FCC Grants CLEC Requests on Allocation of Revenue


On November 25, 2013, the FCC granted a petition for declaratory ruling filed by the Rural Independent Competitive Alliance (RICA), and a request for review filed by Blackfoot Communications, Inc. (BCI) as to whether: (1) competitive local exchange carriers (CLECs) are required to allocate to the interstate jurisdiction a portion of their fixed local service revenue for Universal Service Fund (USF) contribution purposes; and (2) CLECs are not required to report any portion of their end-user revenues that are not received by the them pursuant to rates explicitly designated as charges for the provision of interstate service.

RICA’s Petition for Declaratory Ruling:  In December 2010, USAC informed RICA that they had failed to identify and report a portion of their fixed local exchange service revenues as an interstate service.  USAC relied on the following language in the FCC Form 499-A Instructions regarding Line 404 of the Form:  “filers without subscriber line charge revenue must identify the interstate portion of fixed local exchange service revenues in column (d) of the appropriate line 404.1-404.5.”  RICA responded to USAC by stating that it would file an amended Form 499-A under protest, but would file a petition for declaratory ruling with the Commission to clarify the issue.  In its petition, RICA argued that rate regulation of CLECs is limited by Section 61.26 of the Commission’s rules – which controls CLEC tariffed switched access charges.  Thus, unlike the rules applicable to incumbent local exchange carriers (ILECs) under Part 69 of the Commission’s rules, there is no requirement that CLECs recover some portion of the costs originating and terminating interstate toll cases from their customers as an SLC.  Instead, a CLEC may determine that the interstate access charges by the CLEC to long distance carriers recover all of its costs of providing interstate switched access to its local customers.

BCI Request for Review:  After reviewing BCI’s 2010 FCC Form 499-A, USAC sent BCI a letter requesting information as to why BCI did not allocate and report as interstate revenue a portion of its fixed local service revenues, based on the FCC Form 499-A Instructions.  BCI responded to USAC stating that the carrier did not charge or pass through to its end-user customers a SLC, has no rate element targeted to recovering the interstate costs of the local loop, and does not bundle interstate services with its local exchange service charges.  Also, BCI stated that although it included a line item labeled “subscriber access charge” on the customer bill merely to allow its residential customers to compare BCI’s rates with their competitors, BCI still treats all of its fixed service revenues as intrastate revenues for all purposes.  Despite BCI’s response, USAC issued a decision letter on June 1, 2011 stating the FCC Form 499 Instructions require that when a filer does not charge an SLC, the filer is required to identify and report the interstate portion of fixed local exchange service revenues, and would reclassify a portion of BCI’s fixed local service revenues as interstate for USF contribution purposes if BCI did not provide additional information regarding these revenues. BCI then requested review of USAC’s decision with the FCC.

The FCC agreed with RICA that there was no existing Commission rule or order mandating CLECs to allocate and report for USF contribution purposes a portion of the revenues derived from their fixed local service revenue to the interstate jurisdiction.  Furthermore, the FCC confirmed that unless a CLEC chooses to recover the non-traffic-sensitive costs of providing interstate or interstate exchange access services from their end-user customers, there is no obligation for a CLEC to report those revenues as a subscriber line charge (SLC) in accordance with Section 61.26 of the Commission’s rules.

The Commission subsequently directed USAC to review BCI’s 2010 FCC Form 499-A under the parameters of the order.  Furthermore, the order also allowed RICA a period of 60 days to revise its filings made under USAC’s erroneous direction to identify an interstate portion of fixed local exchange services, and directed USAC to refund any resulting overpayments to RICA.

The RICA-BCI Declaratory Order is significant because it marks a rare occasion on which the Commission was willing to issue a decision on a USF Contributor Appeal, which the agency has been reluctant to do in recent years.  Hopefully the FCC’s action is a signal of a coming shift in how the FCC conducts itself vis-à-vis USAC, and will be more willing in the future to exert its much needed regulatory oversight of the USF administrator.  This does not mean that the Commission will always side with a petitioner by reversing a USAC decision, but that instead, by reviewing a USAC decision, and subsequently issuing an order, the Commission will initiate a much needed policy of proactively reviewing and clarifying USF contributor obligations.

Our firm will be continuing to monitor the Commission to determine whether or not the agency will be more willing to issue decisions on USF Contributor Appeal, which will hopefully bring some much needed guidance for our clients and other carriers.  For more information on USF compliance, please visit our please visit our website or contact, Jonathan Marashlian at jsm@commlawgroup.com.

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