FCC Slams IK Communications with a $100,000 Fine for Failure to Respond to LOI and Failure to File 499-A Forms Over 6 Years

On Thursday, February 17, 2022, the Federal Communications Commission (FCC) released a Notice of Apparent Liability for Forfeiture (NAL) that detailed the proposed penalty assigned to IK Communications, a New Jersey-based prepaid calling card provider, for failure to file annual Telecommunications Reporting Worksheets (Worksheets) with the Universal Service Administrative Company (USAC) to support the FCC’s universal service programs. The FCC recommended a fine of $100,000 for violations spanning from 2015 to 2021.

Service providers that contribute to USF must file an Annual Worksheet (FCC Form 499-A) and, in some cases, a Quarterly Worksheet (FCC Form 499-Q). Annual worksheets are due by April 1 of each year while quarterly worksheets are due by February 1, May 1, August 1, and November 1 each year. The information contained in these worksheets must be truthful, timely, and complete.

Filing annual Worksheets with USAC helps determine the provider’s contribution responsibilities for the Universal Service Fund (USF) and other federal funding mechanisms. The administrators of these funds as well as the FCC rely on these Worksheets to assess fair and accurate fees owed by the provider. The FCC states that failing to file these Worksheets accurately and in a timely manner undermines the Commission’s goal of promoting universal service through USF.

According to the FCC NAL, IK Communications has not filed an Annual Worksheet since 2015. USAC sent a Letter of Inquiry (LOI) to IK Communications concerning the missing Worksheets, but the company did not respond. An LOI constitutes an FCC Order, and failure to respond is a violation of said Order. Accordingly, the FCC determined that IK Communications “apparently, willfully, and repeatedly” violated FCC rules by failing to submit Annual Worksheets and by failing to respond to the LOI. The Commission has proposed a fine totaling $100,000 for these violations.

The base fine for failure to file Annual Worksheets is $3,000, but the FCC is entitled to adjust the forfeiture upward for “egregious misconduct, ability to pay and relative disincentive, an intentional violation, substantial harm, prior violations of Commission requirements, substantial economic gain, or repeated or continuous violations.” Because of the importance of Annual Worksheets in conducting the USF and other provider-contributed funds, the FCC has historically imposed a fine of at least $50,000 for failure to file this Worksheet. Each missed Annual Worksheet deadline is a separate violation, but the fine only encompasses the most recent missed deadline as previous violations fall outside of the statute of limitations. The Commission imposed an upward adjustment of $25,000 on IK Communications because of the repeated nature of IK Communications’ violations over six years. The remaining $25,000 fine stems from IK Communications’ failure to respond to the LOI, which typically carries a base forfeiture of $4,000.

Annual and Quarterly Worksheets are due again on April 1 and May 1, respectively. Don’t end up like IK Communications – saddled with a huge fine over a handful of missing forms. Our experienced attorneys can assist your company in reviewing, preparing, and filing these forms. Contact Michael Donahue at mpd@commlawgroup.com or (703) 714-1319 for more information.

As we previously advised, companies that are reactive (rather than proactive) regarding their FCC requirements can become subject to Enforcement Bureau investigations and exposed to significant penalties for other violations beyond the initial issue of late 499 Registrations.

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