FCC Demonstrates Principle of Conservation of (Regulatory) Energy

Law of physics, FCC-style: Energy expended on international telecommunications reporting requirements must apparently remain constant

Providers of international telecommunications services may be happy to learn that the FCC has reduced or eliminated requirements to report data on international traffic, revenue and circuits.  Sort of.  By consolidating Sections 43.61 and 43.82 of its rules into a single rule (Section 43.62), the FCC claims in the public notice touting its Second Report and Order (2nd R&O) that it will “eliminate” international traffic and revenue reporting requirements for over 1,000 reseller carriers. (Facilities-based service providers should get a few breaks, too, but we won’t cover them in detail here.)

But there’s a catch (or two, or three, or four. . .) to the Commission’s broad claim of deregulation. As it turns out, the elimination/reduction of reporting requirements is balanced out by a raft of new requirements which effectively restore the equilibrium of regulatory burden because, presumably, to do otherwise might violate the laws of physics and destroy the universe.

What new requirements are involved?

First, all entities that either (a) have an International Section 214 Authorization or (b) provided any international services in the prior year will have to file a “Registration Form” and a “Services Checklist” annually by July 31. Previously, only common carriers that actually provided international services had to file anything. (This means that all holders of International Section 214 Authorizations must now file something each year. Before, by simply not providing telecommunications services, companies could obtain and retain such authorizations without necessarily triggering additional filing requirements.)

The new Registration Form shouldn’t create a huge burden. In addition to soliciting basic name/address information and a certification, it also requires a list of a filer’s International Section 214 Authorizations and cable landing licenses. Doesn’t the Commission – which granted such authorizations in the first place – already have all this information in its databases, you ask? Yes, but according to the FCC, requiring companies to report these data “will serve as a valuable check on our own records, ensuring that the filers’ records and our records agree.”

The new Services Checklist, which consists of a list of seven check boxes (two of which include two separate sub-boxes each) also seems fairly tame, for an FCC required form. Reporting entities simply designate the categories which apply to their services; entities which provided “International Communications Services Resale” (ICS Resale) and “International Miscellaneous Services” during the reporting period must indicate whether or not such services generated over $5,000,000 in revenue in the prior year. 

Simple so far.

But once you decide which boxes to check, the Services Checklist provides friendly and convenient instructions on which of the “Schedules” on the new “Traffic and Revenue Report” you will need to file.

Um, “Schedules”? “Traffic and Revenue Report”?

That’s right, companies will now have to submit additional data on a new “Traffic and Revenue Report” containing multiple “Schedules”. At least the new Schedules have defined fields to complete, which is better than the reporting process under the old international traffic and revenue filing manual (last revised in 1995). 

To accompany the new Traffic and Revenue Report, the International Bureau (IB) will also be preparing a new filing manual which would, in a perfect world, be more concise and easier to understand than the old filing manual. The outlook isn’t good so far: the initial draft is a hefty 97 pages of joyous reading (to be fair, only 37 pages comprise actual written instructions – appendices with definitions and copies of the new forms make up the rest). Luckily, the public will have another chance to comment on the IB’s proposed updates, so the draft might get improved. The bottom line, though, is that filing entities will need to learn a new set of parameters for reporting.

Perhaps the most significant new burden: international traffic and revenue reporting requirements will be imposed on interconnected VoIP services (e.g., Vonage) and one-way VoIP services (e.g., Skype) which provide for international calling to the PSTN. Collectively, the 2nd R&O calls these types of services “international VoIP services connected to the PSTN.” 

So while more than 1,000 reseller carriers may experience a reduction in international traffic/revenue filing requirements, more than 1,000 interconnected VoIP providers in addition to an unknown number of one-way VoIP providers will experience the opposite effect.

In the 2nd R&O the Commission trots out the usual justifications for extending additional carrier requirements to interconnected VoIP services, as well as the ever-familiar disclaimer that the Commission does not determine whether such services are “telecommunications services” or “information services.” Interconnected VoIP providers probably won’t be surprised by this (we’re certainly not), as the Commission has been slowly extending all kinds of telecommunications carrier requirements their way for quite some time.

Most providers of “international VoIP services connected to the PSTN” should have an easy enough time handling the new reporting requirements. However, there are a few nuances which may prove to be tricky, and we may need to see the final version of the new filing manual before some questions are fully settled. 

For example, the reporting of “non-route-specific” revenue. Generally, this could include items such as monthly subscription fees for international calling plans or bundled plans which cover both domestic and international calling. The new requirements specifically dictate that revenue from such fees must be broken out and allocated to specific international routes. Allocating revenue to specific international routes (e.g., services provided from the U.S. to Mexico) is easy when service is billed on a per-call basis, but VoIP providers (as well as more traditional carriers) with non-route-specific revenue will need to devise their own allocation methodologies to account for this requirement.

Another issue which may complicate reporting for providers of international VoIP services connected to the PSTN involves the definitions of Facilities ICS (that’s international communications services, if you’ve forgotten) and ICS Resale. 

Facilities ICS providers have greater reporting burdens than ICS Resale providers. According to the 2nd R&O, it should take providers of international VoIP services connected to the PSTN 150 hours when applying Facilities ICS type requirements; by contrast, the burden should be a measly two hours when applying ICS Resale requirements. Needless to say, that’s a big difference. The initial draft of the new filing manual dedicates many pages (and diagrams) to explaining what would be considered “Facilities IMTS” as opposed to “IMTS Resale” (the ICS nomenclature wasn’t introduced until the 2nd R&O). The explanations also cover types of VoIP services which would fit into the “Facilities IMTS” camp, thereby triggering the greater reporting burdens. 

Unfortunately, we won’t have true certainty on how to make the Facilities ICS vs. Resale ICS distinction until the new manual is complete. (Those who have particular views on this should keep an eye out for the next opportunity to comment on the IB’s proposed updates to the filing manual.)

So, getting back to the FCC’s claim that the 2nd R&O will eliminate reporting requirements for over 1,000 reseller carriers: that claim is technically true . . . in a zero-sum game kind of way. The 2nd R&O establishes a reporting threshold of $5,000,000 in revenue generated from ICS Resale (as opposed to Facilities ICS). Thus, resellers with ICS Resale revenue below this threshold won’t need to report additional data or file the Traffic and Revenue Report. Once the rule changes go into effect, qualifying resellers will need only file the Registration Form and the Services Checklist to tell the Commission that they are exempt from filing. So one filing requirement was eliminated, only to be replaced by another. 

On the bright side, this “conservation of regulatory energy” probably prevented the universe from imploding.

Because the new rules include “information collections”, they can’t take effect until they have been run past the Office of Management and Budget (thanks to our old friend, the Paperwork Reduction Act). Additionally, the IB still has to update the new filing manual, and the reporting forms have to be implemented in the International Bureau Filing System. Bottom line: this could take a while. The Commission promises that it will issue a public notice concerning the effective date, once that date is tied down. Check back here for updates.

For a full summary of all the changes being implemented (including changes to reporting on circuit data not covered here), see Appendix A to the 2nd R&O.

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