FCC Imposes Record Fine on PayG, LLC for Failure to Pay Universal Service Fund Contributions
The Federal Communications Commission (FCC) today released Notice of Apparent liability for Forfeiture (NAL), which would fine PayG, LLC almost $1.5 million for underpaying and failing to timely pay Universal Service Fund (USF) contributions between 2018 and 2021. During this time, the FCC charged that PayG not only failed to fully pay its required contributions in a timely manner but also inaccurately filled out its Annual Worksheets by underreporting annual revenue and failed to respond to at least six Commission document requests.
The PayG NAL is notable because of the new and more expansive damage calculation used by the FCC. Since 2015, the FCC has used a “treble damages” rubric to assess forfeitures for violations of payment requirements for the Universal Service Fund (USF), Telecommunications Relay Service (TRS) Fund, Local Number Portability (LNP), North American Numbering Plan (NANP), and federal regulatory fees. This rubric was laid out in the 2015 Forfeiture Policy Statement. The Statement, in turn, drew on the damage rules established in the Globecom Forfeiture Order of 2003. However, the FCC departed from this statement in assessing PayG and vacated the Forfeiture Policy Statement in a separate memorandum also published on May 30.
The FCC instead assessed PayG based on a total evaluation of the nature of its conduct and the circumstances of its underpayment to match the resulting forfeiture to the specific acts. Citing “repeated” underpayment or nonpayment over the course of all or parts of four years, the FCC labeled PayG’s conduct as “egregious,” resulting in “substantial” harm to the USF and its cost recovery program. While the FCC found a total USF worksheet payment violation by PayG of $338,702, it has assessed a forfeiture of $1,138,702, nearly four times as much. The FCC further found that PayG had underpaid its TRS contributions by $61,383 and assessed a forfeiture of $261,383, more than four times as much as the underpayment. Including an additional fine for NANP payment violations, the FCC assigned PayG a total forfeiture of $1,460,085. This total is significantly higher than what would have been assessed under the Forfeiture Policy Statement.
These forfeiture totals should be understood as the FCC taking action against a company which it considers to be a long-time and egregious violator of USF, TRS, and NANP fee and assessment systems, as well as a demonstration of the FCC’s greater flexibility with forfeiture assessment now that it has ended the “treble damage” model in use for the last twenty years. The FCC will likely be more aggressive in its fines until it reaches the level of deterrence it is seeking. Furthermore, these fines and forfeitures are likely to be less predictable as they will be tailored to individual corporate circumstances rather than a flat percentage model. Telecommunications companies are advised to pay more attention than ever to making sure that their revenues match what is reported and that it is current and complete on all compliance obligations.