On Jan. 15, 2013, the Federal Communications Commission (FCC) issued an Order that significantly revises the reporting requirements for international calling services. The Order purports to reduce reporting obligations, but many entities that previously had no reporting obligations—such as VoIP providers, carriers without international traffic, and non-common carrier owners of international transport capacity (i.e., IRUs to submarine cables)—now have a variety of new registration and reporting obligations.
The Order makes many changes. We highlight below only some of the most significant:
VoIP Service Provider Reporting Requirement
Perhaps the most significant new burden is the imposition of a registration requirement for all providers of “international VoIP services connected to the PSTN.” This newly-coined category of service provider includes all interconnected VoIP service providers (including the “fixed VoIP” services offered by most cable companies and over-the-top interconnected VoIP (i.e., Vonage)) and many one-way VoIP services, such as Skype. The FCC bases its authority on its “ancillary jurisdiction” under Title I. (It still has not classified VoIP as either a telecommunications service or an information service.) Larger VoIP providers—those with above $5 million of international services revenue—will also have to file traffic and revenue reports. (The new traffic and revenue reporting requirements are discussed below.)
One might reasonably ask why the Form 499 that VoIP providers already file, which contains the same information, is not sufficient. The FCC, however, did not address that issue.
$5 Million Revenue Threshold for Resellers
The headline, from the FCC’s perspective, is that entities that have no ownership interests in international facilities (i.e., resellers of international services) and that have less than $5 million of international revenue will no longer have to file traffic and revenue reports. The FCC expects that this new revenue-based threshold will reduce by more than 90 percent the number of entities that have to file traffic and revenue reports. In 2010, for example, of the 1,211 filings the FCC received, only 87 reported revenue of more than $5 million. Entities offering flat-rate plans that include international calling, however, will have to do traffic studies to allocate the revenue accordingly.
Registration Requirement for All Carriers
While carriers with less than $5 million in international resale revenue are exempt from submitting traffic and revenue reports, the FCC has created a new annual “registration” requirement. All entities that hold Section 214 international authority will have to provide basic identifying information, such as entity name, contact information, and a list of Section 214 authorizations held (including FCC registration number (FRN) and Form 499 ID number). The registration requirement applies to all carriers holding Section 214 authority, whether they provide service or not. It also applies to VoIP providers if they have 214 authority or are otherwise required to file traffic and revenue reports. This registration requirement applies whether or not the entity has any international revenues.
This registration requirement may not appear burdensome on its face, but the reality is that it will be difficult for many companies to identify all the authorizations they hold, especially if there has been M&A activity in the past (as is almost always the case). In fact, the lack of accurate and up-to-date information currently on file with the FCC probably explains why the agency imposed the requirement in the first place. Many carriers may themselves have to clean-up the information currently in the FCC databases that house this information, which can be quite difficult to navigate. (Note: DWT has experts who can help with this often daunting process.)
Revised Reporting Requirements
For those entities whose revenues do exceed the $5 million revenue threshold, the FCC has significantly changed the format in which the information will be organized and submitted. Some of the changes will be welcome, while others impose new burdens. The following is a non-exhaustive list of some of the most noteworthy changes:
- Entities may now use statistical sampling and other estimation procedures and techniques where actual counts of data are not possible. (Many carriers already do this; the change just acknowledges this reality.)
- While sampling is now “permitted,” fewer reporting errors will be tolerated. Carriers are currently only required to file corrections when subsequent audits reveal that errors exceed 5% of actual. That threshold has now been lowered to 1%. Corrections are still due by October of the following year for which the data is reported.
- The FCC will adopt a set of standard forms for reporting entities to fill out, replacing the billing code parameters that have been used for many years. This change may be welcome by some, as many of the decades-old codes have no relation to current ways of doing business. But the fact is that many accounting and billing systems are set up to generate data in accordance with the old codes. As a result, this change could prove to be a bother for the 90 or so carriers that have been filing the report under the old form.
- Filing entities will have to disaggregate the minutes terminated on foreign networks and settlement payouts between calls terminated on fixed line networks and those terminated on mobile networks (probably not too difficult).
New Circuit Status Reporting Requirements for All Entities with Interest in International Facilities
The Order imposes Circuit Status Report filing requirements on many entities (common carriers and non-carriers alike) that previously had no filing obligation.
Background: The FCC has long required entities that provide international telecommunications services to file “circuit status reports”—i.e., to identify the number, capacity, and destination of “circuits” connected to foreign carriers. Because non-common carriers are not required to report, however, the FCC estimates that approximately 90 percent of all traffic has not been reported. The Order fixes this “problem” by requiring satellite operators and entities with “cable landing licenses and common carriers that have capacity on an international submarine cable to report that capacity.” The bottom line is that many carriers that did not previously file Circuit Status Reports will be filing them in the future.
More Details to Come in the Filing Manual
Because of the many changes and questions left unanswered, the Order’s full impact will be hard to gauge until a revised draft of the Filing Manual is issued and entities actually begin trying to fill out the new forms. The Filing Manuals for these reports have traditionally provided much of the details needed in order to draft the reports.
One piece of good news is that the first reports under the new rule will not have to be submitted until, at the earliest, 2014. It’s quite possible that some reporting requirements could slip until 2015 depending on how quickly the FCC can issue the revised Filing Manual and make necessary changes to its computer systems. OMB review could also add time to the process.
The Order makes dozens of changes. We address only a few of them here.