Telecommunications and New Technologies Law Practice

ARTICLES

Refunds For Carrier Overpayments To The Universal Service Administration Co.

I. INTRODUCTION

The Universal Service Administration Co. ("USAC") has taken the position that it will deem as untimely a common carrier's revisions to its revenue reports filed more than one year of their original submission, which request establishes a refund for overpayments. The USAC's position is arbitrary and capricious and an abuse of discretion.

Neither the Communications Act of 1934, as amended ("1934 Act"), 47 U.S.C. - 151, et sea., nor the rules and regulations of the Federal Communication Commission ("FCC") governing Universal Service, 47 CFR Part 54, specifically require a carrier to file revisions to revenue reports that report revenues for purposes of calculating contributions to Universal Service, within one year of the reports' original submission, or by any certain time deadline, absent a specific provision of the 1934 Act limiting the time to file revisions to reports or an FCC rule promulgated after a rulemaking proceeding, limiting the time period for filing revisions to reports. Thus, common carriers are entitled to refunds for overpayments to the Universal Service even when they submit revised revenue reports more than one year after their original submission.

II. FACTS

Common carriers report their revenues for purposes of determining Universal Service Fund ("USF") contributions by filing with the USFA FCC Forms 457, 499-A, 499-S and 499-Q, with accompanying Telecommunications Reporting Worksheets. In preparing these FCC forms, many common carriers inadvertently overstate their revenues and, thus, overpay the USAC in USF contributions. Moreover, in a large number of instances, the carrier's inadvertent overstatement in revenues results from incorrect gross revenue information supplied to the carrier by the billing entity responsible for the billing and management of the carrier's charges for long distance service.

USAC decisions, however, have uniformly rejected carriers revised revenue reports because "they were not filed within one year of the original submission," or they were "not filed prior to the revision deadlines." The USAC's Decisions, however, do not cite any statutory provision or FCC rule setting forth the requirement that a carrier's revisions had to be submitted within one year of the original submission, or any revision deadline, except for a reference to the instructions for completing FCC Form 499-Q, pertaining to quarterly revenue reports for the year 2001 and after.

III. USAC'S REJECTION OF CARRIERS' REVISED REVENUE REPORTS IS ARBITRARY AND CAPRICIOUS AND ITS REFUSAL TO REFUND OVERPAYMENTS CONSTITUTES AN ABUSE OF DISCRETION

The USAC'S Decisions are not supported by either the 1934 Act or FCC rules governing the structure and operation of the USAC and reporting requirements of contributors to Universal Service. Moreover, the USAC has no authority to establish a time period, or statute of limitations, within which contributors must request a refund of overpayments. Thus, the USAC's rejection of the carriers' Revised Revenue Reports are arbitrary and capricious, and an abuse of discretion.

A. The Communications Act of 1934, as Amended, Does Not Set Forth Any Statute of Limitations barring a Contributor From Revising its Revenue Reports to USAC.

In 1996, Congress substantially amended the 1934 Act by enacting the Telecommunications Act of 1996 ("1996 Act"). In the 1996 Act, Congress, among other things, enacted Section 254, entitled "Universal Service." In this statutory provision, Congress provided that every telecommunications carrier providing interstate communications must contribute on an equitable and non-discriminatory basis to a specific, predictable and sufficient mechanism established by the FCC to preserve and advance universal service. 47 U.S.C. - 254(d). However, Congress did not specify in Section 254(d) any limitation on a telecommunications carrier's ability to seek a refund for an overpayment for universal service. Instead, Congress left it to the Commission to formulate rules to implement Section 254.

B. The FCC Promulgated Part 54 to Implement Section 254 of the Act, But Did Not Prescribe a Time Period for Seeking Refunds for Overpayments for Universal Service

In implementing Section 254 of the 1996 Act, the FCC enacted 47 CFR Part 54. Part 54 of the Commission's rules sets forth specific rules for administration of Universal Service. The FCC appointed the USAC as a permanent administrator of the federal Universal Service support mechanisms. 47 U.S.C. - 54.702(a). The FCC also specifically described the USAC's functions and responsibilities. Specifically, Part 54 provides:

"The Administrator shall be responsible for billing contributors, collecting contributions to Universal Support Mechanisms, and disbursing Universal Support Funds."

47 CFR - 54.702(b).

In addition, Part 54 provides:

"The Administrator may not make policy, interpret unclear provisions of the statute or rules, or interpret the intent of Congress. Where the Act or the Commission's Rules are unclear, or do not address a particular situation, the Administrator shall seek guidance from the Commission."

47 CFR - 54.702(d).

Finally, Part 54 specifically requires contributors to file reports of revenues for purposes of determining the amount of payments for Universal Service, and directs the USAC to refund overpayments. Thus, Part 54 provides:

"Once a contributor complies with a telecommunications reporting worksheet filing requirements, the Administrator may refund any overpayments made by the contributor, less any fees, interests or costs."

47 CFR - 54.713.

Thus, Part 54 is silent with respect to any time period within which a telecommunications carrier must file revised revenue reports and claim a refund; instead, Part 54 only provides that the USAC has the authority to refund overpayments. While the USAC has this authority, the USAC has been specifically instructed not to make policy, interpret unclear provisions of the 1934 Act, or interpret the intent of Congress. Accordingly, the USAC's decisions arbitrarily imposing a one-year limitation or other time period on a carrier's ability to seek a refund for overpayments are beyond its authority, and an abuse of its discretion. Thus, the decisions barring refunds made outside the one-year period must be challenged to force the USAC to accept a carrier's revisions to its revenue reports and refund the carrier's overpayments to the USAC for Universal Service.

C. USAC's Reliance on Instructions to Complete Report Forms is Misplaced.

USAC has asserted in its decisions pertaining to a carrier's revised reports that the carrier's revisions were "not filed prior to the revision deadlines." USAC has stated that this limitation appears on page 8 of the instructions for relevant FCC Form 499-Q, and therefore, the carrier is bound to this time period. For several reasons, USAC cannot legitimately rely on the instructions to FCC Form 499-Q as establishing a limitation on the period within which a carrier may seek a refund for overpayment to the Universal Service.

First, the instructions do not constitute an FCC rule because they were never subject to notice and comment as required under the Administrative Procedures Act, 5 U.S.C. 552. Thus, a carrier administered by USAC never had prior notice of this limitation or an opportunity to comment on any proposed time limitation on the filing of revised reports seeking refunds for overpayments. Accordingly, a carrier's Fifth Amendment due process right would be violated if USAC were permitted to maintain that the instructions to FCC Form 499-Q constitute an FCC rule establishing a limitation on the time period within which a carrier may seek a refund of an overpayment to the fund.

Notably, the instructions to the worksheets for the years 1998-2000 do not even mandate that a contributor file a revised worksheet in any time period. In fact, these instructions state only that a contributor must file the revised worksheet if it discovers an error in the data that it reports, and specify no time period for filing a revised report requesting a refund.

IV. CONCLUSION

  1. USAC's decisions rejecting a carrier's refund requests are arbitrary and capricious.
  2. Carriers who make overpayments and learn about them more than one year after they have paid, must challenge any USAC decision denying a refund.
  3. The challenge must be made to the FCC.
  4. If USAC has rejected your company's request for a USF refund as untimely, or if your company is considering seeking a refund from USAC for overpayments based on revenue requests filed more than one year ago, we would be happy to discuss these matters with you and assist your company in obtaining any refund due and owing.

For more information call Michael L. Glaser at (303) 757-1600.

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