As we warned over a week ago, the USF contribution factor is rising to a new record high of 17.9%. The Commission made it official late today, releasing this Public Notice announcing the new contribution factor for the first quarter of 2012. The nearly 18 percent factor is by far the highest contribution factor in the history of the universal service fund.
One aspect of the new factor deserves special mention. For years, the FCC has employed a Limited Interstate Revenue Exemption (LIRE) for calculation of the contribution obligations of carriers with significant international revenues. This rule, also known as the "88/12" rule, provides that if a carrier’s interstate revenue is less than 12% of its total interstate + international revenue, then the carrier pays USF only on its interstate revenue (and no USF on its international revenue). The rule was put in place in response to a court decision that found that USF assessments which exceed a carrier’s gross domestic revenue are unlawful.
The current LIRE threshold is set at 12% of total revenues. Every quarter in which the USF contribution factor exceeded this 12% threshold, the FCC has included an invitation to carriers to petition for waiver of the LIRE threshold if their contributions would exceed their gross domestic revenues. No carrier has yet taken the Commission up on this invitation. However, with the spread between the LIRE and the USF contribution factor now nearly 6%, we expect that there may be a few carriers whose percentage of interstate revenue falls between the LIRE threshold and the USF contribution factor. If so, we invite those carriers to contact us to discuss filing a petition for waiver with the FCC.