WCB Denies Petition Seeking an Expansion of the Universal Service Government-Only Exemption

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The Wireline Competition Bureau (WCB) of the FCC has denied a petition filed by Stratos Government Services, Inc. (Stratos) requesting clarification, or alternatively, a declaratory ruling, on the scope of the exemption from universal service contribution requirements for entities that provide interstate telecommunications exclusively to government or public safety entities. Stratos’ petition requested that the WCB broaden the government-only exemption to allow subcontractors providing services exclusively to government/public safety entities to avoid paying contributions. While confirming that the government-only exemption applies to entities exclusively providing service to government/public safety entities, the WCB disagreed that the exemption language was unclear, finding nothing in the language contemplating the inclusion of subcontractors within its scope. Because a subcontracting provider does not have a contractual relationship with the government entity, the WCB concluded that a narrow reading of the exemption is consistent with  the FCC’s intent to create a limited exemption to avoid incentives for providers to alter their business structures to reduce their contributions. WCB also found that a narrow reading of the exemption serves the public interest because allowing subcontractors to also use the exemption would increase the number of entities claiming the exemption and decrease the contribution base creating a burden on consumers and impacting business operations and structure.  

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