All Wireless & Prepaid News
2021 - Expo - Register


Oct 17, 2003

METHOD TO THE MADNESS prepaid providers and USF assessment appeals

Since year 2000, the terms “universal service” and USF, Universal Service Fund, have been increasingly flouted about the prepaid industry, primarily in the field of telecom regulatory compliance, with little real attention being paid to them. Then came the year 2002. Beginning last year, a more concerted effort was launched by the FCC and its agencies to enforce reporting and payment of USF contributions in the prepaid industry and all interstate telecom businesses. The most tangible effect of this effort being seen in the increased volume of Form 499-A and 499-Q received and filed by prepaid providers. Undeniably, if you have a 214 authorization, you got a Form 499-A at the very least.

With this filing being increasingly enforced by the FCC, many providers began a mad rush to quickly, and often recklessly, file their Form 499’s before the deadlines ran out. The result is now being seen in the form of USF assessments that don’t properly match actual traffic, or don’t properly account for affiliate traffic. The upshot of all of this is that the Universal Service Administrative Company, USAC, is now in a more aggressive position to require that contributions be made. So, where do you begin the process of appealing miscalculated traffic revenues or uncounted offsets? Let’s first start at the basics:

Any US common carrier that provides interstate telecommunications services, either prepaid or post paid, must contribute to the USF. Under the Telecommunications Act of 1996, Congress established a program to support the development of affordable, nationwide telecommunication services, commonly referred to as “universal service.” To fund this program, the Act requires that all providers of interstate telecommunications and telecommunication services contribute a percentage of their interstate and international revenues to support the concept of universal service through the Universal Service Fund, or USF. The Federal Communications Commission is charged with the statutory responsibility for oversight of the universal service program. However, the FCC, has delegated to the Universal Service Administrative Company (USAC), a Delaware nonprofit corporation, responsibility for the collection, management, investment and disbursement of the funds. USAC ultimately disburses these Funds to schools, libraries, health care providers, low-income consumers, and subscribers in high cost areas to subsidize the cost of telecommunication services. As the primary entity delegated with the responsibility of collection and dispersion of USF revenues, telecom businesses will encounter the USAC regarding all issues of filing, filing deadlines or other compliance matters, more often than they will the FCC.

The assessment of USF is based upon self-reporting made by and through the Form 499. The Form itself includes numerous instructions as to how traffic revenues should be reported, reporting of affiliated companies, and the de minimus status requiring no contribution to USF. In general, if your traffic on both the Form 499-A and 499-Q requires a contribution of less than US$10,000.00, then you are exempt from payment. If it is more, a determination is made by USAC and quarterly assessment payments are imposed on the contribution.


Continue reading this article

Please enter your email address:

So then, what do you do if you feel that your USAC assessment is incorrect or inaccurate for some reason or another? You should first consult an administrative law/regulatory attorney first to assess the basis of your claim and the specific courses of action you can take, depending on the facts of your particular situation. This should be done when first confronted with a USAC determination that the appropriate forms were not used; that they were incorrectly completed or not filed timely; or that you owe more money based on the volume of business as determined by the current formula de jour. Since it is a branch of administrative law, legal regulatory work often involves review of statutory frameworks, validity, and constitutional issues. These issues are often fundamental to any real appeal of the contribution and best left to professionals, as opposed to paraprofessionals. Therefore, it is best to use an attorney.

As for the procedural basics for challenging a USAC determination, they are relatively straight forward and involve a two-tiered system of administrative appeal:

First, a “Letter of Appeal” MUST be filed to the USAC explaining the substance, point-for-point, of your disagreement with the USAC decision. The Letter MUST be postmarked no later than 60 days after the date on the USAC decision letter with which you disagree. Faxes or e-mails are not accepted for purposes of appeal. All the information that is relevant must be attached, and contained within the Letter of Appeal, or you will likely not be satisfied with the result after the USAC receives what it construes to be an incomplete appeal. The Letter is in essence the “four corners” within which you will challenge the USAC assessment. The USAC will review and then respond to your appeal within 90 days its receipt of the package, and it will either agree with your assessment of the situation, or it will not.

If the USAC does not reconsider your situation favorably, you then can appeal the decision to the parent agency - the FCC. Your appeal MUST be postmarked no more than 60 days from the date on the USAC’s restatement of its original decision that you appealed. As with the USAC Letter of Appeal, you need to have all relevant materials included and attached to your FCC appeal package, along with the docket number the USAC assigned to your appeal. Should the FCC deny your appeal, recourse can be further found in the Federal Courts, and there you will need a federal attorney. Should your administrative law attorney feel that there are more substantive statutory or constitutional issues, you may wish to bypass Tier I of the process and go directly to the FCC. Whether you do this or not is a strategic decision from a legal perspective.

A word of warning to the wise - which also relates to the strategic advantage of TIERS I & II and your particular facts: administrative agencies generally perceive themselves as being under-staffed, under-funded and having an enormous task before them. Therefore, these agencies sometimes act in a way that might be optimistically described as “extremely expeditious.” FCC decisions are, of course, appealable in federal courts under a variety of theories, however, the higher you travel up the appellate ladder, you should be aware that the next higher agency or court will be that much more likely to rubber stamp the lower agency or court decision, absent a glaring and clear mistake of fact. Think of it as a radically steep curve wherein the expenditure of resources and the need for legal expertise increases exponentially as the process moves forward. Knowing this before an appeal is made or abandoned, is critical to its success.

•• Ed Maldonado is a principal of Maldonado & Glenn, a telecom legal firm. He can be reached Send all of your Legal Line questions

•• Chris Kiselius is an Associate of the firm and concentrates on administrative law and appellate issues for the firm. Both can be reached


Write a comment: