Late Monday, the FCC released a Public Notice reminding high-cost USF recipients that the support must be used only for its intended purposes. The FCC reminds recipients that Section 254(e) of the Communications Act requires USF to only be used for the “provision, maintenance and upgrading of facilities and services for which the support is intended.” Additionally, the FCC cites Section 65.450 which prohibits recipients from including expenses in their revenue requirement unless such expenses are “recognized by the Commission as necessary to the provision” of interstate telecommunications services. The use of USF for any other purpose could result in recovery of the misused funds, suspension of funding or enforcement action.

According to Commissioner Pai’s statement, the impetus for the Public Notice was the recent suspension of USF funds to Sandwich Isles Communications due to the owner’s conviction for tax evasion and that he used the company as his “personal piggy bank.” Chairman Wheeler also cited this “bad apple” during his speech at the NTCA Fall Conference, where he announced that the FCC planned to release a public notice to ensure that such misdeeds do not distract from the important work that rural LECs are doing to serve their communities.

In addition to serving as a reminder, the Public Notice signals future actions by the FCC to address what it considers as expenses that are “excessive.” In their joint statement, Commissioners Clyburn and O’Rielly said current rules governing recovery of expenses must be “realigned” to reflect the FCC’s more recent USF reforms.

JSI is reviewing Section 65.450 and relevant portions of Part 32 in light of the context in which they are placed in the Public Notice and will provide additional guidance if warranted. As has always been the case, expenses included in the revenue requirement must be reasonable and applicable to the provision of telecommunications services, and companies must certify their USF and cost study submissions.

If you have any questions or would like to discuss the Public Notice, please contact Steve Meltzer or John Kuykendall at 301-459-7590.

Source: JSI e-Lert