Federal Universal Service Update

Transcription

1 Federal Universal Service Update Steve Augustino and John Heitmann March 2, 2011 Agenda USF Reform USF Orders and Appeals USF Contributor Audits and Inquiries 2011 Form 499-A Changes Q&A 2 1

2 FCC USF Reform February 9, 2011 NPRM and FNPRM National Broadband Plan item and themes Modernizing and refocusing ICC and USF to ensure access to robust and affordable broadband and to accelerate the transition to IP networks Fiscal responsibility Accountability Market-driven and incentive-based policies Federal register publication March 2, 2011 Comments due beginning April 1, 2011 Other deadlines: April 18, May 2 and May 23, FCC USF Reform February 9, 2011 NPRM and FNPRM Links ICC to USF High-Cost Fund reform Interrelated subsidy and compensation regimes New transitions and glide paths rather than flash cuts Revenue stability some ICC to be replaced by funds from CAF De-links USF contribution reform Don t count on NBP 1Q11 target Broadband in? Numbers out? Lifeline / Link Up reform on March 3, 2011 FCC Agenda Recent controversies Broadband? 4 2

3 FCC USF Reform (cont d) USF / High-Cost Fund Immediate Reforms $4.3B High-Cost Fund to be replaced in 2012 by a Reformed High-Cost Fund High-cost loop fund Local switching support Reimbursement limits Total support per line limits Study area waivers and Parent Trap rule revision Interstate access support Identical support rule 5 FCC USF Reform (cont d) USF / High-Cost Fund Immediate Reforms Reformed High-Cost Fund operating in tandem with Connect America Fund Phase I One CAF provider per unserved area 2012 $1B technology-neutral reverse auction Public interest obligations Support eligibility requirements Mobility Fund October 2010 NPRM ICC Recovery Final selection of long-term CAF funding mechanism 6 3

4 FCC USF Reform (cont d) USF / High-Cost Fund Long-Term Vision Connect America Fund Subsumes all remaining High-Cost Fund mechanisms Replaces implicit ICC subsidies Options Competitive, technology-neutral bidding COLR with right of first refusal 7 FCC USF Reform (cont d) Intercarrier Compensation Immediate Reforms Phantom traffic Proposed rules Access stimulation Proposed rules Treatment of VoIP for ICC vnxx Begin reducing rates, together with implementation of recovery mechanisms Federal / state role 4 year transition 8 4

5 FCC USF Reform (cont d) Intercarrier Compensation Comprehensive Reform Elimination of per minute rates Tied to implementation of long-term CAF support Transition to all-ip networks Interconnection Peering? Transit traffic 9 USF Orders and Appeals 5

6 USF Orders (cont d) TelePacific (April 2010) WCB reverses USAC interpretation of Wireline Broadband Order BIAS is not currently subject to contribution requirements Use of special access T1s does not make BIAS subject to USF The second question (whether USF contributions should be assessed on the revenues derived from the sale of T1s to TelePacific) is unresolved, if not compounded ILEC clarification petition Reliance on valid reseller certificates Validity of reseller certificates Facilities-based vs. non-facilities-based If input is assessable, direct or indirect contribution? UNE inputs different Retroactive exposure (InterCall) Exemption for broadband transmission offered to an ISP on a private carriage basis 11 USF Orders (cont d) NetworkIP (October 2010) Platform provider does not provide prepaid card service based solely on the provision of platform services Identifying which entity is the carrier (i.e., which entity is subject to USF obligations) is fact-specific inquiry Reasonable expectation requires stringent due diligence for reseller revenues Reseller certificates not enough Must maintain reseller Filer ID numbers Other evidence may suffice 12 6

7 USF Orders (cont d) Nebraska / Kansas Nomadic VoIP (November 2010) Declaratory ruling with prospective effect: states can require nomadic interconnected VoIP providers to pay into state USFs No double recovery: state rules must be consistent with FCC s and must not apply to revenues attributable to another state Carriers claiming the FCC safe harbor will have 35.1% of revenues classified as intrastate Overturns th Circuit decision finding FCC preemption Retroactive exposure unsettled 13 Pending Appeals XO Madison River Grande Global Crossing Masergy Level 3 and Ascent Media 14 7

8 XO Dedicated transport (private line) services Application of 10% rule MPLS enabled services Information service Major carriers assert MPLS should be handled via rulemaking with prospective effect only Reseller revenues and other reliable proof Form 499-A Instructions not binding WCB s asymmetrical 1-year limit on downward adjustments Arbitrary and capricious 15 Madison River Key issues: CLEC wireline broadband Internet access (pre-wireline Broadband Order) CLEC use of UNEs for DSL Facilities-based vs. non-facilities-based, under Computer II rules Transmission component unbundling requirement? Intrastate T1s Service ordered out of intrastate tariff connecting two points in the same state Reliance on customer representation vs. documentation to prove less than 10% interstate use 16 8

9 Grande Key issues: CLEC customer subscriber line charges Always interstate? CLEC wireline broadband Internet access Pre-August 2006 / Pre-Wireline Broadband Order DSL services USAC classification of entire service as interstate telecommunications services Revenue from reseller customers Reasonable expectation standard Double recovery 17 Global Crossing Key issues: Revenue from reseller customers Evidence regarding reseller status: 2005 vs instructions Reasonable expectations vs. certificate and website verification APA violation Shifting contribution requirement from reseller to wholesaler Strict liability standard Section 254 violation Due process violation 18 9

10 Masergy Key issue: A instructions include MPLS service in the list of telecommunications services subject to USF contributions MPLS definition Information service? Local line transmission / local access Wireline Competition Bureau delegated authority Back billing and recovery of contributions Pending USAC request for guidance on ATM/Frame Relay and VPN / Dedicated IP services 19 Level 3 and Ascent Media Key issue: Reporting errors and the consequences Waivers Pay and dispute policy USAC policy making authority Excessive penalties (late fees and interest on unpaid amounts invoiced) APA violation? DCIA limitation? Section 254 equitable and nondiscriminatory violation? (Ascent Media) Aventure (waiver granted) 20 10

11 USF Audits Audit Overview USAC audit letter and initial filer response Entrance Conference (company s offices) Draft Detailed Audit Findings (DAFs) Carrier response USAC Management review USAC Board decision FCC appeal (expect to file one) 22 11

12 Common Audit Issues Wholesale revenues Were resellers properly validated? Private line revenues Jurisdictionalized using 10% rule Non-telecommunications services Bundles Broadband Internet access SLC revenues To be reported as 100% interstate 23 Common Audit Issues (cont d) USF recovery surcharge This is assessed USF Data sources Estimates must be current Estimates should not be used if actual data are available Prepaid cards Face value of cards LIRE exemption Which entity is the service provider? 24 12

13 New Audit Procedure BCAP Beneficiary and Contributor Compliance Audit Program (BCAP) Informal inquiries tailored to both the distinctive features of an auditee s organization and the specific amounts of money being audited. Will identify areas of non-compliance with program rules and amounts of recoverable funds. In other words, it s audit-lite Implementation time uncertain, but soon 25 Tips Before the audit Document the process for completing the Form 499-A Retain all work papers and studies Review telecom/non-telecom and jurisdictional classifications carefully Maintain good records on resellers Depart from instructions only after careful consideration 26 13

14 Tips During the audit Get regulatory/legal involved early Monitor the silence/follow up stage carefully Document requests and keep a log of information provided Involve product managers/sales in the explanations of services Expect to appeal A 14

15 2011 Form Overview Substantially re-written form First-ever major revision of 499-A Instructions Major changes: Reorganize sections to parallel completion activities Consolidate discussion for ease of reference Update references to precedent But Bureau cannot make substantive changes Instructions remain guidance only Form Of Note Audio Bridging No longer incorrectly referred to as telecommunications service addresses now required To be used for BCAP and audits, too Interconnected VoIP-related clarifications throughout Reminder: Traffic studies must be submitted (quarterly) 30 15

16 2011 Form Reminders 2011 Form due by April 1 True-up will be processed in 3Q 2011 Credits/shortfalls shown on July, August, Sept. invoices Revisions to A must be filed by March 31. No downward revisions permitted after this date 31 Stay Up-To-Date Telecom Law Monitor blog

17 Questions? Steve Augustino PARTNER Telecommunications Phone: (202) John Heitmann PARTNER Telecommunications Phone: (202)