FCC Overrules USAC on USF Application to T-1s

The Wireline Competition Bureau of the FCC has overruled a USAC finding that an internet services provider should pay universal service fund assessments on T-1s that the company uses to provide internet access and voice services. The order is available here. In U.S. TelePacific Corp. the Universal Service Adminstrative Company concluded that revenues received by TelePacific Corp from its sale of internet access services, sometimes coupled with voice service, should be subject to assessment for universal service fund contributions. According to the Bureau, USAC had reached its finding ​“solely because the facilities (T-1 lines) ... are typically used for basic transmission service.” The Bureau reversed this conclusion, stating that even though TelePacific was utilizing T-1 lines it ​“is not required to make contribution based on revenues from sales of [internet access] service.”

Notably, the Bureau did not decide an ancillary question raised in the proceeding -- whether TelePacific should have contributed indirectly to the federal universal service fund on T1 wholesale inputs purchased from incumbent LECs. Instead, the FCC instructed TelePacific to take two further actions within 60 days. First, it requested a ​“detailed explanation of the methodology by which TelePacific apportions revenues derived from its sale to end users of voice telephony...and how it reports such revenues” on its USF forms. TelePacific represented in the inquiry that it allocates its revenue among the services it sells and pays into the universal service fund on the amounts attributed to voice services. Second, TelePacific was told to ​“provide USAC with the names and contact information of its wholesale providers of transmission services within 60 days .., so that USAC can assure that all contributions to universal service are promptly paid.” In a footnote, the Order explains that TelePacific may have erroneously certified itself as a resale carrier to its wholesale vendors which, in turn, ​“may have impacted the amount of revenues that TelePacific’s wholesale provider reported.”