Registering to Provide Domestic Interstate Communications Service
Virtually all telecommunications providers, including long distance resellers, prepaid card providers, wireless providers, Mobile Virtual Network Operators (MVNOs), and interconnected VoIP providers, seeking to provide domestic interstate service in the U.S. must first register to do so with the FCC. It is unlawful to provide any domestic interstate service otherwise. The FCC Form 499-A Registration is particularly important. One reason is that it automatically ties a provider into the FCC's Universal Service Fund (USF) contribution system, identifying a company as a payer under the program. Another is that registering companies are added to the FCC's online, searchable database of registered companies. Under FCC rules, underlying facilities-based carriers are only allowed to contract with providers on the FCC registration list. Thus, failing to register could prevent a provider from being able to enter agreements with underlying facilities-based carriers.
Filling Out the Form
In order to file the FCC Form 499-A, providers must first obtain a Federal Registration Number (FRN) from the FCC's website. The company or organization needs to submit its contact information and the FRN is immediately assigned. The FCC Form 499-A registration is also available online, however, a signed paper version must be submitted at the Universal Service Administrative Company (USAC) in Washington, D.C. The FCC Form 499-A Registration asks providers to list the types of services the company provides and the states it anticipates providing interstate service to or from. Additionally, the form requires a new registrant to list an agent for service of process that is located in Washington, D.C. The 499-A registration is effective on the date of submission, and a 499 Filer ID is emailed to the provider usually within a few weeks.
FCC Forms 499-A and 499-Q Revenue Reporting
Once registered, providers typically must file quarterly FCC Forms 499-Q and an annual FCC Form 499-A to report revenue on which the provider will be assessed Universal Service Fund (USF) contributions. Providers are billed based upon projections contained on the FCC Forms 499-Q with payment required on a monthly basis. The revenue reported on the FCC Form 499-A is also used to compute assessments for other programs, including the North American Numbering Plan, Local Number Portability and Telecommunications Relay Services programs. The USF contribution factor, which changes quarterly, has in recent years run upwards of 12 percent of a provider's combined interstate and international revenues. Given the magnitude of the contribution factor, it is imperative that providers subject to USF assessments give careful consideration to the methodology they use to complete FCC Forms 499-A and 499-Q, including potential strategies to minimize or even eliminate contribution liability.
Penalties for Failure to File or Contribute
Failure to register, file required 499-A Registration or ongoing 499-A and 499-Q forms by applicable deadlines, or make required contributions violates FCC regulations and is subject to FCC forfeiture penalties. In 2005, the FCC imposed a forfeiture of $100,000 against a provider for failing to file an FCC Form 499-A Registration when required by FCC regulations. The FCC has also imposed forfeitures of $50,000 for each failure to file an FCC Form 499-A or 499-Q. In addition, the agency regularly imposes forfeitures of $20,000 per month for failure to contribute to USF ($10,000 for partial payments) plus an upward adjustment of one-half of the total unpaid contribution amount. That penalty is in addition to the total back payment owed for USF.
State Universal Service Fund Compliance
Generally, telecommunications service providers, including prepaid providers and Mobile Virtual Network Operators (MNVOs), that are either offering intrastate service or operating within a state will be required to participate in the state's USF program if the state has such a program. However, specific cases vary. For example, in Wyoming, all providers must contribute, based on revenues from intrastate switched toll, cellular/PCS/mobile, paging, pay telephone, alternate access and directory, local private line, toll private line, and local exchange services. In Oregon, Commercial Radio Services providers are specifically exempted from contributing. A few states only require local exchange carriers and wireless providers to contribute. States often require monthly reporting and remittances for USF. In many instances, telecommunications revenues will determine payment frequency. In numerous states, a mandatory annual true-up is required for revenue generated in the previous year.
USF Exemption Certificates for Wholesale Providers
Wholesale providers are generally not liable for USF contributions on services provided to reseller customers, as long as the wholesale provider has verified that the reseller customer is itself a contributor to the USF program. If a reseller is a contributor, then the wholesale provider can report revenue derived from that reseller on Block 3 of the FCC Form 499-A, and the wholesale provider will not be liable for USF contributions on that revenue. The key is to ensure that a reseller's USF contribution status is properly verified. USF Exemption Certificates are the cornerstone of this verification process. However, wholesale providers should be aware that the obligation to obtain USF Exemption Certificates from reseller customers is ongoing. According to the FCC's Form 499-A Instructions, wholesale providers are required to obtain updated USF Exemption Certificates from resellers on at least an annual basis.
The foregoing is intended to provide a general overview only and should not be viewed as a substitute for conferring with qualified legal counsel. Each new business will have unique requirements that should be analyzed by counsel.