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Universal Service Contribution Methodology Application

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Released: November 5, 2012

Federal Communications Commission

FCC 12-134

Before the

Federal Communications Commission

Washington, D.C. 20554

In the Matter of
)
)

Universal Service Contribution Methodology
)
WC Docket No. 06-122
)
Application for Review of Decision of the
)
Wireline Competition Bureau filed by Global
)
Crossing Bandwidth, Inc.
)
)

Request for Review of the Decision of the
)
Universal Service Administrator and
)
Emergency Petition for Stay by
)
U.S. TelePacific Corp. d/b/a
)
TelePacific Communications
)
)

XO Communications Services, Inc.
)
Request for Review of Decision
)
of the Universal Service Administrator
)
)

Universal Service Administrative Company
)
Request for Guidance
)

ORDER

Adopted: November 1, 2012

Released: November 5, 2012

By the Commission:

TABLE OF CONTENTS

Heading
Paragraph #
I.
INTRODUCTION AND OVERVIEW............................................................................................ 1
II.
BACKGROUND ............................................................................................................................. 9
A. The Act and the Commission’s Rules ....................................................................................... 9
B. Petitions for Relief and USAC Request for Guidance............................................................. 15
III.
DISCUSSION ................................................................................................................................ 31
A. To Be Considered a “Reseller,” a Provider Must Incorporate Wholesale Services into
Its Service Offerings and Contribute on Those Service Offerings.......................................... 33
B. Wholesale Providers Are Exempt from Contribution Obligations If They Can
Demonstrate a Reasonable Expectation That Their Customers Are Resellers........................ 37
C. USAC Should Not Double Collect if Clear and Convincing Evidence Shows that
Another Provider Actually Contributed on the Subject Revenues .......................................... 43
D. Clarifying and Applying the Reasonable Expectation Standard ............................................. 47
1. The Relevant Time Period for the “Reasonable Expectation” Analysis is When a
Wholesale Provider Collects and Submits Revenue Data to USAC................................. 48
2. Wholesale Providers May Demonstrate a “Reasonable Expectation” by
Complying with the Form 499-A Instructions or Through Other Reliable Proof............. 50

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3. Application of the Reasonable Expectation Standard to the XOCS Request for
Review and the USAC Guidance Request ......................................................................... 53
4. Application of the Reasonable Expectation Standard to the Global Crossing
Application for Review...................................................................................................... 55
IV.
ORDERING CLAUSES ................................................................................................................ 58
APPENDIX – List of Commenters

I.

INTRODUCTION AND OVERVIEW

1.
In this Order, we address several requests regarding federal Universal Service Fund (USF
or Fund) contribution obligations of wholesale providers and their customers. Our actions today provide
much-needed clarification for contributors on existing USF contribution obligations and administrative
requirements for the contribution system.
2.
Under current Commission requirements, wholesale carriers generally do not contribute
on revenues earned from sales to customers that contribute to the Fund for the services that incorporate
the wholesale service (carrier’s carrier revenues), but may be required to contribute on revenues earned
from sales to customers that do not contribute to the Fund for the services that incorporate the wholesale
service (end-user revenues).1 In recent years, there have been disputes over how to comply with this
general rule, arising in situations when contributors submit revenue information to the Universal Service
Administrative Company (USAC) or subsequently undergo USAC audits. This order addresses a pending
request for guidance from USAC as well as requests for review of Wireline Competition Bureau (Bureau)
and USAC decisions involving the contribution obligations of specific wholesalers and their reseller
customers, as summarized below. Our actions here provide greater clarity and predictability regarding the
application of our current rules while we separately consider more comprehensive rule changes that may
ultimately be simpler to administer.2 By closing perceived loopholes in the current rules, our actions
should assist in stabilizing the contributions system and promoting the sustainability of the Fund.3
3.
The generally applicable findings of this Order are as follows. First, we affirm for USF
contributions purposes the definition of “reseller” in the annual Telecommunications Reporting


1 Federal-State Joint Board on Universal Service, CC Docket No. 96-45, Report and Order, 12 FCC Rcd 8776,
9206-08, paras. 843-47 (1997) (Universal Service First Report and Order) (subsequent history omitted); Changes to
the Board of Directors of the National Exchange Carrier Association, Inc.; Federal-State Joint Board on Universal
Service
, CC Dockets Nos. 96-45, 97-21, Report and Order and Second Order on Reconsideration, 12 FCC Rcd
18400, 18507, App. A (1997) (Universal Service Second Order on Reconsideration).
2 The Commission is separately undertaking comprehensive reform of the contributions system. Universal Service
Contribution Methodology; A National Broadband Plan For Our Future,
WC Docket No. 06-122, GN Docket No.
09-51, Further Notice of Proposed Rulemaking, 27 FCC Rcd 5357 (2012) (Contribution Methodology Reform and
Modernization Further Notice)
. This Order focuses on bringing clarity to existing contribution obligations under the
current system without prejudging the outcome of broader contributions reform.
3 See Letter from David Cohen, USTelecom, to Marlene H. Dortch, FCC, WC Docket No. 06-122 (filed Mar. 28,
2012) at 4-5 (highlighting the wholesaler-reseller issues raised in the Global Crossing and XOCS requests discussed
in Sections II.B and III.A, C and D infra as one of the “most vexing and significant contributor issues,” and noting
that “the Commission’s failure to act on pending contributor appeals can have the effect of picking winners and
losers in the marketplace”); Letter from Maggie McCready, Verizon, to Marlene H. Dortch, FCC, WC Docket No.
06-122 (filed Apr. 3, 2012) at 1-2 (urging the Commission to act on the AT&T, CenturyLink, SureWest and Verizon
petition for clarification, discussed in Sections II.B and III.B infra).
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Worksheet (FCC Form 499-A) instructions attached to the 1997 Second Order on Reconsideration.4
Thus, we make clear that a “reseller” is an entity that (1) incorporates purchased telecommunications into
its own service offerings; and (2) can reasonably be expected to contribute to the Fund based on revenues
from those offerings. In order to classify revenues from wholesale services as being carrier’s carrier
revenues (and thus exempt from contributions), the wholesale provider must either have “affirmative
knowledge” or a “reasonable expectation” that its customer is itself contributing to the Fund on revenues
derived from those purchased wholesale services.5
4.
Second, we provide guidance to USAC on how to proceed when a wholesale provider
demonstrates a reasonable expectation that its customer is contributing to the Fund on revenues derived
from its services that incorporate the wholesale input, but its customer did not in fact do so. In this
situation, we affirm that the wholesale provider is not responsible for any outstanding contribution
obligations.6 Thus, we clarify that the Bureau in the TelePacific Order7 did not alter existing
requirements for wholesale providers to verify that their customers are contributing to the Fund, and if
wholesale providers meet those requirements, they are not responsible for contributions on the revenues
for sales to those customers.
5.
We also provide guidance to USAC on how to proceed when a wholesale provider cannot
demonstrate a reasonable expectation, but its customer did in fact contribute to the Fund based on the
services that incorporate the wholesale input. In such instances, USAC should not attempt to recover
additional contributions from the wholesale provider.8
6.
Lastly, we clarify how a wholesale provider may demonstrate a reasonable expectation.
·
We clarify that the relevant time period for the “reasonable expectation” analysis is the period
during which a wholesale provider collects and submits the revenue data at issue to USAC.
·
We affirm that a wholesale provider can meet the reasonable expectation standard by
(1) complying with the guidance provided in the FCC Form 499-A instructions or
(2) demonstrating that it has “other reliable proof,” as stated in the Bureau’s Global Crossing
Order.
9 Specifically:
o We affirm that the guidance provided in the instructions to the FCC Form 499-A
constitutes a “safe harbor”; i.e., wholesale providers that comply with all of these
procedures will be deemed to have satisfied the reasonable expectation


4 Universal Service Second Order on Reconsideration, 12 FCC Rcd at 18507, App. A (“1997 Worksheet
Instructions”).
5 See infra Section III.A. For ease of discourse, we refer to this standard as the “reasonable expectation” standard
throughout this Order but do not intend to exclude demonstrations through clear and convincing evidence of
affirmative knowledge as well.
6 See infra Section III.B.
7 Request for Review of a Decision of the Universal Service Administrator and Emergency Petition for Stay by U.S.
TelePacific d/b/a TelePacific Communications
, Order, WC Docket No. 06-122, 25 FCC Rcd 4652 (Wireline Comp.
Bur. 2010) (TelePacific Order).
8 See infra Section III.C.
9 Federal-State Joint Board on Universal Service; Request for Review of Decision of the Universal Service
Administrator by Global Crossing Bandwidth, Inc.
, CC Docket No. 96-45, Order, 24 FCC Rcd 10824, 10828-29,
para. 14 (Wireline Comp. Bur. 2009) (Global Crossing Order). Global Crossing is now part of Level 3
Communications.
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requirement.10 To assist filers in complying with the safe harbor standard, we
direct the Bureau to issue a public notice within thirty days seeking comment on
any revisions that should be made to the 2013 FCC Forms 499 and instructions,
which will be used to report 2012 revenues.
o We clarify that if filers choose not to take advantage of the safe harbor provided
in the FCC Form 499-A instructions, USAC should consider all evidence that
filers submit as potential “other reliable proof.” For example, filers may submit
reseller certificates that differ in wording from the language in the FCC Form
499-A instructions regarding the form of reseller certificates. While USAC
should consider all such evidence submitted, USAC is not required to deem such
certificates, or any other evidence, as dispositive. Instead, under the “other
reliable proof” standard, USAC should review all evidence submitted on a case-
by-case basis to determine if a filer has presented clear and convincing evidence
that it had a reasonable expectation that its customer is itself contributing to the
Fund on revenues derived from the wholesale services purchased from the filer.
7.
Below, we provide a summary of the wholesaler-reseller standard and the role of various
types of reseller certificates within that standard.

STANDARD

RELEVANCE OF CERTIFICATES

Did wholesale provider demonstrate …

à affirmative knowledge; or
à reasonable expectation through
à following 499-A instructions (“safe
After 2007, instructions specify annual
harbor”) or
certificates
à other reliable proof
Where appropriate, USAC may take into
account “outdated” certificates (i.e.
certificates signed prior to the calendar
year in which revenues were collected) as
part of a totality-of-the-circumstances
analysis
… that its customer would contribute to the Fund on the
revenues derived from offerings that incorporate the
purchased service?
Yes

Wholesale provider not responsible for additional
contributions

No

Did wholesale provider’s customer actually

USAC may take into account
contribute?
“confirmatory” certificates (certificates
à Yes: wholesale provider not responsible for
stating that wholesaler’s customer actually
additional contributions
contributed to the Fund)
à No: wholesale provider responsible for
additional contributions
8.
In addressing these issues, we specifically address arguments raised in the following
requests for Commission action:
·
Global Crossing Application for Review. In September 2009, Global Crossing Bandwidth,
Inc. (“Global Crossing”) filed an Application for Review of a Bureau order affirming a 2005


10 See id. at 10828, para. 13.
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USAC audit of Global Crossing.11 As discussed in Section III.A and III.D below, the FCC
Form 499-A instructions during the relevant time period did not contain any reference to
obtaining reseller certificates on an annual basis. We largely affirm the Bureau’s decision,
but remand to USAC to reassess Global Crossing’s contribution obligation in accordance
with the applicable Form 499-A instructions as a safe harbor for satisfying the reasonable
expectation standard or the “other reliable proof” standard as clarified in this Order.
·
Petition for Clarification of the TelePacific Order. In June 2010, AT&T Inc., CenturyLink,
SureWest Communications, and Verizon filed a petition requesting clarification or
reconsideration of certain language in the TelePacific Order, which overturned a USAC
decision regarding TelePacific’s contribution obligations.12 In Section III.B of this Order, we
grant the Petition for Clarification and confirm that the TelePacific Order did not alter
existing requirements that wholesale providers are not required to contribute on carrier’s
carrier revenues when they meet the reasonable expectation standard.
·
XOCS Request for Review. In December 2010, XO Communications Services, Inc.
(“XOCS”) requested review of a USAC audit that, among other things, reclassified revenues
from six XOCS reseller customers as assessable end-user revenues.13 In Section III.D.3
below, we reverse this portion of the USAC audit to the extent that it is inconsistent with the
discussion of the “other reliable proof” standard set forth in this Order, and remand that
portion of the audit to USAC for further action consistent with this Order.
·
USAC Guidance Request. In March 2011, USAC sought guidance on whether obtaining
“post-dated” certificates for reseller customers after filing of the relevant Form 499-A is
sufficient to allow a contributor to classify revenues as “carrier’s carrier” revenues.14 The
Guidance Request arises out of the same audit that is the subject of the XOCS Request for
Review
. We provide guidance to USAC on these issues in Sections III.C, D.1, and D.3 of this
Order by making clear that USAC should not consider such certificates, as described in the
Guidance Request and the XOCS Request for Review, under the reasonable expectation
standard, because a filer should have a reasonable expectation that a customer will contribute
to the Fund before it reports revenues from the customer to USAC as “carrier’s carrier”
revenues. However, as we state above, USAC should not seek to “double collect” from a
wholesale provider, even if the wholesale provider cannot demonstrate a reasonable
expectation, if the wholesale provider’s customer did in fact contribute to the Fund on the


11 Application for Review of Decision of the Wireline Competition Bureau by Global Crossing Bandwidth, Inc, CC
Docket No. 96-45 (filed Sept. 16, 2009) (Application for Review).
12 AT&T Inc., CenturyLink, SureWest Communications, and Verizon Petition for Clarification or in the Alternative
for Partial Reconsideration, WC Docket No. 06-122 (filed June 1, 2010) (Petition for Clarification).
13 XO Communications Services, Inc. Request for Review of Decision of the Universal Service Administrator, WC
Docket No. 06-122 (filed Dec. 29, 2010) (XOCS Request for Review). XOCS also sought review of USAC’s
decision to (1) classify certain revenues from XOCS’s Dedicated Transport Services as interstate; (2) classify
revenues from certain Multi Protocol Label Switching (MPLS) enabled services as assessable telecommunications
services revenues rather than exempt information services revenues; and (3) deny XOCS credits based on errors in
its 2006 and 2007 annual Telecommunications Reporting Worksheets because revisions were made outside the 12-
month window for the relevant filing year. See id. at iv-viii. This Order only addresses wholesaler-reseller issues;
other issues will be addressed in a future decision.
14 Letter from Richard A. Belden, Chief Operating Officer, USAC, to Sharon Gillett, Chief, Wireline Competition
Bureau, FCC, WC Docket No. 06-122, CC Docket No. 96-45 (filed Mar. 1, 2011) (Guidance Request).
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relevant services. Therefore, we clarify that USAC may consider “post-dated” certificates in
determining whether a reseller customer actually contributed to the Fund.

II.

BACKGROUND

A.

The Act and the Commission’s Rules

9.
Section 254(d) of the Communications Act of 1934, as amended (the Act), directs that
“every telecommunications carrier that provides interstate telecommunications services shall contribute,
on an equitable and nondiscriminatory basis, to the specific, predictable, and sufficient mechanisms
established by the Commission to preserve and advance universal service.”15 Section 254(d) further
provides that “[a]ny other provider of interstate telecommunications may be required to contribute to the
preservation and advancement of universal service if the public interest so requires.”16 To this end, the
Commission has determined that common carriers and private carriage providers that provide interstate
telecommunications to others for a fee generally must contribute to the USF based on their interstate and
international end-user telecommunications revenues.17 Although the Commission declined to exempt
from contribution “any of the broad classes of telecommunications carriers that provide interstate
telecommunications services,” not all carriers that provide interstate telecommunications service
contribute to the Fund.18 Providers with direct contribution obligations may pass through their
contribution assessments to their customers.19
10.
The Commission has designated USAC as the entity responsible for administering the
universal service support mechanisms under Commission direction.20 Pursuant to the Commission’s
rules, contributors report their revenues by filing Telecommunications Reporting Worksheets (FCC
Forms 499-A and 499-Q), which are released annually by the Bureau on delegated authority,21 with


15 47 U.S.C. § 254(d).
16 Id.
17 See Universal Service First Report and Order, 12 FCC Rcd at 9183–84, para. 795. Although the Commission
exercised its permissive authority to assess private carriage providers, it exempted certain government entities,
broadcasters, schools, libraries, systems integrators, and self-providers from the contribution requirement. 47 C.F.R.
§ 54.706(d). The Commission also requires certain other providers of interstate telecommunications to contribute to
the universal service fund. See, e.g., Universal Service Contribution Methodology et al., CC Docket No. 96-45 et
al.
, Report and Order and Notice of Proposed Rulemaking, 21 FCC Rcd 7518, 7544, para. 52 (2006) (2006
Contribution Methodology Order
) (requiring interconnected voice over Internet protocol (VoIP) providers to
contribute to the Universal Service Fund).
18 Universal Service First Report and Order, 12 FCC Rcd at 9179, para. 787. Telecommunications service
providers are not required to contribute to the universal service fund in a given year if their contribution for that year
would be less than $10,000. 47 C.F.R. § 54.708.
19 See 47 C.F.R. § 54.712(a) (authorizing contributors to recover federal universal service contribution costs from
their customers); 2012 FCC Form 499-A Instructions at 21-22; see also High-Cost Universal Service Support;
Federal-State Joint Board on Universal Service
, CC Docket No. 96-45, WC Docket No. 05-337, Notice of Proposed
Rulemaking, 23 FCC Rcd 1467, 1469, para. 4 n.10 (2008) (noting that providers almost always pass contribution
obligations through to their customers).
20 Universal Service Second Order on Reconsideration, 12 FCC Rcd. at 18423–24, para. 41; see 47 C.F.R. § 54.701.
21 The Wireline Competition Bureau, formerly the Common Carrier Bureau (Bureau), has delegated authority to
revise the Forms 499 and accompanying instructions to ensure “sound and efficient administration of the universal
service programs.” See Universal Service Second Order on Reconsideration, 12 FCC Rcd at 18442, para. 81
(“Because it is difficult to determine in advance precisely the information that will be needed to administer the new
universal service programs, the [Common Carrier] Bureau will have delegated authority to waive, reduce, or
(continued . . .)
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USAC.22 USAC reviews these filings and verifies the information provided by the contributors.23 USAC
also bills contributors for their universal service contributions.24
11.
Because our present rules require contribution only once along the distribution chain
(when a contributor provides telecommunications to an “end user”), a contributor also must apportion its
telecommunications revenues between two categories: (1) revenues derived from sales by one carrier or
provider to another carrier or provider that is expected to contribute, known as “carrier’s carrier” or
wholesale revenues; and (2) revenues derived from sales to all other entities, known as “end-user” or
retail revenues.25 “Carrier’s carrier” revenues are not currently assessed. “End-user” telecommunications
revenues include revenues from sales to carriers or providers that do not contribute to USF, such as de
minimis
carriers and exempted providers of interstate telecommunications.26
12.
To assist contributors, the Commission has clarified the distinction – for contributions
purposes – between revenues from “resellers” (or “carrier’s carrier” revenues) and revenues from “end
users.” In 1997, the Commission defined a “reseller” as “a telecommunications service provider that 1)
incorporates the purchased telecommunications services into its own offerings and 2) can reasonably be
expected to contribute to support universal service based on revenues from those offerings.”27 Thus, a
wholesale provider should exclude revenues from its contribution base only if it has “affirmative
knowledge” or a “reasonable expectation” that its customer is contributing to the Fund on the revenues
(Continued from previous page)


eliminate contributor reporting requirements that may prove unnecessary. The Bureau also will have delegated
authority to require any additional contributor reporting requirements necessary to the sound and efficient
administration of the universal service programs.”). Consistent with this authority, the Bureau annually revises the
Telecommunications Reporting Worksheet Instructions to provide instructions and guidance for complying with
existing rules and requirements. 47 C.F.R. § 54.711(c). The FCC Forms 499 instructions are modified based on
experience in administering the universal service program and explicit rulings by the Commission. See, e.g., 2006
Contribution Methodology Order
, 21 FCC Rcd at 7533–50.
22 47 C.F.R. § 54.711(a) (setting forth reporting requirements in accordance with Commission announcements in the
Federal Register). Contributors report historical revenue on the annual Telecommunications Reporting Worksheet
(FCC Form 499-A), which is generally filed on April 1 each year. See Universal Service Administrative Company,
Schedule of Filings, http://www.usac.org/cont/499/filing-schedule.aspx (last visited Nov. 2, 2012) (USAC Form
499 Filing Schedule). Contributors project future quarters’ revenue on the quarterly Telecommunications Reporting
Worksheets (FCC Form 499-Q), which are generally filed on February 1, May 1, August 1, and November 1. Id.
23 47 C.F.R. § 54.711(a).
24 47 C.F.R. § 54.702(b).
25 Universal Service Second Order on Reconsideration, 12 FCC Rcd at 18507.
26 Id.; Federal-State Joint Board on Universal Service; Access Charge Reform; Price Cap Performance Review for
Local Exchange Carriers; Transport Rate Structure and Pricing; End User Common Line Charge
, CC Docket No.
96-45 et al., Fourth Order on Reconsideration & Report and Order, 13 FCC Rcd 5318, 5482, para. 298 (1997)
(Universal Service Fourth Order on Reconsideration) (“Entities that resell telecommunications and qualify for the
de minimis exemption must notify the underlying facilities-based carriers from which they purchase
telecommunications that they are exempt from contribution requirements and must be considered end users for
universal service contribution purposes”).
27 See 1997 Worksheet Instructions; see also 2012 FCC Form 499-A Instructions at 21 (“For purpose of completing
Block 3, a “reseller” is a telecommunications carrier or telecommunications provider that: 1) incorporates purchased
telecommunications services into its own telecommunications offerings; and 2) can reasonably be expected to
contribute to federal universal support mechanisms based on revenues from such offerings when provided to end
users”); Global Crossing Order, 24 FCC Rcd at 10825-26, para. 5.
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derived from the offering that incorporates the wholesale input.28 If a wholesale provider cannot meet this
standard for a particular customer, that customer should be treated as an end user rather than as a reseller
for contributions purposes.
13.
The Commission has directed providers to have in place “documented procedures” to
ensure that a provider reports as “revenues from resellers” only revenues from entities that “reasonably
would be expected to contribute” to the Fund.29 These procedures should include collection of the
customer’s legal name, address, name of a contact person, and phone number of the contact person. If a
wholesale provider does not have other reason to know that a customer will, in fact, resell the service (and
therefore contribute to the Fund based on those offerings), then the provider should obtain a signed
statement to that effect.30
14.
Under delegated authority, the Wireline Competition Bureau has provided additional
guidance in the Form 499-A instructions to assist providers in meeting the reasonable expectation
standard.
·
In 2002, the instructions explained that filers should maintain their reseller customers’ FCC
Form 499 filer identification numbers (Form 499 Filer ID).31
·
In 2004, the instructions stated that a wholesale provider must be able to produce, upon
request, the information relied upon to form a reasonable expectation. In addition, the
instructions explained that the wholesaler would be responsible for any additional universal
service assessments if it failed to demonstrate a reasonable expectation when its reseller
customers did not actually contribute to the Fund.32
·
In 2007, the Bureau modified the instructions to provide guidance that, to meet the
Commission’s reasonable expectation standard, wholesale providers should seek certificates
from their reseller customers annually. The Bureau also provided sample language in the
instructions for the reseller certificate.33 The instructions noted that wholesale providers may


28 See Universal Service Second Order on Reconsideration, 12 FCC Rcd at 18508, App. A (noting that the
underlying contributor may have reason to know that its customer may, in fact, be a contributing reseller); Global
Crossing Order,
24 FCC Rcd at 10829, para. 14 (wholesale provider should have “affirmative knowledge that its
customer is contributing to the universal service fund as a reseller” or a “reasonable expectation that its customer is
contributing as a reseller”).
29 Universal Service Second Order on Reconsideration, 12 FCC Rcd at 18508, App. A; see also Universal Service
Contribution Methodology; Request for Review of Decision of the Universal Service Administrator by Network
Enhanced Telecom, LLP,
WC Docket No. 06-122, USAC Audit CR 2008CP001, Order, 25 FCC Rcd 14533, 14539,
para. 15 (Wireline Comp. Bur. 2010) (NetworkIP Order) (“The Commission requires... that wholesalers have a
‘reasonable expectation’ that its reseller customers would contribute to universal service and have in place
documented procedures to demonstrate compliance with this requirement”).
30 Universal Service Second Order on Reconsideration, 12 FCC Rcd at 18508, App. A.
31 See 2002 FCC Form 499-A Instructions at 15 (noting that providers could access a list of current contributors
online at http://gullfoss2.fcc.gov/cib/form499/499a.cfm).
32 2004 FCC Form 499-A Instructions at 16-17.
33 2007 FCC Form 499-A Instructions at 19. The sample language was as follows: “I certify under penalty of
perjury that the company is purchasing service for resale in the form of telecommunications or interconnected Voice
over Internet Protocol service. I also certify under penalty of perjury that either my company contributes directly to
the federal universal support mechanisms, or that each entity to which I provide resold telecommunications is itself
an FCC Form 499 worksheet filer and a direct contributor to the federal universal service support mechanisms.”
Substantially the same sample language is contained in the current Form 499-A instructions. See 2012 FCC Form
499-A Instructions at 22.
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“verify the continuing validity of a reseller’s certificate” online through the Commission’s
website listing current contributors, and that wholesale providers “may presume that any
reseller identified as a contributor in this website in the month prior to an FCC Form 499-Q
filing will be a contributor for the coming quarter, and that it was a contributor for all prior
quarters during that calendar year.”34

B.

Petitions for Relief and USAC Request for Guidance

15.
Global Crossing Application for Review. On September 16, 2009, Global Crossing filed
an Application for Review of a decision by the Bureau affirming a USAC decision resulting from an audit
in which USAC: (1) found that Global Crossing had inaccurately reported revenue from customers that
did not contribute to the USF; (2) reclassified these revenues as assessable end-user revenues; and
(3) issued revised invoices to Global Crossing based on the reclassified revenues.35 On review, the
Bureau rejected Global Crossing’s contention that it reasonably expected that certain reseller customers
were contributing to the Fund and found that USAC’s assessment of contributions on Global Crossing
based on revenue from these reseller customers was proper.36
16.
As background, in 2005, USAC audited Global Crossing’s 2005 FCC Form 499-A,
which reported Global Crossing’s 2004 revenues, to evaluate compliance with the Commission’s
contribution requirements.37 The 2005 FCC Form 499-A required reporting of both end user revenues as
well as revenue from “resellers”—i.e. entities that purchase wholesale telecommunications, incorporate
the purchased telecommunications into their own service offerings to end users, and separately contribute
to the Fund.38 In its audit, USAC found, in relevant part, that Global Crossing reported as reseller
revenues certain revenues from customers that did not contribute to the Fund in 2004.39 Specifically,
USAC found that Global Crossing did not have a reasonable expectation that its reseller customers would
contribute to the Fund because it did not obtain reseller certificates from every reseller customer, the
reseller certificates it did obtain were not valid,40 and/or the reseller customers did not have FCC Form
499 Filer ID numbers.41 USAC evaluated additional evidence provided by Global Crossing—certain
reseller certificates, contract provisions, the reseller customers’ company website information and product
descriptions—but determined that such evidence did not support a finding that Global Crossing had a
reasonable expectation that certain customers would contribute directly to the Fund.42 Based on this
finding, USAC recommended that Global Crossing report as end-user revenue the revenue from those
non-contributing customers and re-file its 2005 FCC Form 499-A.43 USAC subsequently reclassified as
Global Crossing end-user revenue the revenue earned from its reseller customers that were not directly


34 2012 FCC Form 499-A Instructions at 18–19.
35 Global Crossing Order, 24 FCC Rcd at 10824, para. 1; Application for Review at 1-2.
36 Global Crossing Order, 24 FCC Rcd at 10830-31, para. 18.
37 See id.
38 2005 FCC Form 499-A Instructions at 17-27.
39 Application for Review at 8; USAC Audit Report at 4, 8-10.
40 USAC Audit Report at 8.
41 Id. at 8-9.
42 Id. at 10.
43 Application for Review at 8-9.
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contributing to the Fund. Because end user telecommunications revenues are subject to the USF
assessment, USAC assessed USF contributions on Global Crossing for these reclassified revenues.44
17.
In June 2007, Global Crossing filed a request for review of USAC’s audit decision.45
Global Crossing argued that the reclassified revenues should be recovered directly from Global
Crossing’s reseller customers, rather than Global Crossing, and that even if such recovery was
permissible, USAC improperly applied the 2007 FCC Form 499-A instructions to the audit of revenues
for calendar year 2004.46 On August 17, 2009, the Bureau released an order denying Global Crossing’s
request for review.47 The Bureau agreed with USAC that the evidence provided by Global Crossing did
not support a finding that Global Crossing had a reasonable expectation that certain customers would
contribute directly to the Fund.48 The Bureau found that USAC’s assessment of additional USF
contributions on Global Crossing based on revenues from these non-contributing customers was
appropriate.49
18.
In its Application for Review, Global Crossing makes four relevant arguments:
·
Global Crossing contends that USAC should have conducted a fact-specific inquiry to
determine whether its customers were resellers rather than simply shifting the contribution
obligation to Global Crossing.50 Global Crossing argues that the Bureau’s order was arbitrary
and capricious and raised due process concerns because the Bureau imposed liability without
a factual basis for treating Global Crossing’s customers as end users.51
·
Global Crossing challenges the validity of the FCC Form 499 filing instructions in general,
arguing that they were not adopted pursuant to the notice and comment requirements of the
Administrative Procedures Act.52 Global Crossing argues that it therefore cannot be held
liable for the failure of its reseller customers to contribute to the Fund, even if it had failed to
take the specific measures specified in the FCC Form 499 instructions.53
·
Global Crossing asserts that the Bureau erroneously applied guidance that first appeared in
the FCC Form 499-A instructions in 2007, but was not in the 2005 Form 499-A instructions
for reporting 2004 revenues subject to the audit.54 In particular, Global Crossing maintains it
was not required to obtain reseller certificates or other evidence such as Filer ID numbers


44 Id.
45 See generally Global Crossing Bandwidth, Inc., Request for Review of Decision of the Universal Service
Administrator, CC Docket No. 96-45, at 21 (filed June 22, 2007) (Portions Confidential) (Request for Review).
Global Crossing also appealed USAC’s adjusted invoices that included additional universal service assessments
based on the audit finding. Global Crossing Order, 24 FCC Rcd at 10827, para. 9.
46 Request for Review at 1.
47 See generally Global Crossing Order, 24 FCC Rcd 10824.
48 Id. at 10828-29, paras. 12-14.
49 Id.
50 Application for Review at 19-23.
51 Id. at 23-25. This issue is addressed in Section III.A infra.
52 Id. at 10, 17-18.
53 Id. at 17-18. This issue is addressed in Section III.D.2 infra.
54 Id. at 14-25.
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because the FCC Form 499 instructions in 2005 did not require it to obtain reseller
certificates or other evidence from its customers.55
·
Finally, Global Crossing argues that the Bureau failed to consider evidence that demonstrates
that Global Crossing, under the standards set forth in the 2005 FCC Form 499-A instructions,
reasonably expected its customers were reselling telecommunications.56
19.
The TelePacific Order and Petition for Clarification. In December 2009, USAC found
that TelePacific—a competitive carrier that offers small business customers bundled services, including
voice telephony and Internet access service, over lines that it leases from wholesale carriers57—was liable
for contributions on those Internet access service revenues. USAC reasoned that the Internet access
service was a telecommunications service subject to USF reporting and contribution obligations because
TelePacific provided the service over resold special access (T-1/DS-1) lines.58
20.
TelePacific filed a request for review of the USAC decision on January 8, 2010.59
Among other things, it argued that no federal universal service contributions should be due on the
revenues associated with the sale of T-1 lines by wholesalers to TelePacific. On April 30, 2010, in the
TelePacific Order, the Bureau reversed USAC’s decision and found that, under Commission precedent,
TelePacific is not required to contribute based on end user revenues from Internet access service.60
21.
In the TelePacific Order, the Bureau concluded there was insufficient information in the
record to address TelePacific’s contention that its wholesale providers should not owe USF contributions
on the revenues received from the special access lines.61 The Bureau did note, however, that if
TelePacific’s reseller certificate affected the amount of revenues reported by the wholesale T-1 provider,


55 Id. at 19-25. This issue is addressed in Section III.D.4 infra.
56 Id. at 12-13, 20-21. This issue is addressed in Section III.D.4 infra.
57 U.S. TelePacific Corp. d/b/a TelePacific Communications Request for Review and Reversal of Universal Service
Administrator Decision, WC Docket No. 06-122, at 2 (filed Jan. 8, 2010) (TelePacific Request for Review).
TelePacific also offers wireline broadband Internet access service over other facilities, such as unbundled network
elements and fiber. See id. The services provided by TelePacific over these alternative facilities are not relevant for
purposes of this order.
58 Administrator’s Decision on Universal Service Fund Contributor Reporting Matter – U.S. TelePacific Corp. d/b/a
TelePacific Communications (Filer ID 819502) Status of Revised 2008 FCC Form 499-A, at 6 (Dec. 10, 2009)
(USAC Decision Letter). The issue arose when TelePacific sought to refile its 2008 Form 499, changing its
reporting of certain Internet access revenues as “intrastate telecommunications revenues exempt from universal
service contribution” to “information service revenues not subject to universal service contribution.” TelePacific
Order
, 25 FCC Rcd at 4656, para. 10.
59 TelePacific Request for Review.
60 TelePacific Order, 25 FCC Rcd at 4657, para. 15.
61 Special access DS-1/T-1 lines sold to end users are generally subject to USF contribution obligations. See 47
C.F.R. § 54.706(a)(4) (listing special access as a service subject to contribution obligations). TelePacific argued that
it should not be required to indirectly contribute to universal service (i.e., by having to pay any wholesaler USF
pass-through charges) based on the T-1 lines; other parties disagreed. Letter from Andrew D. Lipman, Counsel for
TelePacific, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 06-122, at 1 (Feb. 1, 2010) (TelePacific Ex
Parte
); see also AT&T Reply Comments, WC Docket No. 06-122, at 4-5 (Feb. 3, 2010) (arguing that if TelePacific
obtained broadband transmission on a common carrier basis from incumbent carriers and provided reseller
certificates to those incumbents instructing them not to assess federal USF contributions on those facilities,
TelePacific was obligated to report the revenues associated with the transmission component of any broadband
Internet access services provided using those facilities in its assessable base).
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the wholesale provider may be required to report revised revenue data as appropriate.62 The Bureau
instructed TelePacific to provide USAC with the names and contact information of its wholesale
providers of special access transmission services so USAC could ensure that all contributions to universal
service were promptly paid.63
22.
On June 1, 2010, AT&T, CenturyLink, SureWest, and Verizon (collectively Wholesale
Providers) sought clarification or reconsideration of this aspect of the TelePacific Order.64 Specifically,
the Wholesale Providers sought confirmation that under existing Commission orders and precedent,
neither the Commission nor USAC is able to require these wholesale providers to restate prior year
revenues and make additional contributions to the Fund if they relied on TelePacific’s reseller certificates
in classifying the revenues as “carrier’s carrier” revenues.65
23.
TelePacific opposed the Petition, arguing that it was premature because the Bureau had
not yet determined if TelePacific should be treated as an end user or if any Petitioner was required to
make additional USF contributions. TelePacific further argued that requiring USF contributions on the T-
1 lines leased to TelePacific violated section 254’s “equitable and nondiscriminatory” requirement and
Commission principles of competitive neutrality for all broadband Internet access service providers.66
24.
XOCS Request for Review. On December 29, 2010, XOCS filed a request seeking review
of a USAC audit which, among other things, determined that XOCS failed to demonstrate that it had a
“reasonable expectation” that six of its reseller customers would contribute to the Fund.67 As a result,
USAC reclassified revenues from six XOCS reseller customers as assessable XOCS end user revenues.
According to USAC’s records, these six customers did not contribute to the Fund during the relevant time
period.68
25.
XOCS acknowledges that the reseller certificates it received from six of its customers did
not follow the guidance in the FCC Form 499-A instructions, because the reseller certificates were not
signed (or renewed) in the year in which revenues were reported.69 The Form 499-A instructions provide
guidance that reseller certificates should be obtained “each year”;70 XOCS argues, however, that the
guidance in the 2007 FCC Form 499-A instructions is not mandatory, and that it provided “other reliable
proof” that it had a reasonable expectation that its customers would contribute to the Fund. First, XOCS
argues that the reseller certificates, though signed before the relevant year, were executed sufficiently
close to the audit year to constitute “other reliable proof.”71 Second, for two of the customers at issue,
XOCS points to USAC quarterly contribution base filings that list the customers as filers of the quarterly
Telecommunications Reporting Worksheet.72 Finally, for the four remaining customers at issue, XOCS


62 TelePacific Order, 25 FCC Rcd at 4658, para. 16 & n.41. The record does not indicate whether TelePacific
provided reseller certificates to some or all of its wholesale providers.
63 Id. at 4658, para. 16.
64 Petition for Clarification at 1.
65 Id. at 1-2.
66 TelePacific Comments at 5-9.
67 XOCS Request for Review at 32.
68 Id. at 31-32.
69 Id. at 31-33, 40.
70 Id. at 40; see 2008 FCC Form 499-A Instructions at 19.
71 XOCS Request for Review at 40.
72 Id. at 40-41.
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submitted “confirmatory certifications,” obtained in January 2010, three years after the period in question,
and during the USAC audit, in which the four customers each certified that they had either directly
contributed to the Fund in 2007 on these revenues or each entity to which the customer had provided
resold telecommunications was itself a direct contributor to the Fund.73
26.
USAC Guidance Request. On March 1, 2011, USAC requested guidance from the
Bureau on certain wholesaler/reseller issues. In particular, USAC asked whether a contributor that
obtains reseller certificates after filing the relevant Form 499-A, which USAC refers to as “post-dated”
certificates, satisfies the “reasonable expectation” standard and enables the wholesale provider to classify
revenues from such customers as “carrier’s carrier” revenues.74 USAC sought guidance on whether, in
such situations, it should conclude that (1) “the contributor demonstrated an affirmative or actual
knowledge or a reasonable expectation at the time it filed its FCC Form 499-A” and (2) that “the
contributor’s carrier customers were incorporating the services purchased from the contributor into their
own telecommunications offerings, and such customers’ USF contributions were based on revenues from
such offerings when provided to end-users.”75 The revenues at issue in the Guidance Request, unlike the
revenues at issue in the XOCS Request for Review, are from customers that did contribute to the Fund
during the audit period, based on USAC’s records.76 USAC expresses concern that the use of post-dated
certificates may result in under-reporting or underpayment of USF contribution obligations.77
27.
The Bureau sought comment on the Guidance Request on March 7, 2011.78 In response,
XOCS filed comments stating that the Guidance Request “arises at least in part from” the XOCS audit
that was the subject of the XOCS Request for Review, and provided further background on the issues
raised in the audit.79 According to XOCS, the Guidance Request involves similar circumstances, but a
different set of customers, from the XOCS Request for Review. As in the XOCS Request for Review,
USAC determined that XOCS’s reseller verification processes were insufficient to demonstrate a
“reasonable expectation” that its customers would contribute to the Fund.80 As noted above, however, the
issue in the Guidance Request is the wholesale provider’s contribution obligation when a wholesaler does
not demonstrate a reasonable expectation but the customers did contribute to the Fund.
28.
With respect to the Guidance Request, XOCS argues that: (1) the Commission should
prohibit USAC from reclassifying carrier’s carrier revenue as “end user” revenue in circumstances where
USAC’s own records confirm that the customer in question reported its revenues and contributed to the


73 Id. at 41.
74 Guidance Request at 1-2.
75 Id. at 2-3.
76 XO Comments at 3. For these revenues, USAC elected to treat the issue as an “Other Matter” and seek guidance
on whether “post-dated” certificates were sufficient to demonstrate a reasonable expectation. In the context of a
USAC audit, an issue may be deemed an “other matter” if it is not material or if the Commission’s rules do not
specifically address the situation. In certain instances, USAC will classify an item as an “other matter” if USAC
determines it should seek FCC guidance to determine whether a violation of the rules has occurred. Guidance
Request
at 1.
77 Guidance Request at 3.
78 Comment Sought on Universal Service Administrative Company’s Request for Universal Service Fund Policy
Guidance
, WC Docket No. 06-122, CC Docket No. 96-45, Public Notice, 26 FCC Rcd 3419 (Wireline Comp. Bur.
2011).
79 XOCS Comments at 1-2. Comments were also filed by the Ad Hoc Coalition of International Companies,
TelePacific, and Verizon. Level 3, Sprint, TelePacific, and XOCS filed reply comments.
80 XOCS Comments at 3.
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USF during the relevant period;81 and (2) USAC should be required, in evaluating whether a wholesale
carrier meets the reasonable expectation standard, to consider confirmatory certificates as “other reliable
proof.”82 On the first issue, Sprint, Level 3, and TelePacific concurred with XOCS, likewise arguing that
“double collection” on revenues from both wholesalers and their customers would be inconsistent with
Commission policy.83 On the second issue regarding “other reliable proof,” several commenters argued
that there should be flexibility in obtaining reseller certificates.84
29.
As mentioned above, the audit underlying the XOCS Request for Review and the
Guidance Request involves two distinct sets of reseller certificates. In the XOCS Request for Review, the
issue is reseller certificates obtained before XOCS provided service to the customers (the “Pre-Service
Certificates”).85 These certificates were collected when XOCS began providing service to the customers,
contained no expiration dates, and, according to XOCS, remained valid for the entire term of the
associated service agreement.86 As XOCS acknowledges, the Pre-Service Certificates were not updated
annually (as specified in the guidance in the 2008 Form 499-A instructions), and USAC rejected the
certificates because they “were not signed in the year in which revenues were reported.”87 XOCS
concedes that it “did not strictly comply with the guidance” in the Form 499-A instructions with respect
to the Pre-Service Certificates.88 XOCS argues, however, that its procedures as a whole (which included
obtaining both the Pre-Service Certificates and the Confirmatory Certificates described in the next
paragraph and raised in the Guidance Request) were sufficient to demonstrate a reasonable expectation
that the customers would contribute to the Fund.89
30.
In contrast, the Guidance Request involves reseller certificates obtained after the relevant
Form 499 was filed. USAC requests guidance as to whether such certificates should be considered as part
of the reasonable expectation analysis. XOCS obtained these certificates during the USAC audit, but
after USAC rejected the Pre-Service Certificates and determined that XOCS did not meet the reasonable
expectation standard. This occurred because XOCS contacted each of the customers that had submitted
Pre-Service Certificates, and asked them to provide sworn declarations that they had, in fact, contributed


81 Id. at 2, 8-10.
82 Id. at 12-21.
83 XOCS Comments at 8 (arguing that it is unlawful for USAC to knowingly double collect); Sprint Reply at 2
(arguing that allowing USAC to double collect would eviscerate the carrier’s carrier rule); Level 3 Reply at 3
(arguing that double collection is inconsistent with contribution methodology principles); TelePacific Reply at 3
(double collection is inconsistent with FCC policy).
84 See, e.g., Verizon Comments at 3 (stating that the Form 499-A instructions offer flexible guidance to carriers,
recognizing that resellers may be delayed in providing certificates for a number of reasons); Sprint Reply at 1, 3
(stating that the wholesaler faces a substantial burden in determining reseller status and should be given flexibility
with regard to certificates).
85 As discussed in Section III.D.1 below, wholesale providers may obtain evidence to support a reasonable
expectation (including reseller certificates) until the filing deadline for the relevant FCC Form 499-A. We only refer
to the XOCS certificates as “Pre-Service” for ease of reference and because XOCS stated that the certificates were
obtained before providing service to the customer. As a general matter, wholesale providers should have an
incentive for obtaining reseller certificates prior to providing service to a customer so that they can pass through any
USF surcharges on a timely basis.
86 XOCS Comments at 5.
87 Id. at 6.
88 Id. at 5.
89 Id. at 6.
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to the Fund during the relevant year.90 These “confirmatory” (or in USAC’s terms, “post-dated”)
certificates (“Confirmatory Certificates”) contained the language recommended in the Form 499-A
instructions, and differed from a customary reseller certificate only in that the customer submitted a sworn
declaration confirming what it, in fact, had done in the relevant year, rather than what it intended to do in
the upcoming year.91 XOCS argues that the Confirmatory Certificates are more trustworthy than the
annual certificates required by the Form 499-A instructions (which amount to a statement of intent)
because the Confirmatory Certificates were executed after the events in question and can report accurately
as to whether the reseller in fact contributed.92 Thus, XOCS argues, the Confirmatory Certificates should
be allowed as evidence to demonstrate a reasonable expectation.93

III.

DISCUSSION

31.
We find that the Bureau properly applied the definition of “reseller” for USF
contributions purposes in the Global Crossing Orderi.e., that a “reseller” is an entity that not only
(1) incorporates purchased telecommunications into its own service offerings; but also (2) contributes to
the Fund based on revenues from those offerings, as set forth in the Universal Service Second Order on
Reconsideration
. We then address the Petition for Clarification of the TelePacific Order and affirm that
a wholesale provider is not required to contribute in instances in which it demonstrates a reasonable
expectation that its customer is a reseller. We also address an issue raised in the USAC Guidance Request
and clarify that when a wholesale provider cannot demonstrate a reasonable expectation, but its customer
did in fact contribute to the Fund, USAC should not attempt to collect contributions twice on the same
revenues.
32.
We also provide clarification on how a wholesale provider may demonstrate a reasonable
expectation. With respect to timing, we clarify that the relevant time period for the “reasonable
expectation” analysis is the period during which a wholesale provider collects and submits the revenue
data at issue to USAC. We also affirm that the reasonable expectation standard can be met by complying
with the guidance provided in the FCC Form 499-A instructions or through “other reliable proof,” as
stated in the Global Crossing Order. Finally, we provide guidance to USAC on how the standard should
be applied with respect to the Global Crossing and XOCS audits upon remand.

A.

To Be Considered a “Reseller,” a Provider Must Incorporate Wholesale Services
into Its Service Offerings and

Contribute on Those Service Offerings

33.
We first conclude that the Bureau correctly upheld USAC’s decision and properly applied
the definition of “reseller” for universal service contribution purposes in the Global Crossing Order.
Global Crossing argues in its Application for Review that the Bureau’s order was arbitrary and capricious
and raises due process concerns because the order affirmed the reclassification of certain Global Crossing
customers as end users for USF contribution purposes without considering evidence regarding the
“functional nature of the service provided by each wholesale customer at issue.”94 Global Crossing
asserts that the Bureau erred by focusing on whether Global Crossing reasonably expected its customers
had contributed to the Fund and did not give sufficient weight to evidence that its customers


90 Id. at 5-6.
91 Id. at 4-5.
92 Id. at 14-15.
93 Id. at 5-7.
94 Application for Review at 12-14, 21, 23-25.
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“incorporate[d] the purchased telecommunications services into its own offerings.”95 We find that Global
Crossing misreads the Bureau order, and more fundamentally, the established definition of “reseller” for
contributions purposes.
34.
In the 1997 Universal Service Second Order on Reconsideration, the Commission
adopted the original Universal Service Worksheet (the predecessor to FCC Form 499), which included
instructions for contributors, among other things, to exclude revenues from service provided to resellers
from the funding base and defined a “reseller” for contributions purposes as a telecommunications service
provider that “1) incorporates the purchased telecommunications services into its own offerings and
2) can reasonably be expected to contribute to support universal service based on revenues from those
offerings.”96 This definition has been consistently included in the reporting instructions since 1997.97
The two prongs of the definition are separate and independent, and wholesale providers must be able to
demonstrate that customers satisfy both requirements in order to report the revenues from sales to those
customers as carrier’s carrier revenues.98
35.
The Bureau upheld USAC’s findings because Global Crossing failed to demonstrate
compliance with the second prong of the reseller definition: whether Global Crossing had a reasonable
expectation that each of its customers could be expected to contribute to the Fund based on revenues from
the customer’s offerings.99 Global Crossing contends, in essence, that the Bureau should have simply
ignored this second prong. According to Global Crossing, all entities that “incorporate the purchased
telecommunications services into their own offerings” (i.e. meet the first prong) are “resellers” and all
such entities have “an unequivocal duty to contribute directly to universal service.”100 Thus, argues
Global Crossing, if its customer meets the first prong, it is “per se reasonable” for Global Crossing to
assume that the customer will also meet the second prong (i.e. contribute to universal service).101 Global


95 Id. at 12-14.
96 Universal Service Second Order on Reconsideration, 12 FCC Rcd at 18507, App. A (emphasis added). Global
Crossing acknowledges the same. See Application for Review at 5 (quoting id.). Furthermore, as Global Crossing
itself points out, those instructions further provided that a wholesale provider should have documented procedures to
ensure that it classifies as resellers only entities that “reasonably would be expected to contribute to support
universal service.” Application for Review at 5 (quoting 1997 instructions). The original Universal Service
Worksheet classified revenues from resellers under the general heading “Revenue from Other Contributors.”
97 See, e.g., 2000 FCC Form 499-A Instructions at 13; 2005 FCC Form 499-A Instructions at 18; 2012 FCC Form
499-A Instructions at 21.
98 To be clear, a customer is still a reseller if it incorporates a wholesale service into an offering that it is, at least in
part, assessable telecommunications and contributes to the Fund for that service. Thus, if a customer purchases a
DS1 line and incorporates that service into an offering of both telephone service and broadband Internet access
service, it may certify that it is a reseller for purposes of that purchased service so long as it contributes on the
assessable revenues from the telephone service.
99 Global Crossing Order, 24 FCC Rcd at 10828-29, para. 14.
100 Application for Review at 12-13.
101 Id. at 13; Letter from Matt Brill, Counsel for Global Crossing, to Marlene H. Dortch, FCC, WC Docket No. 96-
45, at 2 (dated June 4, 2010). Global Crossing maintains that USAC should have conducted a fact-based inquiry
into whether Global Crossing’s non-contributing customers were bona fide resellers prior to reclassifying those
revenues as end-user revenues and contends that it cannot be held liable for its customer’s failure to pay USF
contributions unless that customer actually operated as an end user rather than a reseller. Application for Review at
20-22. Global Crossing argues that holding Global Crossing liable “without any finding that [Global Crossing’s
customers” actually operated as end users” also amounts to an imposition of “strict liability” for its customers’
nonpayments. Id. at 10-25. As explained herein, however, the Bureau’s finding rested on the fact that Global
Crossing lacked a reasonable expectation that its customers contributed to the Fund, not that its customers resold
(continued . . .)
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Crossing’s argument is at odds with Commission precedent, and would essentially render the second
prong of the reseller definition meaningless. Furthermore, as Global Crossing acknowledges, not all
entities that “incorporate purchased telecommunications services into their own offerings” have a duty to
contribute directly to universal service.102 For instance, providers that incorporate purchased transmission
into their own offering of retail broadband Internet access service do not currently have a duty to
contribute on the revenues derived from the sale of broadband Internet access service.103
36.
Thus, even had Global Crossing established that its customers incorporated the
telecommunications services into their own offerings, Global Crossing’s failure to establish that it
reasonably expected its customers were contributing to the Fund based on the purchased services would
have justified the Bureau’s conclusion.104 For these reasons, we find that the Bureau’s decision was not
arbitrary and capricious and does not raise due process concerns.105

B.

Wholesale Providers Are Exempt from Contribution Obligations If They Can
Demonstrate a Reasonable Expectation That Their Customers Are Resellers

37.
In this section, we grant the Wholesale Providers’ request for clarification or
reconsideration of the TelePacific Order by clarifying that the order did not establish any new
requirements for wholesale providers with regard to the verification of their customers’ contributions to
the Fund on the services incorporating such wholesale inputs.106 In doing so, we affirm the existing
requirement that the wholesale provider seeking exemption from contribution obligations must
demonstrate that it had a reasonable expectation that each of its customers is a “reseller,”107 as we have
long defined that term to mean “a telecommunications service provider that 1) incorporates the purchased
telecommunications services into its own offerings and 2) can reasonably be expected to contribute to
support universal service based on revenues from those offerings.”108 We emphasize that wholesale
providers are exempt only if they can demonstrate a reasonable expectation that each of their customers is
a “reseller” as so defined. To the extent a wholesale provider cannot satisfy both prongs of this standard
for its sale of wholesale services to its reseller customers, it must contribute on the revenues associated
with those services.
38.
In some cases, a wholesale provider may report some revenues as “carrier’s carrier
revenues,” and USAC may determine, after the fact, that the provider’s customer was an “end user” (i.e.
(Continued from previous page)


services. The Bureau did not rely on a presumption that a wholesale carrier is strictly liable for its customers’ failure
to meet their USF contribution obligation. As discussed in Section III.B infra, wholesale providers that demonstrate
compliance with the reasonable expectation standard are not liable for their customers’ nonpayments.
102 Application for Review at 22 (discussing exemption for de minimis providers).
103 Appropriate Framework for Broadband Access to the Internet over Wireline Facilities et al., CC Docket No. 02-
33 et al., Report and Order and Notice of Proposed Rulemaking, 20 FCC Rcd 14853, 14915-16, para. 13 (2005)
(Wireline Broadband Internet Access Order); TelePacific Order, 25 FCC Rcd at 4657, para. 15.
104 See infra Section III.D.4. We discuss the application of the reasonable expectation standard to the Global
Crossing appeal below, after we clarify how that standard should generally be applied by USAC.
105 See Application for Review at 2-24 (arguing that the Bureau’s decision imposed liability on Global Crossing
without a factual basis).
106 The Bureau is referring the petition to the full Commission for action pursuant to section 1.106(a) of the
Commission’s rules. 47 C.F.R. § 1.106(a).
107 Universal Service Second Order on Reconsideration, 12 FCC Rcd at 18507, App. A; see also 2012 FCC Form
499-A Instructions at 21.
108 See supra para. 12; 1997 Worksheet Instructions.
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did not contribute to the Fund on the offerings that incorporated the wholesale input) for some or all of
the services that it provided using the wholesale inputs, so that some or all of the relevant wholesale
revenues were assessable “end-user” revenues. In those cases, USAC should look to the wholesale
provider to determine if that provider can demonstrate that it had a reasonable expectation that its
customer is a “reseller” for those services. Compliance with the reasonable expectation standard protects
the wholesale provider in such cases from being held liable for any additional contributions that may
result from a reclassification of revenues from carrier customers as assessable end user revenues because
the wholesale provider has exercised appropriate due diligence to determine whether such revenues are
exempt from contributions.
39.
Nothing in the TelePacific Order altered these existing requirements. Thus, we clarify
that in this instance, the Wholesale Providers are not required to restate wholesale revenues as end user
revenues and make additional contributions to the Fund if they can demonstrate they reasonably expected
that TelePacific met the longstanding definition of a reseller for those revenues.109 Accordingly, in any
further proceedings on this matter, USAC should determine whether TelePacific’s wholesale providers
had a reasonable expectation that TelePacific was a reseller during the time period in question, in
accordance with the analysis set forth in this order. If a wholesale provider cannot demonstrate a
reasonable expectation as discussed in this order, USAC may require the wholesale provider to restate the
revenues from TelePacific as “end user” revenues.
40.
While we decide generally in this Order that a contributor may demonstrate a reasonable
expectation by following the guidance in the Form 499-A instructions,110 we acknowledge that the sample
certification language and suggested procedure to check the Commission’s website to ascertain whether a
carrier customer is a contributor that have been in the Form 499 instructions since 2007 may have led to
some instances where neither the wholesaler nor its customer contributed on its respective revenues,
allowing revenues for certain interstate services to avoid assessment altogether, contrary to the
Commission’s original intent in establishing the current end-user assessment paradigm. This situation
may have occurred in the past when the wholesale provider obtained a certificate from its customer
consistent with the sample language in the Form 499-A instructions applicable to that time period and
verified that the customer was listed as a contributor on the Commission’s website, but the customer was
not actually contributing on the specific service offerings that incorporate the wholesale service as an
input.111


109 TelePacific asks the Commission to clarify the impact of the Wireline Broadband Internet Access Order on the
universal service contribution obligations of carriers that sell transmission to broadband Internet access providers,
arguing that certain interpretations might violate section 254(d)’s requirement that contributions be assessed on an
equitable and nondiscriminatory basis, as well as contradict principles of competitive neutrality and having a level
playing field for all providers of broadband Internet access services. TelePacific Comments at 5-9; TelePacific Ex
Parte
at 4-5; cf. 47 U.S.C. § 254(d). Nothing in the Wireline Broadband Internet Access Order or the 2006
Contribution Methodology Order
relieved a provider of special access circuits of the obligation to contribute on the
revenues derived from the sale of such transmission on a common carrier basis to providers of retail broadband
Internet access service. See Wireline Broadband Internet Access Order, 20 FCC Rcd at 14915-16, paras. 112-13;
2006 Contribution Methodology Order, 21 FCC Rcd at 7549, para. 62 & n. 206. If TelePacific is seeking
reconsideration of the decisions adopted in the Wireline Broadband Internet Access Order and the 2006
Contribution Methodology Order
, that request is untimely.
110 See infra Section III.D.2.
111 We do not read the existing definition of “reseller” so broadly that it would enable a company to certify it is a
reseller if it contributes on any of its product offerings that may incorporate wholesale inputs. Such a broad reading,
in the extreme case, would allow a carrier to claim reseller status for all of its wholesale inputs even though it only
contributed on a small fraction of its product offerings. For example, if a customer purchases a DS1 line and
incorporates that service into an offering of broadband Internet access service, it is not a reseller for purposes of that
(continued . . .)
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41.
We direct the Bureau to modify the 2013 Form 499-A instructions to revise the existing
sample certificate language, which we find does not clearly reflect the longstanding requirement that in
order to classify revenues as carrier’s carrier revenues, wholesalers must have a reasonable expectation
that their customers are “resellers” as defined above. Nonetheless, the issue under the Commission’s
rules is whether the wholesale providers had a reasonable expectation that their customers were resellers,
and we conclude that the wholesale providers’ reliance on certificates in accordance with the sample
language and other instructions in the Form 499-A worksheets was sufficient to justify a reasonable
expectation.112 We recognize that many providers have adopted the sample certificate language into their
business practices and that it would be unfair to penalize these providers for reasonably doing so. We
therefore direct USAC not to reclassify any revenues in situations where the wholesale provider relied on
a certificate consistent with the applicable Form 499-A instructions (and otherwise complied with those
instructions). In addition, wholesalers and customers may have established operating, reporting and
financial procedures that relied on the sample certification language and suggestion to check the
Commission’s website to determine whether an entity is a contributor contained in last year’s Form 499-
A instructions. Both wholesale providers and their customers may need time to make changes to their
internal policies and procedures, as well as to their existing contracts, to ensure compliance with the
Commission’s reseller requirements as clarified in this order.113 Thus, we will consider it sufficient for
providers to demonstrate a reasonable expectation that particular customers were resellers by relying on
certificates that are consistent with the sample language in the 2012 instructions through December 31,
2013.114 Likewise, we will consider it sufficient for customers to provide certificates to wholesalers that
are consistent with the sample language in the 2012 instructions for the same time period.
42.
The Commission has sought comment on specific rule changes relating to wholesale-
resale arrangements in the context of the pending contributions reform rulemaking proceeding, with one
option under consideration that would significantly alter the respective contribution obligations of
wholesalers and their customers.115 We do not prejudge what rules the Commission may ultimately adopt
in that proceeding.
(Continued from previous page)


line because it has no obligation to contribute on those broadband Internet access service revenues. This is true even
if the customer contributes to the Fund based on revenues from other lines. In contrast, a customer is a reseller if it
purchases a DS1 line and incorporates it into an offering of telephone service (and contributes on that resale), even if
it also provides broadband Internet access service on that line.
112 We note that the Wireline Competition Bureau effectively has treated the receipt of a reseller certificate in
accordance with the sample language and other instructions in the Form 499-A worksheets as sufficient to meet the
“reasonable expectation” requirement in the past. See, e.g., TelePacific Order, 25 FCC Rcd at 4655, para. 8 & n.22;
Global Crossing Order, 24 FCC Rcd at 10825-26, para. 5.
113 Several commenters that filed in response to the Contribution Methodology Reform and Modernization Further
Notice
note that they obtain certifications from thousands of resellers. See Comments of AT&T, WC Docket No.
06-122, GN Docket No. 09-51, at 43 (filed July 9, 2012); Comments of The American Prepaid Phonecall
Association, WC Docket No. 06-122, GN Docket No. 09-51, at 2 (filed July 9, 2012); Comments of Verizon and
Verizon Wireless, WC Docket No. 06-122, GN Docket No. 09-51, at 16 (filed July 9, 2012).
114 Contributors that do not rely on the sample language in the current Form 499-A instructions are required to
establish full compliance with the Commission’s requirements as clarified in this Order. See infra para. 52.
115 See Contribution Methodology Reform and Modernization Further Notice, 27 FCC Rcd at 5419-22, paras. 166-
74 (seeking comment on a value-added approach, under which the Commission would eliminate the current
exemption from contribution obligations for wholesalers and instead assess each provider, with credits provided to
subsequent providers in the value chain).
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C.

USAC Should Not Double Collect if Clear and Convincing Evidence Shows that
Another Provider Actually Contributed on the Subject Revenues

43.
In this section, we respond to the USAC Guidance Request116 by addressing the situation
in which the wholesale provider has not demonstrated a reasonable expectation that a customer would
contribute to the Fund, but the customer actually contributed to the Fund in the relevant calendar year on
the services in question.
44.
As stated above, the Commission adopted the wholesale exemption in part as a means of
addressing concerns that the same revenue should not be assessed twice for USF contributions
purposes.117 Thus, we clarify that if a wholesale provider’s customer actually contributed, USAC should
not attempt to recover contributions from the wholesale provider on the subject revenues, even if the
wholesale provider cannot demonstrate that it had a reasonable expectation that its customer would
contribute when it filed the Form 499 revenue data. However, as we clarify provider obligations in this
Order, we also stress that a wholesale provider that fails to show a reasonable expectation that its reseller
would contribute on the subject revenues is not discharging its due diligence obligations under our
requirements,118 even in those situations where the reseller happens to mitigate some of the harm caused
by the wholesale provider by making sufficient contributions to the USF on the subject revenues.
45.
We note that the burden of proof is on the provider claiming double collection to
demonstrate actual contributions were made to the Fund based on the relevant services through clear and
convincing evidence. Such a standard is necessary to ensure that the no-double-collection exception does
not swallow the rule of complying with universal service contribution obligations in the first instance.
We note that USAC will only need to determine if a reseller customer actually contributed in cases in
which the wholesale provider fails to demonstrate a reasonable expectation. We clarify that USAC,
beyond checking its own records, is not required to conduct additional independent investigations of the
wholesale provider’s customers in making this determination; however, USAC should consider the
evidence offered by the wholesale provider, including sworn reseller certificates (“confirmatory”
certificates).
46.
It is unclear from the Guidance Request whether USAC, with respect to the relevant
XOCS reseller customers, conducted a “reasonable expectation” analysis consistent with existing
precedent, as clarified below. On remand, USAC should evaluate whether XOCS had a “reasonable
expectation” that the customer would contribute to the Fund. If USAC determines that XOCS failed to
meet the reasonable expectation standard with respect to any particular customer(s), USAC should then
consider XOCS’s argument that its customers did in fact contribute to the Fund based on the subject
revenues. The burden is on XOCS to submit clear and convincing evidence that a customer, in fact,
contributed on the relevant services. Within the context of this analysis, USAC should take the
Confirmatory Certificates into account, because they may be relevant to the issue of whether the
customers in fact contributed to the Fund.119 If USAC does determine that the customer contributed to the


116 See supra paras. 26-30.
117 See supra para. 11.
118 See supra Section III.B and infra Sections III.D.1 and D.2; see also 47 C.F.R. § 54.711 and 2012 FCC Form 499-
A Instructions at 28 (requiring an executive officer to certify that to the truth and accuracy of data in the
Telecommunications Reporting Worksheet).
119 These certificates, as discussed below in Section III.D.1, are not relevant to whether XOCS had a reasonable
expectation prior to filing the Form 499-A that its resale customers would contribute, because such certificates were
not obtained during the relevant time period. However, they are relevant to the second issue raised by the Guidance
Request
—whether USAC should conclude that “the contributor’s carrier customers were incorporating the services
(continued . . .)
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Fund, USAC should not seek to recover additional contributions on the subject revenues from XOCS or
other wholesale providers.

D.

Clarifying and Applying the Reasonable Expectation Standard

47.
In this section, we provide guidance on how wholesale providers can demonstrate
compliance with the “reasonable expectation” standard and apply it to the XOCS Request for Review, the
USAC Guidance Request, and the Global Crossing Application for Review. Below is a summary of the
type of reseller certificate at issue in each proceeding and whether USAC records showed that the
customers at issue actually contributed to the Fund at all in the relevant year.

Type of Reseller Certificate At Did Customers Actually
Issue

Contribute to the Fund?

XOCS Request for Review
Pre-Service
No
USAC Guidance Request
Confirmatory
Yes
Global Crossing Application
Pre-Service
No
for Review
1.

The Relevant Time Period for the “Reasonable Expectation” Analysis is
When a Wholesale Provider Collects and Submits Revenue Data to USAC

48.
We reiterate that the relevant time period for the “reasonable expectation” analysis is the
period during which a wholesale provider collects and submits the revenue data at issue to USAC.
Wholesale providers must conduct appropriate due diligence before reporting revenues as exempt and, to
the extent that a wholesale provider relies on the FCC Form 499-A instructions to satisfy the reasonable
expectation standard (the “safe harbor” method discussed in Section III.D.2 below), it must receive the
relevant evidence before the filing deadline for the applicable annual Form 499-A.
49.
XOCS, in both its Request for Review and in response to the Guidance Request, argues
that USAC should have taken the Confirmatory Certificates into account as “other reliable proof” when
determining whether XOCS had a reasonable expectation.120 The Confirmatory Certificates, however, are
irrelevant for purposes of determining whether XOCS had a reasonable expectation at the time that it
failed to report the relevant revenues as “end user” revenues and failed to contribute on them.
Specifically, because XOCS obtained the certificates years after the fact and thus did not consider the
certificates at the time it submitted the 499-A forms, the Confirmatory Certificates could not have played
any role in XOCS’s ability to determine at that time whether its customer could be reasonably expected to
contribute to the Fund. Furthermore, holding that such Confirmatory Certificates can satisfy the
reasonable expectation standard would diminish the incentive for wholesale providers to conduct due
diligence at the proper time—i.e., prior to reporting revenues, not after years of potential under-reporting
and underpayments. We disagree with XOCS’s assertion that there is no risk of underpayment because
USAC can investigate and collect from the reseller customer if the customer claimed to contribute, but
did not.121 Such a policy inappropriately removes the initial burden of due diligence from the wholesale
provider and places it squarely back on the limited administrative resources of USAC and the
Commission. Thus, we clarify that, for purposes of the reasonable expectation analysis, USAC need not
(Continued from previous page)


purchased from the contributor into their own telecommunications offerings, and such customers’ USF contributions
were based on revenues from such offerings when provided to end-users.” Guidance Request at 2-3.
120 XOCS Request for Review at 40-41; XOCS Comments at 14-17.
121 XOCS Comments at 19.
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consider the Confirmatory Certificates or other evidence if the evidence could have had no possible
influence on whether XOCS, at the time it submitted revenue data, had a “reasonable expectation” that a
customer would contribute to the Fund on the relevant services. But, as noted above, USAC may
consider such certificates in evaluating whether the customer actually contributed to the Fund and
assessing the wholesale provider would thus lead to a double collection.122
2.

Wholesale Providers May Demonstrate a “Reasonable Expectation” by
Complying with the Form 499-A Instructions or Through Other Reliable
Proof

50.
In the Global Crossing Order, the Bureau held that USAC may reclassify a provider’s
reported carrier’s carrier revenue as end-user revenue if the provider fails to demonstrate that it either has
a reasonable expectation that its customer is contributing as a reseller “based on the guidance provided in
the FCC Form 499-A instructions or other reliable proof.”123 In the XOCS Request for Review and
comments in response to the Guidance Request, XOCS claims that USAC failed to apply the “other
reliable proof” standard as an alternative method of determining XOCS’s compliance with the
“reasonable expectation” standard, and requests that the Commission instruct USAC to do so.124
51.
We affirm this aspect of the Global Crossing Order and hold that a contributor may
demonstrate a reasonable expectation by either following the guidance in the Form 499-A instructions or
through other reliable proof. A wholesale provider that complies with all of the guidance in the Form
499-A instructions will be afforded a “safe harbor”—i.e., that provider will be deemed to have
demonstrated a reasonable expectation. If the relevant portion of the Form 499-A instructions has
changed from year to year, USAC should treat the instructions from the year the form was due as
applicable for purposes of applying the “safe harbor.” Consistent with the proposal in the Contribution
Methodology Reform and Modernization Further Notice
, and to assist filers in complying with the safe
harbor standard in the future, we direct the Bureau to issue a public notice within thirty days seeking
comment on any revisions that should be made to the FCC Forms 499 and instructions for reporting 2012
revenues in 2013, taking into account our directive in Section III.B above.125
52.
If a wholesale provider follows procedures that deviate in any way from the guidance in
the Form 499-A instructions, USAC should determine whether that provider has demonstrated a


122 See supra Section III.C.
123 Global Crossing Order at 10828-29, para. 14; see 2007 FCC Form 499-A Instructions at 19 (“Filers that do not
comply with the above procedures will be responsible for any additional universal service assessments that result if
its customers must be reclassified as end users”).
124 See XOCS Request for Review at 38-39 (“Nowhere does USAC accept the Global Crossing Order’s holding that
wholesale carriers may submit ‘other reliable proof’ . . . . XOCS respectfully requests that the Commission instruct
USAC that it must give independent consideration to all ‘other proof’” submitted by wholesale carriers); XOCS
Comments at 12-13 (“USAC rigidly applies the Form 499-A Instructions as the sole permissible method of
verification – in clear violation of FCC orders . . . the FCC stated explicitly in Global Crossing that carriers may
establish their affirmative knowledge or reasonable expectation by providing ‘other reliable proof’”) (emphasis in
original).
125 We note that Global Crossing argues that it cannot be bound by language in the FCC Form 499-A instructions.
Application for Review at 17-18. As we clarify here, however, we are not, in fact, treating strict compliance with
the instructions as the only means for a contributor to meet the “reasonable expectation” standard. See also
Contribution Methodology Reform and Modernization Further Notice
, 27 FCC Rcd at 5477-79, paras. 344-49
(proposing a formal process to seek public comment prior to adopting revisions to the FCC Forms 499 and
instructions and seeking comment on whether contributors should be required to comply with instructions adopted
under such a process).
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reasonable expectation using the “other reliable proof” standard. When evaluating whether a contributor
has provided sufficient “other reliable proof,” USAC should consider all relevant evidence, including
reseller certificates or other documents that do not precisely track the language in the sample certificate
language set forth in the instructions.126 We caution providers that, should they choose to take this
alternate route, USAC will be required to make a case-by-case factual determination as to whether each
provider has shown that it had a reasonable expectation that its customer was a “reseller” for each
purchased wholesale service. We also note that the provider bears the burden of production and the
burden of proof under the “other reliable proof” method—and we clarify that the relevant standard of
proof is that the wholesale provider demonstrate a reasonable expectation with clear and convincing
evidence. USAC is not required to conduct any independent investigation, beyond checking its own
records and considering the evidence from the provider, in making this determination. We direct USAC
to refer matters directly to the Commission to the extent it cannot determine from the facts presented
whether the provider has demonstrated a reasonable expectation either by relying on the guidance in the
FCC Form 499-A or other reliable proof.
3.

Application of the Reasonable Expectation Standard to the XOCS Request
for Review

and the USAC Guidance Request
53.
As discussed above, XOCS obtained “Pre-Service Certificates” from its customers prior
to the filing of relevant Form 499 revenue data, but did not update the certificates annually per the
guidance in the applicable Form 499-A instructions. XOCS acknowledged the certificates did not meet
the guidance in the instructions, but argued in the context of both the XOCS Request for Review and the
Guidance Request that these certificates should be taken into account under the “other reliable proof”
standard.127 Other parties also commented on the treatment of similar certificates (i.e. forward-looking in
nature, but dated outside the calendar year when revenues are earned). For example, Verizon stated that a
customer may be delayed in providing an annual certificate for many reasons (for example, administrative
oversight, or because the customer ordered service late in a calendar year after the date when annual
certificates are typically gathered as part of the compliance process).128
54.
We find that USAC should take into account XOCS’s Pre-Service Certificates when
evaluating whether XOCS had “other reliable proof.” Even if reseller certificates do not follow the
guidelines in the Form 499-A instructions, the certificates can still constitute “other reliable proof”
supporting a reasonable expectation, depending on the totality of the facts and circumstances under which
the certificates were obtained. Thus, for example, if customer delay results in the provision of a
certificate that is not dated before the Form 499-A is filed, a wholesale provider may attempt to
demonstrate a reasonable expectation by submitting evidence showing that it knew, at or before the time
of filing, that the customer was filing a reseller certificate and had not done so through a clerical error or
other non-substantive delay and may still submit the post-dated certificate as evidence to support this
explanation. Accordingly, if USAC declined to give weight to the Pre-Service Certificates under the


126 As we have noted above, Confirmatory Certificates obtained after the fact are irrelevant for purposes of
determining whether a contributor had a reasonable expectation at the time that it failed to report the relevant
revenues as “carrier’s carrier” revenues and failed to contribute on them, because they were not considered during
the relevant time period. See supra Section III.D.1.
127 XOCS acknowledges that it did not obtain reseller certificates on an annual basis per the guidance in the Form
499 instructions. Request for Review at 38. Thus, the Pre-Service Certificates alone were insufficient to
demonstrate a reasonable expectation under the “safe harbor” method.
128 Verizon Comments at 3; see also Sprint Reply at 3 (agreeing with Verizon’s statement concerning the reasons for
delayed certificates).
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“other reliable proof” standard merely because they did not comply with the guidance in the instructions,
we direct USAC to reconsider its analysis.
4.

Application of the Reasonable Expectation Standard to the Global Crossing
Application for Review

55.
Finally, we deny in part and grant in part Global Crossing’s Application for Review and
provide additional clarification for the application of the reasonable expectation standard. Global
Crossing makes two primary arguments in its petition. First, Global Crossing argues that the Bureau
retroactively applied the 2007 instructions to revenues reported on its 2005 FCC Form 499-A, in
particular by requiring a reseller certificate.129 This is not correct; the Bureau did not apply the 2007
instructions. Rather, it applied the less detailed 2005 instructions, which explicitly directed filers to verify
that each of their reseller customers would both “1) resell the filer’s services in the form of
telecommunications and not as information services; and 2) contribute directly to the federal universal
service support mechanisms.”130 As acknowledged by Global Crossing, the 2005 instructions also stated
that contributors that did not have an “independent reason” to know that a reseller satisfied both criteria
should “obtain a signed statement certifying that these criteria are met.”131 If Global Crossing did not
have an “independent reason,” the instructions still provided that Global Crossing should obtain signed
statements from its reseller customers.132
56.
Second, Global Crossing argues that it did in fact demonstrate a reasonable expectation
under the 2005 instructions. As discussed in Section III.D.2 above, Global Crossing would need to
demonstrate that it either complied with all of the guidance in the 2005 instructions (the “safe harbor”
method) or provide “other reliable proof” that it had a reasonable expectation that its customers would
contribute to the Fund. With respect to the “safe harbor” method, we remand to USAC as set forth above
for re-evaluation as to whether Global Crossing satisfied the reasonable expectation standard through
compliance with the 2005 instructions.133 To the extent that USAC determines that Global Crossing did
not fully comply with the 2005 instructions as a safe harbor, we further direct USAC to re-evaluate
whether the evidence previously submitted by Global Crossing could still serve as “other reliable proof”
for demonstrating a reasonable expectation that the customers would contribute to the Fund on the
relevant services.134


129 Application for Review at 15-16.
130 2005 FCC Form 499-A Instructions at 18 (emphasis added).
131 See Application for Review at 16; see also 2005 FCC Form 499-A Instructions at 18.
132 Global Crossing further argues that the Bureau retroactively applied the 2007 instructions by requiring printouts
from the Commission’s contributor website verifying the status of each of its customers. Application for Review at
14-16. The Bureau, however, did not rely on the presence or absence of such printouts in the order, so the argument
is moot. See Global Crossing Order, 24 FCC Rcd at 10826, para. 6 (“USAC found, and we agree, that the evidence
Global Crossing presented – e.g., outdated certifications, contract provisions, company website information and
product description – did not support a finding that Global Crossing had a reasonable expectation that its customers
would contribute directly to the universal service fund as resellers”).
133 We agree with Global Crossing that in 2005, certificates were not necessarily required to be annual; nonetheless
the length of time that has passed between their execution and the filing of the Form 499-A could bear on their
probative value.
134 See, e.g., 2005 FCC Form 499-A Instructions at 18 (stating that documented procedures should include, but not
be limited to, maintaining the following information on resellers: Filer 499 ID; legal name; address; name of contact
person; and phone number of the contact person).
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57.
On remand, if USAC reclassifies any revenues associated with Global Crossing’s non-
contributing customers, we direct USAC to provide Global Crossing with detailed findings that form the
basis for the decision to reclassify the revenues. We further direct USAC to reassess Global Crossing’s
contribution payment obligation in accordance with any new findings and to issue new invoices or
refunds as appropriate.

IV.

ORDERING CLAUSES

58.
ACCORDINGLY, IT IS ORDERED, pursuant to the authority contained in sections 1–4
and 254 of the Communications Act of 1934, as amended, 47 U.S.C. §§ 151–154, 254, and section 1.115
of the Commission’s rules, 47 C.F.R. §1.115, that the Application for Review filed by Global Crossing
Bandwidth, Inc. is hereby DENIED IN PART AND GRANTED IN PART as provided herein and is
otherwise REMANDED to USAC for further consideration in accordance with the terms of this Order.
59.
IT IS FURTHER ORDERED, pursuant to the authority contained in sections 1–4 and 254
of the Communications Act of 1934, as amended, 47 U.S.C. §§ 151–154, 254, and section 1.106 of the
Commission’s rules, 47 C.F.R. § 1.106, that the Petition for Clarification or in the Alternative for Partial
Reconsideration filed by AT&T Inc., CenturyLink, SureWest Communications, and Verizon is hereby
GRANTED as provided herein.
60.
IT IS FURTHER ORDERED, pursuant to the authority contained in sections 1–4 and 254
of the Communications Act of 1934, as amended, 47 U.S.C. §§ 151–154, 254, and section 54.722 of the
Commission’s rules, 47 C.F.R. § 54.722, that the Request for Review filed by XOCS Communications
Services, Inc. is hereby GRANTED IN PART as provided herein and is in relevant part REMANDED to
USAC for further consideration in accordance with the terms of this Order.
61.
IT IS FURTHER ORDERED, pursuant to section 1.103(a) of the Commission’s rules, 47
C.F.R. § 1.103(a), that this Order SHALL BE EFFECTIVE upon release.
FEDERAL COMMUNICATIONS COMMISSION
Marlene H. Dortch
Secretary
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APPENDIX

List of Commenters

GLOBAL CROSSING BANDWIDTH, INC. APPLICATION FOR REVIEW

Commenter

Abbreviation

Verizon and Verizon Wireless
Verizon

Reply Commenter

Abbreviation

None

AT&T, CENTURYLINK, SUREWEST COMMUNICATIONS, AND VERIZON PETITION FOR
CLARIFICATION

Commenter

Abbreviation

Coalition for Fairness and Restraint in USAC Fund Administration
Coalition
Qwest Communications International Inc.
Qwest
U.S. TelePacific Corp. d/b/a TelePacific Communications
TelePacific

Reply Commenter

Abbreviation

Ad Hoc Coalition of International Telecommunications Companies
Ad Hoc
AT&T, CenturyLink, SureWest, and Verizon
Wholesale Providers

XOCS COMMUNICATIONS SERVICES, INC. REQUEST FOR REVIEW

Commenter

Abbreviation

AT&T
AT&T
Level 3 Communications, LLC and Paetec Holding Corp.
Level 3
Qwest Communications International Inc.
Qwest
Verizon
Verizon

Reply Commenter

Abbreviation

BT Americas, Inc.
BT
Sprint Nextel Corporation
Sprint
XO Communications Services, Inc.
XOCS

UNIVERSAL SERVICE ADMINISTRATIVE COMPANY REQUEST FOR GUIDANCE

Commenter

Abbreviation

Ad Hoc International Coalition of International Telecommunications
Ad Hoc
Companies
U.S. TelePacific Corp. d/b/a TelePacific Communications
TelePacific
Verizon and Verizon Wireless
Verizon
XO Communications Services, Inc.
XOCS

Reply Commenter

Abbreviation

Level 3 Communications, LLC
Level 3
Sprint Nextel Corporation
Sprint
U.S. TelePacific Corp. d/b/a TelePacific Communications
TelePacific
XO Communications Services, Inc.
XOCS
26

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