As a result of the Federal Communications Commission ‘s Regulatory Fees Order released last Friday, submarine cable licensees will see a welcome decline in fees for fiscal year 2014 due to a reallocation among International Bureau regulatees, and Responsible Organizations (“RespOrgs”) will begin paying regulatory fees on toll free numbers in fiscal year 2015.  However, among other decisions, the FCC declined to adopt its proposal to pool the revenues to be collected from payers of the Interstate Telecommunications Service Provider (“ITSP”) fee and Commercial Mobile Radio Service (“CMRS”) providers.

Because the Regulatory Fee Order for FY 2014 came out later than in years past, the FCC indicated the decision would become effective upon publication in the Federal Register, rather than thirty days thereafter.  The FY 2014 regulatory fees are due September 23 (by 11:59 PM, Eastern Daylight Time), and Fee Filer, the Commission’s automated filing and payment system for FY 2014 regulatory fees, is now open.

In the Commission’s June 13, 2014, notice of proposed rulemaking regarding FY 2014 (“NPRM”) regulatory fees, it had sought comment on approximately a dozen issues, including whether to reapportion the fee allocations between International Bureau regulatees, i.e., submarine cable landing (“SCL”) licensees and satellite and earth stations licensees/operators.   In the Regulatory Fees Order, the FCC recognized that SCL licensees are subject to minimal regulation, enforcement, and oversight after the initial licensing of a submarine cable system, points underscored by comments from the submarine cable industry.  In a decision which should make SCL licensees glad, the Commission amended the allocation percentage between Submarine Cable and Bearer Circuit issues and Satellite and Earth Station issues from 41 to 59 percent of International regulatory fees, respectively, to 35.72 and 64.28 percent, respectively.  (Within the Satellite and Earth Station category, the Commission determined to raise fees for affected earth station regulatees by 7.5% compared to last year, collecting the remainder of the relative increase in the category from satellite regulatees.)  This change contributed to a considerable drop in the fees submarine cable systems will be assessed this year.  For example, the largest systems, with capacity of 20 Gbps or greater, will pay $163,900 this year compared to $217,675 in 2013 (for FY 2013), a drop of nearly 25%.  Notably, the Commission explained that it would revisit the matter of allocations among these International Bureau licensees in future regulatory fee proceedings to ascertain whether additional adjustment is warranted.

In the NPRM, the Commission had also proposed to combine wireline and wireless voice services into one category.  But, after examining the record, the Regulatory Fees Order concluded that combining the ITSP and CMRS categories would be complex and require a totally new methodology, something that could not be accomplished for FY 2014 in the time provided.  Consequently, ITSP fee changes FY 2014 are relatively flat, declining approximately one percent from FY 2013 to $0.00343 per assessable interstate and international end user telecommunications revenues dollar.  Nonetheless, the Commission indicated that the issue may be revisited in future years to determine if this particular combination of fee categories has merit and could be implemented.

The Regulatory Fees Order also added toll free numbers as a new regulatory fee category to help recover Wireline Competition Bureau FTEs.  The new fees will be assessed on RespOrgs, beginning with FY 2015, for each toll free number accessible in the United States that RespOrgs manage.  The Commission noted that it must first submit this change to Congress, under the applicable provision of the Communications Act of 1934, as amended, at least 90 days before it takes effect.  As a result, the change will not create a liability for RespOrgs until next year.  In a Second Further NPRM accompanying the Regulatory Fees Order, the Commission sought comment on what procedures it should use to enforce the RespOrgs’ obligations to pay fees beginning next fiscal year, including potentially reclamation of numbers or decertification.

The Regulatory Fees Order reflects a number of other decisions as well, including:

  • A commitment to update the FTE (full-time equivalent number of employees performing regulatory activities) counts within the agency annually to reflect the changing work of Commission FTEs.
  • A commitment to revise allocations of FTEs among the agency’s constituent bureaus and offices every two years.  (The Commission, which made a series of reallocations for FY 2013, declined to adopt any further FTE reallocations in the Regulatory Fees Order for FY 2014, but found that additional evaluation and information is required.  In the NPRM, the FCC had sought comment on reallocating certain Enforcement Bureau, the Consumer & Governmental Affairs Bureau, and the Office of Engineering and Technology FTEs directly to certain other bureaus.)
  • A determination not to adopt a per unit cap on increases at 7.5 % (or higher) for any fee category resulting from FTE reallocations or reform measures.
  • Effective October 1, 2014, for FY 2015, an increase to the de minimis threshold for regulatory fee obligations to $500, the minimum amount a regulated entity must owe from the sum total of all of its liabilities for different fee categories for the fiscal year before it must contribute.
  • Elimination of 218-219 MHz licensees, broadcast auxiliaries, and satellite television construction permits from the regulatory fee schedule and a commitment to reevaluate in the future whether other categories considered in the rulemaking, but not eliminated at this time for lack of sufficient support, should be subject to elimination.
  • Removal of the exemption for broadcast licensees in the AM expanded band for FY 2014.
  • Declining to include regulatory fees paid by Direct Broadcast Satellite (“DBS”) providers in the cable television and IPTV category on a per subscriber basis, but seeking further comment in the Second Further NPRM whether to adopt a new DBS fee category.
  • A decision to no longer mail out initial assessment letters to CMRS providers beginning with FY 2014 but to post telephone numbers (subscriber counts)  on the Fee Filer.  The Regulatory Fees Order outlines the process by which CMRS carriers can seek to revise its subscriber counts.

Industry-specific guidance on who must pay, and how much, will be posted on the Commission website at http://www.fcc.gov/regfees.   ITSP and CMRS regulatory fee data are available on the FCC site.  Finally, payers should note that only electronic payment of regulatory fees will be accepted this year, and payers are responsible for making sure payments are timely and complete before the September 23, 2014, deadline.