On April 30, 2010, the Federal Communications Commission‘s (“FCC”) Wireline Competition Bureau (“WCB”) issued an Order granting TelePacific Corp. d/b/a TelePacific Communications‘ (“TelePacific”) Request for Review of a December 2009 Universal Service Administrative Company (“USAC”) decision reclassifying its Internet access service as a Universal Service Fund (“USF”)-assessable interstate telecommunications service.
TelePacific challenged USAC‘s decision as contrary to the FCC‘s rules and its 2005 Wireline Broadband Order which identified functionally integrated wireline broadband Internet access services as information services, beyond the FCC‘s jurisdiction. TelePacific argued that USAC incorrectly focused on the T-1 facilities the company used to provide its Internet access service, arguing that it provided a functionally integrated Internet access service exempt from USF obligations under the Order.
The WCB concluded that the 2005 Order exempts from USF liability revenues derived by entities purchasing or leasing transmission from telecommunications carriers to provide wireline broadband Internet access services. Therefore, the WCB agreed that TelePacific‘s Internet access service escapes USF contribution requirements. The WCB instructed USAC to accept TelePacific‘s revised 2008 Form 499-A classifying its Internet access service revenues as information services, exempt from USF contribution obligations.
However, the WCB concluded that it had insufficient information to determine whether USF contributions must be assessed on revenues derived from the sale of T-1 lines to TelePacific. To resolve the issue, the WCB ordered TelePacific to provide the WCB with a detailed explanation of its method of apportionment and reporting of revenues derived from the sale of voice telephony services and Internet access and other services over T-1 lines within 60 days. The WCB further directed TelePacific to provide USAC with a list of its wholesale suppliers of transmission services.
Clients are advised to review the WCB‘s Order and TelePacific‘s Request, available at:
The firm‘s Client Advisory regarding the TelePacific Request is also available for download at:
The WCB‘s Order confirms exemption from direct liability for USF fees on wireline broadband Internet access services. However, it leaves unresolved the question as to whether facilities-based suppliers of special access to Internet access service providers can and should assess USF pass-throughs on the transmission components of the combined retail Internet access service.
Clients with questions regarding this Advisory or issues related to USF revenue reporting should contact Jacqueline R. Hankins at (703) 714-1314 or email: email@example.com.