Telecommunications companies are required by law to make contributions to the universal service fund (USF), paying in a percentage of their end-user interstate and international revenues. This percentage is called the contribution factor, and it changes each quarter, varying with demand for universal service support.
USAC collects revenue data from USF contributors on the FCC Form 499-A (Annual Telecommunications Reporting Worksheet) and FCC Form 499-Q (Quarterly Telecommunications Reporting Worksheet). All intrastate, interstate, and international providers of telecommunications within the United States, with very limited exceptions, must file the FCC Form 499-A. Telecommunications carriers that do not qualify for the de minimis exemption must file the FCC Form 499-Q.
Using information received from universal service program participants, USAC estimates how much money will be needed in each quarter to provide universal service support. USAC then provides this information, called the “demand filing,” to the Federal Communications Commission (FCC) each quarter in its FCC Filings. The demand filing includes projections of support requirements for the High Cost, Lifeline, Rural Health Care, and Schools and Libraries programs as well as the fund size and administrative cost projections. The demand filings are due 60 days before the beginning of the next quarter (e.g., on or about November 2 for first quarter, January 31 for second quarter, May 2 for third quarter, and August 2 for fourth quarter).
Each quarter, the FCC uses information from the demand filing in combination with carriers’ reported revenue to calculate the contribution factor, dividing total demand by total revenue. The resulting percentage, or contribution factor, determines what portion of interstate and international end-user revenues carriers must contribute to the USF. Typically, the FCC releases the contribution factor for the quarter between the 2nd and 15th day of the month preceding the quarter (e.g., between December 2 and December 15 for the following first quarter).
Consumers may notice a universal service line item on their telephone bills. This line item appears when a telecommunications carrier chooses to recover its universal service contributions directly from its customers through a charge on their telecommunications bills. The FCC does not require telecommunications carriers to pass through their universal service contribution obligations to their customers, but if a carrier does choose to assess its customers a universal service charge, the FCC has established certain rules regarding how the charge must be calculated (see 47 C.F.R. Section 54.712 and FCC orders).