USAC Seeks FCC Guidance on Wholesale USF Exemption Certifications and Carrier’s Carrier Rule


On March 1, 2011, USAC formally asked the Wireline Competition Bureau whether wholesale contributors may properly classify carrier’s carrier revenue as exempt from Universal Service assessments based on reseller certificates dated after the Form 499-A filing period.  The FCC has previously ruled that USAC may not reclassify carrier’s carrier revenue as end user revenue solely because a contributor relied on reseller certificates executed before an audit period.  USAC now seeks permission to reject post-dated certificates as inadequate to show that a wholesaler had a “reasonable expectation” that its reseller customers would contribute.  As a consequence, USAC would have the leeway to impose additional assessments on the wholesaler.  In addition, if a reseller is reclassified as an end user, the wholesaler will be responsible for additional universal service assessments, a “vicarious liability” provision now imbedded in the Form 499-A instructions.

The burden of proof USAC has placed on contributing wholesalers to demonstrate a “reasonable expectation” has been challenged in a number of appeals pending before the FCC.  The crux of the appeals is that the FCC has provided a number of ways that wholesalers could establish a reasonable expectation and has never dictated a particular procedure that contributors must use.  Instead, through the Form 499 instructions, the FCC has provided guidance as to how to satisfy the “reasonable expectation” standard, not a hard-and-fast rule that contributors obtain a particular form of certificate from resellers.

A word of caution: While the Form 499 instructions are not rules, challenging audit findings is a lengthy and difficult process. Even if a wholesale carrier has a long-standing relationship with a reseller customer, USAC would seek authority to reject a post-dated certification during an audit, ignoring any other facts about the wholesale carrier’s knowledge, and impose USF liability on the wholesaler based on the date of receipt of the form.  Carriers must have adequate measures in place to establish a reasonable expectation that reseller customers will make contributions to the Fund.  Also note that the current form instructions expressly require new certifications every year.

A copy of USAC’s request for guidance can be found here:

Clients with comments or questions regarding this Advisory should contact the attorney responsible for their account.

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