On November 23, 2012, the Federal Communications Commission’s (“FCC”) Wireline Competition Bureau (“Bureau”) released a notification soliciting comment proposed changes to the 2013 FCC Form 499-A, the FCC Form 499-Q, the accompanying instructions.  This marks the first time in the history of the Universal Service Fund program that the FCC has adhered to the Administrative Procedures Act by soliciting Comments from the industry prior to implementing a Form 499 and its Instructions.

WE URGE ALL AFFECTED CLIENTS TO TAKE ADVANTAGE OF THIS HISTORIC OPPORTUNITY TO HELP EDUCATE THE FCC ABOUT THE SUBSTANTIVE IMPACT THE FORM 499s AND THEIR ASSOCIATED INSTRUCTIONS HAVE ON YOUR BUSINESS AND ITS CUSTOMERS.  ALTHOUGH THE FCC IS SPECIFICALLY SOLICITING COMMENTS ON THE RECENT REVISIONS, SUMMARIZED BELOW, WE BELEIVE THE PUBLICATION OF THE FULL INSTRUCTIONS AND FORMS CREATES A LEGITIMATE OPPORTUNITY TO COMMENT ON EXISTING, UNCHANGED PROVISIONS, INCLUDING THE VICARIOUS LIABILITY CLAUSE, WHICH HOLDS WHOLESALERS LIABLE FOR UNPAID USF CONTRIBUTIONS OF THEIR RESELLER CUSTOMERS, OR THE REQUIREMENT TO TREAT INTERNATIONAL CARRIER CUSTOMERS AS “END USERS” SUBJECT TO USF CONTRIBUTIONS.  THESE AND OTHER EXISTING PROVISIONS WITHIN THE CURRENT FORM 499 INSTRUCTIONS HAVE BEEN THE CAUSE OF TREMENDOUS UNCERTAINTY AND DISPUTES OVER THE PAST SEVERAL YEARS.  BY PARTICIPATING IN THE RULEMAKING PROCESS, CAN YOU HELP SHAPE THE RULES THAT WILL DIRECTLY AND MATERIALLY AFFECT YOUR COMPANY’S OPERATIONS IN 2013 AND BEYOND.

Proposed changes to the Form 499s are significant and potentially impact all interstate telecommunications service providers required to remit FCC Form 499s.  Highlights of the proposed revisions include:

• Clarification of Carrier’s Carrier Rule and Adoption of Sample Exemption Certification Language.  Consistent with the recently adopted 2012 Wholesaler-Reseller Clarification Order, the Instructions were revised to include model Exemption Certificate language which can be relied upon used to meet the Carrier’s Carrier Rule “reasonable expectation standard.” The Instructions were also revised to delete the suggested procedure to check the Commission’s website to ascertain whether a carrier customer is a contributor to the USF, because such action, by itself, is insufficient to satisfy the reasonable expectation standard.
• Charges Allowed by USF/ICC Transformation Order. The Form 499-A Instructions were revised to list the newly adopted access recovery charge (ARC) as a type of end user revenues.  In the USF/ICC Transformation Order, the Commission allowed incumbent local exchange carriers (LECs) to charge an access recovery charge (ARC) on wireline telephone service to partially offset intercarrier compensation revenue declines resulting from the transition of certain switched access rates adopted as part of the comprehensive intercarrier compensation reform.  Similarly, the USF/ICC Transformation Order allows per-minute charges for originating or terminating voice over Internet Protocol (VoIP) / public switched telephone traffic.  The Form 499-A Instructions were revised to list such charges as a type of per-minute originating and terminating charge reportable in Block 3, Line 304.
• Intercarrier Compensation / Carrier’s Carrier Revenues.  The FCC Form 499-A Instructions were revised to provide additional examples of intercarrier compensation that should be reported as Carrier’s Carrier revenues.
• Mergers & Acquisitions.  The Form 499-A Instructions were revised to clarify the procedures for successor companies to report the revenues of acquired entities.
• Retail Broadband Internet Access Service Reported as Special Access.  The Form 499-A Instructions were revised to remind filers that they should report revenues derived from the sale of special access on a common carrier basis to providers of retail broadband Internet access service.
• Consistency in Traffic Study or Safe Harbor Elections.  The Form 499-A and FCC Form 499-Q Instructions were revised to clarify the requirement that the same election made by a filer on its Form 499-Q filings to use either a safe harbor or traffic studies to project revenues for a particular quarter must be used on the filer’s Form 499-A for reporting historical revenues for that particular quarter.  Form 499-Q (Line 114) was revised to include a check box when filers use safe harbors for reporting revenue allocations.
• Local Number Portability Percentage of Revenues Reporting Per Region.  The Form 499-A Instructions was revised to clarify that filers may use customer billing addresses to calculate or estimate the percentage of telecommunications revenues billed by LNPA region.

All clients are advised to pay careful attention to the changes detailed above, as they have a direct impact on FCC Form 499 filing obligations and Federal Universal Service Fund contributions. Notably, all clients affected by the changes to the Carrier’s Carrier rule are advised to contact the law firm directly to ascertain how to ensure full compliance with the new Exemption Certification procedures, which will be migrating towards a “service-by-service” specific exemption process by 2014.

Interested parties may file comments on or before 30 days after date of publication in the Federal Register.

Clients interested in participating should contact Jonathan Marashlian at jsm@commlawgroup.com or 703-714-1313 as soon as possible to discuss and coordinate the preparation of Comments.