Recent Decisions Highlight Importance of Timely Submission of USF Revenue Reporting

As we have discussed on several previous occasions in our blog, there are a number of reviews of substantial universal service fund (“USF”) contribution audits conducted by the Universal Service Administrative Company (“USAC”) pending at the Federal Communications Commission (“FCC”) addressing how revenues from certain offerings should be reported. Similarly, there are a number of universal service fund contribution and reporting enforcement proceedings before the Commission of significance. These pending reviews will potentially have substantial impacts for many providers, depending upon what their reporting and contribution practices have been. On Monday, August 27, however, the Commission issued decisions in two smaller matters that offer some less momentous but important reminders for providers of telecommunications that have an obligation to prepare annual and quarterly reports on Forms 499-A and 499-Q and make contributions to the USF based on their end user revenues.

The first involved a small reseller, Primo Communications, Inc. (“Primo”). Primo had end user telecommunications revenues for the period 2007 through 2010 but only filed its annual and quarterly reports in 2010, at which point it made catch up filings. USAC issued invoices for the retroactive periods which, with interest and penalties, amounted to as much as nine times what Primo would have owed if it had reported and paid all along (based on company correspondence on file with the Commission). Primo sought a waiver of the interest and penalties. The company also sought a waiver on the basis that it had already made payments into the USF indirectly by paying the universal service contribution recovery charges of its underlying providers. The Telecommunications Access Policy Division (“Division”) of the Wireline Competition Bureau denied the appeal summarily. The order underscores that entities with telecommunications revenues should ensure that they are submitting annual and quarterly 499 Forms on time if required, allowing them to make contributions on a timely basis, or they risk owing considerably more than they would have in the first instance. The Primo decision also highlights that USAC and the FCC do not provide credit to providers of end user telecommunications when they contribute to the USF indirectly by paying their suppliers USF contribution recovery charges. By the same token, the Primo scenario provides yet another occasion to remind providers to keep their reseller certificates up to date to ensure that they do not pay both directly and indirectly into the fund.

The second matter involves another small provider, Corporate Telecomm (“CT”). At issue in that order, also issued by the Division, was a late fee assessed against CT for filing its Form 499-A out of time. The Division denied the request for review and waiver summarily even though CT claimed it was suffering financial difficulties and new to the process of being a provider and making Form 499 filings. The CT decision, like the Primo matter, reiterates the importance of timely filings and that USAC and the Commission are not likely to extend lenience to telecommunications providers that do not take steps to file if so required and on a timely basis, no matter how small or unfamiliar with the Commission’s processes the provider might be.

So while USAC and the Commission considers the weightier matters of how to treat certain service offerings from a jurisdictional or regulatory classification perspective that may be of interest to many of our readers, it bears repeating in light of these recent decisions – which likely have attracted far less attention – that service providers need to remain mindful of the basics.