Is your telecommunications company unwittingly exposing itself to regulatory oversight, compliance obligations, and an assortment of compliance costs by ignoring the “Private Carrier” exemption from certain Federal Communications Commission (and State Public Utility Commission) regulations?
As explained in our firm’s White Paper, the FCC (and the majority of State Public Utility Commissions across the U.S.) exerts its full regulatory authority over so-called “Common Carriers” while extending only limited regulatory duties to “Private Carriers.” At the FCC, for example, both Common and Private Carriers are required to comply with Universal Service Fund support obligations, pursuant to Section 254 of the Communications Act. On the other hand, only Common Carriers are exposed to “Title II” regulations which include, but are not limited to the:
- Need to contribute to the Telecommunications Relay Services fund and make support payments for the administration of the North American Numbering Plan and Local Number Portability programs (an approximate 2% cost on every dollar of interstate and international telecommunications services revenue);
- Need to obtain Section 214 international authorization and comply with associated requirements;
- Need to seek prior FCC approval of Assignments and Transfers of Control;
- And many more…
Is full Title II regulation a burden on the telecommunications industry? Don’t take our word for it. Here’s what NCTA – The Internet & Television Association has to say about Title II regulation:
“Professor von Schewick suggests that one of the benefits of a Title II regime is that it “creates low costs of regulation.” Nothing in our long experience with Title II supports this statement. Cable broadband services have been subject to limited regulation under Title I of the Act since they were first introduced. Imposing an entirely new Title II regulatory regime on these companies will involve significant legal, regulatory, and administrative work even under the mildest form of Title II regulation. Given that the vast majority of the hundreds of ISPs operating in the United States are classified by the FCC as small companies, this new regulatory burden is nearly certain to distract ISPs from serving their customers and undermine their ability to expand and improve their services.”
On the whole, private carriers are subject to limited regulatory oversight. Wherefore, the marketplace – and not the governing regulatory agency – is the final arbiter of the private carrier’s actions and business opportunities.
However, as detailed in our firm’s White Paper, private carriers do not necessarily enjoy an unencumbered regulatory landscape, at this time. There are several obstacles which have stood in the way of widespread utilization of the private carriage exemption by telecommunications providers. Key among them is the high degree of uncertainty whether: (1) a service provider or a particular line of business qualifies as private carriage in the first instance (due to the intensely “fact specific” nature of the determination) and (B) the regulatory agency and USAC will honor a company’s self-determination of “private carriage” status, without unduly exposing the provider to the economic consequences of reclassification as common carriage.
Review the following list of factors which the FCC and Courts have established as being key indicia of whether a particular service offering is or is not being offered on a “private carriage” basis:
- Contract Negotiations: Private carriers individually negotiate contracts and otherwise “tailor” the terms and conditions of their services to meet the unique needs of their customers. By contrast, common carriers offer services for set prices and terms.
- Length of Contracts: Private carriers are more likely to enter into contracts with a medium-to-long range term. By contrast, common carriers offer services on a month-to-month or other short term arrangements.
- Customers Involved: Private carriers enter into contracts with sophisticated business entities and stable clientele. Customers of private carriers have unique communications requirements. By contrast, common carriers cater to “mass market” customers.
- Tailoring: Private carriers tailor contracts and services to the special requirements of their customers. By contrast, common carriers generally offer generic services pursuant to standardized terms.
If you believe your Company is unnecessarily exposing itself or specific service offerings (and their revenue streams) to Title II regulations and you seek a legal opinion and guidance on your options and risks, please contact Jonathan S. Marashlian at jsm@commlawgroup.com.
