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.

Update: OMB Approves Remaining Elements of Revised iTRS Rules

As we reported last August, the FCC has revised its rules governing Internet Telecommunications Relay Service (iTRS).  iTRS is the short-hand term for Video Relay Service and IP Relay, services that permit deaf and hard-of-hearing folks to communicate by telephone – over the Internet – with persons with or without normal hearing.  

iTRS services, which are free to the deaf/hard-of-hearing user, are funded by fees imposed on telecommunications service providers. The new rules were intended to avoid abuses that inflated minutes of use (and thus the payments collected by iTRS service providers) and to drive overall costs down.

While some of the rule changes took effect last October, a number of aspects (which happened to constitute “information collections” subject to the Paperwork Reduction Act) could not kick in until the Office of Management and Budget (OMB) had signed off on them. According to a notice in the Federal Register, OMB has now done so (in fact, it did so nearly a month ago), so it appears that those remaining rule sections are good to go. The sections in question – (§§64.611(e)(2), 64.611(e)(3), 64.611(g)(1)(v), 64.611(g)(1)(vi), and 64.613(a)(3) – involve disclosure of: ownership of iTRS providers; disclosure of sponsorship of iTRS services; information about the infrastructure of call centers and copies of deeds for the property where centers are located; reports of service interruptions and cessation of service; and annual reports to the FCC.

The Federal Register notice, curiously enough, does not expressly state the date on which these rules have taken, or will take, effect.  It does, however, helpfully inform us that the response time required by the new information collections is estimated by the Commission to be anywhere from one minute (or, as the notice specifies, "0.17 hours") to 50 hours.  Adjust your schedules accordingly.

Telecom Companies Take Note: Your Form 499-A Deadline Is Less than a Month Away

It’s that time of year again – all telecoms and VoIP providers must file their annual Form 499-A by April 2.

That “other” April deadline is right around the corner: all telecommunications carriers are required to file FCC Form 499-A by April 2, 2012. If you’re an intrastate, interstate or international provider of telecommunications in the U.S., this probably means YOU (but check below for the short list of exemptions).

 Form 499-A is used to true up the carrier’s Universal Service Fund contributions reported during the previous year. The revenues reported on the form will also be used to calculate upcoming 2012 contributions to the Telecommunications Relay Service, the North American Numbering Plan, and the Local Number Portability Fund.  (For 2012, the proposed “contribution factor” – i.e., percentage of revenues that must be paid – will be a whopping 17.9 percent, up from 15.3 percent in the last quarter of 2011. Ultimately, these contributions come from consumers, who are assessed a surcharge as a percentage of their phone bill.)

The new 2012 form was released on March 5, giving carriers less than a month to get on file. It’s mostly the same as last year, except that now non-interconnecting VoIP providers must file to fulfill their new obligation to contribute to the Telecommunications Relay Service Fund. (That new obligation comes courtesy of the Twenty-First Century Communications and Video Accessibility Act of 2010.)

A reporting company’s initial 499-A filing must be paper and ink; after that, carriers can file online through USAC’s website.

Before starting to fill out the form, a reporting company will need to pull together some financial information – i.e.,billed revenues for 2011, broken down into various categories. There is a safe harbor percentage available for entities that have difficulty separating their telecommunications versus bundled non-telecoms revenues. There is also a safe harbor for cell and VoIP providers to use in breaking out their interstate versus intrastate revenues.

Additionally, carriers with a lot of international revenue should take note of the “limited interstate revenues exemption” (LIRE). That allows companies whose interstate revenues are 12% or less than their international revenues to exclude international revenues in their “contribution base” (the amount upon which their contribution is assessed). Don’t look for this exemption in the Form 499-A instructions; it’s buried in a worksheet in an appendix.

If you’re not sure whether you’re a telecommunications carrier or not, you probably are. The category of mandatory 499-A filers is broad, including resellers, non-common carriers and VoIP providers. However, there are limited exemptions for:

  • De minimis providers – whose contribution would be less than $10,000 (available only for exclusively non-common carriers);
  • Government and public safety entities, or carriers who provide services exclusively to the government;
  • Broadcasters;
  • Non-profit schools and libraries;
  • Non-profit health care providers; and
  • Systems integrators and self-providers whose telecoms revenues are less than five percent of the systems integration revenues.

If you have any doubts about whether you’re required to file, you’d best get them resolved sooner rather than later. Failure to file can be expensive. Last year, we reported that the FCC reminded one carrier of its obligations by doling out a $600,000 fine. While we haven’t yet seen any similar forfeitures this year, it’s not hard to run up a big tab quickly. Do the math: $50,000 for each “failure to file,” plus one and a half times the total unpaid amount, plus an extra $100,000 if you also failed to register as a contributor. And you still have to pay the amount in arrears.  For lateness that doesn’t extend long enough to trigger the FCC forfeiture process, USAC still assesses a $100 per month late fee plus 3.5% of the filer’s monthly obligations.

And just because you make the April 2 deadline, don’t think you can kick back and relax: the quarterly Form 499-Q deadline is May 1.

Update: Comment Deadlines Set in Video Relay Service Overhaul

Last month we reported on the FCC’s extensive proposal to overhaul the Video Relay Service, the service which enables people who can’t hear to have near-normal telephone conversations with those who can. The Commission’s Further Notice of Proposed Rulemaking has now been published in the Federal Register, which means that we now know the deadlines for comments and reply comments. Comments on the VRS proposals are due by March 2, 2012, and reply comments by March 19.

Update: FCC Invites Comments on Recon re New iTRS Rules

Last August we reported on new rules imposing a number of restrictions on providers of Internet Telecommunications Relay Service (iTRS). Those rules took effect in October, but if you have an interest in iTRS, heads up. A petition for reconsideration of the new rules was filed, and the deadline for commenting on, or opposing, the petition has just been announced.

Among other things, the new rules put an end to the previous practice of some iTRS providers of assigning free “800” numbers to iTRS users. While iTRS users may still have toll-free numbers, they now have to obtain those numbers like everyone else – from the same companies that provide them to the public at large, subject to whatever fees may be involved (unless a hardship waiver is granted).  Each toll-free number must be mapped to a regular “plain old telephone service” (POTS) number and be portable from one carrier to another; numbers that aren’t so mapped must be removed from directories. 

The sole petitioner seeking reconsideration – Sorenson Communications, Inc. (Sorenson) – says that the FCC put an unjustified burden on its back.Sorenson, which controls the lion’s share of the iTRS market, complains that iTRS service providers should not be responsible for mapping toll-free numbers to POTS numbers. According to Sorenson, if an iTRS provider doesn’t issue the toll-free number, the provider won’t know (other than by burdensome case-by-case investigation) whether a number provided by its customer is legitimate.  The number might not work at all, it might be discontinued after a while, or it might be used for spoofing or other deceptive practices.  If the FCC won’t let iTRS providers issue the numbers, it would be better just to take toll-free numbers out of the iTRS database, in Sorenson’s view.

Oppositions to Sorenson’s petition may be filed by January 24, 2012; replies may be filed by February 3.

FCC Proposes to Reform Video Relay Service

A service that facilitates communications between hearing-impaired and hearing people is in for a major overhaul.

The FCC is trying to update the Video Relay Service (VRS), which enables people who can’t hear to have near-normal telephone conversations with those who can. Did we say “update”? Actually, “complete overhaul” may be more what the Commission has in mind.

Modern technology has done wonders for people with hearing problems. First came Teletype-like devices, called TTY, that sent typed messages over telephone lines. Problem: users on both ends needed TTY units, even if one of them could hear. Then came Telecommunications Relay Service (TRS) in which a Communications Assistant (CA) with a TTY acts as an intermediary between the hearing and the hearing-impaired, speaking aloud what a deaf person types, and typing what a hearing person speaks. TRS thus enables hearing people having no special equipment and deaf people to communicate readily. A variation on TRS, provided over the Internet, is called (inevitably) iTRS.

But that's all very 20th century. Today, the broadband Internet allows live video contact. A CA can provide visual sign language interpretation between a deaf and a hearing person. That is VRS. The overall improvement in the quality of life for deaf people has been dramatic.

Part of the eyebrow-raising fees that we all pay on our telephone bills funds both TRS and VRS. The service is otherwise free to users. Today VRS providers are compensated from the fund on a per-minute basis, and that causes a problem. Since users don’t pay, and vendors are paid per minute, no one has incentives to be efficient or to avoid wasteful use. Indeed, there is a contrary incentive for service providers to stimulate minutes of use, and thus enhance their own income. Service providers’ employees, for example, can pump up usage with subsidized calls, including sales calls to existing and prospective customers. (Some say this crosses over into fraud.) Service providers also want to hinder their users’ switching to a competitor.   One technique is to offer free equipment with unique features that don’t work with other providers. Even though the FCC mandates number and equipment portability, there is no requirement that additional features work universally.

With all the free video calling software and services available today to anyone who wants it, the FCC got to thinking.

Do we need a subsidized VRS service at all? Rapidly improving technology might solve the entire cost problem. But VRS needs broadband, and the neediest segments of the population (handicapped, elderly, poor) don’t have widespread access to broadband, let alone good computers and webcams. A disproportionate number of deaf American adults are unemployed, receive Social Security, or have low incomes, and so are less likely than the average to have broadband service. The FCC is working separately to stimulate broadband adoption. Even if it takes subsidies to reach the neediest consumers, that might be cheaper than paying for today’s VRS services.

If the FCC decides to keep VRS running as a separate service, it will want to provide incentives for greater efficiency and lower cost. That goal, though simple to state, leads the FCC in divergent directions. For one thing, the lack of uniform technical standards may raise the cost of equipment, and certainly makes it more difficult for consumers to switch VRS providers, thus impeding the benefits of competition. It might be more efficient to compensate VRS providers at a flat rate based on the number of users they serve, instead of per minute, assuming the FCC can prevent users from registering with more than one provider. 

Paradoxically, though, the most efficient approach might be to have only one VRS provider, because concentrating all the volume would likely result in the lowest cost per unit of traffic. This does not sit well with advocates of competition, however, and like most monopolies, would require extra regulation to control costs and to avoid abuses. On the other hand, today one provider has 80% market share, so moving to a monopoly provider might not end up all that different in practice.

The FCC asks for comment on a wide range of issues: not only payment structure, but also how much equipment interoperability and portability are necessary, whether the government should run its own outreach program to consumers, whether there should be minimum qualifications for CAs, how to prevent unauthorized changes to a subscriber’s choice of service provider, how to handle E911 calls, and how quickly to implement any changes that are adopted.

In its current drive to be “data driven,” the FCC has spared no detail. The Notice of Proposed Rulemaking  runs 109 pages, with 312 question marks and the phrase “we seek comment” appearing 167 times. By using a bulldozer rather than a pastry tray to dish out its proposals, the FCC might inadvertently be handing an advantage to the largest commercial firms, who might be the only ones with the resources to address all of the FCC’s issues. The short comment deadlines – 30 days for comments and only 15 more days for reply comments – may further handicap smaller participants, including VRS users that the FCC is especially anxious to reach.

The comment deadlines will begin to run on publication on the Federal Register. We will let you know when that happens.

Update: Effective Dates Set For Wireless Backhaul, iTRS Revisions

Last August we reported on some changes, and proposed changes, relating to the Commission’s wireless backhaul rules. Both the Report and Order component of that action (addressing the rule changes that were actually adopted) and the Notice of Proposed Rulemaking component (addressing the changes that are only proposed at this stage) have now been published in the Federal Register. As a result, we now know that the effective date of the new rules will be October 27, 2011. The only loose end is Section 74.605, which mandates registration (in the Commission’s Universal Licensing System) of stationary receive sites for TV pickup stations in the 6875-7125 MHz and 12700-13200 MHz bands. That registration requirement is an “information collection” subject to the Paperwork Reduction Act, so the Commission will be shipping that particular aspect of the new rules over to OMB for its review before the requirement can be finally imposed.

Federal Register publication also establishes the comment deadlines relative to the proposed rules, but those deadlines (October 4, 2011 for comments, October 25, 2011 for reply comments) had already been announced by the Commission back in August; the Register notice confirms them.

Elsewhere in the Federal Register, the Commission has also published the revised rules it adopted last August to align the use of local and toll free numbers by Internet Telecommunications Relay Service (iTRS) users more closely with the way that hearing users use such numbers. (We reported on that decision here.) Those revisions are now set to take effect on October 27, 2011, except for several sections (§§64.611(e)(2), 64.611(e)(3), 64.611(g)(1)(v), 64.611(g)(1)(vi), and 64.613(a)(3), if you’re keeping track) that still need OMB/Paperwork Reduction Act approval.

Reins Tightened on iTRS Providers

Commission adopts certification requirements for providers, limits on toll-free numbers for users

In an effort to reduce unnecessary costs while assuring that deaf and hard-of-hearing people will still enjoy essentially the same access to telecommunications services as everybody else, the Commission has adopted several changes to the rules governing Internet Telecommunications Relay Services (iTRS).

iTRS is the short-hand term for a couple of related services – Video Relay Service and IP Relay – that permit deaf and hard-of-hearing folks to communicate by telephone, over the Internet, with persons with or without normal hearing. iTRS provide those folks a modern alternative to the crude “TTY” typewriter-like keyboards through which they previously interconnected with the phone system. The basic concept is that, with inexpensive webcams and broadband connections, deaf/hard-of-hearing users can access the services of interpreters who can not only type words but also speak with sound to hearing persons and with American Sign Language to deaf persons. (Want to know more about iTRS? Check out the FCC’s information page on the subject.)

The cost of providing iTRS service is picked up by federal and state governments (which in turn get the funds by including a surcharge on everybody’s telephone bill). With annual costs running close to $740 million, there’s a boatload of money at stake – and, needless to say, with opportunities to game the system in great supply, temptation abounds.

Until now, that is – if the FCC has its way.

Providing deaf and hard-of-hearing persons with telephone service comparable to the general public will likely always require some subsidy, of course. But the Commission is committed to removing incentives that unnecessarily drive up costs, so it is seeking to impose more direct control on iTRS providers.

The government pays providers of video interpreting services somewhere in the range of five to six dollars a minute, depending on the provider’s annual volume. Payment by the minute creates an incentive to stimulate minutes of use (i.e., volume) – and thereby increase compensation – by lengthening calls and encouraging users to make more calls. In an effort to curb iTRS abuse at the provider level, the FCC has adopted rules requiring all iTRS providers to: (a) be certified by the Commission; (b) operate their own essential facilities; and (c) employ their own staff of interpreters. They must also document to the FCC their ability to comply with various iTRS requirements. The FCC even plans to inspect facilities during the certification process and from time to time thereafter. These changes will give the FCC more ability to supervise iTRS providers and to scrutinize the costs they submit as a basis for setting rates.

While iTRS providers may lease automatic call distribution (ACD) platforms, the equipment must be located on the providers’ own premises and staffed by the providers’ own employees. Oh yeah, and the FCC wants to see a copy of the lease – not just to make sure that it exists, but to check out some of its terms. For instance, compensation under such a lease may not be based on traffic volume, capacity used, or revenue sharing. iTRS providers may sub-contract services, but only to other certified providers, thereby eliminating sub-contracting as a way to escape regulatory supervision.

To obtain certification, iTRS providers will have to disclose the names of their owners (at least those with ownership interests of 10% or greater), officers and directors and report the number of their full- and part-time employees. Employees may not receive salary or other benefits based on the volume of traffic they handle. Since a primary source of provider abuse involves the making of compensable calls supposedly for “marketing” and “outreach”, providers will now have to report any agreements they make for sponsorships or marketing to iTRS users. They must report any substantial changes in their technology or equipment, file an annual report, and renew their certification every five years. Certifications may not be transferred to an entity that is not itself certified. Service interruptions of over 30 minutes must be reported to the FCC, and authority for planned interruptions must be sought 60 days in advance, with appropriate notice to consumers.

Obviously, the Commission is looking to make it considerably tougher for an iTRS provider to inflate claims for compensation, a practice that, in the view of some, rises to the level of outright bilking of the government.

The new rules will not apply to IP relay and IP CTS providers. Those two sub-groups of providers get paid in the range of only a dollar and change per minute, and there has been no record of significant abuse among them. Additionally, it will no longer be necessary for any iTRS provider to be a common carrier to obtain certification, since there is evidence that non-carriers are fully capable of providing the service.

What’s the timeline for complying with the new certification requirements? 

If you’re an iTRS provider receiving compensation from the TRS Fund but you’re not currently certified, you will have to apply for certification within 30 days after OMB approval of the new rules. Existing holders of certifications that have expired or are about to expire were previously given an extension until November 4, 2011, and must apply for re-certification by October 5, 2011 (if the new rules are effective by then) to avoid risk of service interruption.

To emphasize that it means business, the FCC will require certification applications to be supported by a sworn declaration, under penalty of perjury, from a senior executive officer, the intent apparently being to allow the enforcement noose to be placed on a real live neck if iTRS providers do not toe the line.

In addition to the new limitations being imposed directly on iTRS providers, the Commission has, in a separate order, adopted a number of changes intended to align the use of local and toll free numbers by iTRS users more closely with the way that hearing users use such numbers. We wrote about those changes when the Commission proposed them about a year ago. The Commission has now adopted those proposals.  

Basically, the FCC wants to end the assignment of free “800” numbers to iTRS users, which have been used to lock customers into using one service provider instead of allowing callers to pick and choose providers as competitive service offerings change.   As far as the Commission is concerned, iTRS users should have the same access to both regular and toll-free telephone numbers that everyone else has. That means that iTRS users can still have toll-free numbers if they like, but they’ll have to get those numbers from the same companies that provide them to the public at large, subject to whatever fees may be involved. 

Each toll-free number must be mapped to a normal number and be portable from one carrier to another; numbers that aren’t so mapped must be removed from directories. While no automatic exception was created for locations where an iTRS provider cannot obtain a regular number that is local to its customer, the Commission did indicate that it was open to considering individual hardship situations on a case-by-case basis.

When it comes to iTRS generally, the FCC is in a bit of a tough spot. The Commission wants to assure people with hearing and speech impairments access to new technology that can improve their lives and their interaction with society at large. The government has devoted hundreds of millions of dollars to that end. But that kind of cash screams “come on down” to a substantial universe of sharp operators who, while providing the desired service, have also seized on an opportunity to line their own pockets. The FCC’s challenge is (a) to create a regulatory environment that encourages the hearing- and speech-impaired to take advantage of the latest and greatest telecommunications technology while (b) not allowing that environment to open the till for entrepreneurs looking to grab government money for services that can and should cost far less.

Update: New Comment Deadlines In VoIP/Accessibility Proceeding

On March 31 we reported on a couple of VoIP-related NPRMs, including one item looking toward making VoIP and similar services easily accessible to and usable by persons with disabilities.  Despite the fact that that NPRM proposes sweeping changes in the nature of VoIP obligations and even the scope of the FCC’s regulatory reach (which would be extended into considerable technical minutiae), the deadline for comments on the proposals was originally set for April 13. But now, at the request of a number of organizations, the Commission has extended the comment deadline to April 25, 2011, and the reply deadline to May 23, 2011. That’s still not a lot of time, but it does provide some breathing room.

Update: Comment Deadlines Set In VoIP/TRS Contributions Rulemaking

Last week we posted about an NPRM proposing to expand the requirement that VoIP providers contribute to the Telecommunications Relay Service (TRS) Fund.  The requirement, already applicable to connected VoIP operators, would be broadened to include non-VoIP as well. See the original post for details.

The NPRM has now been published in the Federal Register, which sets the deadlines for comments on the proposals. Comments are due on May 4, 2011, and reply comments on May 19, 2011. And if you feel like commenting on the “information collection” aspects of the proposal (as you are entitled to do, thanks to the Paperwork Reduction Act), you’ve got until June 3, 2011, to do so.

For VoIP Providers: Warning - Steep (Regulatory) Incline Ahead

More burdens just up the road, thanks to two Congressionally-ordered NPRMs

The FCC’s release of two Notices of Proposed Rulemaking (NPRMs) on March 3 will give VoIP providers a familiar sinking feeling – that is, the feeling of sinking ever deeper into the quicksand of FCC regulation.   At Congress’s direction, the FCC is looking both to expand TRS contribution obligations and to impose additional accessibility rules on all VoIP providers. As we describe below, the new accessibility standard for VoIP (as well as email and video conferencing) will be even higher than that already imposed on most telecommunications services.

The NPRMs (along with the video description NPRM about which we’ve already reported) are some of the first regulatory offspring of the 21st Century Communications and Video Accessibility Act of 2010 (CVAA). Because the CVAA is clear in its mandate, the Commission has little choice with respect to the major points on the table – but it does have discretion relative to a number of the ancillary and administrative aspects. (And, given the scope of CVAA’s ambition to modernize the nation’s accessibility laws, we expect more NPRMs to follow in the months to come.)

TRS contributions.  Section 103(b) of the CVAA requires that all VoIP providers contribute to the Telecommunications Relay Service (TRS) Fund.  (The TRS Fund supports services that allow deaf people or people with speech disabilities to communicate by phone.)  Of course, interconnected VoIP providers are already contributing (as our readers should be aware).  One of the two NPRMs addresses the Section 103(b) mandate by proposing to expand that requirement to non-interconnected VoIP providers, that is, VoIP that doesn’t interconnect with the regular telephone network.  We’re looking at you, Skype et al.

While the CVAA requires all VoIP providers to contribute to TRS, it leaves the FCC some discretion as to details. Accordingly, the Commission asks for comment on specific issues such as:

  • Should the VoIP safe harbor apply to non-interconnected VoIP? (The “safe harbor” allows carriers to report a specified fixed percentage of revenue as interstate if they are unable or unwilling to measure interstate and intrastate traffic separately.)
  • What revenues should be included in calculating TRS contributions (just revenues from interstate end-user calls, or revenues from all sources?)
  • Should providers of free services, that have no end-user revenues, be required to make any contributions to the TRS fund?

Clearly the FCC is focused on how to treat free, non-interconnected Internet voice services (again, that’s Skype-to-Skype et al.). Some such services are supported by advertising, and the FCC suggests that it might require TRS contributions based on those revenues, in place of or in addition to subscriber revenues. The answers to these questions will significantly affect contribution amounts; affected companies will want to express their viewpoints when the docket is open for comments. 

Accessibility. As required by Section 104 of the CVAA, the FCC proposes to make VoIP, electronic messaging (emails, IMs, etc), and video conferencing “accessible to and usable by” persons with disabilities. Naturally, a new rule needs a new acronym – we must learn to call these types of services “advanced communications services” (ACS).

ACS will be subject to a higher standard of achievement than “telecommunications services” under the existing Section 255 of the Communications Act. Section 255 requires telecommunications manufacturers and providers (including interconnected VoIP but not including non-interconnected VoIP) to provide accessibility if readily achievable. For ACS manufacturers and providers, on the other hand, the presumption is reversed; they must make their services and products accessible to people with disabilities, unless it is not achievable to do so. (According to the CVAA, “achievable” means “with reasonable effort or expense, as determined by the Commission” taking into account a list of certain factors.)

Further, ACS providers may not install network features, functions, or capabilities that impede accessibility or usability. Finally, all equipment and networks used to provide ACS services must allow information content that has already been made accessible to pass through in accessible form. The NPRM seeks comment on definitions of relevant terms (e.g., what is “achievable”?) as well as input regarding matters such as:

  • the standards that would apply to requests for waivers for equipment designed for non-ACS purposes but having incidental ACS capability
  • whether any exemption(s) for small entities might be warranted
  • obligations for applications or services accessed over service provider networks rather than based on user hardware features
  • recordkeeping and enforcement 

Mobile web access. The ACS NPRM also gets a head start on assuring that Internet browsers built into mobile phones will be accessible to those with visual impairments. As with ACS services, mobile Internet browsers must be “accessible to and usable by individuals who are blind or have a visual impairment, unless doing so is not achievable.” The statutory requirements do not take effect for three years, but the FCC seeks input now on how best to get everyone up to speed before then.

Some ramp-up time may be needed, because ACS and browser accessibility raise practical difficulties. Accessibility functions will work only if they are supported by each component or layer of the device: i.e.,the hardware, the operating system, the user interface, the application, and the network. This practical reality has at least two major consequences: (1) a broad array of entities will be affected, some of whom may not have previously fallen under FCC jurisdiction and may not be habituated to regulatory compliance matters; and (2) various entities will have to cooperate with each other on technical standards, without much market motivation to do so.

So the FCC will have to get in the business of compelling information-sharing: mandating industry standards, setting up industry forums and working groups, and so on. Yes, even Apple may have to share information about iPhone design, which is certainly not their custom. This process inevitably raises hard questions. For example: Who will develop and enforce compatibility standards? What is the appropriate balance between the necessary sharing and protecting proprietary, confidential technical information? Will components have to be compatible only with existing fellow components, or also with potential future components? At what stage of development should accessibility be considered?

The FCC has tackled tough inter-industry compatibility issues before, with some success. Doing so in this case, however, will certainly require the agency to delve into technical minutiae generally outside its usual expertise (such as software). It will also require constant calibration to keep things running smoothly in the future.

The bottom line here is that Congress, through the CVAA, is determined to impose new and substantial burdens on VoIP providers in order to ensure technological access for people who are deaf, blind or subject to other disabilities or impairments. That means that the FCC has little discretion going forward with these two NPRMs, at least with respect to the Big Picture aspects. Congress did, however, give the Commission some leeway in working out the operational details, and it’s there that affected parties (including, particularly, VoIP providers) may have their best chance to ease the ultimate burden. Given that, VoIP providers should give serious thought to submitting helpful comments in these proceedings.

Caveat Carriers: Telecom Report Form 499-A Is Due April 1

FCC pillories telecom provider with $600K+ fine as the Form 499-A deadline draws near. Coincidence? We suspect not. 

With less-than-subtle timing, the FCC has fined ADMA Telecom, Inc., a Florida telecommunications company, more than HALF A MILLION DOLLARS for Universal Service Fund (USF)-related violations.  The message is clear: telecom companies that ignore the FCC’s paperwork requirements run the risk of hefty financial penalties. So get out your calculator, look through your books,  and get those 499-A’s on file by April 1, 2011.

As we all know, Congress has long required the FCC to establish and oversee a number of programs aimed at assuring the provision of telecommunication services to all Americans. Those programs are for the most part funded by consumers, through telecom providers. The FCC has developed an extensive set of reporting requirements so that it can keep track of all providers and determine how much each of them owes to the various programs. (Those programs include the USF, the Telecommunications Relay Service (TRS), and the North American Numbering Plan (NANP).)

The reporting requirements include an initial registration (to let the FCC know that the telecom provider has started providing telecom services) and then annual (and, in most cases, quarterly) worksheets – either Form 499-A or 499-Q – from which USF contributions are calculated. These filing chores apply to most telecommunications carriers, including resellers and interconnected VoIP providers.  Limited exceptions include government-only providers, broadcasters, certain non-profits, and systems integrators that derive less that 5% revenue from telecoms resale. Carriers owing less than $10,000 are considered de minimis and do not have to contribute, but still must file the form and pay any TRS and NANP contributions.

Since these programs involve billions of dollars, the Commission has an obvious incentive in riding close herd on the players, to make sure that everybody pays what they owe. And it has an equally obvious incentive to make examples of those who come up short. 

ADMA, for example.

Each USF-related violation carries its own forfeiture amount.  The Commission concluded that ADMA had failed to register itself for several years, had been late in filing its worksheets, and didn’t make its required USF/TRS/NANP contributions for significant periods.   Here’s the dollar breakdown of ADMA’s forfeiture:

  • Failure to register: $100,000
  • Late/Missing Form 499’s: $150,000 ($50,000 each)
  • Failure to contribute to USF: $211,835
  • Failure to contribute to TRS: $80,706
  • Failure to contribute to NANP: $20,000

The FCC also slapped on $100,000 for operating without an international section 214 authorization, bringing the grand total up to $662,541.

Notice that the fines for stiffing the USF and TRS look a bit strange – they’re not the nice round numbers you’d expect to see. That’s because for these types of fines, the FCC starts with a base figure (for example, $20,000 per month for no USF payment) and then adds half the total unpaid amount to the forfeiture.  Oh, and by the way, this does not decrease the amount due: the carrier still has to pay all the contributions in arrears.

As noted above, the deadline for the next Form 499-A is right around the corner – April 1, 2011. While the timing of the ADMA fine may just be coincidental, we suspect it wasn’t. What better way to encourage timely filing than to make an expensive example of an untimely filer on the eve of the deadline?

So don’t delay. Carriers who have already registered can submit the form online through the Universal Service Administrative Company (USAC)’s website.

Deadlines For Comments in E911 Proceedings Set

Today appears to be E911 Day in the Federal Register. Two recent E911-related Notices of Proposed Rulemaking are published, which means that the deadlines for comments and reply comments in those proceedings have now been set. (The two NPRMs were separately released back in September, so you’re forgiven if they may have slipped your mind of late.)

The first (CG Docket No. 03-123/WC Docket No. 05-196/WC Docket No. 10-191) involves the issuance of toll-free numbers for iTRS use, a practice which can make it difficult for emergency response teams to respond as promptly as possible to E911 calls. We reported on it here, you can read the full text of the NPRM here, and the Federal Register version may be found here. Comments on the proposed rules are due by December 2, 2010, 2010, and reply comments are due by December 17, 2010. Note that this particular proceeding also involves proposed new “information collection” requirements, which triggers the Paperwork Reduction Act – and thus affords yet a third opportunity to comment. If you feel like commenting on the proposed information collection requirements, you may do so by January 3, 2011.

The second proceeding (PS Docket No. 07-114/WC Docket No. 05-196) involves standards for E911 location capability accuracy. We reported on that one here, you can read the full text of the NPRM here, and the Federal Register version may be found here. Comments in the matter are due by January 3, 2011, and reply comments by January 31, 2011.

Commission Cracking Down On Toll-Free Numbers For iTRS Use

Proposal would dramatically restrict iTRS-provider-provided toll-free numbers

In a move that may at first seem counter-intuitive, the Commission is proposing to restrict the issuance of toll-free telephone numbers affording access to deaf and hard-of-hearing people for use with the Internet-based Telecommunications Relay Service (iTRS). But even though the restrictions might appear to deprive deaf and hard-of-hearing people of a possible benefit, there is method to the FCC’s madness – and it has the support of a number of groups representing deaf and hard-of-hearing people, to boot.

The government subsidizes services which allow people with hearing disabilities to communicate by telephone with persons with or without normal hearing. Those services (generically known as “Telecommunications Relay Service”, or TRS) have been greatly improved by the advent of home computers and now for the most part come in two flavors of Internet-based access – “Video Relay Service” and “IP Relay” – which the FCC refers to collectively as iTRS. (Click here for an overview of TRS generally.)

Prior to 2008, iTRS users (i.e., deaf and hard-of-hearing persons) could be reached on the Internet through IP addresses, proxy or alias phone numbers, or toll-free phone numbers. iTRS providers routinely would give iTRS users a toll-free number which the provider controlled. Most people seeking to reach an iTRS user would dial that toll-free number, and the iTRS provider would route the call to the iTRS user with which the iTRS provider had associated the called number in the provider’s database. But back then, providers didn’t share their databases, which meant that people calling the iTRS user were forced to use the service of the iTRS provider that issued the toll-free number to the iTRS user. Such arrangements ran counter to the FCC’s policy to allow users to pick different iTRS providers without changing equipment.

Additionally, unlike conventional local phone numbers, toll-free numbers confuse public safety officials whose databases associate local numbers with a location when an E911 call is received. Plus, toll-free numbers aren’t as portable from one iTRS provider to another; in fact, since the toll-free numbers were in many, if not most, cases assigned to the provider (which in turn allocated them to iTRS users in its own database) rather than the user, the toll-free numbers were often not portable at all.  And toll-free numbers waste scarce telephone numbering resources.

The Commission’s policy (mandated by Congress) is to give the deaf and hard-of-hearing persons access which is “functionally equivalent” to the access enjoyed by the hearing community. The pre-2008 arrangement obviously did not achieve that goal, so in 2008 the Commission adopted a uniform telephone numbering system for iTRS users. 

The 2008 system provides for assignment of conventional ten-digit telephone numbers to iTRS users and creation of a central database mapping each of those numbers to an appropriate IP address. When a caller dials an iTRS user’s number, that number rings at the user’s iTRS provider, the provider refers to the central database, identifies the user, and accesses the user’s computer. The numbers are assigned to the iTRS user – not the provider – and are locally identifiable, portable among different providers, and not limited to any one service. 

The Commission anticipated that this system would result in the transition of iTRS users to local telephone numbers from the toll-free numbers they had been relying on.

But that hasn’t happened, mainly because, when iTRS users get their own personal local numbers, iTRS providers have been slipping them a separate toll-free number as well. Toll-free numbers may be attractive to some iTRS users because such numbers allow anyone to place a call to a deaf or hard-of-hearing person from anywhere in the country without paying toll charges. The iTRS provider absorbs the toll-free cost, since it recoups a sufficient amount for its translation services from the government’s TRS Fund. Plus, because of lack of portability of toll-free numbers, the iTRS user tends to stay put with the iTRS provider in order to keep the toll-free number.

In other words, iTRS providers appear to have been using toll-free numbers as a none-too-subtle incentive to keep their iTRS users in place.

But reliance on toll-free numbers is still undesirable for all the public policy reasons identified by the FCC in 2008. Accordingly, the FCC is now proposing to stop the automatic assignment of toll-free numbers. If deaf and hard-of-hearing people want their own toll-free numbers, they can have them – BUT they will have to get them like anyone else does. That is, they will have to order a number from a toll-free provider, have that number mapped to a local telephone number, and pay for the cost of incoming calls. No more free rides from the iTRS providers.

And for sure, if any cost associated with the assignment or use of toll-free numbers has been charged to the TRS Fund, that will end.  The FCC’s proposal also provides that any toll-free numbers not mapped to a local telephone number will be removed from the iTRS directory after a period of time.

These steps, if adopted, will obviously have a disruptive effect for some. In view of the considerable difficulty the FCC has had so far in getting local numbers assigned to all TRS users, the FCC asks for comments on what kind of consumer outreach and transitional time period will be required.

Comments will be due 30 days after publication of the NPRM in the Federal Register, with replies due 15 days later – short time periods that indicate that the FCC pretty well knows where it wants to end up. Check back with CommLawBlog.com for updates as to the comment deadlines.