Something's gotta give: Universal service and the 14.1% surcharge

The word is out, and if you're hearing it here for the first time, I apologize: The federal universal service surcharge for the first quarter of 2010 will be 14.1% of applicable interstate (including access) and international charges. Man oh man!

And I've noticed an interesting phenomenon. The FCC announced the new percentage rate in this announcement last Friday, but as of today, this announcement appears nowhere on the list of FCC "Headlines" on the FCC's home page. Yet somehow, FCC announcements from the same day about panelists for "a workshop on Speech, Democracy and the Open Internet" and a speech by one of the FCC commissioners about Guglielmo Marconi (you know, the guy who won a Nobel Prize 100 years ago for basically inventing the radio) are right there on the home page! And it took until today for the FCC to add the announcement to its required spot at its special URL for contribution factor notices.

Maybe the whole thing is too embarrassing? A levy of 5% feels like a tax. Something running 10% is the kind of surcharge we in telecom are used to. But edging toward 15%? Deep down, all parties know this is out of whack.

I encourage anyone looking for a constructive deep dive and how to provide input on the what-to-do from a public policy standpoint to check out LB3's regulatory advice and advocacy practice. They've been flagging this issue forever. In the meantime, be aware that this breaking point is being reached by an all-too-foreseeable crossing of lines between mild but steady declines in the carrier-reported revenues for basic telecommunications services and marked increases in carrier demands for the universal service funds.

In particular, the wireless carriers (who are no slouches when it comes to taxes and fees) have really ramped up their demands on the "High-Cost" program -- you know, the part of universal service that's mostly thought of as helping independent telcos to reach far-flung subscribers in less densely populated areas of the country.

It's not like the FCC hasn't been doing anything about this. They've now capped how much the wireless carriers can get, in a decision recently upheld by the federal appeals court in Washington, D.C. But these stopgap measures only illustrate how much fundamental USF reform is needed, something the FCC and all parties to the regulatory world have to know.

With every surcharge shock, we at TC2 redouble our reminder that the higher these fees and passalongs go, the more impact you get by gauging them them in a competitive framework. Part of what we know is going on is that the large U.S. carriers, few though they may be, at any given moment do feel some reluctance to actually levy the passalong on freshly won major data networking business. That's particularly true now with MPLS ports and CoS packages, even if the FCC has gotten hip to MPLS's revenue impact on the carriers.

So any time you have either:

-- a service for which the carrier won't assess USF vs. a service for which it will, or

-- the same service competitively bid to multiple carriers who make different commitments to passing along or not passing along the surcharge (provided you've specifically asked)

then you have a dollar difference that's every bit as significant as the rate element pricing itself. And the higher the USF (or other) surcharge on the carriers' revenue goes, the bigger the impact of this passalong vs. no-passalong commitment on you.

There's more to come, including what may be more impetus for universal service reform as the surcharge factor looks more and more ridiculous. The FCC may not make it easy to find about this on their online front door, but we're happy to shout about this issue in all its ramifications for as long as it takes.