Telecom Fees and Taxes

Universal Service Fund (USF)

Prior to the Telecommunications Act of 1996, the Universal Service Fund (USF) operated as a mechanism by which interstate long distance carriers were assessed to subsidize telephone service to low-income households and high-cost areas. The Communications Act of 1934 stated that all people in the United States shall have access to “rapid, efficient, nationwide communications service with adequate facilities at reasonable charges.”

The Telecommunications Act of 1996 expanded the traditional definition of universal service – affordable, nationwide telephone service – to include among other things rural health care providers and eligible schools and libraries. Today, FCC provides universal service support through four mechanisms:

1. High Cost Support Mechanism provides support to telephone companies that serve high cost areas, thereby making phone service affordable for the residents of these regions.

2. Low Income Support Mechanism assists low-income customers by helping to pay for monthly telephone charges as well as connection charges to initiate service.

3. Rural Health Care Support Mechanism allows rural health care providers to pay rates for telecommunications services similar to those of their urban counterparts, making telehealth services affordable.

4. Schools and Libraries Support Mechanism, popularly know as the “E-Rate,” provides telecommunication services (e.g., local and long-distance calling, high-speed lines), Internet access, and internal connections (the equipment to deliver these services).

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End User Common Line (EUCL)

Section 69.104 of the FCC Commission’s rules requires local exchange carriers (LECs) to assess a charge on end users that subscribe to local telephone service — the end user common line (EUCL) charge. The EUCL charge, which is also known as the subscriber line charge, is part of a comprehensive system of tariffed access charges for recovery of LEC costs associated with the origination and termination of interstate calls. Twenty-five percent of the costs of the local loop — the telephone lines that connect end-users’ premises to LEC switches at local central offices — are assigned to the interstate jurisdiction.

The EUCL charge is a monthly charge intended to recover a major portion of a LEC’s interstate loop costs from subscribers on a flat-rate basis. The portion of local loop costs that is assigned to the interstate jurisdiction but not recovered through the EUCL charge is recovered from inter-exchange carriers through the Pre-subscribed Inter-exchange Carrier Charge ( PICC ).

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Pre-Subscriber Interexchange Carrier Charge (PICC)

PICC is a charge that long distance companies pay to local telephone companies to help them recover the costs of providing the “local loop.” Local loop is a term that refers to the outside telephone wires, underground conduit, telephone poles, and other facilities that link each telephone customer to the telephone network.

The monthly service fee that consumers pay for local telephone service is not enough to cover all of the costs of the local loop. Historically, the local telephone companies have recovered the shortfall through per-minute charges to long distance companies. Now, however, part of these costs are recovered through flat-rated charges to long distance companies, who use the local networks to complete their long distance calls. Because the costs of the local loop do not depend on usage, this flat-rated charge better reflects the local telephone company’s costs of providing service.

A long distance company pays this charge for each residential and business telephone line pre-subscribed to that long distance company. If a consumer or business has not selected a long distance company for its telephone lines, the local telephone company may bill the consumer or business for the Pre-subscribed Inter-exchange Carrier Charge.

As of July 2001, there is no fee charged for Pre-subscribed Inter-exchange Carrier Charge for primary residential lines and single-line business lines.

As of July 1999, the maximum Pre-subscribed Inter-exchange Carrier Charge paid by the long distance companies for each multi-line business line is $4.31. Like the residential Pre-subscribed Inter-exchange Carrier Charge, this is a maximum; the actual charge may be less than this maximum amount.

A long distance company pays the local phone company a Pre-subscribed Inter-exchange Carrier Charge for each multi-line business telephone line pre-subscribed to that long distance company. If a consumer or business has not selected a long distance company for its telephone line, the local telephone company (i.e. Bell South) will bill the consumer or business for the Pre-subscribed Inter-exchange Carrier Charge.

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