Recent USF Contributor Appeal Illustrates Pitfalls Faced by De Minimis Resellers


Last month, a small reseller of Global Crossing and Primus wholesale long distance services filed a contributor appeal with the Federal Communications Commission asking for various relief, including an order requiring its wholesalers to refund “excess” Universal Service Fund (“USF”) contribution pass-through charges which had been assessed over the course of several years.  Primo’s appeal highlights a variety of important issues and potential pitfalls many smaller and de minimis service providers face when dealing with USAC and the USF program.

A copy of Primo’s appeal is linked here:

USAC Appeal Letter of Primo Communications

According to Primo, its suppliers began passing through USF surcharges in 2007 because Primo was identified as a “non contributor” in the FCC’s 499 Filer database.  In 2009, USAC opened an informal inquiry into Primo’s history of filing Form 499s (as an important side note, such informal inquiries, which are conducted by USAC staff in lieu of more costly, formal contributor audits, are becoming increasingly commonplace).  The USAC inquiry led Primo to file historic Form 499-As.

As claimed in Primo’s appeal, the consequence of filing historic Form 499-As was a USAC invoice in excess of $280,000, consisting primarily of late fees, penalties and interest, with a mere $30,000 of the amount comprised of actual USF contributions.  Primo’s appeal asks the FCC to grant the following relief:

“We respectfully request the Commission to wave the charges, penalties and interest in the statement of account we received from USAC as we indirectly paid the USF contributions of $30,000 we owed as well and more that (sic) $140,000 in excess of what the USAC would have originally imposed.

We also respectfully request the Commission to order Global Crossing and Primus Telecommunications to pay $30,000 to USAC and return to us the amount of  $146,000 they collected from our company in excess of the amount we actually owed to the USAC.”

Based on the FCC’s long history of rigidly enforcing USAC decisions and FCC precedent which directs aggrieved resellers to seek refunds of allegedly duplicative USF contributions from their wholesalers, not from the Commission, Primo’s appeal is unlikely to be granted.

Primo’s circumstances highlight a number of important issues and considerations for resellers of telecommunications services.

First, merely filing a 499 Registration and obtaining a Filer ID in response to a supplier’s request without understanding the reasons why and the implications of taking such steps can result in the imposition of duplicative contributions and massive penalties which may not be unwound either by the FCC or the supplier.

Second, although simply paying wholesaler pass-through charges may appear convenient and less burdensome than assuming direct USF contributor responsibilities, the outcome can be far more costly than tackling the administrative duties yourself or, as we would recommend, outsourcing compliance maintenance to our affiliated consulting firm, The Commpliance Group, with a subscription to its Managed Compliance & Reporting Service.

Third, no matter how innocuous or innocent the issue may seem, never take an inquiry from USAC lightly, be careful what you disclose, and never take responsive actions without knowing the consequences beforehand.  We highly recommend seeking the assistance of counsel to advise your company of its rights, consequences and to engage in risk mitigation.

Clients with questions regarding this Advisory should contact the Attorney assigned to their account.

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