January 29, 2020

Commentary

Our first USF Tracker of 2020 follows an uptick in FCC activity affecting the Universal Service Fund.  In the last quarter of 2019, the FCC released major orders affecting three of the four programs (E-rate, Lifeline and Rural Health Care).  The ramifications of these changes will show themselves in many ways.  One that should not be neglected is the impact they will have on USAC’s operations.  Every new FCC rule results in changes in USAC procedures, such as the review of applications, reporting requirements and eligibility standards.  USAC even will have to adjust PQA and audit standards to accommodate some of the changes.  This “behind the scenes” implementation merits close scrutiny from USF participants.
 
One other trend to note:  USF contribution audit appeals seem to have slowed over the past year.  This month’s report includes only one new contribution appeal, and that seeks a waiver of the downward revision deadline.  We believe this decline in appeals is the result of USAC decisions to shift its auditing focus away from contributions reporting to program oversight.  USAC now conducts fewer than 10 contributions audits each year, while conducting 70 audits in the four programs in addition to over 1200 PQAs of program documentation obligations.  USF contribution audits still have a big impact, thanks to the high contribution factor, but they’ve become more rare. 


Recent News

  • On December 12, the FCC's Office of Managing Director announced the proposed universal service contribution factor for the first quarter of 2020 would be 21.2%, a decrease from 24.2% last quarter.  This also represents a change in the recent trend of record high contribution factors from the last two quarters.
 
  • On November 11, the Universal Service Administrative Company (USAC) launched a redesigned website with expanded menus to facilitate easier navigation and an improved search functionality.  The new site features universal service fund data on the main home page as well as important dates on each program’s home page.
 
  • On December 26, the Wireline Competition Bureau (WCB) issued a Public Notice seeking comment by January 27 on proposed changes to the 2020 FCC Forms 499 A and 499 Q and the related instructions.  Proposed changes to the instructions include the following:
    • noting that providers are no longer required to file quarterly traffic studies relied on to report interstate revenues on the FCC Form 499-Q;
    • stating that filers that fail to provide documentation to support their Forms 499 are subject to enforcement and administrative penalties; and
    • clarifying that all amounts that filers receive as universal service support should be reported on line 308.   
 

Lifeline

  • On December 10, the FCC announced the launch of an electronic interface (or API) to facilitate streamlined Lifeline customer enrollment by allowing ETCs to verify subscriber eligibility.  The API will connect an ETC’s systems to the National Verifier and submit information on a customer’s behalf to conduct an eligibility check.
 
  • The National Lifeline Eligibility Verifier soft launched in Florida, Illinois, Minnesota, Ohio, and Wisconsin on December 16 and in California, Oregon, and Texas on December 20.  In addition, the National Verifier fully launched for use with all new enrollments in Alabama, Arkansas, Louisiana, Maryland, Massachusetts, New Jersey, Oklahoma, South Carolina, and Washington, effective January 22, 2020.
 
  • On November 14, the FCC released a multi-part Lifeline program item—Fifth Report and Order, Memorandum Opinion and Order, Order on Reconsideration, and Further Notice of Proposed Rulemaking (FNPRM)—that implements a number of Lifeline program revisions proposed in 2018.  The order makes the following rule changes (effective January 27, except where noted):
    • returns responsibility for eligible telecommunications carrier (ETC) designation to the states;
    • prohibits carriers from paying commissions to staff or agents based on the number of applications or enrollments (effective 60 days after Federal Register publication);
    • requires staff or agents involved in enrollment for an ETC to register with USAC (effective 90 days after Federal Register publication);
    • explicitly codifies the prohibition against claims using a deceased person’s information;
    • requires USAC to share suspicious activity information with state-level officials; and
    • requires USAC to post aggregate subscribership data on its website.
 
  • In the reconsideration portion of the order, among other things, the FCC 1) ruled that an ETC is not allowed to receive reimbursement for subscribers who are within the 15-day cure period triggered by non-usage and 2) reinstated the requirement that ETCs complete subscriber recertification annually rather than the current requirement to do it on a rolling basis.
 
  • In addition, the FNPRM seeks comment on other ways to address concerns over waste, fraud and abuse, including how to verify that subscribers are in fact using the service and whether the issuance of free phones incentivizes ineligible parties to seek enrollment in the Lifeline program.  Comments were due January 27, 2020 and reply comments are due by February 25, 2020.
 
  • The FCC issued an Order in response to a petition from CTIA and several public interest groups that had requested a pause on implementation of a proposed increase to the Lifeline minimum service standard (MSS) for mobile broadband to 8.75 GB per month and decrease to voice service support that was set to take effect in December 2019.  The Order waived the revised mobile broadband MSS, to the extent it requires the provision of more than 3 GB of mobile broadband data per month, but maintained the phase-down of support for voice service.
 
  • On October 30, the Wireline Competition Bureau (WCB), on its own motion, issued a one-time waiver to subscribers that received incorrect information about their Lifeline eligibility recertification deadline.  Specifically, between mid-July to mid-September, USAC sent letters to subscribers that listed a 90-day, rather than 60-day, recertification timeline.  As a result, WCB is allowing affected subscribers that have not already done so to recertify until the deadline specified in their letter.
 

High Cost/Connect America Fund (CAF)

  • On January 21, WCB released an updated list of fixed competitive eligible telecommunications carriers that are receiving legacy support at phased down levels.  This update corrects an error in the original June 2019 list that omitted one carrier.
 
  • WCB issued a Public Notice to inform carriers receiving CAF broadband loop support that did not have High Cost Universal Service Broadband portal reporting obligations that they do have such requirements following the 2018 Rate-of-Return Reform Order.  Specifically, these CAF recipients must provide certain geo-located broadband deployment information by March 1, 2021.
 
  • WCB issued a Public Notice with a list of eligible minimum geographic areas and associated annual reserve prices for Puerto Rico and the U.S. Virgin Islands to help determine how to allocate the support for fixed broadband service, approved in September.  In September, the FCC approved $950 million in funding for the deployment of broadband networks in Puerto Rico and the U.S. Virgin Islands, which included up to $691.2 million over a 10-year period for fixed voice and gigabit broadband service.
 
  • On December 20, WCB issued an Order, on its own motion, to waive sections 54.901 and 54.903 of the FCC’s rules to allow rate-of-return carriers to report their actual rates for consumer broadband-only lines to determine 2018 revenues on their FCC Form 509, rather than assigning revenues based on the maximum rate that would have been assessable.  The Bureau determined that circumstances exist that require this action to prevent these carriers’ revenue from being overstated, which would result in reduced USF support.
 
  • On December 6, the FCC’s Office of Managing Director issued an Order that adopted non-substantive revisions to the parts 1, 20, and 43 rules to enable better operation for the new Digital Opportunity Data Collection.
 
  • WCB and the Office of Economics and Analytics announced the 2020 reasonable comparability benchmarks for fixed voice and broadband services for ETCs that are subject to public interest obligations such as ILEC rate of return carriers, incumbent price cap carriers that receive CAF Phase II support, and CAF Phase II auction winners.  They also made available recent data they collected regarding fixed voice and broadband service rates in urban areas.
 
  • Simultaneous with the release of the MF-II investigation report, on December 4, Chairman Pai announced his plan to establish a 5G Fund that would replace the Mobility Fund Phase II.  The 5G Fund would make up to $9 billion in universal service support available to carriers to deploy advanced 5G mobile wireless services in rural areas.  The new fund also would set aside at least $1 billion for deployments that facilitate precision agriculture needs.  Support from the Fund would be made available via a reverse auction with a focus on hard-to-serve areas.
 
  • On December 4, the FCC released a Staff Report with the results of the investigation, led by the Rural Broadband Auctions Task Force, into the Mobility Fund Phase II (MF-II) coverage maps submitted by various providers, which was undertaken in response to concerns about the information’s accuracy.  The Report concluded that coverage maps submitted by Verizon, U.S. Cellular, and T-Mobile likely overstated each provider’s actual coverage and did not reflect on-the-ground performance in many instances.  As a result, the Task Force made the following recommendations to the FCC:
    • terminate the MF-II challenge process;
    • release an Enforcement Advisory on broadband deployment data submissions, detailing penalties for filings that violate the law;
    • analyze and verify the mapping data in Verizon, U.S. Cellular, and T-Mobile’s most recent Form 477 filings; and
    • adopt policies, procedures, and standards for submission and verification in the Digital Opportunity Data Collection rulemaking.
 
  • In October 31, 2019 remarks to the Broadband Communities Conference, Commissioner Starks proposed a 10-year review to understand better how the High Cost/CAF program has performed.  The proposed study would give the agency data on which parts of the program have been effective at delivering broadband to communities in need and the parts that need reform.
 
  • On November 12, WCB issued an Order detailing steps for the post-auction review process of a CAF Phase II auction support recipient’s deployment obligations where the number of actual locations in an area is less than the number of locations required to receive funding.  The FCC previously established this process (and directed WCB to develop implementation steps) to enable a support recipient to reduce their deployment obligations by demonstrating actual locations are less than required and allow another stakeholder to challenge such a claim.
 
  • WCB granted petitions, from Allamakee-Clayton Electric Cooperative and Consolidated Communications Networks Inc., seeking waiver of the rural broadband experiments program requirement to provide service to a specific number of locations.  The FCC concluded that the amount of eligible locations available in the petitioners’ respective study areas is less than the amount mandated by the rules.  In its approval, WCB reduces the deployment obligations for the petitioners but also directs USAC to pro-rate the eligible support amount. 


Schools and Libraries (E-Rate)
  • On January 14, WCB denied a request from Knox County School District for review of a USAC decision that partially reduced the district’s request for funding support.  WCB claimed Knox County sought more funding support than its contract price stated for the particular period and Knox County could not properly substantiate the request.  WCB found that USAC was correct to reduce the funding amount, but also concluded USAC should have reduced the amount fully to match the funding commitment levels.
 
  • On January 9, Senators Joe Manchin, James Lankford, Jon Tester, Marsha Blackburn, and John Kennedy sent Chairman Pai a letter that expressed reservations about the recently announced 5G Fund (see item below) and “the decision to focus these limited mobile broadband deployment dollars on the promise of a 5G future when many places in our states still lack 4G service or do not have any service at all.”  The senators asked Pai to develop an accurate method for determining mobile coverage and ensure the rural funding process considers factors like the terrain of an area.
 
  • On January 8, WCB granted a limited waiver to the Houston Independent School District to allow the district to amend its prior Form 471 filing to include additional funding so that it would qualify to receive matching state funds.  WCB found that this decision would encourage the deployment of high-speed Internet connections.
 
  • On December 9, WCB issued the E-Rate eligible services list for FY 2020 Order and authorized USAC to open the annual application filing window within 45 days after release of the Order.  The FY 2020 filing window opened on January 15, 2020 and closes March 25, 2020.
 
  • WCB announced E-Rate category two budget multipliers and funding floor amounts for FY 2020, which is related to the extension of the for the category two budget approach test period.  In addition to the extension, the FCC had approved a pro-rated portion of category two funding for all applicants for FY 2020, the sixth year of the test period, to smooth the transition to a permanent approach.
 
  • On December 3, the FCC issued a Report and Order to make permanent the “category two budget” approach which involved five-year budgets for a set amount of funding to support internal connections (e.g., Wi-Fi)  in schools and libraries.  The category two budget approach was initially adopted in 2014 for a five-year test period to assess its efficiency.  To facilitate the transition to permanent rules, which will be effective in 2021, the FCC extended the test period to six years, through 2020.
 
  • USAC released additional funding commitment decision letters for funding year (FY) 2018 and 2019.  As of January 17, the total commitments for FY 2018 are $2.27 billion and for FY 2019 are $2.14 billion.


Rural Health Care

  • As of January 1, applicants for fiscal year 2020 RHC funding who are going through the competitive bidding process may submit their Form 461 (Healthcare Connect Fund) or Form 465 (Telecom Program) to request services.
 
  • WCB released a Public Notice to provide guidance to RHC Program participants about the implementation schedule for the various reforms adopted in the August 2019 Order.
 
  • USAC reminded providers that the August 2019 Order that reformed the RHC program eliminated the three-year grace period for health care provider consortia to become “majority rural.”  Therefore, beginning in FY 2020, all current and new Healthcare Connect Fund Program consortia must be comprised of more than 50% rural providers.
 
  • On November 13, a variety of telehealth stakeholders filed petitions for reconsideration of the August 2019 Order that reformed the way the Rural Health Care (RHC) program distributes funding.  Petitioners raised concerns that the rate determination process does not sufficiently consider the geography of different regions, that delegation of authority to establish the compensable rural rate median to USAC was improper, and that the new rules deprioritized non-rural health care using incorrect data overstating telehealth expenditures in non-rural areas.
 

USF Appeals Tracker

Kelley Drye’s Communications group prepares a comprehensive summary of pending appeals and guidance requests before the FCC relating to USF contributions issues.  Due to the number of appeals and the FCC’s routine disposition of them, appeals relating to the imposition of late filing fees and petitions seeking waivers of the quarterly Form 499 revision deadlines are not included in this summary.

This list covers appeals filed on or after January 1, 2016.  Pending appeals filed before January 2016 are not included.

 
Number of Appeals Pending New Appeals Filed Contribution Questions Pending
 14                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            Dodson Group. Dodson requests a waiver of the Commission’s one-year revision deadline for FCC Form 499-A.
  • Private line services (10%) rule
  • Systems integrator exemption
  • Use of safe harbors/traffic studies
  • Jurisdiction (international calls)
  • Wholesale/resale classification
  • Private carriage
  • LIRE exemption


1. Dodson Group, Inc. Primary Issues: Form 499-A deadline
 
  • Petition for Waiver (filed November 27, 2019).
  • Dodson Group, Inc. (Dodson) requests that the Federal Communications Commission waive its one-year revision deadline for FCC Form 499-A so that the company may resubmit its 2000-2008 Form 499-As. The company states that, from 2000 to 2008, the then-Chief Financial Officer (CFO) was “intentionally and fraudulently” inflating the revenue reports as part of an embezzlement scheme. According to the petition, Dodson spent years addressing the issues caused by the criminal activity of the then-CFO and all debts were believed to be resolved until a May 2, 2019 USAC reminder concerning outstanding Treasury debt was sent to company representatives. Dodson met with USAC and claims that a resubmission of the 2000-2008 Form 499-As will result in a “resolution of this entire liability” but that such an outcome is “dependent on the grant of this [a]pplication.”

2.  XO Communication Services, LLC. Primary Issues: Jurisdictional classifications (private line)
 
  • Request for a Review of Decision of the Universal Service Administrator (filed October 16, 2019).
  • XO Communication Services (XOCS) requests that the Federal Communications Commission reverse the August 15, 2019 decision of the Universal Service Administrative Company (USAC) finding that both XOCS' 2008 Form 499-A and its subsequent documentation are insufficient in proving that the subject private lines did not carry more than 10 percent interstate traffic and are thus subject to interstate revenue classification. XOCS disputes USAC's interpretation of the Wireline Competition Bureau's 2017 Private Line Order and reaffirms its opposition to the Bureau's order itself. In particular, XOCS contests USAC's "negative inference" that a supposed lack of evidence proving XOCS' private lines did not serve more than 10 percent interstate traffic is proof that "all of the subject revenue was interstate in nature." Additionally, XOCS requests that, where USAC's findings are in line with the Ten Percent Rule, the Commission grant XOCS a waiver "because of the widespread confusion regarding the private line rule that preceded the [Wireline Competition] Bureau's order."
  • XOCS' May 1, 2017 application for review that challenges the Wireline Competition Bureau's 2017 Private Line Order, which is covered below, remains pending. The USAC inquiry had proceeded despite the application for review.

3.  BA Telecom, LLC. Primary issues: Limited International Revenue Exemption
 
  • Request for Review of a Decision of the Universal Service Administrator (filed September 27, 2019).
  • BA Telecom, LLC (BA) requests that the Wireline Competition Bureau (Bureau) review USAC's denial of their invoice appeal. BA disputes USAC's finding that, because the company's revised 2017 and 2018 Form 499-A reports identify the same holding company as UVNV, Inc., a wireless reseller, the two companies’ interstate and international end-user telecommunications revenues must be combined, resulting in BA losing its LIRE qualification. BA argues that USAC's decision is at odds with the FCC's intent in Section 54.706(c), the Fifth Circuit Court of Appeals 1999 ruling in Texas Office of Public Utility Counsel v. FCC, the "basic principles of statutory construction,", and BA's due process rights.

4.  Tata Communications, Inc. Primary issues: Limited International Revenue Exemption
 
  • Petition for Waiver (filed March 29, 2019).
  • In its petition, Tata asks to continue contributing to USF solely on the basis of its interstate end-user telecom revenues, thereby excluding international revenues from assessment. Tata’s contributions are already based on interstate revenues alone, pursuant to the Limited Interstate Revenue Exemption (LIRE), but it seeks to extend this exemption through a waiver of Commission rules. Tata believes that recent changes to its jurisdictional mix will change in a way that would preclude Tata from the LIRE. Under the LIRE rules, if less than 12% of a carrier’s combined interstate and international revenues is derived from interstate traffic, that carrier is exempt from contributing based on international revenues.
  • If the company were forced to contribute on the basis of all revenues, claims Tata, it would amount to a “draconian penalty” that exceeds Tata’s total interstate telecom revenues. According to Tata, the FCC should waive the rules and extend its exemption because such a dramatic increase in contributions would violate Section 254(d) of the Communications Act and have deleterious effects on the public interest, including undermining competition in the interstate telecommunications marketplace. The Commission has previously encouraged carriers faced with this massive contribution spike to file petitions for waiver—Tata is now taking the Commission up on its offer.

5.  Gtek Computers and Wireless, LLC.  Primary issues:  Systems integrator exemption.
 
  • Request for Review and Contingent Request for Waiver (filed Sept. 16, 2016).
  • Renewed Request for Review and Contingent Request for Waiver (filed Feb. 22, 2019).
  • Gtek seeks to review USAC’s denial of its appeal to cancel the sanctions, interest, and penalties imposed for its failure to file a Form 499-A for 2010-2015. Gtek argues that the levying of sanctions was improper and erroneous because Gtek is a systems integrator that derives less than five percent of its revenue from the resale of telecommunications. Thus, Gtek asserts, it is qualified for the systems integrator exemption and is not required to file a Form 499-A.  Alternatively, Gtek requests a waiver in light of its reliance on the Form 499-A instructions, the FCC’s longstanding systems integrator exemption policy, and the fact that the sanctions would surpass the revenue Gtek derived from providing interconnected VoIP service.
  • In 2019, Gtek renewed its request for cancellation of sanctions. Gtek argues that it is a systems integrator that receives less than five percent of its revenue from reselling telecommunications, and is therefore exempt from filing Forms 499-A according to the form instructions. Gtek contends USAC is trying to limit the systems integrator exemption to a subclass that offers ‘legacy’-type telecommunications—a definition that Gtek contends is unsupported by any prior Commission statements or by the language in Form 499. Gtek thus asks the Commission to rule on its 2016 appeal, reverse the USAC denial, and cancel the sanctions.

6.  Sprint Spectrum, L.P. Primary issues:  Jurisdictional classifications (prepaid cards), use of safe harbors.
 
  • Request for Review of a Decision of the Universal Service Administrator (filed December 14, 2018).
  • In its request, Sprint asks that the Wireline Competition Bureau reverse USAC’s conclusion that Sprint’s reported allocations for bundles of telecom and non telecom services were unreasonable, and to reverse USAC’s decision to reject Sprint’s traffic studies.  In connection with its prepaid card services, Sprint reported USF revenues as a bundled offering, using an allocation method it considered reasonable.  USAC had begun an audit in September 2016 of Sprint’s 2016 Form 499-A filing.  In the audit, USAC concluded that Sprint did not adequately support its allocation method and instead applied the USF safe harbor of treating 100 percent of the bundled revenues as telecommunications.  Additionally, USAC rejected Sprint’s traffic studies to determine the jurisdiction of its prepaid services.  Sprint appealed. 
  • In the request for review, Sprint poses two questions: first, whether USAC erred when, in assessing the allocation of revenue for one prepaid bundled offering, it applied the 100 percent telecommunications safe harbor method due to an alleged failure to retain documentation of the allocation used; and second, whether USAC erred when it retroactively created and enforced new rules regarding the sufficiency of jurisdictional documentation, of which Sprint had no notice. Sprint contends that its allocation method was reasonable, that USAC did not have a valid basis to reject the method, and that USAC applied the safe harbor method allegedly as a penalty for the failure to retain documentation of the allocation.  Sprint further contends that USAC acted unlawfully in retroactively concluding that Sprint’s traffic studies (which were filed regularly) were insufficient to justify the carrier’s reported revenue.

7.  SLIC Network Solutions, Inc.  Primary issues: Form 499-A deadline
 
  • Request for Review and Consolidated Action (filed April 6, 2018).
  • SLIC requests that the FCC review and reverse the decision by USAC to reject SLIC’s Forms 499-A submitted for 2014, 2015, and 2016, and that the Commission vacate the requirement that any revised Form 499-A that would yield decreased contributions be submitted by March 31 of year after the original filing due date (i.e., the one-year downward revision deadline). As a result of an error, SLIC’s non-assessable revenues were incorrectly reported to USAC as assessable revenues for the years 2008 through 2016. When SLIC tried to submit revised Forms 499-A and recover its overpayments, USAC rejected the filings as untimely, citing the One-Year Deadline Order. Because that order is still subject to petition for reconsideration and applications for review, SLIC has submitted this request for review.

8.  Altice USA, Inc.  Primary issues: Jurisdictional classifications (private line)
 
  • Request for Review of Decision of the Universal Service Administrator (filed February 2, 2018).
  • Altice seeks reversal of USAC’s reclassification of revenues from certain geographically intrastate private line services as interstate in an audit of Lightpath NJ, an Altice subsidiary. In the January 2017 audit, USAC interpreted the FCC’s “Ten Percent Rule” to establish that geographically intrastate private lines are presumptively interstate, and to require carriers and their customers to furnish evidence establishing the appropriate jurisdictional allocation for private line revenue. Altice contends that this application of the Rule was incorrect and violated the prohibition against USAC’s resolving ambiguities in the Commission’s rules. USAC denied Altice’s appeal of the audit, and, in doing so, retroactively relied on the Wireline Competition Bureau’s Private Line Order, which offered a substantively new interpretation of the Rule for determining the jurisdictional nature of revenues associated with private line service, and created new burdens of proof and evidentiary standards for carriers. Thus, Altice requests that the Commission direct USAC to 1) reverse its audit finding and 2) not retroactively apply the Private Line Order.

9.  XO Communications Services, LLC.  Primary issues: Jurisdictional classifications (private line)
 
  • Application for Review of Decision of the Wireline Competition Bureau (filed May 1, 2017).
  • XO Communications Services (XOCS) asks that the Commission review the Wireline Competition Bureau’s order denying several requests for review, including one by XOCS. In an audit, USAC rejected XOCS’s intrastate classification of physical intrastate circuits because XOCS could not produce evidence that the traffic was not interstate. USAC operated on the presumption that an intrastate circuit was nonetheless interstate unless XOCS could prove that the circuit’s traffic was no more than 10% interstate. In response, XOCS filed a request for review, which the Bureau denied in the 2017 Private Line Order.  XOCS seeks review of the Bureau’s decision because, XOCS argues, it is in conflict with case precedent and Commission policy.  XOCS contends that the Bureau misapplied the Commission decisions establishing the Ten Percent Rule and also that the Bureau, in effect, created new standards that could not be applied retroactively.  

10.  TDS Metrocom, LLC.  Primary issues: Jurisdictional classifications (private line)
 
  • Application for Review or Clarification, or in the Alternative, Request for Waiver (filed May 1, 2017).
  • TDS filed an application for review of the Wireline Competition Bureau’s 2017 Private Line Order regarding application of the Ten Percent Rule for allocating jurisdictionally mixed intrastate private lines.  In its application, TDS contests USAC audit findings related to the amount of interstate traffic carried by private lines. In 2012 USAC notified TDS of its intention to conduct an audit of the company’s Form 2011 Form 499-A filing. In response, TDS provided a list of private lines documenting the end points, showing that all but one had intrastate end points. TDS also furnished end user certifications collected during and after the audit period from certain 2010 private line customers. However, because TDS did not demonstrate that 10% or less of the traffic carried over its remaining end user private lines was interstate, USAC required TDS to make USF contributions on all remaining revenue reported in line 406 of Form 499-A. TDS filed a request for review of the audit report, requesting that the Commission reverse USAC’s finding, which the Wireline Competition Bureau denied four years later. The Bureau instead remanded the audit to USAC to consider additional documentation. TDS Metrocom thus filed an application for review of the Bureau’s order, arguing that it violates FCC precedent, is based on mistakes in fact, and violates the APA.

11.  Eureka Broadband Corporation. Primary issues: Reseller revenues
 
  • Application for Review (filed Feb. 10, 2017).
  • Eureka submits its application for review of the Commission’s decision to remand to USAC Eureka’s 2007 petition for reconsideration. In 2003, Eureka responded to a USAC investigation concerning missing contributions owed by Eureka, for which Eureka had been billed for USF contributions by its underlying carrier, MCI, and which MCI was supposed to remit to USAC. During its 2003 investigation, Eureka contends, USAC did not try to confirm if MCI had remitted these charges to the Fund. Instead, in 2004, USAC chose to assess upon Eureka those same charges. Thus, in 2007, Eureka filed a petition for review, which the Wireline Competition Bureau denied. Eureka shortly thereafter filed its petition for reconsideration.
  • In response, after nine years, the Bureau remanded the issue to USAC for further consideration. Therefore, in this application, Eureka contends that the Bureau violated the APA and the Commission’s Rules by refusing to promptly act on Eureka’s earlier petitions; rendering an arbitrary and capricious decision in conflict with the directive that USF contributions are due only once with respect to any revenue stream; announcing a drastic policy change in its memorandum opinion and order, and applying that policy retroactively against Eureka; and reaching an erroneous finding as to whether the Fund had already been fully compensated USF contributions on the revenue in question.

13.  Locus Telecommunications, LLC.  Primary issues: Private carrier revenues
 
  • Petition for Declaratory Rulings Relative to the Treatment of Private Carriage Revenues (filed Nov. 22, 2016).
  • Locus seeks declaratory rulings to clarify carriers’ rights relative to the treatment of private carriage revenues under federal law. Specifically, Locus requests rulings that revenues derived from private carriage offerings are exempted from non-USF Title II fees and North American Numbering Plan administration fees; that USAC’s policy of sharing Form 499-A revenue data with Title II Program administrators is unlawful; and that carriers must be afforded the opportunity for redress—both retroactively and prospectively—for these Title II fees calculated on private carriage revenues.

12.  Locus Telecommunications, LLC.  Primary issues: Private carrier revenues 
 
  • Request for Review of Decisions of the Title II Program Administrators (filed Nov. 2, 2016).
  • Locus seeks review of the decisions of Rolka Loube (TRS Fund Administrator) and Neustar (administrator of the LNP funding mechanism) for assessing revenues from both common carriage offerings and private carriage offerings. Locus argues that the Form 499-A is deficient for failing to provide carriers a means to segregate private carriage revenues from common carriage revenues. Locus therefore asks that the Commission instruct the Title II Program Administrators to recognize its private carrier status and to reissue invoices as requested; direct USAC to withhold private carriage revenues from data shared with the Program Administrators; order USAC to discontinue its policy of relying on the “primary” service identified in Line 805 of Form 499-A; and provide relief as appropriate.

14.  2009 USAC Guidance request.  Primary issues:  Prepaid calling cards, Frame relay/ATM, VPN and Dedicated IP services 
 
  • Letter from Richard A. Beldon, USAC, to Julie Veach, Wireline Competition Bureau, FCC, August 19, 2009 (received August 24, 2009). 
  • On August 19, 2009, USAC submitted a list of outstanding policy guidance requests which it had presented to the FCC. Of the 6 individual items on that list, 3 were requests for guidance on USF contribution matters. Specifically, these concerned reporting on prepaid card revenue; the classification of Asynchronous Transfer Mode (ATM) and Frame Relay revenue; and the classification of VPN and Dedicated Internet Protocol revenue.
  • USAC requests clarification regarding the revenues to be reported by prepaid calling card providers.  Prepaid cards present an issue for accurate assessment of revenue because they may be sold through a third-party distributor, sold without a face value, or sold at a discount. Further, the date on which a prepaid calling card is sold to the end-user may be ambiguous (because of sales through distributors or wholesalers), so it is unclear when a carrier should report the associated revenue. Because of the uncertainty surrounding these cards, USAC asked the FCC to identify the amount of revenue that should be reported and the date when such revenues should be counted.
  • USAC also seeks advice relating to revenue from Asynchronous Transfer Mode (ATM) and Frame Relay products. In its audits of Forms 499-A, USAC found several instances where this ATM revenue was classified as “non-telecommunications” because carriers considered it derived from an information service. USAC seeks greater clarity regaring the proper classification of ATM and Frame Relay revenue.
  • Finally, USAC seeks guidance on the revenue received from VPN and Dedicated Internet Protocol services. This revenue was related to data transport using IP, which, according to USAC, is similar to Private Line/Frame Relay. That revenue is supposed to be reported as telecommunications-derived, but carriers had classified IP revenues as “non-telecommunications.” USAC has requested guidance on this issue.