9 TH ANNUAL UNIVERSAL SERVICE FUND UPDATE

Transcription

1 9 TH ANNUAL UNIVERSAL SERVICE FUND UPDATE MARCH 8, 2018 JOHN HEITMANN (202) STEVEN AUGUSTINO (202) MARISA LORENZO (212) DENISE SMITH (202)

2 Agenda Pai s First Year: 2017 USF Year in Review Pai s Priorities Funds at a Glance/Trends Major USF Program Developments Lifeline Schools and Libraries Rural Broadband/Healthcare Connect Fund Connect America Fund/Mobility Fund Contributions 2

3 Agenda 2018 Form 499-A Overview and Reminders USF Audits 2017 Audits Overview USAC Audit Trends 2018: What to Watch in USAC Audits Audit Process Tips and Preparation USF Enforcement FCC USF Enforcement Actions OIG and Third Party Enforcement Q&A 3

4 CHAIRMAN PAI S FIRST YEAR: 2017 USF YEAR IN REVIEW

5 Chairman Pai s Priorities USF-RELATED OPEN MEETING ITEMS: JAN MAR RHC 17% Lifeline 8% E-rate 0% 5 CAF 75%

6 The Year in Review: Funds at a Glance Overall trend toward rural broadband (RHC and CAF) and away from Lifeline and most E-rate services High Cost Clear priority; Auctions progressing; Pai proposals for increased funding Rural HealthCare 2017 Funding cap waived and additional funding being considered E-rate Focus was to stabilize E-rate address administrative and implementation issues. Self-provisioned fiber to be addressed Lifeline 6 FCC proposes disbursement cap and banning reseller participation 6

7 MA JOR 2017 USF PROGRAM DEVELOPMENTS

8 Major 2017 USF Program Developments Lifeline Implementation of the Lifeline Modernization Order National Verifier Port Freezes, Minimum Service Standards and Tech Neutrality LBP Order Rescissions GAO Report Waivers 8

9 Major 2017 USF Program Developments Lifeline 2017 Digital Divide Order (11/2017) Scales back Tribal support Eliminates the benefit port freeze Concludes that Premium Wi-Fi is ineligible for support Proposes changes that would limit support to facilities-based providers 9

10 Major 2017 USF Program Developments Schools and Libraries 10 $4B budget cap for FY2018 ($1B targeted for Category Two) Major progress in broadband connectivity Category Two budget set to expire in 2019 Application process challenges Fiber builds under a microscope Hurricane relief

11 Major 2017 USF Program Developments Rural Healthcare Fund / Rural Broadband December 2017 NPRM proposals: Raising program spending cap Implementing program reforms Funding Year 2017 (July 1, 2017 June 30, 2018) Initial FY2017 filing window: February 1, 2018 May 31, 2018 FCC anticipates FY2017 funding requests could exceed funding cap 11

12 Major 2017 USF Program Developments Mobility Fund Mobility Fund Phase II February 2017 Order outlined budget/application process Will provide up to $4.53 billion over next decade to expand 4G LTE coverage August 2017 Order established challenge procedures Challenge process begins March 29, 2018 FCC made final tweaks in February 2018 Sets stage for auction later this year 12

13 Major 2017 USF Program Developments Connect America Fund CAF Phase II February 2017 Order finalizing bidding rules for Phase II auction (Auction 903) August 2017 Public Notice finalizing specific auction procedure details January 2018 Public Notice and Recon Order Announces auction start date July 24, 2018 CAF Phase II Cost Model 13 March 2018 Public Notice - WCB reverses previous decision to make certain high-cost census blocks eligible for funding even if served by a carrier

14 Major 2017 USF Program Developments Communications Network Funds for PR and USVI 14

15 Major 2017 USF Program Developments Contributions Stratos Government Services, Inc. Petition for Declaratory Ruling FCC rules USF contribution exemption for governmentonly service providers does not apply to subcontractors SES Government Solutions Petition for Reconsideration Out for comment Reseller Contribution Order 15 Remanded to USAC several reseller appeals asserting double collection of USF FCC clarifies no double collection of USF from resellers where preponderance of the evidence confirms contribution by wholesale provider

16 Major 2017 USF Program Developments Contributions Private Line Jurisdiction 10% Rule 2017 WCB Order: 16 Requests for Review allege USAC misapplied 10% Rule for mixed-use private line revenues No presumption of interstate or interstate jurisdiction Nature of traffic, not endpoints of line, is determinant of jurisdiction USAC must review jurisdictional documentation/evidence Customer certifications of jurisdiction must be informed Recent appeal suggests USAC is still making presumptions on jurisdiction

17 2018 FORM 499A

18 2018 Form 499A Overview No changes of note on 2018 form Reminder: Bureau cannot make substantive changes Instructions remain guidance only 18

19 2018 Form 499A Substantive Reminders Reseller certification Revenues for exclusion from ITSP regulatory fee and TRS, NANPA and LNPA fund contribution bases Review for significant changes from prior year s 499A Post-Merger 499A Filings 19

20 2018 Form 499A Procedural Reminders 2018 Form due by April 2 Pay attention to 499 correspondence True-up will be processed in 3Q 2018 Revisions to A must be filed by April 2 No downward revisions permitted after this date No changes to DCIA USAC may refer delinquent fees directly to US Treasury for collection Onus on contributor to monitor delinquent payments 20 USAC puts delinquent carriers on Red Light Status

21 USF AUDITS

22 USAC Audits Overview - Trends Decrease in audits as USAC shifts to risk-based audit selection Some backlog of audits remains Decrease in number of monetary findings Average percentage monetary recovery generally increasing 22 Planned Audits Monetary Findings Monetary Recovery as % of Disbursements/Contributions

23 USAC Audit Trends Schools and Libraries Year FY FY2016 FY2017 Planned FY FY 2016 % Change Average Disbursement $5,377,519 $4,435,421-18% Average # of Monetary % Findings Average Recovery $114,755 $105,661-8% Recovery % % Average Recovery with Improper Payment Prevention $114,755 $137,640 20%

24 USAC Audit Trends High Cost Year FY FY 2016 FY 2017 Planned FY FY 2016 % Change Average Disbursement Average # of Monetary Filings $6,836,251 $5,124,363-25% % Average Recovery $29,161 $64, % Recovery % 0.43% 1.25% 193% 24

25 USAC Audit Trends Lifeline Year FY FY 2016 FY 2017 Planned Average Disbursement Average No. of Monetary Findings FY FY 2016 % Change $93,558 $343, % % Average Recovery $5,691 $629-89% Recovery % 6.08% 0.18% -97% 25

26 USAC Audit Trends Contributors Year FY FY 2016 FY 2017 Planned FY FY 2016 % Change Average Line 419A $4,409,104,209 $680,013,227-85% Average # of Monetary Findings Average Additional Contribution Additional Contribution % % $232,199 $167,407-28% % % 367% 26

27 USAC Audits What to Watch for in U.S. Government Accountability Office (GAO) Report Highlighted contributor audit issues Made audit-related recommendations Four Things to Watch: Increase in USF Contributor Audits/Focus on Larger Contributors Expansion to include Truth-in-Billing Resolution of USAC Requests for Guidance Increase in Post-Audit Enforcement Actions 27

28 USAC Audits Common Audit Findings Schools and Libraries Lack of Necessary Resources to Make Effective Use of Services and Equipment Invoicing USAC for Ineligible Products/Services Untimely Payment to Service Provider Insufficient Internet Safety Policy Products and/or Services Received by Ineligible Entity 28

29 USAC Audits Common Audit Findings High Cost Improper Allocation Methodology Improper Account Classification Improper Cut Off Periods Improper Documentation/Data Retention 29

30 USAC Audits Common Audit Findings - Lifeline Form 497 & NLAD Variance Inaccurate Form 497 Reporting Inaccurate Form 555 Reporting High Volume Addresses Deceased Subscribers Improper Recertification Process Improper Qualification Criteria 30

31 USAC Audits Common Audit Findings Contributors Wholesale revenues Were resellers properly validated? International Services International private lines USF recovery fee Is USF being assessed and reported properly? 31

32 USAC Audits Process Tips/Preparation Document retention minimum 5 years, maintain good records Resource management audits can be lengthy and resource intensive; identify key personnel with relevant knowledge Seek experienced counsel early 32

33 ENFORCEMENT

34 2017 USF Enforcement Actions Rural Healthcare DataConnex: $18.7 million NAL for alleged consultant kickback scheme, plus potential authorization revocation Network Services Solutions: $22 million amended NAL for alleged competitive bidding violations and wire fraud, plus $3.5 million in repayments High-Cost/CAF 34 Blanca Telephone: Order requiring $6.7 million in repayments for claiming ineligible service costs beginning 12 years ago Sandwich Isles: Order requiring $27 million in repayments and $49 million NAL for submitting inaccurate data, filing false certifications and using support for ineligible expenses - plus revocations

35 2017 USF Enforcement Actions E-rate NYC DOE: Settlement requiring repayment of $17 million after school consultant submitted fraudulent invoices AT&T: $106K NAL and $63K in repayments for violating lowest corresponding price rule Lifeline Pai Letter to USAC: Followed GAO report criticizing Lifeline enforcement directs action in six key areas Lifeline Settlements: Resolving 2013 investigations 35

36 2017 USF Enforcement Trends Enforcement trends Paybacks of improperly disbursed support Non-monetary penalties (revocation) Relief for affected institutions Personal liability 36

37 OIG AND THIRD PARTY ENFORCEMENT

38 Enforcement Players FCC EB and Strike Force USAC FCC OIG State AGs DOJ Relators/ Whistleblowers 38

39 FCA s Relevance to USF USF disbursements are a high-profile area Continued push by DOJ for FCA recoveries DOJ recovered over $3.7 billion from FCA cases in fiscal year new FCA matters in 2017 In fiscal year 2017, Total Call Mobile agreed to pay $30 million to resolve allegations that it defrauded the Lifeline Program 39

40 OIG and Third Party Enforcement Anticipate enforcement will continue to be a focus False Claims Act investigations into provision of USF funding possible Timely legal advice is a necessity 40

41 QUESTIONS? JOHN HEITMANN Partner Communications Phone: (202) STEVE AUGUSTINO Partner Communications Phone: (202) MARISA LORENZO Partner Communications Phone: (212) DENISE SMITH Special Counsel Communications Phone: (202)