TANgents Summer 2004

Telecommunications Policy Primer:
Understanding the Nebraska Universal Service Fund

NUSF consists of three separate programs: High Cost Support, Low-Income, and Rural Tele-Health. Each of these programs is designed to compliment its counterpart in the Federal Fund. However, unlike the Federal Fund, the NUSF doesn't include a schools and library component.

The High Cost program is designed to keep basic local rates at the Commission adopted benchmarks of $17.50 and $27.50 for residential and business services, respectively. These benchmarks do not include other charges such as the federal subscriber line charge or federal USF rate, state and local taxes, charges for other services such as caller-id, or the NUSF rate. Telephone service to approximately 15% of the households within Nebraska fall within the high cost category.

Discounts of up to $13.50 a month for qualifying low-income individuals are available through the low-income program. The Nebraska Telephone Assistance Program (NTAP) was formerly known as the Lifeline/Link-up program. However, the Commission changed the name to NTAP to be more descriptive of its function and to avoid confusion with the medical alert lifeline service. NTAP program provides $3.00 per month of the support with the remainder coming from the Federal Fund. Additionally, the NTAP funds public service and outreach programs which are designed to reach the more than 50,000 Nebraskans who are currently eligible, but not enrolled in the program.

The Rural Tele-Health program builds upon support available from the Federal Fund by providing further reductions in rates for a statewide tele-health network. This network will, at a minimum, link 60 critical access hospitals to hub hospitals in Scottsbluff, North Platte, Kearney, Grand Island, Hastings, Norfolk, Lincoln, Fremont, and Omaha. This program is designed to make available to rural Nebraskans, in their hometowns, a similar level and quality of medical services as is available in urban areas.

The NUSF is funded by a 6.95% rate assessed on in-state retail revenue. This rate should not be confused with a tax. While the current rate is assessed on billed revenue, the NUSF could just as easily be funded through, for example, a per-line charge or on a per-minute basis. The Commission felt that a rate applied on a revenue basis was a progressive funding mechanism that took into account an individual's ability to pay.

One difference between the NUSF and the Federal Fund is that NUSF funding is only provided to telecommunications companies for providing telephone service. Accordingly, no support is provided directly to an individual, hospital, or etc. In exchange for receiving support, the telecommunications company charges a reduced rate for the supported service.

Another difference between the funds is the philosophy as to how the surcharge should be set. The Federal Fund rate is set once a quarter and has increased from 3% to 9% over time. The Commission felt that it was important to give consistency to the NUSF surcharge. Accordingly, the Commission forecasted NUSF support needs over a number of years and set a surcharge that would meet this need. As a result, the NUSF surcharge rate of 6.95% has not changed since it was implemented in 1999.

TANgents, a quarterly publication of Technologies Across Nebraska, is edited and produced by Linda Tempel, University of Nebraska Cooperative Extension, ltempel@unlnotes.unl.edu, and Anne Byers, Nebraska Information Technology Commission, abyers@notes.state.ne.us. Please contact us if you would like to contribute an article or an idea for an article. Comments and suggestions are also welcome.