Private lines are dedicated connections chiefly used by businesses, banks, and other institutions to transmit large amounts of sensitive data, and by wireless carriers to ease congestion by funneling traffic from cell towers to wired telephone and broadband networks. Private lines can carry solely intrastate or interstate traffic or a mix of both, and under the FCC’s rules interstate telecommunications revenues are subject to federal universal service fund (USF) contributions, while intrastate telecommunications revenues are not.

In classifying the jurisdiction of a private line, providers have long looked to the Federal Communications Commission’s (FCC or Commission) Ten Percent Rule defining interstate telecommunications. Specifically, the Commission has held that where more than ten percent of the traffic on a private line is interstate, the revenues and costs of the entire line are classified as interstate. The Commission previously agreed that the best method for confirming the traffic carried over a private line was by obtaining a customer certification regarding the traffic. Many in the telecommunications industry viewed the Ten Percent Rule as establishing a presumption that a private line was intrastate unless a customer certified that more than 10 percent of the private line’s traffic was interstate.

In its Order, the Bureau denied and remanded back to USAC long-pending requests from six carriers to review USAC audit findings that reclassified the carriers’ private line revenues from jurisdictionally intrastate to jurisdictionally interstate, thereby subjecting the carriers to significant USF contribution obligations. However, the Bureau’s Order has import for the telecommunications industry in general. The Order not only rejects the perceived intrastate jurisdiction presumption, it also clarifies that carriers are required to conduct a good faith inquiry into the nature of the traffic carried on the private line. Moreover, the Order is instructive that, for purposes of audits – and therefore relevant to a carrier’s proactive measures – examples of supporting documentation include customer certifications or other acknowledgements (such as contract terms) that more than ten percent of the traffic is interstate or that ten percent or less is interstate, provided the carrier explains to customers what constitutes intrastate and interstate traffic before relying on such certifications. Carriers also can rely on sworn declarations from a corporate officer attesting the private lines are technically unsuitable for any interstate usage and the Bureau noted that these declarations ideally would be supported with detailed engineering reports or other evidence of the service’s technical specifications. However, the Bureau acknowledged the challenges of meeting this standard in light of the difficulty for a carrier to demonstrate that the customer has not linked the private line to other network facilities that permit the private lines to carrier interstate traffic.

The key takeaway for private line providers is the importance of carefully considering the nature of the traffic carried over private lines – and retaining documentation of that nature – when classifying the jurisdiction of private line revenues. The importance of document retention was underscored by the Bureau’s statements that carriers subject to USF contributions are required to retain, for five (5) years from the contribution date, all records demonstrating compliance with the FCC’s rules regarding reporting of revenues on the FCC Form 499A. The Bureau also issued an important warning to carriers undergoing audits, that if a carrier withholds or fails to timely provide information during a USAC audit, the carrier cannot later claim that USAC failed to consider all evidence or request additional information related to a carrier’s untimely filed information. While not directly relevant to private line classifications, all carriers should take heed of the need to completely and promptly respond to audit requests.

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ITSPs can log into the Fee Filer system to access a preview of the FCC Form 159-W ITSP Report worksheet which identifies revenues based on the provider’s April 1, 2016 FCC Form 499-A filing. These revenues will be used to calculate the provider’s regulatory fees once the FCC’s FY2016 Regulatory Fee Report and Order is adopted and released. If a provider determines the revenue amount is incorrect, it must file a revised Form 499-A with the Universal Service Administrative Company to update the revenue amounts. ITSP revenue adjustments cannot be made through the Fee Filer system.

CMRS providers also can log into the Fee Filer system to preview their subscriber, porting, and Operating Company Number information. The “Net NRUF Telephone Number” subscriber count listed in the system will be used in determining the CMRS provider’s annual regulatory fee. If the provider agrees with the subscriber count, then the provider does not need to take any further action. If the CMRS provider believes its subscriber count is incorrect the provider is able to revise its subscriber count information directly via the Fee Filer system. Any such revisions must be made by August 24, 2016 to allow the Commission time to determine whether to accept or disapprove the revision and enter any approved revisions in the fee filer system. Revisions made after August 24, 2016 will be addressed on a case-by-case basis and must be sent directly to Roland Helvajian.

The Public Notice does not establish a payment deadline for any annual regulatory fees but, based on prior year payment deadlines, these fees likely will be due in late August or September. ITSPs and CMRS providers should be aware that the FCC no longer mails regulatory fee notices or assessment letters and it is the licensee's responsibility to determine the fees owed. Failure to meet the regulatory fee payment deadline (once established) will result in late payment penalties of 25% being applied and the FCC does not waive late payment penalties.

All telecommunications carriers and interconnected VoIP providers must file an annual report certifying their compliance with the Federal Communications Commission’s (FCC) rules regarding Customer Proprietary Network Information (CPNI). The report covers calendar year 2010 and must be filed with the FCC by March 1, 2011.

The FCC’s Enforcement Bureau recently released a FCC Enforcement Advisory addressing the importance of making timely and compliant filings and noting that filers now have the option of filing CPNI certifications via a new FCC web application, in addition to filing via ECFS, mail or by hand delivery.

Form 477: Local Competition and Broadband Report

The Local Competition and Broadband Report, containing data as of December 31, 2010, must be filed by March 1, 2011. The report requires the submission of information regarding broadband connections in individual states.

Who Must File:
(1) ILECs or CLECs that provide local exchange service to one or more end user customers;
(2) facilities-based providers of mobile telephony services that serve one or more mobile telephony subscribers;
(3) entities (including all commonly-owned or commonly-controlled affiliates) that are facilities-based providers of broadband (i.e., faster than 200 kbps, in at least one direction) connections (including both wired lines and wireless channels) to one or more end users in a state; and
(4) providers of interconnected VoIP services that provide interconnected VoIP service to one or more subscribers in a state.

Reporting Basis:
In addition to specific reporting requirements contained in the Form 477 Instructions, for all broadband technologies other than terrestrial mobile wireless, filers must report broadband subscribership information by Census Tract.

Filing Process:
The Form 477 Report must be submitted via an FCC web-based interface and filers will need to use their Federal Registration Number (FRN) and associated password to access the system.

REVISED Form 499-Q Quarterly Telecommunications Reporting Worksheet

Providers required to contribute to universal service support mechanisms must report their actual and projected end user and wholesale revenues for each calendar quarter by filing FCC Form 499Q on a quarterly basis. Filers making revisions to the February 1, 2011 Form 499-Q filing must submit the revisions to the Universal Service Administrative Company (USAC) no later than March 18, 2011.

REVISED Form 499-A Annual Telecommunications Reporting Worksheet

All providers of interstate telecommunications service and all common carriers are required to file FCC Form 499-A with USAC each year with limited exceptions. Filers making revisions to their previous year’s Form 499-A Telecommunications Reporting Worksheet filing which result in a decreased contribution must submit the revisions to USAC by March 31, 2011.