Tag Archives: USAC

Could the FCC Enforcement Bureau be ramping up for Letters of Inquiry for 499-A Non-Filers?

November 30, 2009 Washington DC – The Federal Communication Commission.
In the wake of the Omnibus Notice of Apparent Liability of 2008-2009 for CPNI violations against small-sized carrier, there are rumblings that the next major enforcement actions will be against non-filers and contributors of the 499-A for 2008 and 2009.   Comment on confirmation or dispel.

UPDATE February 19, 2010 – Washington DC  

 The FCC’s Office of Inspector General (OIG) seems to be the source of some recent inquiries that may have a potential impact on telecommunication and VoIP service providers that have failed to report on the FCC Form 499-A. Initial reports believed the inquiries from the FCC’s Enforcement Bureau, the inquires were in fact originating from the FCC’s Office of Inspector General.    

Beginning in 2009, the Inspector General undertook a program called the USF Contributors Survey Project to vet out telecommunication companies that are not, or have not, filed the Telecommunications Reporting Worksheet (FCC Form 499-A) during other ongoing contributor audit field work. The FCC’ Office of Inspector General has apparently contracted an independent accounting/audit firm to find federal USF non-filers by comparing listings of active telecommunication companies registered from each state Public Utility Commissions (“PUC”) to USAC’s main 499-A database. The audit initially focused on active registered telecommunication companies from state PUCs in Maryland, Delaware, Virginia, Pennsylvania, West Virginia and New Jersey.  Out of those six initial states, the accounting/audit firm identified about 50 probable non-filing telecommunication companies for follow-up.  Further research on telecom listings gathered from a broad range of state PUC websites identified over 1,000 potential non-filing telecommunication companies in 32 states.  These results have spurred inquiries by the OIG. 

In September 2009, the OIG issued 49 letters to potential non-filers asking for the companies’ position on whether they were required to file FCC Form 499-A or if they claimed an exemption to the filing requirement – and if so to provide a written explanation and documentation to support their exemption.  Two telecommunication companies responded that they would begin filing the 499-A.  As of February 19, 2010, the OIG effort in the USF Contributors Survey Project is ongoing.

 Under Section 2 of the Inspector General Act, the OIG has independent discretionary authority to conduct audits and investigations related to the FCC’s programs and operations, such as the federal universal service program. This includes contributions to the FCC’s regulatory support mechanisms and USAC. While USAC does itself have authority to conduct audits in Regard to USF and reported revenues on the Telecommunications Reporting Worksheet (FCC Form 499-A), the statutory directive of the OIG is to provide leadership and coordination for the agency (USAC), and to recommend policies designed to promote economy, efficiency and effectiveness and to prevent fraud, waste and abuse in agency programs and operations. The OIG often refers discovered abuses or fraud against the E-Rate Program and of TRS/VRS to the Department of Justice and the U.S. Postal Inspector General for criminal investigation.  

In the case of the USF Contributors Survey Project, the interplay between the OIG (and non-filer information it is now gathering) and the FCC’s Enforcement Bureau has yet to be seen.  Failures to contribute to USF or failure to file the Telecommunications Reporting Worksheet (FCC Form 499-A) are violations of the Communications Act of 1934, as amended and have resulted in forfeitures against carriers and providers.

 Clear from the recent audits and investigations by the OIG is that non-contributors are on the radar of future actions of the FCC.  Those carriers or providers that have failed to consistently file the Telecommunications Reporting Worksheet (FCC Form 499-A) for the last four (4) years are well advised to do so and report any and all back filings and make arrangement for any back USF contributions.  

 As more information becomes available, this post will be updated.


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Requiem of the Small FCC 214 Carrier: The Dirge of FCC Shut-Downs.

I hate to say it, but, my office consultations to discuss carrier shut-downs have been more frequent in recent days.  Not surprisingly its small competitive resale and retail carriers closing-up shop these days. These small-sized carriers were not long-haulers in the market. The post 911 Era saw many of them enter the marketplace quickly after obtaining base FCC 214 Authority or declaration as a VoIP Carrier and budget facilities. Fueled by competitive international direct routes and the use of VoIP to offer aggressive rates in comparison to the major providers, these plucky carriers leveraged their small-size and niche routes to enter and exist in the marketplace.  

 However these exuberant entrepreneurs often lacked the financial stability and/or the proper administrative organization to successfully manage both the business and regulatory side of telecommunications.   Regulatory compliance was often consciously left to the back-burner in lieu sales and the quest for premium routes.  This became patently evident when the Great Recession of 2008-2009 coupled in time with more sophisticated FCC Regulatory Fee Enforcement and converged on them simultaneously. Pinned by shrinking commercial margins and back-owed FUSF, TRS, LNP, NANPA and FCC Contributions, many crawled for a period but now are coming to a make-it or break-it proposition: clean-ups or shut-down.   

 After reciting the colloquy of necessary clean-up steps and cancellation processes involved in a formal FCC and State shut-downs a few dozen times, it seemed prudent to post a brief, but non-exhaustive, list of what is needed to properly shut-down a FCC 214 Carrier or VoIP Carrier with some safe harbor suggestions for when you meet with your regulatory counsel:

1.  Understand that Cancellation of any Authority is your responsibility per the Federal Communication Commission’s Rules. Therefore if you don’t cancel your Section 214 Authority (214 License) and Form 499 Filer ID Number, FCC won’t do it for you and the FCC will continue to regulate you until they have Formal Notice from you as a carrier.  This includes the assessment of late fees for not filing regular FCC 499-A and 499-Q Reports and remitting Contributions.  Cancellation of your FCC Section 214 Authority can be done by a simple Petition.  Cancellation of your 499 Flier ID can be made through a Notice to USAC.  Both are formal Notices to the FCC and must be made truthfully under penalty of perjury per Commission Rules. Also pursuant to Commission Rules, it is your responsibility as a part of Cancellation to give Notice of Shut-Down to the State Regulatory Commissions (Public Utility or Service Commissions) where you operated, or alternatively the Governor of each state where you operated, and to the Department of State where applicable.

  •  Safe Harbor Suggestion #1 – If you decide to close operation as a FCC 214 Carrier, establish a final date of service in mind and have the necessary shut-down Petitions and Notifications prepared filed with the FCC International Bureau (FCC 214) and USAC (499 Filer ID and FCC 499 Reports) before that date.  If you leave it as a rolling date, it will, and liability will continue to accrue. Hedge any time delays due to glitches in the process, particularly the payment of past due regulatory fees owed to the FCC.
  • Safe Harbor Suggestion #2 – Have a ready list of States in which your company was authorized to provider telecommunication services. File your cancellation Notices to the State Public Utility Commissions well in advance of the final date of service, and even the Petition for the FCC 214 Cancellation, as states generally take more time to process this type of request, or, may require approval by sitting Commissioners in some instances.   

 2. Understand effective May 13, 2009, the same procedure required by FCC Section 214 Carriers for closing down their 499 Filer ID and paying down Contribution debt is also required by Interconnected VoIP Providers and VoIP Carriers.  See In the Matter of IP-Enabled Services WC Docket No. 04-36 REPORT AND ORDER Adopted: May 13, 2009.

 3. Understand that past due Contribution debts of over $100 that are over 180 days delinquent must be referred to the Department of Treasury for offset of any refunds or payments to your company. This means Treasury will match the debts against payments that might be owed to you from other Federal governmental entities (including tax refund payments), and will reduce those payments by the amount of your debt to the FCC. If mandatory centralized offset is not possible, Treasury and the Department of Justice will take necessary legal action to collect the delinquent debts. Treasury often uses third-party debt collection companies to collect the debt. The debt may be reported to a consumer reporting agency.  If the Carrier is financially unable to pay a debt owed to the FCC in one lump sum, it may request an installment payment plan, which can extend past the last date of service. There must be a basis for such a and the FCC will require the carrier, or its principal owners to enter into legally enforceable written agreements supporting the arrangement pursuant to 47 C.F.R. Part 1, Subpart O §1.1914.  The carrier can seek to offer a debt compromised, or reduced in amount as a part of closing out, however this must be backed by financial information justifying the request. FCC is only authorized to settle under a compromise when the principal balance of the debt is less than $100,000 USD. Only the Department of Justice may compromise debts exceeding a $100,000 USD debt. If you are about to enter into Federal bankruptcy protection, the FCC and its agencies should be Notified of this event in relation to Regulatory Fee Debt as the automatic stay imposed at the time the bankruptcy petition may stop any further collection activity by the FCC or Department of Treasury.

  •  Safe Harbor Suggestion #3 Assess any outstanding or past due Federal Universal Service Fund (FUSF) Contributions owed to USAC as well as Telecommunication Relay Service Fund (TRS), Local Number Portability (LNP), North American Numbering Plan Administration (NANPA), and FCC Contribution.  This will involve review of FCC Form 499 Reporting for the last two fiscal years in combination with review of Notices and Statements from USAC, NECA, NANPA, Welsch and Company, NuStar, and the FCC. Section 254(d) of the Communications Act of 1934 (Telecom Act) requires the FCC to collect USF contributions from all telecommunications providers offering interstate telecommunications services.  This includes all services until last day of operation.  Identify as best as possible Contribution Debt to be managed as a part of paying-down liabilities.
  • Safe Harbor Suggestion #4  Assess, Collect and Remit all pending Federal Universal Service Fund (FUSF) Contributions owed to USAC as well as Telecommunication Relay Service Fund (TRS), Local Number Portability (LNP), North American Numbering Plan Administration (NANPA), and FCC Contribution until last day of service.
  • Safe Harbor Suggestion #5 Begin negotiations for installment payments or debt compromise in advance of last date of operation.

4. Understand the Difference between the FCC Red Light Rule and FCC Wage GarnishmentThe “red light” rule simply means that if you are delinquent in debt owed to the FCC, it will not grant any further applications or other benefits until your debt to the FCC is resolved.  This can include the Cancellation of your Section 214 Authority.  If the Regulatory Contribution Debt has been already transferred to the Department of Treasury, there may be a possibility that the debt may be subject to wage garnishment.  Under Department of Treasury rules, also found at 47 C.F.R. § 1.1936 for the FCC, the Treasury may collect money owed to the FCC by garnishing wages of the delinquent debtor without first obtaining a court order. This may occur for delinquent debts of individuals or businesses that are sole proprietorships or partnerships.

  •  Safe Harbor Suggestion #6 Identify any past-due Contribution Debt and place priority to it as a part of shut-down liability liquidation.  Avoid risks of Red Light Rule treatment of your company that would result in denial of FCC Section 214 Cancellation or linger into future Wage Garnishment of Owners.   

5. Understand that any pending Enforcement Action by the FCC’s Enforcement Bureau must be resolved prior to shut-down unless a consent decree is entered by the carrier.   Since the FCC may potentially propose a fine against the carrier, the payment of the fine may be subject to the FCC Red Light Rule.

  The point of this brief review of steps and procedures is to provide small-sized resale and retail carrier a point of venture when talking to regulatory counsel about shut-downs.  It is by no means exhausting, or should it be.  The reality is that a final decision to close operations requires a hard analysis into the success, failure and potential of any business; and likewise, into the tenacity of its owners. Remember that a tough regulatory clean-up can be just as effective as closing and re-starting a business anew depending on the capabilities of the ownership and the core business proposition of the company. 

Good Luck and Success in the Industry

Attorney Edward A. Maldonado

November 29, 2009 – Miami, Florida

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Posted by on November 30, 2009 in FCC on VoIP, Wireline Bureau


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