Tucked inside a semi-annual report released over the holidays, the FCC’s Inspector General revealed that its most recent round of audits of the Universal Service Fund included, for the first time, an effort to identify entities that failed to contribute to the fund. The IG contracted with an independent accounting firm to compare state PUC listings of active telecom companies with the USAC 499 filer database.
This led to 50 letters sent in September 2009 to companies that had not filed a 499-A. Of these 50 targets, 23 had responded by the end of the reporting period (Sept. 30). The other group — slightly more than half — had not yet responded to the IG’s letter. However, this sample was taken from only six states. The IG estimates that as many as 1,000 non-filing companies may exist in 32 states.
Although the IG lacks enforcement power, potential targets of the IG effort should be cautious. The IG likely will refer non-filers to the FCC’s Enforcement Bureau, where they could be subject to substantial penalties after an Enforcement Bureau investigation. For example, in January 2009, the FCC proposed a fine against a small provider that filed four months late in the year that it slightly surpassed the de minimis threshold for contributions. The FCC’s proposed fine was $672,000, even though the highest amount of USF owed was alleged to be $22,000.
With respect to its contributor audits, the IG reports that 12 audits conducted in 2009 are close to resolution. According to the IG, three of the audits conclude that a wholesale carrier overstated reseller revenues. This has been a frequent subject of USF appeals, leading to one FCC decision in August 2009 (now subject to an application for review) and a half dozen other appeals pending before the FCC. It appears that more are on the way.