Selected portions of the BloostonLaw Telecom Update, and/or the BloostonLaw Private Users Update — newsletters from the Law Offices of Blooston, Mordkofsky, Dickens, Duffy & Prendergast, LLP are reproduced in this section with the firm's permission.
| BloostonLaw Telecom Update || Vol. 17, No. 18 || May 7, 2014 |
FCC to Hold Workshop on 911 Reliability Certification Process
On June 2, the FCC the Bureau will convene the workshop to seek input from stakeholders regarding the most effective method of collecting certification information for the annual 911 Reliability Certification. The workshop will include a presentation from Bureau staff on the proposed development of the certification process, followed by an interactive question-and-answer session with attendees.
In December 2013, the Commission adopted a Report and Order (911 Reliability Order) requiring certain 911 communications providers to take reasonable measures to provide reliable service, as evidenced by an annual certification. Covered entities must certify whether they comply with specified best practices or reasonable alternative measures to mitigate the risk of failure in three areas:
- critical 911 circuit diversity,
- backup power for central offices that directly serve a public safety answering point (PSAP), and
- diverse network monitoring.
If a certifying entity relies on alternative measures with respect to a certification element or believes that an element is not applicable to its network, it must provide a brief explanation for its response.
FCC Provides Guidance to USAC on the Treatment of S-Corporation Taxes
The Wireline Competition Bureau (WCB) provided letter guidance to USAC on the treatment of income taxes attributable to S corporations for purposes of high cost support and actions USAC should take when carriers do not meet document retention requirements. In the letter, the WCB clarified that income taxes attributable to S corporation shareholders as a result of their ownership of the corporation’s equity are includable in a carrier’s revenue requirement and therefore recoverable through high-cost support. According to the WCB, this guidance is in line with prior Commission actions, industry practice and comparable treatment on this issue by other regulatory agency decisions. For example, the WCB noted that the National Exchange Carrier Association (NECA) allows S corporations to receive income tax reimbursement from NECA pools and from high-cost support.
The WCB also responded to USAC’s question concerning the treatment of carriers “that did not maintain documentation for periods [audited] prior to the establishment of the High-Cost Program documentation rules,” in section 54.202(e) of the Commission’s rules. In January 2008, section 54.202(e) of the FCC’s rules became effective, which requires recipients of high-cost support to retain, for at least five years, all records required to demonstrate to auditors that the support received was consistent with the high-cost program rules. USAC sought guidance on whether it should take any remedial action against carriers that did not maintain documentation before the rule became effective.
The WCB clarified that USAC should not take any action against carriers that did not retain documents during time periods when the document retention rule was not in effect” absent evidence of waste, fraud and abuse.” However, where such evidence is present, then “USAC should take further action to ensure the integrity of the Fund.” The WCB stated that factors indicated waste, fraud and abuse could include:
- evidence of non-compliance with other statutorily- or regulatory-mandated document retention requirements ( e.g., document retention requirements to support the account balances in the Part 32 Uniform System of Accounts, continuing property records, pole attachment calculations, plant equipment age, cost, or useful life, depreciation rates);
- fraudulent representations;
- corrupt administrative processes; or
- any other suggestion or indication of waste, fraud or abuse.”
According to the WCB, in such instances “USAC should work in consultation with appropriate Commission staff in the Wireline Competition Bureau, Office of Managing Director, Enforcement Bureau, and Office of Inspector General to take appropriate action, including, but not limited to, further review of relevant funding requests and recovery of funds disbursed in violation of a Commission rule that implements the Communications Act of 1934, as amended, or a substantive program goal.”
Law & Regulation
FCC Plans $3.96 Million Fine for Switching Customers’ Services, Illegal Billing Practices
In a Notice of Apparent Liability for Forfeiture released on May 5, 2014, the FCC announced that it plans to fine Central Telecom Long Distance, Inc. $3.96 million for allegedly deceiving consumers to switch their long distance service, billing customers for unauthorized charges, and failing to clearly and plainly describe charges on customers’ bills. Many of these actions allegedly victimized elderly and disabled consumers. Over 100 consumer complaints were filed against Central. The company is a non-facilities-based inter-exchange carrier authorized to provide service in 32 states.
The FCC alleges that telemarketers for Central, an Irvine, CA based company, tricked consumers into believing that the telemarketers were calling on behalf of the consumers’ existing telephone companies, then changed the consumers’ preferred carriers to Central without their authorization (a practice known as “slamming”). Many consumers stated in their complaints that they had never heard of Central or did not intend to sign up for its services. In other instances, Central allegedly violated the FCC’s truth-in-billing rules by failing to plainly describe the charges on its customers’ telephone bills.
“Deceptive marketing practices are bad enough, but when a company preys on our most vulnerable communities, that conduct goes from unacceptable to reprehensible,” said Travis LeBlanc, Acting Chief of the Enforcement Bureau.
In many instances, the FCC contends that Central and its representatives appear to have exploited elderly or disabled consumers’ obvious confusion and inability to understand the sales pitch they heard and the questions they were asked. The FCC emphasized that this conduct was “particularly egregious,” and it noted that a sizable fine was warranted in part because of the “substantial harm” that Central caused to the public. One particular complaint was filed on behalf of a deceased elderly grandmother whom Central continued to bill for months after she died and even after her telephone was disconnected.
FCC Plans $11.9 Million Fine for TRS Fraud
In a Notice of Apparent Liability for Forfeiture released on May 2, 2014, the FCC proposed to fine Purple Communications, Inc. $11.9 million, alleging that the company improperly billed the Telecommunications Relay Service (TRS) Fund, a government fund designed to support communications access for people with hearing and speech disabilities.
The FCC determined that the Rocklin, CA company sought and received millions of dollars in reimbursements from the TRS fund for more than 40,000 customers with names that were so clearly false and-nonsensical that they could not have been the actual names of eligible users, including names like “sdfsdf cicwcicw,” “ Myname Yourname,” and “Lot$a Money.” Many of the names were characterized by the FCC as appearing to be “gibberish, random keystrokes, vulgarities, or otherwise self-evidently false names.” Federal law requires that TRS providers verify the names and mailing addresses of their users.
“Purple’s actions have threatened the integrity of a fund that is designed to help persons with hearing and speech disabilities make phone calls,’’ said FCC Enforcement Bureau Acting Chief Travis LeBlanc. “This is not only a misuse and waste of government resources, but it comes at the expense of a community that relies on this fund for basic communications needs. We have zero tolerance for this type of abuse.”
The FCC alleges that Purple billed the TRS Fund for calls by more than 40,000 registrants with obviously false names. The proposed fine is based in part on the amount that Purple received from the TRS Fund from June 2010 through January 2011 for the false name users. The FCC also intends to require Purple to reimburse the TRS Fund for the improperly billed amounts.
To protect the TRS Fund from waste, fraud, and abuse, the FCC requires TRS providers to use a reasonable process to verify the name and mailing address of potential TRS users, and support reimbursement requests with true and adequate data to justify payment. It alleges that these things were not done in this case.
FCC Announces Unused E-Rate Fund Carry-Forward
By way of Public Notice released May 2, 2014, the FCC’s Wireline Competition Bureau announced that $200 million of the $600 million it has in unused E-Rate funds will be carried forward in order to meet the estimated demand for eligible ‘priority one’ funding requests received from schools and libraries in Funding Year 2014 in excess of the annual cap.
According to USAC’s projections, $600 million in unused funds from previous funding years is available to carry forward to increase disbursements to schools and libraries via the E-rate program, more formally known as the schools and libraries universal service program. The FCC’s rules require that all funds collected that are unused must be carried forward into subsequent years, notwithstanding the annual cap.
The funding cap for 2014 is $2,413,817,693, but the estimated demand (according to USAC) is $4.825 billion. This includes an estimated $2.630 billion for so-called ‘priority one’ services (telecommunications, telecommunications services, and Internet services). Since another $200 million above the $2.4 billion cap would be necessary to meet the estimated demand for priority one services, the FCC has decided to use a portion of the $600 million carry-over for that purpose.
The FCC has not announced how the remaining $400 million would be used, or what will happen to non-priority one funding requests.
Mozilla Files Petition to Recognize Remote Delivery as Telecommunications Services Under Title II
On May 5 Mozilla, creator of the Internet browser FireFox, filed a petition for rulemaking with the FCC that would have the agency classify remote delivery services as telecommunications services covered by Title II of the Communications Act.
Specifically, Mozilla’s petition asks the FCC to:
- Recognize that the enabling of communications within a last-mile terminating access network between a remote endpoint and the local subscribers of an Internet access service provider constitutes a delivery service provided by that Internet access service provider to that remote endpoint; and
- Declare such a service to be a telecommunications service subject to Title II of the Communications Act.
According to Mozilla, “this action will help preserve the future of technology innovation online, particularly for online video communications and smartphone applications and services.”
Mozilla justifies the application of Title II on the grounds that remote delivery services include the transmission of communications, with no other integrated functions. “They are offered to all remote Internet hosts, a class that includes anyone with an Internet connection in the peer-to-peer, many-to-many Internet we have today, where anyone can be a maker, not merely a consumer. Thus, their proper classification is as telecommunications services subject to Title II,” the Petition suggests.
In a blog post on the Petition, Mozilla responded to buzz about its Petition by emphasizing that, “[it is] not asking the FCC to apply Title II to peering and interconnection, only last mile remote delivery services,” and “[the petition] would not impose obligations on technology companies, but instead would safeguard them by clearly delineating services.”
May 9 – Reply comments are due on Grain Management, LLC Petition for Clarification.
May 12 – Comments on Petitions for Waiver of Rural Call Completion are due.
May 13 – Comments on Revisions to Appendix C of Rural Call Completion rules are due.
May 19 – Reply comments on Petitions for Waiver of Rural Call Completion are due.
May 29 – Comments are due on the short form Tariff Review Plans.
May 31 – FCC Form 395 (Employment Report) is due.
Jun. 16 – ILEC Tariff filings made on 15 days' notice are due.
Jun. 23 – Petitions to suspend or reject tariff filings made on 15 days' notice are due.
Jun. 24 – ILEC tariff filings made on 7 days' notice are due.
Jun. 26 – Replies to petitions to suspend or reject tariff filings made on 15 days' notice are due.
Jun. 26 – Petitions to suspend or reject tariff filings made on 7 days' notice are due.
Jun. 27 – Replies to petitions to suspend or reject tariff filings made on 7 days' notice are due.
Jul. 1 – FCC Form 481 (Carrier Annual Reporting Data Collection Form) is due.
Jul. 1 – Mobility Fund Phase I Auction Winner Annual Report is due.
Jul. 31 – FCC Form 507 (Universal Service Quarterly Line Count Update) is due.
Jul. 31 – Carrier Identification Code (CIC) Report is due.