FCC Demands USF Payments from Conference Providers

Government Agency Desperate to Expand Base of USF Contributors

Desperate to increase contributors to the shrinking Universal Service Fund (USF), the FCC on June 30 — just one day before the start of the third quarter — told audio conferencing providers that they must pay USF fees as of the third quarter. That’s zero notice for reprogramming back-office systems and notifying customers. And it’s wreaking havoc in the industry.

The FCC order stemmed from an InterCall Inc. appeal. Earlier this year, the Universal Service Administrative Co. (USAC) finished auditing conferencing company InterCall and then imposed funding requirements on the company. InterCall appealed to the FCC, which in turn sided with USAC, although the commission did nix USAC’s ruling that InterCall had to make retroactive USF payments. Now, other providers want the FCC to clarify and reconsider the decision to add the conferencing industry to the base of USF contributors, a base that’s dwindling because of the FCC’s own decisions.

But conferencing companies contend that their offerings don’t qualify as telecommunications services, that they instead fall under the less-regulated umbrella of information services. And AT&T Inc. has asked for a refund of its conferencing USF payments if the InterCall order wins on appeal. AT&T said in a filing that it treats audio teleconferencing service as a telecommunications service and thus contributes to the USF based on both the underlying transport and "audio bridging service” revenue. Conferencing providers’ biggest problem now is meeting the third-quarter contribution deadline.

Conferencing providers InterCall, RollCall and Level 3 Communications Inc. declined to talk with xchange for this piece. Each said it’s still figuring out the impact of the FCC order and how to explain it to customers. Ken Johnson, principal at Bennet & Bennet PLLC, which represents rural telecom clients, said that doesn’t surprise him. “I think they’re getting over their initial shock,” he said. That’s because conferencing companies have operated under few regulatory pressures in the past. But Wainhouse Research analyst Marc Beattie said there’s a more likely reason providers didn’t want to do interviews. “If I was a provider and there was no way I could comply with the current deadline, there’s no way I’d want to say anything on the record,” said Beattie, who serves as managing partner and conference service provider practice manager for Wainhouse.

VoIP providers faced like challenges when the FCC instructed them, in June 2006, to start paying USF fees as of that August. Facing a similar timeline, the FCC should have afforded conferencing providers a heads-up of at least six months, Beattie said. A number of companies probably will file for a 30-60 day extension, he said.

“Most will not comply not out of defiance but out of sheer lack of capability,” he said.

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