On July 22, 2010, Representatives Rick Boucher (D-VA) and Lee Terry (R-NE) introduced sweeping legislation to update the Universal Service Fund ("USF" or "Fund").  In a statement released with the 58-page Universal Service Reform Act of 2010 ("Reform Act"), Reps. Boucher and Terry announced that the USF, as currently structured, is broken and that recent contribution rates of more than thirteen percent are unacceptable and unsustainable.  Reps. Boucher and Terry blame this failure on the Fund's inability to keep up with the changing telecommunications landscape and assert that their proposed reforms will ensure the continued viability of the USF.

The legislation appears to have bipartisan support in Congress and, perhaps just as importantly, broad support from the telecommunications industry.  In fact, numerous carriers and industry groups have already voiced approval of the bill, including AT&T, CenturyLink, Frontier Communications, the Independent Telephone and Telecommunications Alliance, the National Telecommunications Cooperative Association, OPASTCO, Qwest, Verizon, and Vonage.

Among the bill's most notable reforms, it will:

• Expand the contribution base by allowing the Federal Communications Commission ("FCC" or "Commission") to assess contributions on 1) any entity that pays into the universal service fund under the current system (e.g., long distance providers); 2) any provider of a service that uses telephone numbers, IP addresses or their functional equivalents to provide or enable real time voice communications and in which the voice component is the primary function (e.g., VoIP providers); and 3) any provider that offers a network connection to the public (e.g., DSL, cable modem, WiMax and broadband over powerline providers);
• Allow the FCC to determine whether to use a contribution methodology based on revenues, numbers, connections or any combination as long as the result is non-discriminatory and equitable;
• Maintain de minimis exemptions by allowing the FCC to limit the contributions of providers whose customers typically make a low volume of calls on a monthly basis (e.g., prepaid wireless customers) or for additional phone numbers provided under a group or family pricing plan for residential customers;
• Direct the FCC to complete a proceeding to reform intercarrier compensation within one year of the date of enactment and implement rules within 18 months;
• Address the problem of traffic pumping by prohibiting access charge recovery when an entity offers a free or below cost service and shares the switched access revenues with a local exchange carrier;
• Require carriers to identify all traffic which originates on their networks and requires all intermediate carriers to pass through that identification so that carriers which terminate that traffic can seek appropriate intercarrier compensation.;
• Declare broadband to be a universal service and that the Fund should support the build out of broadband lines;
• Require Fund recipients to offer high-speed broadband within five years of the date of getting funds; and
• Provide numerous reforms intended to more effectively constrain the Fund size.

Clients who wish to read more regarding this bill can access its full text at the following link:

 http://www.boucher.house.gov/images/stories/USF_7-10.pdf

The Firm is currently preparing a detailed analysis of this legislation that will be released next week for interested parties.  If you have any questions or concerns regarding the possible effects of the proposed legislation on the telecommunications industry or your business, please contact the attorney assigned to your account to indicate that you are interested in receiving additional information.