The Federal Communications Commission’s (FCC or Commission) Office of Managing Director (OMD) has issued a Public Notice announcing that the Universal Service Fund (USF) contribution factor will be 23.8% for the second quarter of 2022. This is similar to the 25.2% factor for the first quarter of 2022, and a significant reduction compared to the 29.1% factor used in the fourth quarter of 2021, and the average of 31.5% for 2021 as a whole. It appears that the sustained reduction may continue to be the result by one-time events, and the contribution factor may increase in future quarters.
Providers of interstate and international telecommunications and interconnected voice over internet protocol (VOIP) are required to make USF contributions on their end-user revenues, which they may recover through end-user fees. The amount of USF contributions is calculated by the Universal Service Administrative Company (USAC) every three months based on projected USF expenditures and assessable revenue projections submitted by providers.
The reduction in the USF contribution factor for the second quarter of 2022 appears, as it was in the first quarter, to be related to notable reductions in projected expenditures for the high-cost and rural health care programs of $350 million and $150 million, respectively, compared to the fourth quarter of 2021. USAC’s Fourth Quarter Projections show the reduction in high-cost expenditures is likely attributable to the end of Connect America Fund, Phase II model support, with the resulting reduction not being fully offset by anticipated increases in Rural Digital Opportunity Fund support, many of which have yet to be authorized. The reduction in rural health care expenditure appears to reflect continued use of available funds carried over from 2021. Consequently, projected expenses in both programs appear likely to increase in future quarters, which may lead to higher contribution factors.