Back on February 25, 2009, the Federal Communications Commission’s (“FCC” or “Commission”) Wireline Competition Bureau (“Bureau”) released instructions to the 2009 Form 499-A, the annual reporting worksheet for Universal Service Fund (“USF”) contributions.The revised instructions contained various amendments, including yet another expansion of the list of “telecommunications services” whose revenue is considered by the FCC to be subject to USF contributions.The newly-listed service is Multi-Protocol Label Switching (“MPLS”), a service offering which previously was perceived to be an “information service” exempt from USF contributions.
On March 30th, Masergy Communications, Inc. (“Masergy” or “Petitioner”) filed a Petition for Clarification (“Petition”) of the Form 499-A instructions.In the Petition, Masergy requested that the FCC limit the definition of MPLS subject to USF contribution to the transmission component of MPLS.Masergy explained that MPLS generally incorporates enhanced features such as IP-based traffic information management, routing and protocol conversion.Such features, Masergy argues, fall within the category of unregulated “information services” and as such escape USF obligations.Masergy presumed that much of the industry has similarly interpreted Commission precedent and separately classified the transmission and enhanced components of MPLS.
Masergy admitted that the provision of local access from a customer’s location to the MPLS network might qualify as telecommunications subject to USF rules.However, Masergy argued that to the extent the Bureau intended to qualify the entire MPLS service including the integrated IP-based enhanced services as telecommunications, it exceeded its delegated authority.Specifically, the Bureau created a new policy without placing the matter on public notice and allowing interested parties an opportunity to comment as required by the Administrative Procedures Act. Masergy requested that the Commission issue a clarification distinguishing MPLS from stand-alone transmission services and classifying its enhanced components as an unregulated information service, exempt from USF charges.Petitioner suggested a specific description of MPLS services that must file Form 499-A.Masergy requested expedited review due to the time-sensitive nature of USF filings.
In response to the Petition, the FCC issued an advisory letter to the USF administrator, Universal Service Administrative Company (“USAC”).The FCC asserted that the revisions to the 2009 Form 499-A instructions incorporate only “nonsubstantive clarifications.”Specifically, the letter explained that the Bureau added MPLS merely as an additional example of “interstate communications” upon which USF fees are assessed.The Commission reasoned that the list of examples is not exhaustive and is intended only to provide guidance on completing the Form.However, “[f]ilers should consult the Commission’s rules and orders to determine whether they must contribute to one or more of the mechanisms.”The FCC charged service providers with interpreting the Communications Act, Commission rules and orders “in a manner consistent with the [Commission’s] definitions of ‘information services’ and ‘interstate telecommunications’” to determine their USF liability.
In its attempts to “clarify” the bounds of the USF contribution base, the FCC has caused confusion among Form 499-A filers. This Petition reminds the FCC that serious ambiguities remain with respect to the Commission’s dichotomized regulatory regime.
The FCC’s letter offers minimal clarification on reporting requirements in general and the MPLS matter in particular. The Commission apparently affirms USAC’s right to enforce revised Form 499-A instructions even if they appear to work a substantive change on filers.It further reveals that the use of MPLS alone is clearly not an information service. However, it fails to offer a clear response to Masergy’s Petition, and therefore, its request for clarification remains outstanding. Rather, the FCC encourages filers to take it upon themselves to interpret Commission precedent.
As the distinctions between information and telecommunications services become less clear, clients are advised to thoroughly review the Form 499-A instructions and Commission rules and orders governing USF contributions.Should any questions arise, clients should seek guidance from counsel on reporting and contribution obligations.
Clients who have any further questions or concerns about the information contained in this Advisory should contact Charles H. Helein at: email@example.com or 703-714-1301.