USAC s 499 and Billing Overview General Overview Submitting the 499 Form Who uses the 499 information? USF Billing Audits Common Ecert Issues March 2010 1 www.usac.org
General Overview 2 www.usac.org
Who must file the 499-A? Instructions pg 4-47 U.S.C. 254(d) ALL intrastate, interstate and international providers of telecommunications service providers within the United States, with very limited exceptions, must file the FCC Form 499A. Telecommunications as defined by the FCC for purposes for the FCC Form 499-A is the transmission, between or among points specified by the user, of information of the user s choosing, without change in the form or content of the information as sent and received. 3 www.usac.org
Who must file the 499-A? Instructions pg 4-47 C.F.R. 54.706(a) Types of entities responsible for filing the 499 form includes, but is not limited to, the following types of services: wireless telephony, including cellular and personal communications services (PCS) paging and messaging services dispatch services mobile radio services operator services access to interexchange service special access message telephone services (MTS) subscriber toll-free services wide area telecommunications services (WATS) private line telex telegraph video services satellite services resale services frame relay and ATM services interconnected VoIP services 4 www.usac.org
Different Types of Current 499 Forms Type Rcv d by Revenue Reported Fund(s) 499A April 1 Annual Actual Billed Revenue: Jan Dec prior year 499Q May 1 3Q Projected Billed & Projected Collected Revenue: July Sept same year 1Q Actual Billed Revenue: Jan March same year 499Q Aug 1 4Q Projected Billed & Projected Collected Revenue: Oct - Dec same year 2Q Actual Billed Revenue: April June same year 499Q Nov 1 1Q Projected Billed & Projected Collected Revenue: Jan March next year 3Q Actual Billed Revenue: July Sept same year 499Q Feb 1 2Q Projected Billed & Projected Collected Revenue: April June same year 4Q Actual Billed Revenue: Oct Dec Prior year TRS, NANP, LNP & USF USF USF USF USF 5 www.usac.org
499 Non Responders Late Filing Fees FCC Order 07-150 paragraph 14. If a filer is more than 30 days delinquent in filing an FCC Form 499-A or 499-Q, the USF Administrator shall also use the U.S. prime rate plus 3.5 percent in assessing a remedial sanction. The sanction will be the greater of $100 per month or the amount derived when a rate of interest equal to the U.S. prime rate plus 3.5 percent is assessed on the amount due per the Administrator s invoice or calculations (if no invoice was provided). Calculation Filing Quarterly Contribution Base (499Q Line 120 B + C) Monthly USF Contribution WSJ Prime Rate (As of May 1, 2008) USAC Late Filing Fee Rate (WSJ Prime + 3.5%) Daily Late Filing Fee Monthly Fee Yearly Fee May 2008 499Q (Due May 1, 2008) $430,000 $14,333.33 5% 8.5% 3.34 $100 $1,218.33 The FCC Order requires USAC to continue to bill Late Filing Fees until the form is received. Invoice Filing 1/15/08 2/15/08 3/15/08 4/15/08 5/15/08 6/15/08 7/15/08 8/15/08 9/15/08 10/15/08 11/15/08 12/15/08 Nov 07 Q $100 $100 $100 $100 $100 $100 $100 $100 $100 $100 $100 $100 Feb 08 Q $100 $100 $100 $100 $100 $100 $100 $100 $100 May 08 Q $100 $100 $100 $100 $100 $100 2008 A $100 $100 $100 $100 $100 $100 Aug 08 Q $100 $100 $100 Total $100 $100 $100 $200 $200 $200 $400 $400 $400 $500 $500 $500 6 www.usac.org
Submitting the 499 Form 7 www.usac.org
499 Data Processing A Filer of the FCC Form 499 can either submit their form by mailing in a hardcopy with original signature or by online through USAC ecert system. Online Ecert Hard Copy 8 www.usac.org
499 Data Processing Hardcopy Officer Signs the 499 form certifying that the information is correct and mails in the form to USAC All Hardcopy forms received are date stamped (receive date) Form must be received by USAC by the due date or the Form is late. Data from the form is then entered into USAC s ecert system. Form is then visually doubled checked by a 499 Analyst to ensure data entry accuracy. 9 www.usac.org
499 Data Processing Online Ecert Preparer or Officer Logs into Ecert and enters the form. Officer Certifies with electronic signature the information is correct. Certification Information captured Officer User ID (Batch ID) Date Officer Certified the Form. (Postmark and Receive Dates) No Hardcopy Required 10 www.usac.org
Online System USAC s Online System pre-populates all non-financial date from previous filings and has automated checks and helpful hints to help preparers file their FCC Form accurately and in compliance with FCC instructions. 11 www.usac.org
499 Form Analysis All FCC Form 499 filings are checked against prior filings and FCC rules for compliance and accuracy. 40 checks are conducted on the 499A 10 checks are conducted on the 499Q 12 www.usac.org
Correspondence Standard emails pertaining to FCC Form 499 filings. FCC 499 Notice This email is to notify filers of upcoming filing due dates and recently issued FCC orders. Non-responder Notice This email to notify filers that USAC has not received their latest 499 filing. Issue This email is specifically tailored to a issue with a filer s 499 filing. The email will identify the issue and provide more definition as to why USAC analyst feel there is a issue with the filing. Accepted (499Q Only) This email is the last email USAC sends out to notify a filer that their filing has been reviewed and there are no apparent issues with their filing. This email will also tell the filer the % change in their contribution base as compared to their last 499Q filing. 13 www.usac.org
Who uses the 499 Information? 14 www.usac.org
Who uses the 499 Information? - TRS FCC Form 499A Only Telecommunications Relay Service (TRS) is a telephone service that allows persons with hearing or speech disabilities to place and receive telephone calls. TRS is available in all 50 states, the District of Columbia, Puerto Rico, and the U.S. territories for local and/or long distance calls. Revenue Base Line 420(d) + Line 420(e) + Line 412(e) Line 511(b) Minimum Fee Filers with interstate or international end-user revenues must pay a minimum of $25 15 www.usac.org
Who uses the 499 Information? - USF FCC Form 499A and 499Q The goals of Universal Service, as mandated by the 1996 Act, are to promote the availability of quality services at just, reasonable, and affordable rates; increase access to advanced telecommunications services throughout the Nation; advance the availability of such services to all consumers, including those in low income, rural, insular, and high cost areas at rates that are reasonably comparable to those charged in urban areas. The Universal Service Fund is one fund with four programs. High Cost - This support ensures that consumers in all regions of the nation have access to and pay rates for telecommunications services that are reasonably comparable to those in urban areas. Low Income - This support, commonly known as Lifeline and Link Up, provides discounts that make basic, local telephone service affordable for more than 7 million low-income consumers. 16 www.usac.org
Who uses the 499 Information? USF cont. Rural Health Care - This support provides reduced rates to rural health care providers for telecommunications and Internet services so they pay no more than their urban counterparts for the same or similar telecommunications services. Schools & Libraries - This support, commonly referred to as E-rate support, provides affordable telecommunications and Internet access services to connect schools and libraries to the Internet. This support goes to service providers that provide discounts on eligible services to eligible schools, school districts, libraries, and consortia of these entities. Largest of all funds using the 499 information. Revenue Base 499-A: Line 423(d) + Line 423(e) 499-Q: Line 120(b) + Line 120(c) De Minimis Exemption - Telecommunications carriers are not required to contribute to the universal service support mechanisms for a given year if their contribution for that year is less than $10,000. 17 www.usac.org
FCC Form 499A Only Who uses the 499 Information? - NANP The North American Numbering Plan (NANP) is an integrated telephone numbering plan serving 19 North American countries that share its resources. These countries include the United States and its territories, Canada, Bermuda, Anguilla, Antigua & Barbuda, the Bahamas, Barbados, the British Virgin Islands, the Cayman Islands, Dominica, the Dominican Republic, Grenada, Jamaica, Montserrat, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, Trinidad and Tobago, and Turks & Caicos. AT&T developed the North American Numbering Plan in 1947 to simplify and facilitate direct dialing of long distance calls. Implementation of the plan began in 1951. Revenue Base Line 420(a) + Line 412(a) Line 511(a) Minimum Fee Filers with end-user revenues must pay a minimum of $25. Filers with no end-user revenues must pay $25. 18 www.usac.org
Who uses the 499 Information? - LNP FCC Form 499A Only Local Number Portability was defined in the Telecommunications Act of 1996 as the "ability of users of telecommunications services to retain, at the same location, existing telecommunications numbers without impairment of quality, reliability, or convenience when switching from one telecommunications carrier to another. The intent of LNP is to open up local telephone service to competition. Revenue Base - by region (Line 420(a) + Line 412(a) Line 511(a)) * % of end-user revenues shown on Lines 503 through 509 Minimum Fee Filers with no end-user revenues must pay $100 19 www.usac.org
Who uses the 499 Information? - FCC FCC Regulatory Fees for interstate telecommunications providers DC Agent Declaration: Carriers can satisfy their obligations under Section 413 of the Act to designate an agent in the District of Columbia for service of process. FCC Registration: Companies also satisfy their obligations to register with the FCC under Slamming Regulations passed February 2001 Industry Analysis 20 www.usac.org
USF Billing 21 www.usac.org
FCC Contribution & Circularity Factors The FCC sets a quarterly contribution factor based on the cumulative revenue reported by the carriers on the Form 499-Q. Carriers are permitted, within certain guidelines, to pass the Universal Service Fund charges through to their customers. The revenue they generate from these pass-through charges must be reported on the Form 499. To prevent assessing further USF fees on these pass-through charges, the FCC also sets a quarterly circularity factor, which reduces the contribution amount. The circularity factor is the same for all carriers USF calculations, regardless of whether they do or do not pass-through the charges to their customers. All FCC Contribution and Circularity Factors can be found at http://www.fcc.gov/omd/contribution-factor.html 22 www.usac.org
SMC Background USAC uses data submitted on the Quarterly Telecommunications Worksheet (Form 499-Q) filed by carriers to determine the carriers monthly USF contribution obligation. Obligations are assessed based on a company's projected collected end-user interstate and international revenues (Line 120). The FCC sets a quarterly contribution factor based on the cumulative revenue reported by the carriers on the Form 499-Q. Carriers are permitted, within certain guidelines, to pass the Universal Service Fund charges through to their customers. The revenue they generate from these pass-through charges must be reported on the Form 499. To prevent assessing further USF fees on these passthrough charges, the FCC also sets a quarterly circularity factor, which reduces the contribution amount. The circularity factor is the same for all carriers USF calculations, regardless of whether they do or do not pass-through the charges to their customers. 23 www.usac.org
Understanding Your Invoice USAC uses data submitted on the Quarterly Telecommunications Worksheet (Form 499-Q) filed by carriers to determine the carriers monthly USF contribution obligation. Obligations are assessed based on a company's projected collected end-user interstate and international revenues (Line 120). 24 www.usac.org
Understanding Your Invoice 25 www.usac.org
Understanding Your Invoice 1 2 4 USF Calculation: 1. Interstate Revenue (Line 120B) + International Revenue (Line 120C) = Quarterly Contribution Base 2. Quarterly Contribution Base x FCC Contribution factor = Unadjusted Contribution 3. Unadjusted Contribution x FCC Circularity factor = Circularity Deduction 4. Unadjusted Contribution - Circularity Deduction = Adjusted Contribution (Quarterly) 26 www.usac.org
Understanding Your Invoice De Minimis Exemption Telecommunications carriers who are not required to contribute to the universal service support mechanisms for a given year because their contribution for that year is less than $10,000. A company needs to be De Minimis on both their Current 499Q and their last filed 499A in order to not to be billed by USAC. 27 www.usac.org
Understanding Your Invoice 5 6 USF Calculation: 5. Adjusted Quarterly Contribution 3 = Total Monthly Contribution 6. Total Monthly Contribution * Support Mechanism Allocation Percentage = Support Mechanism Charge 28 www.usac.org
Understanding Your Invoice 29 www.usac.org
A/Q True-Up Background The purpose of the true up is two-fold: To determine who was de minimis for the prior calendar year, and reverse any billings associated with that status. To compare quarterly filings to the year-end annual filing, and adjust non- de minimis accounts for any differences in the revenue reported. Four quarters of projected, collected revenue are compared to the corresponding 499-A filing. If the sum of the 499-Qs exceeds the 499-A, credits are issued on the July September invoices. The credits are calculated using the average of the two lowest contribution factors and associated circularity factors in place during the quarterly billings. If the sum of the 499-Qs is less than the 499-A, charges are issued on the July September invoices. The charges are calculated using the average of the two highest contribution factors and associated circularity factors in place during the quarterly billings. Revised 499A Forms result in a recalculation of the true up. The resulting recalculation is compared to the original true up to determine credits or adjustments due. 30 www.usac.org
A/Q True-Up Example - 499 Filings Interstate Revenue (Line 423D) International Revenue (Line 423E) Contribution Base 2008 499A $2,377,064 + $19,218 = $2,396,282 Interstate Revenue (Line 120B) International Revenue (Line 120C) Contribution Base Nov 06 499Q $621,080 + $7,495 = $628,575 Feb 07 499Q $603,005 + $4,978 = $607,983 May 07 499Q $623,264 + $4,627 = $627,891 Aug 07 499Q $639,772 + $4,211 = $643,983 2007 499Q Contribution Base $2,487,121 + $21,311 = $2,508,432 2007 Avg. Contribution & Circularity Factors Avg. of 2 highest FCC contribution Factors.1150 Avg. of 2 lowest FCC Contribution Factors.1035 Avg. of 2 FCC Circularity Factors associated with 2 high FCC Contribution Factors.105615 Avg. of 2 FCC Circularity Factors associated with 2 low FCC Contribution Factors.094918 Avg. of all FCC Contribution Factors.10925 Avg. of all FCC Circularity Factors.100266 31 www.usac.org
A/Q True-Up Step 1 The first step in the True Up is to determine whether or not the company is de minimis for purposes of the A/Q True Up using the following formula: (499A *.10925) (499A *.10925 *.100266) If result is < $10,000, then the contributor is de minimis, and January- December 2006 support mechanism charges are reversed. If result is > or = $10,000, then the contributor is NOT de minimis; continue to step 2. Example ($2,396,282 *.10925) ($2,396,282 *.10925 *.100266) = $235,544.79 $235,544.79 > $10,000 Not De Minimis 32 www.usac.org
A/Q True-Up Step 2 The next step in the True Up is determining which FCC contribution factor, and associated FCC Circularity factor to use in the True Up Calculation. After determining which factor is applicable, it will be used to replace the Average FCC Contribution Factor* in step 3. Average of 2 highest FCC Contribution Factors and the associated average FCC Circularity Factor should be used if (499A) > (Q1 + Q2 + Q3 + Q4). Average of 2 lowest FCC Contribution Factors and the associated average FCC Circularity Factor should be used if (499A) < (Q1 + Q2 + Q3 + Q4). Average of all 3 FCC Contribution Factors and the associated average FCC Circularity Factor should be used if (499A) = (Q1 + Q2 + Q3 + Q4). Example ($2,396,282) < ($628,575 + $607,983 + $627,891 + $643,983) Average of 2 lowest FCC Contribution Factors and the associated average FCC Circularity Factor should be used. 33 www.usac.org
A/Q True-Up Step 3 Using the inputs noted above, the A/Q True Up formula for calculating necessary Support Mechanism Credits or Adjustments is: (499A) - (Q1 + Q2 + Q3 + Q4) = True Up Base (True Up Base * Average FCC Contribution Factor) (True Up Base * Average FCC Contribution Factor * Average FCC Circularity Factor) = Quarterly Credit or Adjustment Quarterly Credit or Adjustment / 3 = Monthly Credit or Adjustment Example ($2,396,282) - ($628,575 + $607,983 + $627,891 + $643,983) = -$112,150 (-$112,150 *.1035) - (-$112,150 *.1035 *.094918) = -$10,505.80 -$10,505.80 / 3 = -$3,501.93 The company will receive three equal credits of -$3,501.93 on their July September Invoices. 34 www.usac.org
A/Q True-Up - Inactivation SMC USAC reverses all SMC and related interest and penalties from the date the company was inactivated forward. Example: If a company goes out of business on 6/31/2007 USAC will Reverse all SMC and related interest and penalties billed to the company after their 6/15/2007 invoice. Reverse all late filing fees and related interest and penalties for any filing due after 6/31/2007 All remaining SMC and Late Filing Fee are still considered outstanding debt subject to FCC 07-150 and DCIA. 499A True Up USAC only reverses 499A True Up charges that resulted from USAC generated estimated 499A created after the company was inactivated. When a company is inactivated mid year USAC does not use the revenue reported on the company s 499Q filings because a company may not have been billed for all those revenues. In these cases USAC will calculate those 499Q revenues from the company s actual SMC billed throughout the year. Example: Total 3Q SMC billed $10,000 FCC Contribution Factor.113 FCC Circularity Factor.112959 3Q Revenues = $10,000/(.113-(.113*.112959) = $99,764.92 35 www.usac.org
A/Q True-Up - Inactivation Company Goes Out of Business / No Longer Provide Telecommunications When a company goes out of business mid year that company is not required to submit a 499A form for that calendar year. Sales, Mergers, & Consolidations The purchasing company is responsible for reporting all the revenues from the purchased company for the complete reporting year on their 499A unless specifically stipulated in the sales/merger agreement. USAC will use the combined 499Q revenues of both companies when calculating the purchasing company s 499A True Up. 36 www.usac.org
Billing Exceptions - De Minimis De minimis Contributors whose annual contributions would be less than $10,000 are not required to contribute to the fund. 499Q USAC uses the related FCC Contribution and Circularity Factors to determine if a 499Q filing is de minimis. 499A USAC uses the average of the related FCC Contribution and Circularity Factors to determine if a 499A filing is de minimis. To assess monthly charges, the de minimis test is performed on both the 499-Q for the current quarter, as well as the latest 499-A. A company who is de minimis on both forms will be exempt from charges. Using the 499-A helps to smooth the cyclical nature of some quarterly filings. The De minimis test is conducted on an individual filing basis. 37 www.usac.org
Billing Exceptions - De Minimis De Minimis Example 1 Both 499A and 499Q are not De Minimis 499A: $165,000 *.104 = $17,160.00 Contribution Base FCC Estimated Annual Factor Estimated 499A Contribution 499Q: $4041.95 * 4 = $16,167.79 Adjusted Contribution Estimated 499Q Contribution O O De Minimis Example 2 499A is De Minimis and 499Q is not De Minimis 499A: $50,000 *.104 = $5,200 Contribution Base FCC Estimated Annual Factor Estimated 499A Contribution 499Q: $4041.95 * 4 = $16,167.79 Adjusted Contribution Estimated 499Q Contribution P O De Minimis Example 3 499A is not De Minimis and 499Q is De Minimis 499A: $165,000 *.104 = $17,160.00 Contribution Base FCC Estimated Annual Factor Estimated 499A Contribution 499Q: $1,000.00 * 4 = $4,000.00 Adjusted Contribution Estimated 499Q Contribution O P In all these examples the filer would receive an invoice. 38 www.usac.org
Billing Exceptions - De Minimis De Minimis Example 4 Both 499A and 499Q are De Minimis 499A: $50,000 *.104 = $5,200 Contribution Base FCC Estimated Annual Factor Estimated 499A Contribution 499Q: $1,000.00 * 4 = $4,000.00 Adjusted Contribution Estimated 499Q Contribution P P A company needs to be De Minimis on both their Current 499Q and their last filed 499A in order to not to be billed by USAC. 39 www.usac.org
Billing Exceptions - De Minimis De Minimis for 499Q Only 1Q 2Q 3Q 4Q Total True Up Final Quarterly Revenues 25,000 25000 25000 $25,000 $100,000 $75,000 FCC Contribution Factor 9% 9% 9% 13% 10% 11%* Annual Contribution $9,000 $9,000 $9,000 $13,000 10,000 DeMinimis Yes Yes Yes No No USF Contribution 0$ $0 0$ $3,250 $3,250 $8,250 $11,500 De Minimis for 499Q and 499A 1Q 2Q 3Q 4Q Total True Up Final Quarterly Revenues 25,000 25000 25000 $25,000 $100,000 $0 FCC Contribution Factor 9% 9% 9% 13% 10% 10% Annual Contribution $9,000 $9,000 $9,000 $13,000 10,000 DeMinimis No No No No No USF Contribution $2,250 $2,250 $2,250 $3,250 $10,000 $0 $10,000 In the above scenario a filer would be charged $1,500 more if USAC did not require companies to be both De Minimis on the 499Q and 499A. 40 www.usac.org
Audit 41 www.usac.org
Audit 2007 Form 499A Instructions: Filers shall maintain records and documentation to justify information reported in the Telecommunications Reporting Worksheet, including the methodology used to determine projections and to allocate interstate revenues, for three years. Filers shall provide such records and documentation to the Commission or the Administrator upon request. Review by the Commission or the Administrator may cover any existing corporate records, not just those specifically maintained for the three year period. Entities that acquire carrier operations through acquisition of property, consolidation, merger, etc, must maintain the records of the acquired entity. 42 www.usac.org
Audit Areas of Concern Block 3 Revenues Wholesale Revenues For the purpose of completing Block 3, a reseller is a telecommunications carrier or telecommunications provider that: 1) incorporates purchased telecommunications services into its own telecommunications offerings; and 2) can reasonably be expected to contribute to federal universal service support mechanisms based on revenues from such offerings when provided to end users. Private Line Revenues If over ten percent of the traffic carried over a private or WATS line is interstate, then the revenues and costs generated by the entire line are classified as interstate. 418 Revenues Non Telecommunications The Commission adopted two safe harbor methods for allocating revenue when telecommunications and CPE/enhanced services are offered as a bundled package.42 The first option is to report revenues from bundled telecommunications and CPE/enhanced service offerings based on the unbundled service offering prices, with no discount from the bundled offering being allocated to telecommunications. Alternatively, contributors may elect to treat all bundled revenues as telecommunications revenues for purposes of determining their universal service obligations. 43 www.usac.org
Audit Areas of Concern Subscriber Line Charges (SLC) & Universal Service Charges Federal subscriber line charges typically represent the interstate portion of fixed local exchange service. Filers without subscriber line charge revenue must identify the interstate portion of fixed local exchange service revenues in column (d) of the appropriate line 404.1-404.5. Any charge that is identified on a bill as recovering contributions to universal service support mechanisms must be shown on Line 403 and should be identified as either interstate or international revenues, as appropriate. Filers should report intrastate revenues on line 403 only to the extent that actual payments to state universal service programs were recovered by pass-through charges itemized on customer bills. 44 www.usac.org
Ecert - Common Issues 45 www.usac.org
Ecert Common Issues I can t log into Ecert. Favorites Due to security concerns the Ecert system will not let you log in if you use a link from your internet favorites list to get to the sight. If you would like to add a sight to your favorites list try one of the following links instead http://www.usac.org/hc/tools/required-forms.aspx http://www.usac.org/fund-administration/forms/ Then select E-file from the USAC Forms list on the right hand side of the page. 46 www.usac.org
Ecert Common Issues I can t log into Ecert Internet Browser The Ecert system has issues with certain internet browsers if you can not log into the system try changing your internet browser (Internet Explorer works the best) Pop-up Blocker Please make sure that your internet Pop-up Blocker is off. Common Error Messages No User ID Generally caused by either a form rejection or an uncertified form. In either case a paper form will be required to obtain a login. Login not valid Both User name and password are case sensitive. Customer Service can support questions with user name, and reset passwords. 47 www.usac.org
Ecert Common Issues Common Error Messages Not Authorized User gets a not authorized message when logging in. This is caused by an active directory issue, and users will need to contact USAC to try to resubmit the form, or open an IT ticket to have the user manually corrected. Delegated Users Delegated User forgets password Contact their delegator to have the password reset. USAC can not reset the password for delegated users. Delegated User not Authorized The delegator will need to ensure they were given the appropriate entitlements by their delegator. If the delegator feels there is a problem, the delegator must contact USAC. Inactivation or Changing of Company Officer If the Company Officer is changed or inactivated all delegated users linked to that company officer will be inactivated. 48 www.usac.org
Ecert Common Issues I can log in but I can t view any forms Adobe Please make sure that you have Adobe version 7.0 or greater. Pop-Up Blocker Please make sure that your internet Pop-up Blocker is off. USAC Customer Service 888-641-8722 49 www.usac.org