While the industry waits to see if the Federal-State Joint Board will recommend that broadband Internet access service providers must contribute to the Universal Service Fund (it will), and whether that recommendation is accepted by the FCC (it will be), it appears that the Commission is in search of even more ways to increase the flow of universal service dollars. Its latest effort is a back door attempt through the Universal Service Administrative Company (USAC) to require VoIP providers to contribute to the Fund based on their revenues from ancillary services such as call forwarding and call waiting. 

This latest controversy became public when the Compliance Group (Group) filed a Petition for Declaratory Ruling (Petition) in Docket 96-45 on March 26, 2015, requesting the FCC to clarify that its “adjunct-to-basic” precedent does not apply to interconnected VoIP services. Let me explain the significance of this for the Universal Service Fund.   

First, it is important to know that interconnected VoIP services are defined as services that: (1) enable real-time, two-way voice communications; (2) require a broadband connection from the user's location; (3) require Internet protocol-compatible customer premises equipment; and (4) permit users generally to receive calls that originate on the public switched telephone network and terminate calls on the public switched telephone network.

Second, the Commission’s little known adjunct-to-basic rule requires services normally classified as information services to be classified instead as (adjunct-to-basic) telecommunications services if they are incidental to an underlying basic telecommunications service and do not alter the fundamental nature of the telecommunications service. Examples of adjunct-to-basic services include, call forwarding, call waiting, caller ID or a recorded message provided with a calling card service.

The Commission has already determined that for time division multiplexed (TDM) calls, these adjunct services facilitate the completion of calls through the public switched telephone network therefore they are telecommunications services and are part of the Universal Service Fund.

In its Petition, however, the Group claims that USAC has been expanding the adjunct-to-basic precedent to include VoIP calls for the first time. Specifically,

The Compliance Group has learned that [USAC] appears to be extending the “adjunct-to-basic” precedent to [interconnected] VoIP through a corollary concept – “associated with [interconnected] VoIP.” Specifically, USAC appears to be considering “ancillary” services, offered in conjunction with an underlying [interconnected] VoIP service, to be  [interconnected] VoIP, even if these ancillary features do not necessarily individually meet the four-pronged definition of [interconnected] VoIP.  [Moreover], the FCC has not expressly extended its adjunct-to-basic line of precedent to [interconnected] VoIP services (Petition, at pp. 1-2).

Some might argue that requiring VoIP ancillary service revenues to become part of the Fund is a good thing, since the overall Fund is capped and this would simply reduce the quarterly contribution factor for all contributors. However, as we noted a few weeks ago, it has been publicly reported that the Commission is planning to use the Universal Service Fund (with an increased cap) to extend its Lifeline program to provide discounted broadband service to millions of low income Americans. The additional revenues to finance such an increase in broadband service will have to be raised somehow. This may be one of the ways. 

Check out one of our older posts for more details about other ways the Commission plans on increasing the Fund.

The argument could also be made that the FCC had nothing to do with this new VoIP mandate, since the requirement that ancillary VoIP ancillary service revenues are now part of the contribution base came from USAC and not the Commission directly. 

It is technically true that USAC is an independent company. It is a subsidiary of the National Exchange Carrier Association (NECA), and is governed by a 19-person board of directors representing various industry stakeholder interests. It supposedly exists to enforce rules adopted by the FCC not create them on its own.   

However, the line between the Commission and USAC is very blurred. While USAC cannot act without Congressional approval, it can make specific recommendations, and many have been accepted and implemented by the FCC, Examples include increasing broadband access to schools and libraries, and the original requirement that VoIP providers contribute to USF. Thus, it appears that USAC and the Commission are usually reading from the same book – finding additional ways to increase the Fund.

While increasing the Fund may be a good thing for our society, it should be done through an open and transparent industry debate. That is why the Commission should grant the Compliance Group’s Petition and begin a proceeding to determine if ancillary VoIP services should contribute to universal service. All back door stealthy attempts to increase the Fund should be rejected.

By Andy Regitsky, CCMI