NetworkIP Meets with WCB to Discuss USAC’s Classification of its Revenues as “Prepaid Card Revenue”


On June 29, 2010, Network Enhanced Telecom (“NetworkIP”) met with staff from the Federal Communications Commission‘s (“FCC” or “Commission”) Wireline Competition Bureau (“WCB”) to discuss Universal Service Fund (“USF”) contribution issues relating to its pending appeal of a Universal Service Administrative Company (“USAC”) audit decision.  In particular, NetworkIP asks the FCC to reverse a USAC finding that revenues from NetworkIP‘s software service platform should be treated as “prepaid card revenues” for purposes of universal service contribution requirements.  To the contrary, NetworkIP asserts that revenues from its service platform were properly reported as reseller telecommunications revenues and that USAC‘s decision to reclassify its services as prepaid card revenues was not only erroneous, but also beyond the scope of its authority.

NetworkIP argues that its platform offering has none of the characteristics of prepaid card service, as defined by the Commission’s rules, because it is not sold on a prepaid basis and is not a finished retail product.  NetworkIP further points out that its customers (who are in fact prepaid card providers) control the price of the cards, the number of minutes on the cards and the rate at which value and minutes are decremented, and assign the cards’ personal identification numbers (“PINs”).  Moreover, NetworkIP maintains that it had a reasonable expectation that its customers were contributors, because it had adequate reseller certification procedures in place.

In its presentation to WCB staff, NetworkIP argued that USAC‘s current FCC Form 499-A Instructions (“Instructions”) do not reflect the realities of the prepaid calling marketplace.  Specifically, NetworkIP notes that the Instructions do not contain any provisions addressing situation where a carrier only resells telecommunications service to other reseller carriers (i.e. intermediate carriers).  Currently, the Instructions require a filer that has a customer, who only resells telecommunication services, to pay USF on behalf of that customer.  NetworkIP asserts that this creates the “double payment problem” that the FCC‘s First USF Order sought to avoid and that it results in inequitable and discriminatory contribution burdens on intermediate carriers.  To remedy this situation, NetworkIP has proposed that the Instructions be revised to allow carriers to avoid USF assessment of revenues derived from customers that are “intermediate providers in a chain that ends in the provision of telecommunications service or interconnected VoIP to end users by an entity that reasonably would be expected to contribute to support universal service.”

Additional information regarding NetworkIP‘s pending petition is available at the following links:

NetworkIP Ex Parte Presentation

NetworkIP Petition

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