On April 30, 2010, Verizon filed an ex parte letter with the Federal Communications Commission (“FCC” or “Commission”) discussing Verizon‘s universal service contributions on its prepaid calling card (“PPCC”) revenues. Through this ex parte letter, Verizon announced that it will report in its assessable base of universal service revenues only those revenues that Verizon actually receives from selling prepaid calling cards – not the ultimate retail price of those cards when they are resold. In other words, but for limited circumstances where the company sells directly to the public, Verizon will cease reporting prepaid calling card revenue at face value. Verizon‘s shift in policy comes on the heels of a similar announcement by AT&T last December that it would cease contributing on the basis of its non-contributing resellers‘ revenues for PPCC revenue.
The AT&T and Verizon announcements are consistent with arguments made by the Ad Hoc Coalition of International Telecommunications Companies (“Coalition”) in a Petition for Declaratory Ruling, which remains pending since February 2009. The Coalition‘s petition was the first time concerns about the unfairness and discriminatory treatment of PPCC revenue was publicly raised with the FCC. As noted by the Ad Hoc Coalition, the FCC‘s current treatment of all PPCC revenue as end-user revenue has the effect of substantially increasing resale providers‘ universal service fund (“USF”) liability and imposing higher USF costs on PPCC providers vis-à-vis carriers selling equivalent post-paid services. To solve the problem, in a similar fashion to AT&T and Verizon, the Ad Hoc Coalition advocated allowing PPCC providers to deduct uncollected revenues from their USF-eligible revenues or report only those revenues actually received, precisely the course chosen by both AT&T and Verizon.
CLIENT ADVISORY
Affected clients should monitor this development closely and are advised to review the ex parte letters as well as the still pending Ad Hoc Coalition petition.
Clients with questions regarding issues related to USF revenue reporting should contact Jonathan S. Marashlian at jsm@commlawgroup.com or (703) 714-1313.
