WE APOLOGIZE TO CLIENTS WHO MAY HAVE RECEIVED THIS MESSAGE PREVIOUSLY. AS A RESULT OF OUR ISP’s ACCEPTABLE USE POLICY, WE WERE INFORMED THAT OUR ATTEMPT TO E-MAIL OUR MEMORANDUM DETAILING THE FCC’S ORDER ON THE CARRIER’S CARRIER RULE WAS BLOCKED. THEREFORE, WE ARE CONCERNED THAT MANY CLIENTS DID NOT RECEIVE THE ORIGINAL MESSAGE AND THE MEMORANDUM ATTACHED THERETO.
WE ARE RESENDING THE MESSAGE THROUGH OUR CLIENT ADVISORY SYSTEM. UNFORTUNATELY, WE ARE UNABLE TO INCLUDE ATTACHMENTS. THEREFORE, IF YOU WOULD LIKE TO RECEIVE THE MEMORANDUM PREPARED BY OUR FIRM, PLEASE RESPOND TO THIS MESSAGE OR SEND AN E-MAIL DIRECTLY TO JONATHAN MARASHLIAN AT JSM@COMMLAWGROUP.COM.
Clients:
Every once in a while, the Federal Communications Commission takes action we are certain will impact the entire industry. Last Friday, the FCC released an Order which decided a handful of pending appeals of USAC and Bureau level rulings, clarified existing regulations and also forecast future regulations — all of which we can guarantee will hit home with nearly every company engaged in the telecom industry. From large Tier 1 and Tier 2 network providers and wholesalers of telecommunications services, to mid-sized and small wholesalers, to VoIP platform providers and resellers of all stripes… we believe all will be affected by the clarification of FCC rules governing the relationships of Wholesalers and Resellers, as laid out in last week’s Order.
Some providers will be in impacted in material and more immediate ways; others will be impacted over the course of time through the changes adopted by their upstream suppliers. If either upstream or downstream providers choose to ignore our call to evaluate the implications of the FCC Order, they run the risk of being blindsided and finding themselves staring at higher cost of goods to the tune of up to 17% or more. Our prediction is that Tier 1 and 2 carriers will be digesting the FCC Order and making decisions on internal process changes before the end of 2012. As early as Q1 2013, the changes being made by Tier 1 and 2 carriers will begin to filter downstream. Ultimately, we believe all companies either purchasing and consuming or purchasing and reselling telecommunications services will begin to feel the impact of the FCC’s recent Order clarifying its so-called “Carrier’s Carrier Rule.”
Why am I so certain of this? Because for the past 6 years our firm has represented countless telecom clients of all shapes, sizes and colors. And we’ve counseled clients covering the full spectrum of risk tolerance, from the ultra-conservative Tier 1 and Tier 2 carriers to the smallest new entrants into the VoIP/Telecom services industry. Perhaps more than any other issue, the one we’ve been called upon to address most during this span deals with Universal Service Fund compliance; and when talking about USF compliance, the Carrier’s Carrier Rule has been an unavoidable topic because, more than any pain the FCC might impose, the pain inflicted by USF pass-throughs (at a whopping 17%) is every businesses’ real concern.
The complexities and vagaries of the Carrier’s Carrier Rule have been so prevalent (prior to last week’s Order) that the sheer volume of questions, issues and concerns being expressed by our clients prompted our firm to form a Coalition to lobby the FCC for the suspension of further enforcement of the Rule pending resolution of the numerous pending appeals and requests for clarification of the FCC’s intent: Petition for Rulemaking to Address Carrier’s Carrier Rule Inequities and Confusion. And while last Friday’s Order may not make many happy, we believe that the Order will eventually lead to greater certainty. And, as they say, certainty is a good thing in business. Of course, some of you may not think so, especially if the certainty means your cost of goods could increase by as much as 17% or more on certain services. To know if you’ll be affected in this manner, to what extent, when and whether there are lawful ways to minimize future exposure? These are all good questions for you to ponder and for you to seek legal counsel for analysis and guidance.
The Order provides far greater clarity and certainty as to the FCC’s position regarding the scope, purpose and detailed procedures associated with the Carrier’s Carrier Rule. The Order evidences the FCC’s intent to enforce the Carrier’s Carrier Rule in a “strict” and “unyielding” manner. In addition, the Order paints a clearer picture of what future implementation and enforcement of Carrier’s Carrier Rule compliance measures will entail for Sellers, Resellers and Customers of telecommunications services, as well as the agency itself (along with its delegated agent, the Wireline Competition Bureau, and the Fund administrator, USAC).
Due to the importance of the issues decided in the FCC’s Order and the likely impact the decisions and guidance will have on every company that either “sells” or “buys and resells” (or buys and incorporates) telecommunications services AND the still extremely high Universal Service Fund contribution factor (which remains hovering around the 17% mark, which is enough to wipe out margins and turn profitable services into unprofitable ones), I am personally writing this message to each of our firm’s clients to draw attention. I am imploring you to review the attached Memorandum summarizing and explaining the FCC’s Order.
In particular, I want to draw attention to Section VII, Implications and Considerations for Wholesalers and Resellers. While the specific impacts on your company will be defined by your unique facts and circumstances, Section VII offers our high level insight and observations you may find helpful in identifying how you will be impacted and by whom (your suppliers? customers? USAC? All of the above?). Also, I want to point out that even though the tone we use to describe the path taken by the FCC to achieve its desired destination is rather condemning, please understand that regardless of whether or not anyone likes the outcome (and even if we believe the outcome may, in some way, violate the Administrative Procedures Act), we – as you – must function within the practical realities and costs associated with ignoring the Carrier’s Carrier Rule obligations, as clarified by the FCC. As explained in the Memo, the FCC has deftly set up a very long, torturous and expensive path for any service provider willing to roll the dice on compliance.
I invite you… indeed, implore you to give your full attention to the Memo. Should you have questions, you may contact me directly or you may reach out to the primary Attorney assigned to your account. Our professionals are standing by and will be prepared to work with you to ensure full awareness of the implications and likely consequences of the newly clarified Carrier’s Carrier Rule regulations.
Thank you,
Jonathan S. Marashlian
Managing Partner
