California Public Utilities Commission Updates Surcharge Mechanisms for Telecommunications Services

Strategic Insights -

The California Public Utilities Commission has issued a ruling to update the mechanisms for surcharges, fees, and taxes assessed on customers of telecommunications services in California. The Voice on the Net Coalition (VON) has submitted comments to the Commission, expressing skepticism about the per-line fees to support Public Purpose Programs (PPPs) and recommending a revenue-based model instead. VON argues that the current access line surcharge disproportionately affects small business and small volume users, and that changes to the existing framework may impose additional compliance costs and time burdens on service providers.

Key Takeaways:

  • VON recommends a revenue-based model for funding PPPs, consistent with the federal Universal Service Fund (FUSF) structure.
  • The access line fee represents a substantial percentage of the cost of service for small business/small volume users, with some customers paying up to 18% of their monthly bill in surcharges.
  • The FUSF contribution factor has seen significant growth, from 20% in 2019 to 36.6% in 2025, resulting in calls for reform.
  • The United States Supreme Court is reviewing the constitutionality of the FUSF contribution methodology, which may lead to changes in federal legislation.
  • VON suggests that the Commission wait for reform at the federal level before making substantive changes to the existing access line framework.
  • User Fees should continue to be assessed on intrastate revenues and not assessed on access lines or another mechanism.
  • The Commission should not prohibit any fees that appear on provider telephone bills, as this would be preempted by federal law and could lead to market instability.
  • The voice provider market is highly competitive, with hundreds of companies offering services to business customers in California.

Statistics:

  • The access line surcharge represents up to 18% of the monthly bill for small business/small volume users.
  • The FUSF contribution factor has increased from 20% in 2019 to 36.6% in 2025.
  • The revenue-based surcharge was 8.359% at its peak, representing more than a 100% increase in fees assessed to customers.

Sources:

  • Assigned Commissioner's Phase Two Scoping Memo and Ruling, Rulemaking 21-03-002 (May 14, 2025).
  • ALJ Hazlyn Fortune E-Mail Ruling Granting Motion Requesting an Extension of Time to File Comments, Rulemaking 21-03-002 (May 22, 2025).
  • VON's comments to the Public Utilities Commission (June 20, 2025).
  • The Voice on the Net Coalition (www.von.org).
  • https://www.cpuc.ca.gov/userfeerates (last viewed June 16, 2025).
  • Contribution Factors - Universal Service Administrative Company (usac.org) (last viewed June 16, 2025).
  • https://www.lujan.senate.gov/newsroom/press-releases/lujan-fischer-announce-bipartisan-bicameral-universal-service-fund-working-group/ (released June 12, 2025).
  • https://www.congress.gov/crs-product/LSB11301 (last viewed June 16, 2025).
  • Vonage Holdings Corp., 19 FCC Rcd 22404 (2004).
  • Minnesota Public Utilities Commission v. FCC, 483 F.3d 570 (8th Cir. 2007).