Like most FCC regulatees, Competitive Local Exchange Carriers (“CLEC”) are required to file various reports and certifications on a regular basis and pay annual regulatory fees. In addition, CLECs are also required to contribute to the Universal Service Fund (“USF”), which was established by the FCC in order to, among other things, promote the quality and availability of telecommunications services at reasonable and affordable rates.
According to a recently released Consent Decree, a Mississippi based CLEC voluntarily disclosed to the FCC that, among other things, it had failed to pay its annual regulatory fees and timely file its 1) quarterly USF revenue report (FCC Form 499-Q), 2) annual USF revenue report (FCC Form 499-A), and 3) annual Customer Proprietary Network Information (“CPNI”) certification. As a consequence of failing to file the USF reports, the CLEC had also failed to make the mandatory contributions to the USF, the Telecommunications Relay Services Fund, the North American Numbering Plan and Local Number Portability Administration. According to the Consent Decree, the CLEC later submitted the required regulatory fees, FCC Forms 499, the associated contributions, and its CPNI certification. The Consent Decree cited potential violations of Sections 9(a)(1), 222, 225, 251(e)(2), and 254(d) of the Communications Act of 1934, as amended (the “Act”), and Sections 1.1154, 1.1157, 43.61, 52.17, 52.32, 54.706, 54.711, 64.604, and 64.1195 of the FCC’s Rules.
As a result, the Consent Decree required the CLEC to “voluntarily” contribute $16,000 to the Department of the Treasury, to implement a compliance plan that includes establishing certain internal procedures, to provide employee training, and to submit compliance reports to the FCC for a period of three years. As discussed below, without the Consent Decree, the CLEC could have found itself in a much worse position.
Under Section 9(a) of the Act and Sections 1.1154 and 1.1157 of the FCC’s Rules, regulatory fees must be paid by the established deadline, which usually falls on a date between August and October each year, or be subject to a 25% late-filing penalty. In addition to the late penalty, the FCC also has the authority to assess interest.
Section 254(d) of the Act and Sections 54.706 and 54.711 of the FCC’s Rules require certain telecommunications providers to file quarterly and annual Telecommunications Reporting Worksheets (FCC Forms 499Q and 499-A respectively). The FCC has stated that the quarterly and annual revenue report worksheets are more than an “administrative tool” and are a “fundamental and critical component of the Commission’s Universal Service program”, with the failure to timely file such reports resulting in “delayed payments, and difficulty in calculating contributions to the USF….” The importance of such revenue reports is reinforced by the FCC’s consistent history of fining telecommunications providers $50,000 for each missing or late-filed report.
The FCC also has the authority to levy heavy penalties for failure to pay USF contributions. There is a base forfeiture of $10,000 (per month) for failure to pay the full amount of the monthly USF contribution. A telecommunications provider’s failure to contribute any portion of its monthly USF contribution generally results in a $20,000 (per month) fine. Under the authority provided in Section 503(b)(2)(E) of the Act, the FCC also has the authority to levy an upward adjustment, which usually equals 50% of the outstanding USF contributions.
Finally, the FCC has indicated that the CPNI certification “includes some of the most sensitive personal information that carriers have about their customers as a result of their business relationship.” As evidence of the importance associated with protecting consumer data, the FCC has recently increased the typical fine associated with failure to file the annual CPNI certification, which is due annually on March 1, from $20,000 to $25,000. These annual certifications provide an ongoing record that a telecommunications provider has procedures in place to protect against unauthorized disclosure of certain sensitive consumer information. The FCC’s Rules do not include a base forfeiture for CPNI violations. The FCC’s ability to fine for such violations originates from Section 503 of the Act. Under that section, the FCC has the authority to impose monetary forfeitures of up to $150,000 for each violation or each day of a continuing violation, up to a maximum of $1,500,000.
The difference here between the imposed voluntary contribution and the more typical fines for such violations is substantial. Telecommunications providers and others with lurking rule violations may wish to carefully assess their compliance history, and consider initiating communications with the Enforcement Bureau before the Bureau calls on them.