Ad Hoc Coalition Asks FCC to Provide Relief to Carriers Caught in LIRE Trap


On March 7, 2012, the Ad Hoc Coalition of International Telecommunications Companies (“Coalition”) filed an ex parte letter imploring the Federal Communications Commission (“Commission” or “FCC”) to take immediate action to prevent the inequitable and discriminatory  consequences resulting from the Universal Service Administrative Company’s (“USAC”) policy forbidding  de minimis contributors from electing to become direct Universal Service Fund (“USF”) contributors.  As described in the Coalition’s letter, FCC rules that are intended to mitigate administrative costs and burdens on USAC and de minimis service providers (under $10,000 annual USF contributions) have been misapplied by USAC, resulting in the indirect imposition of administrative burdens and costs which frequently exceed the cost of direct contributions.  According to the Coalition:

“USAC enforces a policy that precludes de minimis contributors from voluntarily electing direct contributor status.  This policy minimizes USAC’s burdens.  However, the policy either has the unintended (or, worse, intended) consequence of foisting excessive costs onto de minimis contributors in the form of wholesale supplier USF surcharge pass-throughs which are eventually contributed to the Fund.  Frequently the amount of USF surcharges billed by wholesale suppliers to their de minimis reseller customers (particularly de minimis customers also qualifying for the Limited International Revenue Exemption (“LIRE”)), can exceed the contribution amount the de minimis customer would be required to contribute if USAC allowed them to contribute directly.  This inequitable and discriminatory situation arises as a direct consequence of USAC’s interpretation and enforcement of the FCC’s Carrier’s Carrier Rule (“CCR”).
Pursuant to the CCR, wholesale providers of telecommunications are exempt from making USF contributions on revenue from reseller customers who already contribute to the USF.  This exemption was intended to prevent the “double counting” of revenues, which contravenes universal service contribution methodology and conflicts with the federal policy of competitive neutrality.  USAC instructions further find wholesalers liable for revenue from non-contributing resellers who are treated as end-users for purposes of calculating USF liability.   Resellers who fail to meet or exceed the $10,000 threshold of interstate revenue are de minimis and not required to contribute directly to universal service, so subsequently,  de minimis resellers are considered non-contributors and end sers of underlying wholesale service. Because a carrier’s USF contribution is tied to end-user revenues, this scenario expands the underlying carrier’s contribution eligibility.  And, since underlying carriers are permitted by the FCC to pass their contribution obligations along to end-user customers, de minimis resellers ultimately find themselves responsible for USF contributions, only in an indirect rather than direct manner.
The situation just described, in and of itself contravenes the FCC’s original intent.  The FCC intended for  de minimis providers to be wholly exempted from any contribution obligations whatsoever; indeed, the FCC made it clear that de minimis providers would not even be required to file Worksheets, i.e., Form 499s.  See Fourth Order on Reconsideration, ¶ 293 (“The Commission found that, if a contributor’s annual contribution would be less than $100.00, it is not required to contribute to universal service or comply with Commission Worksheet filing requirements.”); citing Report and Order, 12 FCC Rcd at 9187.   To our knowledge, no FCC rulemaking ever resulted in a change to the proposition set forth in both the original  Report and Order and  Fourth Order on Reconsideration; that proposition plainly being that  de minimis contributors are not required to contribute to the USF, without qualification or condition as to whether the contribution duty is imposed “directly” or “indirectly.”  Today, however, as a result of USAC’s use of the CCR to impose indirectly that which it is legally barred from imposing directly, great numbers of de minimis providers find themselves subject to the same administrative burdens and contribution liabilities as their direct contributing brethren.
This unfair and clearly unintended situation is aggravated by what the Coalition refers to as the ‘LIRE Trap.'”
To read more of the Coalition’s letter to the Commission, click here:
For more information regarding the Coalition and its mission,  visit:
The Coalition is comprised of a wide variety of international long distance service providers, including domestic and non-U.S. corporations, wholesale carriers and retailers, subscribed and prepaid providers, as well as Internet-based and IP-in-the-Middle providers that facilitate the transmission and routing of international communications over traditional switched networks and advanced, IP-based networks.  The Coalition is committed to the fair and equitable treatment of its predominantly international  and international only service providers (“ITCs”) who must operate under particularly adverse circumstances as de minimis resellers of telecommunications service due to the Limited International Revenue Exemption (“LIRE”).

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