Total value of today’s high-cost Universal Service fund, which is designed to help cover the cost of providing phone service in areas that are expensive to serve--and which also has helped fund broadband build-outs in a large part of rural America. The FCC wants to cap the proposed broadband Universal Service Fund at around the same amount as it transitions away from focusing on voice.

$1 billion: Approximate amount of high-cost funding that goes to competitive carriers (primarily wireless carriers) at the same level of support as the landline telcos, although many of the wireless carriers would have been able to deliver service without the subsidy. Almost everyone agrees this program should be eliminated and the money diverted toward broadband.

Something less than $1 billion: Amount that rate of return carriers receive in per-minute access charges, which also helps cover network costs, according to the National Telecommunications Cooperative Association. This does not include access charges that go to price cap carriers, who receive less money on a per-minute basis but who handle a larger share of total traffic.

The FCC wants to phase out the access charge system—and although the commission may recommend an access charge revenue replacement mechanism, the FCC apparently hopes to cover the cost of that mechanism as well as the proposed broadband Universal Service program from the $4.5 billion it plans to allot for broadband Universal Service.

$328: The average amount of Universal Service funding that rate of return carriers received per line per year, according to the 2010 Telergee Alliance Benchmarking Study (unfiltered: Sandwich Isles Communications could go bankrupt if USF payments are not reinstated). Rural telcos say they need to continue to receive funding to support broadband service delivery as the fund transitions away from voice service.

15.5%: As of first quarter 2011 (unfiltered: USF contribution factor set at record 15.5%), the percentage of long-distance revenues that carriers paid to fund the Universal Service program—a number that has reached an all-time high. Policymakers do not want to see this number increase any further.

Some people have recommended expanding the contribution base to include broadband revenues, which would likely lower the contribution factor, but the FCC does not plan to tackle that issue until after it solidifies reforms involving the payout side of USF.