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FCC Form 499-A: Updated and Ready to File by April 1

The newly revised FCC Form 499-A and its accompanying instructions are now available, but some expected revisions on wholesaler-reseller USF exemption guidance are conspicuously absent.

It’s March! Spring is right around the corner, the excitement of college hoops is in the air, and you only have a few weeks left to come up with a clever April Fools’ Day prank to play on your coworkers. (If you’re short on novel – and safe – ideas, here’s a classic.) As if that’s not enough excitement, telecommunications providers get to experience the fun of preparing the annual FCC Form 499-A filing due by April 1. 

The FCC has released its annual update of the Form 499-A, including changes to the Form’s accompanying instructions. All joking aside, there really are some interesting aspects to this year’s new 499-A – including some anticipated “guidance” that is conspicuously absent. We’ll discuss that more after we cover some of the 499-A basics.

When to file? 499-A filings are due by April 1. If you’ve filed the 499-A before, you know it’s a process that has undoubtedly contributed to the madness in March. It’s as fun as filing your taxes but with virtually no possibility of getting a deadline extension. So don’t be a fool, and don’t miss the April 1 due date – the potential penalties are no joking matter.

Who has to file? With very few exceptions, telecommunications providers of all kinds must file the 499-A. This includes, for example, providers of wireless and wireline telephony, interconnected and non-interconnected VoIP service, audio bridging service, prepaid calling cards, and satellite services. A common misconception is that the 499-A and other FCC requirements don’t apply to non-voice/data services or to companies that simply buy and resell the services of other carriers. Don’t be fooled (there’s that word again): the definition of telecommunications is quite broad (basically, any transmission of information could fit) and the 499-A’s applicability is vast.

(REMINDER: The FCC’s new accessibility-related recordkeeping certification is also due by April 1. If you’re required to file the FCC Form 499-A, you’ll most likely need to also file this new certification. Sorry, not joking here, either.)

Where and how to file? You can still file the 499-A the old-fashioned way, on paper. Filings are submitted to the Universal Service Administrative Company (USAC), not directly to the FCC. If you’re a veteran filer (i.e., you’ve filed a Form 499 by paper before), you can even submit the 499-A online via the USAC website. To file online, you’ll need a computer and a company officer with an email address.

What to file? Filers must report revenue from the prior calendar year (the upcoming filing will report 2012 revenue). Of course, revenue must be reported on the 499-A in a very special – and by “special” we mean “complex” – way. You can’t just copy and paste from your tax returns or financial statements. Revenue has to be reported by categories of service and sources of revenue (i.e., whether it’s derived from end-users or other providers, such as resellers). Revenue must also be allocated on the 499-A to intrastate, interstate and international jurisdiction. There are rules for how to do all this, some of which are described in the instructions which accompany the Form 499-A. Other nuances of completing the 499-A may necessitate consulting the FCC’s regulations or the numerous orders on federal Universal Service Fund (USF) reporting and contribution compliance.

Why file? It’s all about the money! The FCC wants to know how much money is generated from telecommunications. More significantly, the 499-A is used to calculate contributions owed by telecommunications providers to various federal programs. These programs include the USF, Telecommunications Relay Services (TRS) Fund, North American Numbering Plan (NANP) Fund, Local number Portability (LNP) Fund, and the FCC’s Interstate Telecommunications Service Provider (ITSP) Regulatory Fees. Since money is involved, it’s important to report and allocate revenue properly on the 499-A. If you report revenue incorrectly, it could lead to over-contributions or under-contributions to the various federal programs. Under-contributing sounds great (right?), except it could also lead to those pesky penalties we mentioned earlier. If you’re required to file but don’t (even if you claim you didn’t know about the requirement), you will also be subject to – guess what – potential penalties.

What’s so interesting about the 499-A this year?

For starters, this year marks the first time that the FCC has released an updated Form 499-A after letting the public have an opportunity to provide feedback on proposed revisions to the Form and its instructions. If you’ve ever tried to complete the Form 499-A, or any form for that matter (just ask some Canadian Senators), this makes great sense (unlike many of the forms/instructions themselves). What better way to make a form better than to solicit input from those who will be completing it?

According to the Wireline Competition Bureau (WCB) last year, getting public feedback on the proposed revisions would serve “to promote clarity, transparency and predictability.” Again, that makes great sense! So why, then, is this the first time the WCB has sought public comment on proposed revisions to the 499-A form/instructions?

Um, because the Commission told it to, in the so-called Wholesaler-Reseller Clarification Order (we’ll just call it the Clarification Order for short). Basically, nobody had told the WCB it had to seek feedback on revisions to prior 499-A forms and instructions, so previously it hadn’t bothered to. But “to promote clarity, transparency and predictability” sounds better than “we’re doing this now because we were told we had to.”

As its nickname suggests, the Clarification Order focuses mainly on revenue reporting issues – questions dealing with services provided by wholesalers (a/k/a underlying carriers or carrier’s carriers) to reseller carriers. The 499-A’s instructions supposedly contain “guidance” on the parameters and processes wholesalers should utilize to determine whether revenue should be reported as exempt from or subject to USF contributions. But those instructions have historically left filers (and USAC – the entity responsible for administering the USF program) unclear on how to make the determination in a manner which would satisfy the FCC. (Properly determining revenue reporting for USF purposes is pretty important, especially since the rate at which USF contributions are calculated has been as high as 17.9% in the past year!)

Accordingly, the Clarification Order attempted to clarify the process. Among the particulars up for clarification: the “reseller certifications” (a/k/a USF exemption certificates, verifications of USF contributor status, among other things) used by the telecommunications industry to help determine ultimate responsibility for USF contributions and how to report revenue on the Forms 499. The Clarification Order expressly instructed the WCB to propose and seek public comment on revisions to wholesaler-reseller guidance contained in the 499-A instructions including, specifically, new sample language for use on reseller certifications. (The new sample certification language is of particular importance because the FCC considers it part of the “safe harbor” procedures for obtaining valid reseller certifications.) Since the WCB had to obtain feedback on these revisions anyway, it opened the floor to comments on all of the proposed changes.

Now we turn back to the changes on this year’s Form 499-A and accompanying instructions.  Guess what’s missing? That’s right, the sample reseller certification language which formed the bulk of the WCB’s proposed revisions to the wholesaler-reseller guidance portion of the 499-A instructions somehow didn’t make the cut. Instead, the new instructions essentially say that wholesalers/resellers can rely upon suggested reseller certification language contained in last year’s 499-A instructions, at least until the end of 2013. What should filers do after the end of this year? No word. Why did the guidance get cut? No word. 

So much for clarity, transparency and predictability.

We have a couple theories.

First, it’s possible the WCB simply ran out of time to evaluate all the thoughtful feedback provided by the public. After all, considering this was the first time public feedback had to be incorporated into the revision process, the WCB was on a fairly tight schedule. The comment deadline was January 11, providing the WCB a little over a month-and-a-half to consider the feedback and incorporate it (or at least any worthy elements of it) into the final revised 499-A and instructions by early March. (Of course, this still means that filers are left with less than a month to digest the final changes, implement modifications to reporting methodology, and prepare the 499-A to be filed by April 1 to avoid – say it with us – potential penalties.) The time constraints would’ve been even greater if certain revisions necessitated Office of Management and Budget approval pursuant to the Paperwork Reduction Act.

Another theory is that the WCB did not include the proposed revisions because soon the guidance provided in the Clarification Order may not be any good. In addition to the feedback in response to the 499-A revisions, a couple of parties of have also filed petitions for reconsideration (see here, and here) of the Clarification Order. It’s possible these petitions could result in further modifications to wholesaler-reseller USF obligations, prompting the WCB to wait. 

Then there’s also the idea, perhaps a little far-fetched, that the proposed revisions would be completely irrelevant because the FCC will soon reform the entire USF contribution program as a result of a proceeding (re)initiated last year.

Whatever the actual reason may be, you’ll have to wait a little longer before getting absolute (is that possible?) clarity, transparency and predictability on the wholesaler-reseller USF issues in question.

In the meantime, take a look at the WCB’s Public Notice summarizing the final changes to this year’s 499-A and instructions. There are no April Fools’ jokes in the Public Notice, but there are some other changes that should be reviewed by those who need to file the Form 499-A by April 1.

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