This article describes the actions the FCC has taken to ensure that affordable access to telecommunications services is available to:
- telephone customers with low incomes;
- telephone customers who live in areas where the costs of providing telephone service is high;
- schools and libraries; and
- rural health care providers.
For many years universal service support mechanisms have helped make telephone service affordable for low-income consumers and consumers who live in areas where the cost of providing service is high.
Congress mandated in the Telecommunications Act of 1996 -- also called "the 1996 Act" -- that universal service mechanisms should also include support for schools, libraries, and rural health care providers. The FCC has adopted rules to implement this requirement. The following are commonly asked questions about these universal service support mechanisms.
Universal Service Charges
Why has the FCC provided support for low income consumers andconsumers in high cost areas? How long have they received this support?
Since its inception in the 1930's, it has been the policy of the FCC to promote service to all households that desire telephone service. Telephone service provides a vital link to emergency services, to other government services, and to surrounding communities.
For many years the support mechanisms for high cost areas were handled privately by the telephone industry, primarily by AT&T. With the break up of AT&T in the early 1980's, the FCC set up a mechanism to ensure that the rates of local telephone companies would remain affordable to consumers. The FCC's programs to assist low income consumers, described in detail below, began in 1985. These programs reduce the monthly local telephone charges for low income consumers and assist them with initiation fees for local telephone service.
Who pays for universal service?
In the past, only long distance companies paid fees to support universal service. The 1996 Act expanded the types of companies contributing to universal service. Starting in 1998, universal service will be supported by all telecommunications carriers that provide service between states, including long distance companies, local telephone companies, wireless telephone companies, paging companies, and payphone providers.
How much do companies contribute for universal service?
All companies that provide telephone service between states currently contribute to universal service funding mechanisms less than 4 percent of the amount they billed in the previous year to their residential and business customers for telecommunications services. The exact percentage that companies contribute is adjusted every quarter based on projected universal service demands.
My long distance company telephone bill lists universal service charges. Did the FCC require long distance companies to pass on their contributions to the universal service fund to their customers?
No. The FCC did not require companies contributing to universal service to recover their contributions directly from their customers. Each company makes a business decision about whether and how to assess customers to recover universal service costs.
Currently, local telephone companies recover the costs of their universal service contributions through "access charges" levied on long distance companies. Local telephone companies, as a result, do not place separate universal service charges on bills for local telephone service.
Because the long distance market is competitive, the FCC does not heavily regulate long distance company charges for service. As a result of this flexibility, long distance companies are permitted to, and do, take varying approaches to recovering the costs of their contributions to the universal service funding mechanisms. Not all companies impose specific universal service charges on customers bills.
Some companies contributing to universal service have recently added itemized charges -- such as a "universal service fee" -- to their residential customers' bills (many business customers have been receiving bills containing itemized universal service charges since January 1998). These charges and fees may either be a percentage of the customer's bill, typically of between 4 percent and 5+ percent, or a flat, monthly charge, typically of less than $1.00.
Schools and Libraries
Will my residential long distance rates increase to pay for the schools and libraries program?
No. One of the primary objectives of the FCC has been to ensure that interstate telephone rates do not increase overall as a result of changing regulations, policies, and rules.
Since the inception of universal service more than 50 years ago, long distance carriers have borne much of the cost of its funding. These costs have historically been passed onto consumers, but usually as part of the cost of the telephone call.
Through the 1996 Act, Congress expanded universal service support to include support for schools, libraries, and rural health care providers. Overall, the schools and libraries support mechanism is only a small part of total universal service support and is one of its many goals.
The FCC has taken steps to ensure that continued support for universal service will not lead to higher long distance rates. In June 1998, the Commission decided to maintain current collection rate levels for schools, libraries, and rural health care providers, at least through June of 1999. These collection rates should be sufficient to fully fund requests for support for telecommunications services and Internet access, and to fund requests for the neediest schools and libraries for support for internal connections. In addition, these collection rate levels will not increase the long distance carriers' cost of providing service and should ensure that long distance rates, overall, continue to decline. Long distance companies' costs are declining, and the Commission is working to ensure that those declining costs are reflected in declining rates to customers.
In addition, each long distance telephone call you make includes per-minute charges that your long distance carrier pays to both your local telephone company and to the local telephone company of the person you call. These charges to long distance companies are called "access charges" and are part of the long distance companies' costs of providing long distance service.
In 1997, the FCC reformed its system of interstate access charges. Under the FCC's new rules, the charges the long distance companies pay local telephone companies for each line the long distance companies serve went up -- but the per-minute charges long distance companies pay for each call made by their customers were reduced by an even greater amount. On July 1, 1998, access charges were further reduced by hundreds of millions of dollars, with no increase in universal service contributions.
In addition, reductions in per-minute charges that long distance companies pay to local telephone companies for use of the local companies' telephone network have and will likely continue to offset any future universal service costs for the long distance companies. As a result, long distance prices should continue to fall.
The FCC also has taken steps to ensure that expenditures that are made on behalf of eligible schools, libraries, and rural health care providers are delivered effectively and at the lowest possible prices. In addition, consistent with the 1996 Act's mandate, the FCC has imposed reasonable limitations on the types of discounted services that eligible schools, libraries, and rural health care providers may receive and has imposed annual caps on expenditures for these support mechanisms.
It is important to remember that although universal service was expanded by the 1996 Act to provide support to eligible schools, libraries, and rural health care providers, the number of companies contributing to universal service also has expanded.
Doesn't the FCC's schools and libraries support mechanism duplicate state and local efforts, as well as voluntary activities?
No. The FCC's plan complements the efforts underway by states and localities to bring the information superhighway to America's classrooms and libraries.
A significant portion of the costs of wiring schools comes from computers, software, and teacher training. These costs are not supported by universal service.
Universal service support provides discounts only for telecommunications services, Internet access, and internal connections. School administrators must negotiate with service providers to obtain the best and most cost- effective package of services, and then apply for a discount of 20 to 90 percent, depending on the income level and whether the school or library is located in a rural area.
According to data collected by the U.S. Department of Education in 1996, only 14% of all public school instructional classrooms are connected to the Internet. The federal support to schools and libraries augments state and local efforts and builds on voluntary efforts.
Financial Assistance Programs
I have a low income and can't afford to pay full price for telephone service. Are there federal programs that provide financial assistance?
Yes. Two federal universal service programs provide financial assistance to low-income telephone subscribers and ensure that low-income Americans can afford telephone service.
- Link-Up America helps qualified low income consumers to connect, or hook up, to the telephone network. This federal program offsets one-half of the initial hook-up fee, up to $30.00, for qualified households. The program also includes a plan to encourage local telephone companies to offer low income telephone subscribers a deferred payment schedule for these charges.
- The Lifeline Assistance Program provides a waiver of the $3.50 federal subscriber line charges for qualified telephone subscribers, and, depending on the actions by state authorities, an additional reduction in a qualified subscriber's local phone bill of up to $3.50 per month in certain states. Thus, the maximum monthly federal lifeline assistance support per month for any subscriber is $7.00.
These two programs are available to qualifying consumers in every state, territory, and commonwealth. You should contact your local telephone company or your state regulatory agency for information about these programs and to determine whether or not you qualify for financial assistance under these programs. You can obtain the telephone number and address for your state regulatory agency from your local or state consumer offices or the government section of your telephone directory. The telephone number for your state regulatory agency can be found on the FCC's web site.
Tips For Consumers
The company that provides my long distance telephone service added universal service charges to my bill. What options do I have?
Remember -- the FCC does not require your long distance company to place these charges on your bill. Let the company know if you believe these charges are inappropriate or are too high. It's in company's best interest to meet the needs of its customers.
Companies compete for your telephone business. Use your buying power wisely and shop around. Long distance companies are taking very different approaches to whether and how they are charging their customers to reflect the universal service charges they pay.
Call other companies and ask if they add these types of charges to their customers' bills. If these charges are added to customers' bills, ask each company to explain how these charges are calculated and exactly what amount would appear on your bill if you decide to use the company's services. Be sure to ask each company about its per- minute rates and special calling plans. You should make sure that you are getting the best deal for the types of calls you place.
Find the carrier whose combination of per-minute calling rates and any additional charges best meets your needs. For example, if you make a lot of long distance calls you might want to avoid a long distance company that charges its customers for the universal service charge through a percentage of the amount you spend on long distance calls.
If you have a contract with a telephone company to provide long distance or wireless service, carefully read the contract to determine whether or not the company is allowed to add new charges or surcharges to your bill.
It is important to remember that:
On July 1, 1998, access charges were further reduced by hundreds of millions of dollars, with no increase in universal service contributions.
The FCC did not tell companies whether or how to adjust their customers' rates in response to the universal service payments. The long distance and wireless companies have decided what to do, and some companies have implemented charges significantly different from other companies.