WASHINGTON-With the first round of universal service payments having been made this month to the government by any service-offering telecommunications operation, there still is controversy surrounding how and why commercial mobile radio service providers that are not in direct competition with local exchange carriers must pay into the fund.
Comments submitted to the Federal Communications Commission last week by the two dominant wireless associations first remind the FCC that their questions surrounding the issue were brought up last fall in formal petitions-which still have not been addressed-and that the methodology on fee determination and paperwork submission was set up for carriers in a wireline environment.
The nature of wireless communications is interstate, but according to the Personal Communications Industry Association, the FCC has misinterpreted a certain section of the Telecommunications Act of 1934 that deals with universal service funding. “The clear language … indicates that states cannot require CMRS providers to contribute to their intrastate universal service funds unless CMRS is used as a substitute for landline LEC service for a `substantial portion’ of the state’s communications,” PCIA wrote. The group also cited a court case that prevented Connecticut from assessing universal service fees on cellular carriers.
The role of resellers in universal service payments also is unclear, even though the FCC has ruled that they are liable for such payments. However, PCIA pointed out that carriers will bear the brunt of the paperwork because they must figure out-by evaluating revenues-if each reseller makes enough money to pay into the fund or if it is exempt and must be considered to be an end user of the carrier’s service.
“In the paging industry … resellers constitute a significant portion of the customer base. Many of these resellers may be smaller entities,” it wrote. “Whether they qualify for the de minimus exemption may vary from year to year, depending upon their business operations as well as the levels of the quarterly contribution factors adopted by the commission … Moreover, some resellers may not be able to determine whether they qualify under the de minimus exemption before completing the calculations required by Form 457 and awaiting each of the commission’s quarterly determinations of requisite contribution factors.”
The association also said that the FCC has done a poor job of notifying resellers that they have a universal-service obligation at all. Instead, PCIA wondered if the commission was depending on the trade associations to handle universal-service information. If this is the case, PCIA wrote that the FCC will be missing out on revenues because many resellers do not belong to a professional group, have never had any dealing with regulatory agencies and do not hold any licenses themselves. It is up to the commission, it wrote, to “publicize the nature of the new regulatory requirement.”
As for the Form 457 itself, PCIA again raised some of the concerns that have been voiced in the past. Because the current form is based on past wireline-related forms, it “relies heavily on the Uniform System of Accounts. CMRS carriers, however, generally do not use the USOA and are not even familiar with its terms.” In addition, the FCC has not established a mechanism for allocating CMRS revenues between intra-and interstate jurisdictions; the FCC has asked wireless carriers to make a “good faith estimate,” which could leave them open to fines down the road.
The FCC also requires “billing entities” to fill out the form, but the form is requisite for each affiliate or subsidiary. PCIA contended that one form is sufficient per company, with combined revenues stated. PCIA also found that the form asks for gross revenues from all sources, instead of just telecom services and that there is no need for the commission to require such information.
The Cellular Telecommunications Industry Association was in lock step with much of what PCIA wrote, again writing that its own petition for expedited consideration on universal service has been lingering at the FCC since September.
Agreeing with PCIA’s stance on the interstate nature of wireless, CTIA added some specific concerns. Should roaming revenues be considered intra- or interstate and to which system should they be attributed? Can carriers deduct non-telecommunications features and equipment to make bundled services easier? And how will carriers be able to recover universal service costs from existing contract customers?
Regarding the reseller-reporting dilemma, CTIA wrote in a footnote, “By requiring the underlying facilities-based carrier to include certain resellers’ revenues in its contribution base, the commission is inadvertently promoting the policy of resale. That is, resellers buy service at a bulk, or wholesale rate, and resell that service at a higher, retail rate to consumers. By imposing a universal service tax on the wholesale price via the facilities-based carrier, the commission allows the reseller to gain a competitive advantage because it is not forced to pass through what would have been a higher tax on its retail rates.”
