Ad Hoc Coalition Comments on Network IP Proceeding

In June 2009, Network Enhanced Telecom, LLP ("NetworkIP") filed a request with the Federal Communications Commission ("FCC" or "Commission") for review of the findings of a 2008 Universal Service Administrative Company ("USAC") audit.  In its request, NetworkIP challenged USAC's instructions directing NetworkIP to reclassify certain revenues reported as wholesale revenue as end-user revenue, subject to Universal Service Fund  ("USF") contribution obligations.  The Ad Hoc Coalition of International Telecommunications Companies ("Coalition") believes that this forced reclassification of wholesale revenue as "end-user" retail revenue is unreasonable and unlawful, and it filed comments supporting NetworkIP's request for the following reasons.

First, USAC improperly interpreted the FCC's Carrier's Carrier Rule and exceeded the scope of its administrative authority when it rejected NetworkIP's documentation of compliance with the Carrier's Carrier Rule.  Further, USAC wrongfully allocated NetworkIP's prepaid calling card revenues to contribution-eligible end-user revenues.  All of USAC's actions with regards to its 2008 audit of Network IP conflict with the language of the FCC's rules, contravene Congress' intent, and result in unlawful substantive changes to FCC regulations in violation of the prescriptions of the federal Administrative Procedures Act.

Specifically, USAC's instructions directing providers to report prepaid calling card revenue at face value contravene the FCC's rules and underlying rationale for those rules.  They unfairly discriminate against prepaid calling card providers and result in overstatement of their contribution obligations under Commission rules.  Finally, this "face-value" reporting method is inconsistent with generally accepted accounting principles and imposes substantive burdens on prepaid calling card providers which are not imposed on providers of nearly identical toll services on a postpaid basis.

The Coalition's Comments are available for review here.

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