Implementing InterCall: USF Implications for the Conference Call Industry

Transcription

1 Implementing InterCall: USF Implications for the Conference Call Industry July 15, 2008 Presented by Brad Mutschelknaus, Steve Augustino, and Tom Cohen

2 Agenda Overview of USF and the InterCall Decision USF-Related Implications of InterCall Non-USF Implications of InterCall Impact on Free Conference Calling Litigation 2

3 Part 1 Background and Overview 3

4 Overview of USF Federal Universal Service Fund (FUSF) Created in 1996 Explicit support for rural telephone service, service to low income customers and services to schools, libraries and healthcare providers Approx. $7 billion annual contributions/disbursements Current USF assessment rate: 11.4% of end user telecommunications revenues 4

5 Overview of USF (cont d) Two Types of Contributors Telecommunications Carriers (mandatory) Providers of Telecommunications (by FCC order) Private carriers Payphone providers Interconnected VoIP providers Contribution Method Interstate and International end user revenues Intrastate and wholesale revenues not assessed 5

6 InterCall Order InterCall appeal of USAC Administrator s Decision requiring direct contributions Prior to InterCall, industry treated audio bridging services as non-telecom services No FCC precedent classifying audio bridging services as telecom for USF purposes FCC acknowledged consistent understanding of the stand alone industry FCC acknowledged that it may have contributed to this understanding by its actions 6

7 Retroactivity FCC reverses USAC decision requiring InterCall to file revenues for past periods. Only going-forward contributions are required Retroactive protection is extended to all stand alone audio bridging providers (fn. 27) Does not address integrated providers who may have contributed differently First filing is November 1. Impact will be January 1,

8 Refunds? Many integrated providers (and a few stand alone providers) contributed to USF prior to this order New FCC standard likely increases the amount owed to the FUSF no refund possible If the provider contributed more than the InterCall order would require, a refund theoretically is possible Abeyance orders seemed to disclaim a refund opportunity. InterCall order is silent, however. One-year time limit for 499-A revisions 8

9 Contribution Obligation FCC concludes that InterCall is a provider of telecommunications subject to USF obligations Record does not permit the FCC to determine whether InterCall is a private carrier or a common carrier. Conclusion extends to all stand alone audio bridging providers: We therefore find that stand alone audio bridging service providers are providers of telecommunications that are required to contribute directly to the USF ( 22) 9

10 Contribution Obligation (cont d) InterCall must contribute to USF based on their interstate and international end user revenues derived from providing these services. ( 9) USAC is directed to implement this finding to all audio bridging service providers ( 25) Uniform application across stand alone and integrated providers But FCC does not decide non-usf issues Are bridging providers common carriers? Are bridging providers end users of telecom for other purposes? Access charge/intercarrier compensation implications (fn. 49) 10

11 Part 2 USF Filing Issues 11

12 Mechanics All contributors file five revenue filings per year Quarterly estimates (499-Q) on Feb. 1, May 1, Aug. 1 and Nov. 1 Annual Filing (499-A) on April A also used for registration purposes 499 revenue data used for related funds Telecommunications Relay Service (TRS) NANP, LNP FCC Regulatory Fees 12

13 New Classifications are Required Five major issues Which services are telecommunications Separating telecommunications revenue from nontelecom revenue Determining the jurisdiction of revenue Separating wholesale revenues Tracking non-telecom revenues Significant uncertainty will persist for the near term 13

14 Which Services are Telecommunications? Audio Bridging Video Conferencing Audio component Web-based Conferencing Audio component Free conferencing services 14

15 Separating Telecommunications Revenues What are the end user revenues derived from [audio bridging] services? purpose and function of the bridge is to facilitate the routing of ordinary telephone calls Bridge results in no more than the creation of the transmission channel chosen by the customers Are all other features and functions non-telecom? Actual operation of features and billing practices will influence the result 15

16 Determining jurisdiction InterCall Order does not offer a method to determine jurisdiction Order appears to find that the call both terminates at the bridge and that the bridge facilitates routing FCC generally uses an end to end test to determine jurisdiction Not clear whether or how to apply test in a multiple caller scenario Farmers questioned anomalous results in multiple caller scenario presented on those facts But, good-faith estimates are permitted, if jurisdiction cannot be determined from corporate books 16

17 Wholesale Revenues 499 Form requires separate reporting of revenues from wholesale sales and from end user sales Only end user sales are subject to USF Wholesale customers must Resell the service to end users AND Reasonably be expected to contribute directly to USF Contributors selling wholesale service must verify reseller s status USAC is aggressive in audits 17

18 Non-Telecom Revenues Features or services that are not telecom are reported in a separate section, not subject to USF FCC does not rule on the classification of features offered by InterCall ( 13) Bundled Services safe harbors may be useful Report undiscounted telecommunications, OR Report all revenues as telecom Other allocations available, but contributor must demonstrate their reasonableness 18

19 USF Reporting Summary Bottom Line: All aspects of reporting USF revenues will be subject to risk for the near future New contributors should proceed carefully, or face the risk of retroactive adjustments in audits or enforcement actions Further USAC or FCC clarification is possible 19

20 Part 3 Non-USF Implications 20

21 Billing and Collection Issues Customer Contracts are key Does the contract permit the provider to collect USF from end users? FCC restrictions on USF recovery apply to all contributors May not recover more than the contribution factor from a customer Administrative fees may only be recovered by a separate line item May not describe the USF fee as a tax or as government mandated 21

22 Other regulatory issues Private carriage vs. common carriage Key difference is in whether the provider makes individualized decisions whether to serve customers Unclear whether stand alone providers can operate as private carriers Integrated providers likely will choose common carriage model Unclear whether free conferencing providers Provide telecommunications, or Do so for a fee 22

23 State regulation Stand alone providers may be required to obtain state certification as a carrier In which state(s)? State USF funds may apply to services State and local taxes may apply to services Many state or local laws do not recognize private carrier distinction States likely to use FCC finding of telecommunications as support for applying state taxes But, states not bound by FCC finding against retroactive application! 23

24 Impact on Vendor Contracts Many stand alone providers obtain telecommunications service as end users May need to renegotiate service contract or switch to a wholesale contract Additional certifications likely to be required by vendors Providers should stop vendor billing of USF surcharge to coincide with direct USF filings 24

25 Part 4 Free Conference Calling Litigation 25

26 Part 4 Decision s Application in Intercarrier Compensation Context Nothing in this order is intended to address issues relating to access charge tariffs or other types of intercarrier compensation. (fn. 49) [A] company may be classified as an end user due to its role in obtaining telecommunications services [but that] does not, in turn, preclude the provider from also being a telecommunications provider in terms of its USF contribution obligations. ( 22) As a legal and policy matter and following Commission precedent, application of the bridging as routing rationale to intercarrier compensation matters would result in anomalies. 26

27 Free Conference Calling Litigation Iowa Litigation and Primary Jurisdiction Referral pending outcome of Qwest-Farmers Complaint at FCC Status of Reconsideration of Qwest-Farmers Complaint Outcome limited to facts as presented? FCC Rulemaking on Traffic Stimulation How can there be stimulation if calls don t terminate? Will FCC focus only on rate? 27

28 Thank You For Further Information Contact: Steve Augustino