On Monday, the Federal Communications Commission’s (FCC) Enforcement Bureau released two Notices of Apparent Liability for Forfeiture (NAL) against telecommunications providers for allegedly failing to comply with Universal Service Fund (USF) obligations. Specifically, the FCC proposes to fine Blue Casa Telephone, LLC, and Compu-Phone Voice & Data, Inc. $75,000 a piece for their repeated failure to respond to information requests from USAC, the USF administrator. USAC repeatedly, over the course of several months, sought documentation that each company is required to prepare and maintain in the ordinary course of managing their FCC Form 499 compliance reporting. Neither company appears to have responded to USAC’s numerous requests and, ultimately, only provided responses to the Enforcement Bureau upon receipt of Letters of Inquiry (the opening of an FCC investigation). It appears both companies outsource some, and potentially all, of their compliance responsibilities to an outside consulting firm.
USAC administers the federal USF, collecting funds from telecommunications companies and disbursing them to providers of high-cost and rural services. Assessed companies provide quarterly and annual reports (FCC Forms 499-Q and 499-A, respectively) to determine the USF contributions owed by Form 499 Filers. Commission Rule §54.711(a) gives USAC the authority to verify any information contained in these Form 499 worksheets. Fund contributors must maintain and make available the business records necessary to calculate each company’s contribution and confirm the information reported in their Form 499s.
In both of the NALs, the Enforcement Bureau concluded that Blue Casa and Compu-Phone “apparently willfully and repeatedly violated section 54.711(a) of the Commission’s rules by failing to timely and fully respond to USAC directives.” The Commission cited both companies’ submission of incomplete USF reports in March of 2019, and alleged a failure to provide complete information, despite repeated official requests, over the next fifteen months. The two Notices made reference to previous enforcement actions over reporting deadlines and suggested willingness to bring future actions against Blue Casa and Compu-Phone, as necessary, to ensure timely and accurate data submission.
As proven out by more than 15 years and several dozen enforcement actions, and as our firm has reported on time and time again, the FCC takes USF program compliance seriously. Incomplete and otherwise imprecise compliance with the FCC’s USF program can result in costly and embarrassing consequences; and compliance includes treating USAC with respect, and by timely and fully responding to its requests (which typically start off as seemingly innocuous “ISSUE NOTICES” e-mailed to the “Preparer” and authorized “Certifying Officer” identified in Form 499s). Ignoring USAC e-mails is ill-advised and something our firm has warned could spiral into an audit, or worse yet, FCC investigation.
For companies daring enough to hand the keys to their company’s compliance to a third-party consultant (even going so far as to sign off on a power of attorney authorizing a third-party to speak/sign documents on behalf of the company), the two recent NALs can serve as a cautionary sign; perhaps even the impetus to assert greater control over the management of their compliance responsibilities. After all, pursuant to FCC precedent, placing reliance in a third-party is not a viable defense or even a mitigating factor in an enforcement proceeding. Taken all together, the two recent NALs drive home the seriousness and importance of (1) choosing a trustworthy compliance vendor AND (2) ensuring that your telecom company’s management remains engaged and involved in all critical steps of the compliance process. Always remember, the Bitterness of Poor Quality Remains Long After the Sweetness of Low Price is Forgotten.
Clients with any concerns regarding their current USF program compliance (or regulatory compliance, in general) should contact Jonathan S. Marashlian to evaluate and obtain guidance on implementing best practices, including best of breed outsourced compliance solutions, to mitigate potential exposure to a USAC audit or FCC investigation in the future. Mr. Marashlian can be reached at 703-714-1313 or by e-mail: firstname.lastname@example.org.