Even as 2014 Form 499 deadlines loom, develop a plan for 2015. Examine your current practices and explore The Commpliance Group’s USF Exemption Management Service.
The “safe harbor” and “reasonable expectation” standards announced by FCC last year as part of the 2014 Form 499 overhaul introduced significant, regulatory requirements impacting telecommunications carriers. Under the new regime, even as carriers prepare to file their last 2014 Form 499-Q on February 1 and final Form 499-A on April 1, they should already be thinking about what compliance will look like in 2015.
Demonstrating a “Reasonable Expectation”
Determining whether a wholesale service provider must contribute to federal universal service support mechanisms is a multistep process. A key part of that process is determining whether customers purchase telecommunications services as a contributing reseller or an end user. A customer is a reseller if (1) it incorporates purchased telecommunications services into its own offerings and if (2) there is a “reasonable expectation” that the customer will contribute to the universal service fund based on revenues from those offerings.
Since January 2014, carriers have been able to demonstrate this “reasonable expectation” in two ways. First, a filer can follow the safe harbor rules, which include as a major component obtaining a certification by the customer confirming its status as a reseller. Second, a filer can provide “other reliable proof” on a case by case basis to demonstrate the “reasonable expectation” that its customer is a reseller. The FCC confirmed last year that the standard of proof here is the preponderance of the evidence test.
A major exception is the actual contribution rule. If a customer actually contributed to the universal service fund based on revenues from offerings that incorporate the services of the wholesale service provider, then the wholesaler is not obligated to contribute even without demonstrating any reasonable expectation. The standard for proving actual contribution is similarly the preponderance of the evidence test.
Incentives to Plan Ahead
Carriers that plan how they will demonstrate a “reasonable expectation” will avoid regulatory obstacles and higher costs down the road. The FCC reaffirmed in a July 2014 order that carriers should obtain all exemption certificates before they report revenues. This rule was written to safeguard the Universal Service Fund from potential underpayments resulting from under-reporting of revenues. Failure to comply could result in treatment of carrier’s carrier revenues as assessable end user revenues.
The FCC does offer a post-dated certificate option for cases where a filer sells additional services after obtaining the annual certification, but this process adds an additional layer of proof. To show a reasonable expectation, the filer may require either a (1) notification from the customer that the purchase is consistent with a valid, previously signed annual certificate, or (2) a subsequent certificate covering the additional purchased service.
Planning ahead will help to avoid administrative headaches, as well. By setting up billing systems now the right way, carriers can avoid cost recovery billing to non-contributors.
How we can help
Our firm works with carriers of all sizes to create a plan for compliance with contribution responsibilities. We’ll help your business avoid the last-minute scramble by determining your eligibility for USF contributions and developing a plan to ensure eligibility for safe harbor provisions. Our firm has formed the USF Exemption Task Force – 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;
- Provide guidance with setting up cost recovery procedures in billing systems;
- 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 Jonathan S. Marashlian at jsm@commlawgroup.com or by phone at 703-714-1313.
