Bureau Decision Highlights Importance of Verifying That Resale Carrier Customers Are USF Contributors

The Wireline Competition Bureau (“Bureau”) upheld a determination by the Universal Service Administrative Company (“USAC”), which administers the Universal Service Fund (“USF”), that Global Crossing Bandwidth, Inc. incorrectly reported revenues as “carrier’s carrier” or “resale” revenue from customers that did not contribute to the USF. Thus, according to the Bureau, USAC was justified in seeking USF support based upon that revenue.

The FCC distinguishes between “end user” revenue, which is subject to USF contribution obligations, and “carrier’s carrier” or “resale” revenue, which generally is not subject to contribution obligations. Any revenues derived from resale customers that do not contribute to the USF, however, are treated by the FCC as “end user” revenue and thus subject to USF contribution requirements.

The Bureau concluded that Global Crossing’s reliance on outdated customer certifications, contract provisions and information and product descriptions from customers’ websites did not establish a reasonable expectation that its resale customers directly contributed to the USF. Accordingly, USAC acted appropriately by reclassifying the resale revenue as “end user” revenue and seeking USF support from Global Crossing based upon that revenue. The Bureau acknowledged that the resale customer verification process set forth in the FCC Form 499-A Instructions (which includes obtaining annual certifications and related information from customers and checking the FCC’s online database of Form 499-A filers) is “guidance” only and that other validation measures might be used, but indicated that service providers have a high burden to demonstrate the validity of these alternative measures.

In related matters, the Bureau also confirmed in the Global Crossing case that in the event it disputes an invoice from USAC, a service provider is required to pay the disputed invoice. If the dispute is resolved in favor of the service provider, USAC will credit back the disputed amount.  

Decreased USF Contribution Factor Still Hovers Above 12%

The USF contribution factor for the fourth quarter of 2009 will decrease by 0.6% from 12.9% to 12.3%. The decrease comes at the heels of significant criticism, alarm and renewed calls for USF reform after the contribution amount almost topped 13%.

Tip Box: USAC Will No Longer Accept Filings at New Jersey Location

USAC announced that after December 31 it will no longer accept forms for the USF high-cost and low-income programs at USAC’s New Jersey address. Starting October 1, carriers should submit these filings to USAC’s Washington, D.C. location (or online where possible). The affected forms include, but are not limited to, FCC Forms 497, 507, 508, 509, and 525; local switching support forms; interstate access support line count filings; and CMT revenue filings.