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498/499 Spotlight - April 2016

Upcoming deadlines, compliance tips, and more

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498/499 Spotlight Quarterly Newsletter

2nd Quarter 2016

In this issue...

 

Deadlines   |   Revenue Reporting   |   Did You Know   l   At the FCC

 

DUE ITEM More Details
April 15 Universal service contributions Making Payments
May 2 FCC Form 499-Q File FCC Form 499-Q
May 13 Universal service contributions Making Payments
June 15 Universal service contributions Making Payments

 

Report Revenues on FCC Form 499-Q by May 2, 2016

Each quarter, all telecommunications carriers and all interconnected VoIP providers that are not de minimis and thus required to contribute directly to the Universal Service Fund must file the FCC Form 499-Q (Telecommunications Reporting Worksheet) with USAC.
 
The FCC Form 499-Q is used to collect carrier revenue information and to determine the carrier's universal service contribution obligation for the upcoming quarter.
 
Universal service contributors with access to the Internet must submit their FCC Form 499-Q using E-File. Users can pull up historical forms, edit and submit changes, and certify online.
 
If you have questions about the revenue you are reporting on your form, or the dates listed here, call USAC's Customer Operations team at (888) 641-8722.


2nd Quarter 2016 Contribution Factor Decreases to 17.9 Percent

The FCC released a Public Notice (DA 16-266) announcing that the proposed universal service fund contribution factor for the second quarter (April-June) of 2016 will be 0.179, or 17.9 percent.

 

 

Contact Us

We are here to support you! Visit the Contact Us page and let us know how we can help you.

 

Revenue data you will provide on the May FCC Form 499-Q

Actual billed revenue from January 1 - March 31, 2016, on lines 115 - 118

 

Projected billed and projected collected revenue from July 1 - September 30, 2016, on lines 119-1120

May FCC Form 499-Q revision deadline June 15, 2016
Resulting USAC invoices

Based on the July 1, 2016 - September 30, 2016, projected collected revenue reported:

 

Invoices issued in July, August, September 2016

Payments due in August, September, and November 2016

 

De minimis carriers do not need to complete FCC Form 499-Q. Visit the De Minimis page on the USAC website to find out if your company qualifies as de minimis.

Revising the Online FCC Form 499-Q Experience

While the form fields for the FCC Form 499-Q don't change much from year to year, USAC is in the process of redesigning the online interface for how carriers enter your information and move through the form. Here are some of the changes we’re planning (just to name a few):
  • A revised layout of the current input fields,
  • Improved functionality that is (hopefully) more intuitive and user-centered, and
  • An "in-form" review capability (as opposed to being able to review only at the end).

Do you have thoughts about how to improve the form filing experience? USAC would love to hear from you! Our target timeframe for updates is November of this year, and we need your input to make this project successful.

 

If you would like to participate in giving feedback on the design process, please contact us as soon as possible. Many thanks in advance for helping us improve!

Revisions and Changes to Revenue Reporting on the 2016 FCC Form 499-A

So you've successfully navigated the annual FCC Form 499-A filing requirement! What happens next?
 
Shortly after the April 1 deadline, automated programs run through the submitted forms and do standard checks to ensure that lines are filled out accordingly on each form. If the form is flagged, a USAC analyst will review the form and may contact the filer if there are additional questions that require further conversation.
 
Filers are allowed to revise their forms at any time during the year. But note that changing your contribution revenue may cause a change in the amount of Universal Service Fund support you are responsible for contributing. In other words, your monthly statements could change!
 
If you have any questions about this process, or already know you need to submit a revision, be sure to contact USAC right away.

The Bottom Line: Reporting Your Reseller Revenues

Definition:

The FCC has defined a "reseller" as a telecommunications carrier or telecommunications provider that:

 

(1) incorporates purchased telecommunications into its own offerings; and

(2) can reasonably be expected to contribute to federal universal service support mechanisms based on revenues from those offerings.

 

Specifically, to report your revenues as reseller revenue in Block 3 of the FCC Form 499-A, the customer must be:

  1. Purchasing service(s) for resale, at least in part, and that the company is incorporating the purchased services into its own offerings which are, at least in part, assessable U.S. telecommunications or interconnected VoIP service; and
  2. Either directly contributing or has a reasonable expectation that another entity in the downstream chain of resellers directly contributes to the federal universal service support mechanisms on the assessable portion of revenue from offerings that incorporate the purchased services.

Each of these conditions must be met if you intend to report your revenues from other carriers as reseller revenue in Block 3 and, therefore, have that revenue exempt from your universal service contribution base:

 

First Condition

The first condition states that the customer is incorporating at least a part of the service that it is purchasing into its own telecommunication offering.

 

Example 1

If a customer purchases a T1 circuit, they will meet the first part of the definition if they are using at least part of the circuit for voice or other assessable telecommunications services.

 

They will not meet the first part of the definition, however, if they are using 100% of the circuit for internal purposes or are reselling it as internet or part of an enhanced product.

 

As you can see, the same reseller customer can be treated as both a reseller and an end user, depending on the purpose of the circuits that they are purchasing.

 

Second Condition

The second condition states that either the customer or another entity in the downstream chain of resellers directly contributes on the revenues for that service. This difference is crucial, because the FCC expects you to collect the USF from a reseller of your services who is de minimis.

 

Example 2

If the same customer purchases another T1 circuit but is not a direct contributor and not a direct contributor, then they will not meet the second part of the definition. All the services purchased by the customer, even the ones being resold as 100% telecommunications, must be reported as end-user revenue in Block 4 of the form.

 

Procedure

Your company must demonstrate that it has a reasonable expectation that the revenues it reports as reseller revenue are for services that meet both parts of the definition. This process must also be repeated every year. The FCC has provided a safe harbor procedure in the FCC Form 499 instructions that includes the following steps:

  1. You must have, at a minimum, the following information about your resellers:
    • 499 Filer ID
    • Legal name
    • Legal address
    • Name of contact person
    • Phone number of contact person
    • Annual certification by the reseller regarding its reseller status (described in item 2 below)
  2. Annual Certificates. A filer may demonstrate that it had and has a reasonable expectation that a particular customer is a reseller with respect to purchased service(s) by providing a certificate signed each calendar year by the customer that:
    • Specifies which services the customer is or is not purchasing for resale pursuant to the certificate; and
    • Has wording consistent with the following language, which comes from the 2016 instructions, pages 37 – 38:

      I certify under penalty of perjury that the company is purchasing service(s) for resale, at least in part, and that the company is incorporating the purchased services into its own offerings which are, at least in part, assessable U.S telecommunications or interconnected Voice over Internet Protocol services. I also certify under penalty of perjury that the company either directly contributes or has a reasonable expectation that another entity in the downstream chain of resellers directly contributes to the federal universal service support mechanisms on the assessable portion of revenues from offerings that incorporate the purchased services.

If your company is audited, we will expect to see these certification documents. Be sure to keep them on file for at least 5 years. If you are missing certificates for companies you reported as resellers with revenue reported in Block 3, that revenue will be moved to Block 4, and the company will be reclassified as an end user.

Common Audit Findings

  1. No Filer ID – One of our most common audit findings is that the carrier does not have a Filer ID. Since having a Filer ID is essential to filing an FCC Form 499, you cannot credibly establish that the customer is a direct USF contributor if that customer is not filing the FCC Form 499.
  2. Certification is not service specific – The 2015 FCC Form 499-A was the first form for which reseller certificates had to identify the specific services that were being resold (at least in part) as applicable telecommunication services. Our review of filers' certificates shows that many filers have not updated their certificates to be service-specific. In the FCC Form 499-A instructions, there are examples of how to make certificates service-specific:
    • Entity-Level: that all services purchased by the customer are or will be purchased for resale pursuant to the certificate;
    • Account-Level: that all services associated with a particular billing account -- the account number for which the customer shall specify -- are or will be purchased for resale pursuant to the certificate;
    • Service-Specific: that individual services specified by the customer are or will be purchased for resale pursuant to certification; or
    • Exception-Specific: that all services except those specified either individually or as associated with a particular billing account, are or will be purchased for resale pursuant to the certificate. The certificate shall specify the account number(s) of specific customers included in the exception.
  3. The certificate is not for the specific time period – All certificates should be obtained on an annual basis. They must state the calendar year that the certificate covers and must be signed before the filer submits the FCC Form 499-A.

You Requested More! March Webinar Follow-Up

In preparation for the annual revenue reporting, USAC staff hosted webinars in March 2016 reviewing what's new with the 2016 FCC Form 499-A, how to use the online filing system, and a line-by-line walkthrough of revenue reporting (recordings, slide decks, and Q&As from the webinars are available in the Online Learning Library).

 

During those discussions, you, our audience, brought up some great questions about various topics. Two topics you requested more information about were de minimis carriers and USAC invoices. Here are the web pages that provide in-depth explanations of each of these topics:

If you have further questions about these or other topics, we're here to help! Contact us at customersupport@usac.org anytime or at (888) 641-8722 Monday-Friday 9:30 AM to 4:30 PM ET.

Add 498 Company Officers from the E-File Login Page

If you're a new user, you can now add yourself as a 498 Company Officer straight from the E-File log in page!
 
Click on Add FCC Form 498 Company Officer in the list under the login button and follow the prompts. Stay tuned for a tutorial video that will be posted soon in the Online Learning Library.

 

498/499 Spotlight

Newsletter

2Q 2016