While the FCC Order is specific to the appeals of the five petitioning resellers, it reinforced and clarified some important aspects of the FCC’s FUSF contribution scheme:
The FCC emphasized the “resellers must exercise due diligence in meeting the requirements of the universal service contribution system…The Commission’s rules set forth the contribution obligations of both resellers and wholesale providers and do not permit the party with the primary USF contribution obligation to shift its contribution obligation to a third-party through private contractual arrangements. We affirm…that the contribution obligation of the resale (or wholesale) provider cannot be contracted away.”
In the recent Order, the FCC approached the double recovery issue from the reseller’s perspective, finding that “USAC should not attempt to recover contributions from a resale provider to the extent that a preponderance of the evidence demonstrates that its wholesale provider contributed on the revenue from the telecommunications input at issue.” It likewise concluded that resellers who are claiming double collections have the burden to demonstrate that their wholesale providers made contributions to FUSF on the revenues at issue.
In its review of three of the reseller petitions for relief, the FCC found that the resellers had not provided sufficient evidence that the wholesale carriers had contributed FUSF on revenues generated from the reseller and/or the amount of such contributions. The FCC remanded those cases back to USAC to give the resellers an opportunity to satisfy their burden of proof.
The FCC found that one of the five petitioners did establish by a preponderance of evidence that its underlying carrier contributed to the FUSF on the relevant revenues, by:
(1) providing information directly from its wholesale provider that detailed the quarterly interstate wholesale revenue and FUSF surcharge billed by the provider to the reseller and reported to USAC and;
(2) submitting an affidavit from the reseller’s officer responsible for the company’s FUSF reporting and remitting activities that attested to the accuracy of the revenue data reported by the wholesale provider.
The fifth reseller petitioner that was the subject of the Order submitted evidence from its underlying providers demonstrating the amount of FUSF fees billed to and collected from the reseller and demonstrating that the collected FUSF fees were remitted to USAC. However, that reseller failed to provide an affidavit attesting to the accuracy of the revenue data submitted by the underlying carrier, based on the reseller’s own books and records. The FCC found this to be a deficiency, stating: “We believe that such an attestation is important to corroborate the information submitted by the underlying carrier.”
Notably, the FCC did not impose any obligation on wholesale providers to assist their reseller customers in meeting their burden of proof to demonstrate double recovery. Resellers may often find it difficult to persuade their upstream carriers to provide the information that USAC will demand to meet that burden, particularly if they are large carriers with multiple reseller customers. Even if the wholesale carrier is willing to cooperate, unless the required evidence is captured contemporaneously, it may be difficult to obtain. For instance, three of the reseller petitions at issue in the FCC Order were filed in 2007 and likely reflected transactions in prior years. Given the five-year record retention policy for Form 499-related documentation, it is unlikely that a carrier would have retained documentation of specific reseller revenues and related USAC payments from more than 10 years ago.
If a reseller can meet its burden of proof, the FCC has instructed USAC to credit the reseller’s USAC bill to reflect the contribution already paid by its underling wholesale provider(s). This is a significant "win" for resellers. In the past, a reseller’s only recourse if it found itself in a double payment situation was to try to convince its underlying carrier to issue it a refund of the FUSF contributions that the wholesale provider had made on the reseller’s behalf. The wholesale carrier would then need to file a revised 499A to move the subject revenues from the “retail” to the “wholesale” category, and seek its own refund or credit from USAC for the prior “over” payments. However, the FCC’s rule limiting the time frame for 499 revisions that reduce previously reported FUSF assessable revenues to one year made this option unworkable in most cases. The FCC’s instructions to USAC in the current Order provide at least some hope to resellers who mistakenly believed that their underlying carriers could satisfy their FUSF payment obligation and are now facing double FUSF payments on the same revenues.