On April 30, 2012, the FCC released a Further Notice of Proposed Rulemaking (“NPRM”) requesting input on how to reform its Universal Service Fund (“USF”) contribution methodology.  This proceeding promises to result in sweeping changes to the current USF contribution system and will likely expand the number of services subject to the USF rules.  All providers of telecommunications and information services should stay abreast of these developments.  

Reforms being considered include: 

1)               Expanding the contribution obligation to specific additional services, or expanding it to all providers of information or telecommunications services that provide the transmission path to the end user (including CMRS data services and broadband Internet); 

2)               Moving from a contribution system based on revenues to one based on the number of connections or telephone numbers served, while removing or tightening exceptions for wholesale, international, and de minimis carriers;

3)               Making the USF system more transparent to consumers by creating standard disclosure requirements for points of sale and bills; and

4)               Improving and streamlining the administration of the USF system. 

Under the FCC’s proposals, some services currently exempt from USF contributions may be assessed USF for the first time, including:  

• Broadband Internet access
• Wholesale services
• Enterprise Communications Services (dedicated IP, VPN, WAN).
• Text Messaging
• Machine-to-Machine Service Providers (smart meter, smart grid, remote health monitoring, and remote security, etc.).
• Prepaid Calling Card Distributors and Retailers.
• Free or Advertising-Supported Services
• International Only services
• One-Way VoIP (non-interconnected VoIP) 

Comments to the NPRM are due 30 days after publication in the Federal Register.  Reply comments are due 60 days after publication.  The FCC intends to complete this proceeding this year.  If you have any questions regarding USF, please contact James Moskowitz at (202) 872-6881 or jmoskowitz@cm.chi.com.