USAC Late Filing Penalty Policy Now More Costly due to Stealth Change in Method


Telecommunications and Interconnected VoIP carriers who are late in filing their FCC Forms 499-A and 499-Q are subject to a late fee of $100 per month until the delinquent filing is completed.   This fine, imposed by the Universal Service Administrative Company (“USAC”), started off a couple of years ago as a minor nuisance cost due to the way it was initially calculated and applied by USAC.   Over the past 12–18 months, however, we have noticed a change in approach which now makes the “penalty” much more costly than before — the change is detailed below.  While USAC’s financial sanction policy affects all late filers, carriers who apply for a USAC Filer ID after they commence service are likely to be the most severely impacted.

USAC originally applied a $100 late fee for each month, beginning 30 days after a Form 499 was due.  As such, if a carrier was 24 months late in filing, it would be fined $2,400.  Carriers who understood the USAC’s financial sanction policy would not be surprised when they received an invoice that included the late fees.  That is no longer the case.

Sometime during the past 12-18 months, USAC stealthily implemented an “aggregate” late fee policy.   By stealth, we mean that this “change in policy” was not published in any FCC regulation or order and the change was not announced by USAC.  Instead, USAC just made the change in policy and implemented it on its own initiative.  We learned of the change in policy after reviewing the invoices of new firm clients that had failed to register with USAC when they first started providing regulated services several years ago.

The new late fee policy means that USAC will now apply the $100 fine for each month and each year a filer is late.  This can result in fines several times larger than under USAC’s previous policy.

For example, if a carrier commenced service in January 2009 and did not make its requisite Form 499 filings until January 2014, USAC would levy a base fine of $18,000 (plus interest ) on that carrier:

  • January 2009 to January 2014 = $6,000 (60 months) plus
  • January 2010 through January 2014 = $4,800 (48 months) plus
  • January 2011 through January 2014 = $3,600 (36 months) plus
  • January 2012 through January 2014 = $2,400 (24 months) plus
  • January 2013 through January 2014 = $1,200 (12 months) equals
  • $18,000 + interest.

Under the old policy, the same carrier would have been fined only $6,000.

What remains unchanged is also the USAC policy that requires a carrier that was delinquent registering to obtain a Filer ID to file all historic Form 499-As for the years of unregistered operations.  Not just re-file the Forms, but also report revenue derived during those periods.  USAC has no clear, simple and easy to utilize “offset” process either, which means carriers that have been paying USF pass-throughs to their suppliers during the unregistered period may find it difficult to offset paid amounts of USF from the amount of USF contributions owed on retail revenue.

To state the obvious, USAC’s new policy harms contributing carriers by imposing increased financial burdens in the event of a missed filing.   Not as obvious, but equally important, is the harm caused by USAC imposing its new policy suddenly; without public notice or an opportunity for interested parties to comment.

USAC is a quasi-governmental entity that does not have authority to create, change, or implement substantive rules and policies.   USAC has authority only to adopt and follow administrative processes and procedures to implement the pertinent rules of the Federal Communications Commission (“FCC”).

USAC unilaterally enacted a policy that has a substantial impact on communications businesses, without seeking input from the businesses that are directly affected by its decision.  The FCC silently permitted USAC to make a stealth change in its financial sanction policy; an action for which it lacks authority.

Moreover, this is not the first time USAC has imposed serious policy changes without public notice, and it is unlikely to be the last.   Accordingly, it is more critical than ever for carriers to ensure that they are in full compliance with FCC and USAC rules and requirements.  In addition to having to pay ballooning fines, non-compliant carriers are also potentially subject to USAC reviews, audits, and enforcement action by the FCC.

This means, among other things, that if you are a domestic U.S. provider of telecommunications or VoIP provider, you are required to register with the FCC and obtain a Filer ID from USAC prior to commencing services, as well as timely filing accurate FCC Forms 499 during the applicable time of year.   A USAC Filer ID is required to make Form 499 filings.  Hence, carriers that operate prior to registering with USAC will be delinquent in their required filings and USAC will impose aggregate financial sanctions on them.

As addressed in previous client alerts, it is a near impossibility to provide communications services in the U.S. without the necessary authorizations and registrations and walk away unscathed financially. It is far less costly to comply with the FCC’s and USAC’s requirements than it is to hire a lawyer to clean up a messy enforcement action, engage in other remediation work, or pay off the late fees, penalties and potential forfeitures & fines.

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