Trends in wireline and mobile services strongly suggest a refresh to the FCC Forms 499-A/Q is in order. For purposes of brevity, this entry focuses on the Form 499-A. While changes to the forms do not address the challenge of a declining USF revenue base and an accelerating contribution factor or answer long pending USAC requests for guidance to the Wireline Competition Bureau (“the Bureau”), a shift to fewer revenue buckets (categories) aligned with the major services currently provided to customers could reduce the time for services providers to prepare Forms 499-A and for USAC staff to review forms or conduct audits. Other incremental steps are also suggested.
Consumers increasingly purchase service in bundles:
- Wireless bundles: Voice, text and data (Internet access service); occasionally, voice-only
- Wireline bundles: Voice, data and video: data and video; or increasingly data-only
Voice services are assessable services. High speed Internet access and multi-channel video programming services are not. The FCC has declined to classify text messaging as telecommunications, a telecommunications service or an information service. Interconnected VoIP is rapidly displacing circuit switched wireline voice services. Switched access service revenues are approaching inconsequential status.
The all-distance bundles for wireline voice services may encompass unlimited domestic calls and unlimited or an allotment of international minutes to select countries with the overage billed on a per minute basis, as service to other countries, tracking closely mobile voice service pricing schemes. International calling card revenues remain cognizable. Payphone services revenues are not.. The same is true for Line 405 revenues (subscriber line charge and certain PICC charges). The latter can be added to the voice services bucket.
The utility of separate USF reporting categories for wireline voice services, depending on how they are priced, is not apparent. The same is true for mobile voice service revenues; distinguishing between prepaid and postpaid voice revenues is irrelevant for determining USF assessable revenues. The relevant USF considerations are (1) apportioning revenues between assessable voice services from the revenues from bundled non-assessable services and products and (2) determining the proper jurisdiction.
The revenues for wireline voice services (increasingly interconnected VoIP) provided to small businesses, many educational institutions, libraries and not-for-profits, and many local governments (collectively “SMB customers”) are principally wireline voice (intrastate, interstate, and international, both outbound and inbound (toll free)), and high speed Internet access service. These services are often priced separately, posing less of a revenue apportionment challenge.
Enterprise customers often obtain a broader mix of services that include
- Voice services (local, outbound and inbound (toll free), increasingly interconnected VoIP), with multiple pricing options
- Special access services
- Private line services
- Other non-Internet data services, such as MPLS-based services
- High speed Internet access services
Enterprise customers, including the Federal government and many state governments, will have significant international revenues.
Enterprise voice services revenues would be added to a services provider’s voice services revenue category; for enterprise voice services, the principal USF consideration is assignment to the correct jurisdiction (intrastate, interstate, international or foreign). The same is true for special access and private line services. Special access services are sold to wireless carriers and, principally, to wireline services providers that resell the services to end users. Special access services should be reported separately from private line service, consistent with industry practice of offering and charging for these services separately.
Private line service should be reported on one line as the distinction between “local’ and “toll” private line services is both confusing and irrelevant. The critical issue for private line and special access services is determining the correct jurisdiction. For physically intrastate private lines and (almost all) special access circuits (having endpoint within a single state), services providers must consider the 10% de minimis rule to determine the jurisdiction of these services. The Bureau addressed several longstanding requests for review of USAC determinations involving the 10% de minimis rule in its 30 March 2017 Memorandum and Opinion and Order, but the decision is subject to applications for review.
An addressable issue raised in the 2012 USF Contribution Reform Further Notice of Proposed Rulemaking is the disparity between the “safe harbors” for interstate/international mobile service (37.1%) and interstate/international VoIP service (64.9%) on the one hand, and the noticeably lower reported values provided by the services providers (based on actual traffic or traffic studies) for these services on the other. A review of how the Commission set the mobile service safe harbor highlights the need for a refresh.
The Bureau could readily take the pragmatic step and conclude the process (or refresh the record) to align the safe harbors with services providers’ reported data either actual or based on traffic studies. This could reduce administrative burdens for services providers and for limited USAC staff resources.
Despite the trend in USF-support being extended increasingly to non-assessable high speed Internet access service, the instructions for Line 308 could be expanded to identify (i) all USF-supported programs, and (ii) the portions of providers’ revenues from supported services per program that should be reported as end-user revenues. This is preferable to reliance on abbreviated answers in USAC FAQs, particularly as more services providers are and will be receiving USF funds going forward as compared to 2015 and previous years.
Finally, a “Line 418.5” could be added to identify the revenues for high speed Internet access service provided within the United States. It merits reporting as it is such a large component of many services providers’ aggregate revenues.