FCC Supports USAC Finding that Carrier Incorrectly Allocated Revenue to Avoid USF


In a decision that further empowers and emboldens the Universal Service Administrative Company to dictate the revenue reporting policies and practices of auditees and Form 499 filers, earlier today the FCC’s Wireline Competition Bureau (“WCB”) released an Order partially denying a request for review of a 2009 USAC contributor audit decision filed by Clear World Communications (“Clear World”).  Clear World is a provider of intrastate, interstate and international telecommunications.

Despite FCC rules which appear to allow carriers to report revenue based on their accounting books and records, the WCB ruled that USAC neither erred nor exceeded its authority when, in the course of a contributor audit, it determined that Clear World had incorrectly allocated as international all of its revenue from monthly recurring charges (presumably in an effort to qualify for the Limited International Revenue Exemption or “LIRE”).  USAC effectively required Clear World to use Percentage of Interstate Use samples and statistics to allocate revenue from fixed monthly charges to the intrastate, interstate and international jurisdictions.  Once a portion of Clear World’s revenues were, according to USAC, properly allocated to the interstate jurisdiction, Clear World no longer qualified for the LIRE and thus understated its contributions to the USF.  The WCB supported these findings and USAC’s resulting decision requiring Clear World to remit contributions based on the revised revenue amounts based on the jurisdictional re-allocation of fixed fee revenue.

In addition, the WCB supported USAC’s finding that Clear World overcharged its customers through line item surcharges designated as recovering USF contributions.  The WCB did not, however, support USAC’s directive requiring Clear World to remit to USAC any amount of excessive line-item charges that Clear World does not refund to its customers, instead directing USAC to forward such findings to the Enforecement Bureau for further investigation of possible Truth-in-Billing violations.

Clients with questions or concerns about the issues addressed in this advisory should contact the attorney assigned to their account.

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