Could the USF Contribution Factor Top 15%?

The Universal Service Contribution factor has been increasing recently, but could it top 15%? That is the prediction of Billy Jack Gregg, an analyst who studies the USF fund. If it does, the cries for USF reform should grow even louder, just at the time that the FCC is announcing USF support for broadband in its National Broadband Plan. Perhaps even -- or especially -- end users will object to being assessed what amounts to a 15% tax on their telecommunications purchases. (Disclaimer: technically, the USF is not a tax”).

This prediction stems from a routine filing made by the Universal Service Administrative Company (USAC). USAC is required to submit to the FCC a quarterly estimate of the revenues and obligations of the Federal Universal Service Fund. USAC submitted its most recent projection on March 2, 2010. Billy Jack Gregg of Universal Consulting, who regularly analyzes USF issues, predicts based on this report that the 2Q 2010 USF contribution factor will be 15.3%, yet another new high. Mr. Gregg has kindly agreed to allow us to post his projections here. His chart of the USF contribution factor over time graphically displays the staggering increases in the fund the past 10 years.

The FCC will not release its proposed USF factor for another week or so. But history suggests that Mr. Gregg’s projections will be pretty close. This also may be a good time to remind contributors that any revisions to your 2Q 2010 499Q are due by March 18. After that date, you will be assessed USF on the revenues you have projected, at the applicable USF contribution factor for the quarter.