On the heels of the Federal Communications Commission’s (“FCC”) release of safe harbor language for service-specific certificates exempting resellers from Universal Service Fund (“USF”) pass-through charges from their wholesale providers, our firm is fielding numerous questions from wholesale providers and resellers concerning how to draft and complete the new forms, and what impact these decisions have on direct and indirect USF contribution obligations.
Our firm strongly encourages wholesale providers to adopt the safe harbor certification language contained in the newly revised Form 499 Instructions. Although variation in the forms can be expected based on differences in billing systems and identification of customer accounts, wholesalers should adopt the safe harbor language and accompanying procedures to support reporting reseller revenues.
The new reseller verification procedures, for services provided, went into effect January 1, 2014. Although these new rules are currently in effect, they will likely manifest their effect on downstream companies through the receipt of pass-through surcharges or increases to pass-through USF. Thus, we expect to see further questions about the way wholesalers now apply USF surcharges once resellers and other customers receive invoices implementing information submitted on the forms. Our firm strongly advises resellers claiming exemptions to review their invoices to insure that the service-specific exemptions are correctly implemented, and that pass-through charges are appropriately applied to specified accounts or services.
The consequences of non-compliance with the FCC’s clarified rules governing USF exemptions can be severe for both wholesalers and resellers. They may include revenue reclassification by Universal Service Administrative Company (“USAC”), the USF Administrator. For resellers and other customers, the risks of a non-compliant arrangement with a wholesale provider can be breach of contract, claims of fraud, back-billing, and other economic harms. For wholesalers, failure to satisfy the FCC’s “reasonable expectation” standard can substantially increase the risk of revenue reclassification by USAC.
To assist clients with their efforts to comply with the clarified USF exemption requirements, our firm has formed an internal task force that will provide the following services:
- Design, develop, and assist with the implementation of USF Exemption Policies and Procedures that are appropriate for your unique business;
- Review USF exemption forms and certifications provided by your suppliers, and provide guidance and advice on the appropriate manner to complete such exemption forms; and
- Analyze and advise on the practical economic consequences of your responses to wholesale supplier USF exemption forms, and evaluate options to address the same.
If you require assistance from our firm’s USF Exemption Task Force, please contact Linda G. McReynolds at lgm@commlawgroup.com or (703) 714-1318.
