ATTENTION INTERNATIONAL CARRIERS! Concerned About the LIRE? Your TRS Contributions Too High?

If you’ve operated in the telecom industry at any time over the past decade or so, it’s a safe assumption your company has experienced its fair share of frustrations regarding the Universal Service Fund program.  Whether it’s the FCC’s unwillingness to provide clear guidance or take action to address legitimate grievances with the administration of the program or the Universal Service Administrative Company’s (“USAC”) rigid and unforgiving enforcement of the all too often unclear or inequitable FCC rules, there’s been no shortage of justifiable criticism of both the FCC and USAC regarding their administration of the USF program. 

Yet as frustrating as it has been, there is no legitimate excuse for ignoring an inequitable situation or relying on hope that USAC or the FCC will be sympathetic if your company’s ticket is punched.  Sooner or later, sitting on your hands or taking the “head in sand” strategy are going to result in painful consequences for your business.  This is particularly true with regard to a specific exemption that has been historically very favorable to providers of predominantly international long distance services – you guessed it, the Limited International Revenue Exemption or “LIRE.”

If you are not familiar with the LIRE or if you are and you are not impacted, you can stop reading!  If you aren’t paying USF and Title II contributions on foreign-billed revenue (revenue billed to a customer outside the U.S.), you can stop reading!

If the LIRE is important to your business and the loss of LIRE eligibility would result in a ten-fold increase in your company’s annual USF contributions or if you’re paying contributions on revenue from foreign-based, foreign-billed customers, you’ll want to continue on. 

As our firm has done on numerous occasions in the past, we continue to identify systemic inequities in the course of our representation.  Quite often, as here, the troubling “rules” and “interpretations of rules” seem to impact our international carrier clientele.  The three thorny issues we’re honing in on now are:

  1. The LIRE threshold (88% international to 12% interstate) has failed to keep pace with the ever-increasing quarterly USF contribution factor, which now consistently exceeds 17%, thus justifying (in our view and in line with judicial precedent that led the FCC to create the LIRE) an across the board increase in the LIRE threshold to 80% international to 20% interstate);
  2. The inclusion of foreign-billed revenue in the TRS and USF fund contribution base; and
  3. With respect to the TRS Fund:
    1. Lack of LIRE or LIRE-like exemption
    2. Inclusion of transit/traversing traffic in the contribution base

Because no service provider wants to put the bullseye on their back, concerns regarding USF program administration inequities have often gone unaddressed at the FCC.  Which is why we formed the Ad Hoc Coalition of International Telecommunications Companies (“Coalition”) many years ago.  The Coalition affords impacted service providers the benefit of anonymity, while also being able to air their grievances publicly, explain the inequities in formal FCC filings, and if and when it becomes necessary to mount a legal defense, express some degree of reliance on the fact that certain “unclear” rules are subject to a pending petition.  For example:

The Coalition identified the second issue summarized above in a Petition for Declaratory Ruling, filed back in 2009 (which remains pending before the FCC).  You can read the Petition here:  Petition.  By refreshing the record and raising the issue yet again, it demonstrates to the FCC and, potentially, a reviewing court, that the FCC has alerted to the confusion and failed to provide guidance to the industry when it had ample opportunity to do so.

The Coalition has also been active in seeking TRS reform.  See, for example: https://ecfsapi.fcc.gov/file/7521150764.pdf and https://ecfsapi.fcc.gov/file/7521745073.pdf

The Coalition is now actively seeking support to raise the three issues summarized above in a new Petition for Declaratory Ruling.  We’re asking for your support in this effort.

A draft outline of the arguments we plan to raise in the Petition follows: 

  • Introduction
    • Introduction to Ad Hoc Coalition and its mission (the ex parte linked here includes a number of links to relevant ACITC filings, including an introduction to the ACITC and its mission. https://ecfsapi.fcc.gov/file/7021977504.pdf)
    • Summary of Issues
  • USAC/FCC Lack Jurisdiction over Foreign Carriers
    • Refresh arguments in Second Petition for Declaratory Ruling: https://ecfsapi.fcc.gov/file/7020037544.pdf
      • No jurisdiction over foreign carriers
      • USF/TRS limited to “domestic” end-user revenue (47 C.F.R. § 54.709)
      • Foreign-billed revenue should be exempt from USF/TRS
    • Fairness
      • Minimally, the FCC should increase the LIRE threshold to match the FCC contribution factor (e.g., 80:20)
      • Petition for Waiver is not a viable option when petitions before the FCC languish for years
  • TRS

You do NOT have to join the Coalition in order to support our firm’s filing and prosecution of the Petition.  You do NOT even HAVE to pay our firm any fees (although you are certainly welcome to contribute financial support below, it is not imperative that you contribute).  You do not even have to be identified by name in the Petition or anywhere else, if you so choose.  All we really need is for you to indicate that you support the Petition and stand behind the objectives of the ACITC, as described in the Petition.

Now, would our firm appreciate some financial support?  Of course we would.  After reading the draft outline and considering the objectives we seek to attain thereby, if you feel compelled to back the Coalition and provide financial support (we are seeking a minimum commitment of $250), let me know and I will contact you to work out arrangements. 

If you are interested in supporting the Petition (with or without financial backing), please contact jsm@commlawgroup.com or 703-714-1313.

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