FCC Proposes Changes to Form 499; Noteworthy Among the Proposed Changes, System Integrators Reselling “Traditional” Telecom Services Would Be Required to Register, File 499s, Report Revenue, and Contribute to Title II Programs (TRS, LNP, NANP) for the First Time

On July 1, 2021, the Federal Communications Commission (“FCC” or “Commission”) released a Public Notice proposing changes to the 2022 FCC Form 499-A, 499-Q, and accompanying filing instructions.  Proposed clarifications/edits to the Form 499 include the following (review closely, as some of the changes may be impactful on your company — in particular, if your company has historically been exempted from 499 registration, reporting, and Title II program contributions as a qualified “systems integrator” whose revenue from the resale of “traditional telecommunications” comprised less than 5% of total systems integration revenue):

  • Page 7 is updated to clarify that a de minimis provider may still have an indirect contribution obligation through USF pass-through fees assessed by an underlying wholesale provider.
  • Page 9 is updated to clarify that systems integrators have an obligation to file the Form 499-A even if they do not have a USF contribution obligation because they may have an obligation to contribute to other support mechanisms (TRS, NANPA, or LNPA).
  • Page 14 is updated to clarify that traffic studies also include international revenues.
  • Pages 24 and 29 are updated to clarify that non-USF revenues received as support from the federal or state governments may be reported on Line 308, including from programs such as the Emergency Connectivity Fund, Emergency Broadband Benefit Program, and the COVID-19 Telehealth Program.
  • Page 34 is updated to clarify that any charge identified on a bill as recovering contributions to state universal service support mechanisms must be shown on Line 403 and included in column (a) in the total.
  • Page 34 is updated to clarify that Line 418 includes revenue from the provision of broadband transmission service offered on a common-carrier basis by rate-of-return carriers that are exempt from contribution obligations on those services pursuant to Commission order.
  • Page 39 is updated to clarify that reseller certifications must be signed by an employee of the customer rather than a third-party representative or consultant.
  • Page 41 is updated to clarify how filers should report good-faith estimates of interstate and international revenues, consistent with USAC’s E-file system configuration requirements, which does not support figures reported in percentages.
  • Page 42 is updated to clarify that a safe harbor can be applied to revenues reported on Line 311.
  • Page 51 is updated to provide an active link for other common filing requirements for telecommunications carriers and other providers of interstate telecommunications.

The outcome of this proceeding could impact future funding mechanisms for the Commission’s universal service programs, interstate telecommunications relay services, and other regulatory programs. 

Significantly, the FCC proposes expanding the class of required FCC Form 499-A filers to include system integrators (not just systems integrators reselling Voice over Internet (“VoIP”) services). This is a substantive change that would subject an entire ecosystem of businesses, such as managed service providers, channel partners, and distributors, to regulatory fees of close to 5% on interstate revenue. The FCC proposes revising the Form 499-A Instructions to clarify that systems integrators have an obligation to file the Form 499-A because they may owe contributions to the so-called “Title II” programs (TRS, NANPA, or LNPA). The emphasis, however, remains on the “may” in “may be required” because the determination whether contributions/support payments are owed “may” depend on whether or not a company qualifies as a private carrier, as opposed to a common carrier. The determination whether a particular service is or is not a private vs. common carriage offering is highly dependent on individualized facts; it is advisable to seek legal advice to help determine how the proposed clarification/change to the Form 499 impact your business given the complexities, nuances, and potentially material economic effects of the changes, particularly those impacting systems integrators.

Public comments on the proposed changes are due August 2, 2021. The FCC encourages interested parties to file electronically using the Commission’s Electronic Comment Filing System, but paper filings will be accepted.

If you have any questions or concerns about the proposed changes or are interested in filing comments in the proceeding, please contact Jonathan S. Marashlian at (703) 714-1313 or jsm@commlawgroup.com.

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