USF Contribution Rate May Stay at 17.4%, Not Jump, on Revised USAC Estimate, Gregg Says
The industry USF contribution factor could stay in Q3 at 17.4 percent of carriers' U.S. interstate and international (long-distance) telecom end-user revenue, industry consultant Billy Jack Gregg emailed Wednesday. Previously, he projected the Q3 contribution (assessment) factor could spike to 19.6 percent, based on Universal Service Administrative Co.'s estimate for quarterly USF subsidy demand (see 1705030049). That sparked some concerns (see 1705040059).
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USAC this week revised its annual USF E-rate demand projections to $3.2 billion after the window closed for school and library discount requests, Gregg wrote, referring to filings in FCC dockets, including 06-122. "This is over $700 million less than the current $3.99 billion cap on the Schools and Libraries Fund [SLF]. According to the revision filed by USAC, adjusting for this reduced annual demand lowers third quarter Schools and Libraries Fund projections by $183.2 million," he said.
Incorporating the revised SLF demand, and assuming the contribution base is the same as for the current quarter, "the USF assessment factor for the third quarter 2017 will remain at 17.4%, unchanged from the current quarter," Gregg wrote. "This is over 200 basis points lower than the assessment factor which resulted from USAC’s original demand projections. USF revenue projections for the third quarter are due out next week, at which time it will be possible to accurately calculate the assessment factor for the third quarter of 2017."
The FCC said funding is sufficient to fully meet requests for E-rate discounts projected by USAC for funding year 2017 beginning July 1. USAC's estimated demand of $3.2 billion for FY 2017 included $2.296 billion for category one services (providing broadband connectivity to schools and libraries) and $904 million for category two services (providing internal connections), said a Wireline Bureau public notice Wednesday in docket 02-6. It noted the $3.99 billion E-rate annual cap (which is indexed for inflation) and that USAC projects $1.2 billion in unused funds from previous years is available for FY 2017.