It appears the FCC may finally be prepared to issue orders on several long-pending USF appeals that could have a significant, immediate impact on the industry. However, based on discussions several parties have held with the Chairman and Commissioner’s offices over the last week, the FCC’s decisions may increase the complexity of USF compliance and solidify inequities in USAC’s current policy.
First, the FCC is considering a draft order that would uphold a 2004 Wireline Competition (“WCB”) Decision that established an asymmetrical deadline for submitting revisions to the Form 499A. Specifically, in its 2004 decision, the WCB upheld USAC’s policy limiting to one year the time period within which a contributor can submit revisions to the Form 499 that would reduce its USF contributions, while leaving in place the open-ended filing deadline for a contributor to submit revisions that would increase its USF contributions. As recent ex parte filings by AT&T and The Independent Telephone and Telecommunications Alliance point out, it would be inconsistent with the requirements of Section 254 of the Act that USF contributions be “equitable and nondiscriminatory” to adopt a rule that would impose an indefinite, ongoing obligation on contributors to submit revisions that would increase their USF contributions, but only providing contributors one year to submit revisions that would decrease their USF obligations.
Second, and even more troubling, the FCC is apparently considering adopting a requirement that resellers provide USF exemption information on a circuit-by-circuit or service-by-service basis. The FCC’s current exemption process provides for an entity-based certification requirement through which a reseller can provide exemption information for the company as a whole. The FCC is contemplating a similar change in its pending USF reform proceeding, so the draft order appears to be a short-term “fix” while the FCC considers a longer-term solution. The FCC’s proposal, as characterized in the flings, could create a trap for resellers in that it would relieve wholesale providers that implement a service-by-service exemption process of the vicarious liability of the Carrier’s Carrier Rule, while exposing resellers to potential inaccuracies in the information they provide their underlying carriers. USAC has demonstrated its willingness to reclassify revenue on a circuit-by-circuit basis where a contributor cannot meet USAC’s standard for supporting a non-USF-assessable classification. If the FCC adopts a circuit-by-circuit exemption process it will create a situation ripe for USAC to exploit.
As suggested by AT&T, Sprint, and The Independent Telephone and Telecommunications Alliance, imposing a service-by-service requirement on resellers would be burdensome, time-consuming and costly for all parties, and would increase significantly the complexity of Carrier’s Carrier Rule compliance. Both wholesale providers and resellers would have to implement substantial procurement, billing and reporting changes in order to implement a circuit-by-circuit certification requirement. According to parties opposing the draft order, imposing such burdensome requirements as an “interim” solution while a record is still being developed in the USF reform proceeding is premature and may be inconsistent with the Act and the FCC’s rulemaking obligations under the APA.
Verizon filed an ex parte on August 14, 2012, and urged the Commission to make clear that wholesale providers cannot be forced to make USF contributions on behalf of carrier-customers in situations where they in fact obtain a reseller certification from those customers. Verizon also discussed proposals to change the reseller exemption process to require resellers to apportion facilities or services purchased from wholesale providers between services resold as telecommunications and those resold as information services.
Finally, a recent ex parte related to the USF appeal by the Rural Independent Competitive Alliance and Blackfoot Communications, Inc. suggests that other pending USF matters may be under active consideration by the FCC.
We recommend clients continue to monitor these matters closely, as there are increasing indications the FCC is poised to act on a number of long-standing USF appeals as it considers patching up the broken revenue-based system simultaneously with long-term reforms of the USF contribution system. The good news is that the FCC may finally be starting to clear the significant backlog of pending USF appeals — some of which have languished for five years and longer (despite FCC rules requiring decisions in 90 days). Unfortunately, it appears the FCC may be focusing on issues it can resolve without putting at risk a substantial amount of USF contributions, which means many of the most important issues before the FCC — the ones which could impose the largest financial burden on the current fund — may remain unresolved until the FCC concludes its USF Reform Rulemaking proceeding and shores up the contribution base.
If your company believes it may be impacted by the proposed FCC orders now being circulated with the Commissioners or if decision on other pending appeals would affect your business, we urge you to contact us to evaluate the implications so that preparations to buffer the outcome can be made in advance.
Please contact the attorney assigned to your account or contact Michael Donahue at 703-714-1319 / mpd@commlawgroup.com.
