Service-Specific USF Exemption; Industry Group Asks FCC to Adopt 499 Instructions to Clarify Duties of Wholesalers and Resellers


With a little more than five months until the much anticipated January 1, 2014 transition to a “Service” or “Circuit-Specific” Universal Service Fund (“USF”) exemption process (a stark change from the “Entity-Wide” USF exemption rules in existence since the establishment of the program more than a decade ago), several influential industry members — all with wholesale operations — filed a letter asking the Federal Communications Commission to adopt Form 499 Instructions that offer the industry greater clarify as to the rules and policies that shall govern the USF exemption process in 2014 and beyond.  The industry group includes:  AT&T, Verizon, CenturyLink, Sprint, BT Americas, XO, Orange and BCE Nexxia.  The Ex Parte letter is available here.

Faced with the daunting task of establishing corporate policies, procedures and setting up internal systems and training personnel to implement the expected change-over from the “Entity-Wide” to “Service/Circuit-Specific” exemption rules, the wholesale industry group has met privately over the past several months to develop solutions that will further the FCC’s goal of requiring increased accountability and compliance with the USF rules, while simultaneously providing the industry with essential guidance and flexibility to implement and administer the rules.

To appreciate just how complex the transition from “Entity-Wide” exemption — where an entire company can be exempt from all supplier USF pass-through assessments, even if only a fraction of the purchased telecommunications services are resold — to “Service” specific exemption — where each service, each circuit, each use of a supplier’s telecommunications services would need to be accounted for, we direct you to read the following industry group recommended change to the Form 499 Instructions:

“At the filer’s discretion, the filer may rely on certificates that specify any of the following: (1) that all services purchased by the customer are purchased for resale pursuant to the certificate (“entity-level certification”); (2) that all services associated with a particular billing account, the account number for which the customer shall specify, are purchased for resale pursuant to the certificate (“account-level certification”); (3) that individual services specified by the customer are purchased for resale pursuant to the certification (“service-specific certification”); or (4) that all services except those specified, either individually or as associated with a particular billing account, the account number(s) for which the customer shall specify, are purchased for resale pursuant to the certificate.”

It is uncertain whether or to what extent the FCC will adopt the wholesale industry group’s recommended changes to the 499 Instructions or, for that matter, when such changes can be expected — historically, the industry has been given very little time to adjust to changes to FCC Forms 499 and their associated Instructions, sometimes only a few weeks.  The FCC has a long history of identifying regulatory problems it would like to see solved, pointing the industry in the right direction (while holding a proverbial gun to the industry’s proverbial head), and then putting it in the hands of the industry to present Commission staff with options.  We view the transition from the “Entity-Wide” to “Service-Specific” USF exemption process as a classic example of this process, one that is currently playing out before our eyes.  Therefore, we give more weight to the recommendations being presented by the industry group.  Although it may be too soon to implement changes to your current policies, practices and procedures vis-à-vis “Carrier’s Carrier Rule” compliance, we highly recommend monitoring this matter closely.  It is never too soon to prepare.

As demonstrated by the industry group’s meetings, which have been occurring throughout the first half of the year, and the resulting meetings with FCC staff and recommended changes to Form 499 Instructions, the issues are complex, challenging and will require ample time to implement.  That said, the FCC is unlikely to extend the January 1st deadline, which means the “Entity-Wide” exemption process will disappear regardless of whether or not clarified guidance regarding the “Service-Specific” exemption is adopted.  Therefore, whether your company is a Wholesaler, Reseller or a purchaser of telecommunications used in the delivery of retail information services, we urge you to learn about the FCC’s Carrier’s Carrier Rule changes and understand how future changes are likely to impact your business.

Please contact Jonathan Marashlian to receive our firm’s Memorandum explaining the FCC’s 2012 Wholesaler-Reseller Clarification Order, which directed the change from Entity-Wide to Service-Specific exemptions.  You may also purchase our firm’s Carrier’s Carrier Rule Compliance Guide here.  If you require assistance trying to understand how the rule change is likely to affect you company, please contact the attorney assigned to your account.

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