Today's Regulatory Mix:  FCC Reforms IP Captioned Telephone Service Rates, FCC Revises Team Telecom Rules, FCC Fines Sandwich Isles Over $49 Million for Defrauding USF, US Congress COMPETE Act

FCC Reforms IP Captioned Telephone Service Rates

At its Open Meeting, the FCC voted to issue a Report and Order setting TRS Fund compensation rates for IP CTS at $1.42 per minute for the remainder of Fund Year 2020-21 (December 1, 2020, through June 30, 2021) and $1.30 per minute for Fund Year 2021-22 (July 1, 2021, through June 30, 2022).  The rates, reduced from the current level of $1.58 per minute, will bring TRS Fund expenditures for IP CTS into line with current average costs and are expected to save the TRS Fund approximately $200 million through June 30, 2022.  The step-down approach to the rate reductions is intended to give service providers time to react.  Specifically, by applying a single rate to all IP CTS calls, regardless of the technology used, the FCC gives higher-cost providers opportunities to adjust to the changes by adopting more efficient technology.

The item includes a Further Notice of Proposed Rulemaking proposes more precise measurements of the quality of telephone captioning.  It seeks comment on establishing measurable standards for caption delay and accuracy—two key elements of effective telephone captioning as well as the appropriate entity to conduct such assessments.

The FCC denied a petition by Sprint to reconsider the FCC’s previous rate adjustments to the IP CTS compensation rates.  Those changes set interim compensation rates for TRS Fund Years 2018-19 and 2019-20. The FCC said that the interim rates have already saved the TRS Fund more than $350 million.

FCC Revises Team Telecom Rules

At its Open Meeting, the FCC voted to adopt new rules aimed at improving the transparency and timeliness of the cross-agency review process for applications from companies with foreign ownership seeking to participate in the U.S. telecommunications market. These changes formalize the long-standing review process—known informally as Team Telecom review—and  establish firm timeframes for the Executive Branch agencies to complete their review of applications and petitions for declaratory ruling that the FCC refers to them. T

The FCC will continue to refer to the Executive Branch Committee for review applications such as those to provide international telecommunications services, deploy submarine cable licenses, and transfer control of a license to a carrier with reportable foreign ownership—subject to certain exclusions.  The new rules will require parties to provide answers to a standardized set of national security and law enforcement questions directly to the Committee at the same time as the parties file their applications with the FCC.  They also provide for a 120-day initial review period followed by a discretionary 90-day additional assessment and require applicants to make particular certifications to help protect national security and law enforcement interests.

FCC Fines Sandwich Isles Over $49 Million for Defrauding USF

The FCC announced it  fined Sandwich Isles Communications, Waimana Enterprises, and Albert S.N. Hee $49,598,488 for violations of Universal Service Fund program rules that resulted in millions of dollars in improper payments. Sandwich Isles was the designated carrier receiving support to deploy and maintain communications networks serving Americans living on the Hawaiian Homelands through the Fund’s High-Cost program.

The FCC said that Hee used his control of Sandwich Isles, Waimana, and other affiliated companies to tap corporate funds to pay for more than $4 million in personal expenses benefitting himself and his family, including personal massages, personal travel and meals, tuition payments for Hee’s children, a vehicle and home for Hee’s children, and salaries and benefits paid to Hee’s wife and children while they did not actually perform any work for Waimana. Sandwich Isles also used Universal Service support to pay Waimana inflated rent and management fees as well as unjustified bonuses to Hee.

In 2015, Hee was convicted of criminal tax fraud and sentenced to nearly five years in federal prison. On December 5, 2016, the FCC eliminated Sandwich Isles’ ability to receive additional support from the Fund, took action to recover $27 million in improper payments Sandwich Isles had received, and proposed a $49,598,448 fine against Sandwich Isles, Waimana Enterprises, and Hee for its apparent violations of High-Cost program rules. The FCC found Sandwich Isles apparently liable for the following violations: (1) filing inaccurate data in its annual cost studies; (2) falsely certifying the accuracy of the data contained within the cost studies; (3) misclassifying costs relating to its cable and wire facilities; (4) overstating the costs related to the lease of abandoned water mains; and (5) failing to keep its accounts, records, and memoranda as prescribed by the Commission’s rules.  That proposed penalty is adopted in the Forfeiture Order.

US Congress COMPETE Act

The House of Representatives unanimously passed H.R. 8132, the “American Competitiveness Of a More Productive Emerging Tech Economy Act” or the “American COMPETE Act.” The bill directs the Department of Commerce (DOC) and the Federal Trade Commission (FTC) to study and report to Congress on the state of Artificial Intelligence (AI), quantum computing, blockchain and new and advanced materials. The bill also requires the DOC to study and report to Congress on the state of the Internet of Things (IOT), IOT manufacturing, three-dimensional printing and unmanned delivery services, while also directing the FTC to study how AI may be used to address online harms.

In response to the bill’s passage, House Energy and Commerce Committee Republican Leader Greg Walden (R-OR) and Consumer Protection and Commerce Subcommittee Republican Leader Cathy McMorris Rodgers (R-WA) (one of the bill’s authors) released the following statement.

“The U.S. must lead in the development and deployment of emerging technologies like artificial intelligence, quantum computing, blockchain, Internet of Things, and more to grow our economy, strengthen our national security, and advance U.S. leadership against bad actors like China. The bipartisan American COMPETE Act is an important step forward to helping us do just that.  We thank our E&C Republican colleagues for provisions they authored in this bill, and our House colleagues for coming together in a bipartisan way today to ensure America leads in these technologies that define our future. We urge our colleagues in the Senate to take swift action on this important bill.”

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The Regulatory Mix, Inteserra’s blog of telecom related regulatory activities, is a snapshot of PUC, FCC, legislative, and occasionally court issues that our regulatory monitoring team uncovers each day. Depending on their significance, some items may be the subject of an Inteserra Briefing.