Federal Subscriber Line Charge (SLC)
& Universal Service Reform
Frequently Asked Questions
The federal SLC is a flat monthly charge, established by the FCC, assessed directly to residential and business customers to help local telephone companies recover some of the costs they incur in constructing and maintaining their local networks. The FCC has capped the SLC charges since their inception due to customer affordability concerns.
To promote competition in long-distance services, the FCC has sought to reduce the level of "access charges" that long-distance carriers pay local companies for their use of the local network. In June 2000, the FCC adopted a plan proposed by a coalition of national long-distance carriers and large local companies to reform the interstate (state to state) access system. To align the interstate rate structure more closely with the manner in which costs are incurred, the FCC capped federal SLCs for the large local companies at $6.50 for residential and single-line business customers and $9.20 per-line for multi-line businesses. The FCC's latest order brings the SLC levels of community based providers in line with those already charged by urban companies.
What is the federal "subscriber line charge" (SLC)?
The FCC requires that local telephone companies recover some of the costs of the facilities they use to connect your home or business for telecom services through a flat, monthly charge assessed on the bills of all residential and business customers. Commonly referred to as the "subscriber line charge" (SLC) or the "federal subscriber line charge," this charge is part of the FCC's ongoing effort to promote a competitive framework for the U.S. telecommunications industry.
The FCC designed the federal SLC as a way to reduce the access charges paid by long-distance companies but still compensate local telephone companies for the use of their facilities by long-distance companies to gain access to customers. The FCC's intent is to target end-user customers more directly for these costs.
Q. Why has the FCC ordered the increase in the federal SLC?
A. Throughout their history, independent companies and cooperatives have done business according to a complex, carefully constructed system of federal rules and regulations, which control how rates and charges are structured. In its campaign to promote competition, the FCC is seeking to rebalance telephone rates and charges.
When it enacted the Telecom Act of 1996, Congress mandated that all consumers, rural and urban, should be assured of similar access to comparable telecom services at comparable rates. Congress made this commitment to universal telephone service knowing full well that it costs significantly more to serve rural areas than urban markets.
In 2000, the FCC capped the SLCs for the large local companies at $5.00 for residential and single-line business customers and $9.20 per-line for multi-line businesses. By expanding the higher SLC caps to community based telecom providers, the FCC has reasoned that rural customers should pay the same levels of subscriber line charges as urban customers.
Q. What is universal service, and what does it mean to subscribers of Pierce Telephone?
A. In 1934, the nation made a commitment to ensure that telephone service would be available to as many Americans as possible – rich or poor, rural or urban – when Congress passed the original Communications Act, creating the concept of universal service. Guided by this principle, the country promoted the development and reach of the national telephone network by distributing costs across groups of services and users in order to connect all segments of the American public.
Universal service recognizes the economic reality that the costs of providing telephone service to all parts of the country vary widely, but that the nation as a whole benefits from a network that connects as many Americans as possible. While it may be difficult to define, universal service can be looked on as a system by which everyone benefits from the fact that everyone else has a telephone.
Thanks to universal service, independent companies in high-cost rural areas have been assured of appropriate recognition of their business costs, and all Americans have been assured of quality telephone service at reasonable rates, no matter where they live.
Q. How does the universal service support system work?
A. Long-distance carriers pay access charges to local companies for "access" to the local network to enable customers to make or receive toll calls. The access-charge dollars reflect a legitimate business cost, compensating local companies for the long-distance carriers' use of their networks. The access-charge system works together with the federal universal service program to ensure that all Americans have access to "comparable service at affordable rates."
Universal service support and access charge revenues are essential to community based telecom providers. These programs generate revenue that help local companies serving rural areas keep local rates affordable and comparable to rates in urban areas where the population is more densely clustered and costs are not as high. Indeed, many independent companies and cooperatives depend on access charges and universal service support for more than half of their revenues. These companies continue to rely on this support today, given the costs of the equipment and facilities necessary to make state-of-the-art service available to rural customers.
Q. Is universal service or its objectives threatened?
A. Competition, technology, and new federal and state policies threaten to undermine the objectives of universal service. Without continued resolve to connect all Americans, what's been labeled as "reform" could mean the significant reduction of access-charge revenues and universal service support for community based telecom providers.
If programs designed to protect subscribers in high-cost rural areas fall victim to pro-competitive policies intended to benefit large, urban markets, the only place for community based telecom providers to make up the lost dollars is through increased local rates. Universal service support and access charge revenues are essential to the services Pierce Telephone provides and the investments we make – these dollars help to ensure affordable telephone rates for our customers.
Debates continue in Washington, DC and in state capitals across the land about how access charges should be reduced and how universal service should be funded. How these issues are resolved is critical, especially for rural consumers. The answers will affect us all, both as telecom users and as members of rural communities whose economic prosperity depends on continued connection. Universal service remains essential if rural Americans are to remain equal partners in the information economy.
Q. Where does the federal SLC fees go?
A. The federal SLC fees are re-distributed to local companies based on their specific costs, to enable community based companies and cooperatives serving high-cost rural areas to recover some of the costs of the facilities they use to connect your home or business for service.
In addition to the federal universal service programs, Pierce Telephone and other telecom providers in Nebraska could collect fees for the Nebraska Universal Service Fund that is administered by the Nebraska Public Service Commission (PSC) in Lincoln. The Nebraska Universal Service Charge supports universal service programs within the state. All telecom providers in the state must contribute to the support of universal service in Nebraska to help keep basic local rates affordable for everyone in the state.
The Nebraska Public Service Commission has authorized telecom providers to recover their universal service contributions through a charge to all customers. The PSC uses the Nebraska Universal Service Fund as a means to ensure that Pierce Telephone and other community based companies in the state have sufficient financial support to keep basic local rates affordable for all Nebraska citizens, rural and urban. As with the federal support program, the Nebraska Universal Service Fund is distributed to individual telecom providers based on the costs they incur in serving their particular areas of the state.
Q. Do all local telephone companies receive universal service support?
A. No, not all local companies qualify. While most telecom providers contribute to the support of federal universal service, companies that serve large, urban markets where costs are not as high as in rural areas are not likely to qualify for support from the federal Universal Service Fund. Thus, customers of the large, urban-based companies are helping, through their SLC and FUSC payments, to keep local rates "comparable" and "affordable" for customers of community based telecom providers and other small, rural companies. This mutual social benefit is the very objective that the universal service system was created to achieve.
Q. What does this mean to rural customers? What can we expect next?
A. From the day Pierce Telephone first wired our area for service, we've maintained a simple philosophy: to provide a variety of quality services at affordable rates to the residents and businesses we serve. All the while, we've operated with a strong conviction that we do not serve merely "customers" – we provide essential services to friends and neighbors. And, thanks to the historic commitment to universal service and other programs that recognize that it costs significantly more to provide telecom services in rural areas than it does in urban markets, Pierce Telephone has been an active partner in the national telephone network.
Now, in a new millennium, independent local companies face unprecedented challenges. Competition, advancing technology, and new policies have radically altered the way telecom service works. Ironically, these changes mean that community based telecom providers confront obstacles as formidable as those they had to overcome when they first brought service to rural areas. But Pierce Telephone is ready for the challenge, and we remains true to our mission of offering quality service to our customers and playing a vital economic role in our communities. Rural America may be tough to serve, but it's worth it. Wouldn't you agree?