What Resellers May Not Know about 214 Authority

Posted: 3/2004

What Resellers May Not Know about 214 Authority
By Edward A. Maldonado, Esq.

Many resellers are confused about the mandate and obligations of securing international service authority from the FCC under Section 214 of the Communications Act. Some believe it to be a one-time inconvenience required for international resale. Others simply view it as a requirement to pass universal service fund (USF) contribution or federal excise tax responsibility. Still others believe it to be a requirement of large wholesale carriers in order to purchase traffic. Although a kernel of truth lies in each of these views, the reality is that most resellers do not have a complete picture of what Section 214 authority requires and prohibits.

A streamlined online application process, enabling such authority to be obtained without the need of an attorney or regulatory advisor, has further exacerbated this unawareness. Seeing a cost-saving advantage, resellers increasingly are using this online process to file for their own Section 214 licenses without any understanding as to what is required of them, which can lead to increased costs over the long run.

Since the year 2000, the FCC and other federal agencies increasingly are using Section 214 authority as a benchmark for potential regulatory and tax liability between telecom providers and end-users of those services. Resellers are receiving more requests from federal regulatory agencies and the IRS for reporting associated with Section 214 authority or the FCCms Commission Registration System (CORES) registration. Recent rumblings from within the FCC suggest that stricter reporting to the FCC may be implemented in coming months that will be targeted to international resellers and carriers.

Federal regulation places specific conditions on Section 214 authority that are not understood until regulations have been fully reviewed or all too often until carriers are confronted with violations. Five such conditions are of particular importance to the average reseller:

1. Under CFR Sec. 63.21 (a) the resale carrier is responsible for the continuing accuracy of the certifications made in its application and must notify the FCC if its certificate information is inaccurate. This includes an array of information including changes of ownership, business address, affiliations with foreign dominant carriers or any other information that differs between the first application and a companys present state of business. If a provider updates its certificate, the FCC will adjust that 214 certificate, but also reserves the right to review that certification anew to determine if the providers regulatory status has changed for any reason. The purpose of this requirement is simple: to maintain an updated public file that consumers and other carriers can check to verify carriers. The problem is that the current listing of 214 carriers on the FCC Web site is more a gallery of the living and the dead than an accurate listing of active carriers. Because of this, the FCC is likely to begin cleaning house and increasing enforcement CFR Sec. 63.21 (a) by making providers responsible for updates that should have been filed.

2. Under CFR Sec. 63.21 (c) non-dominant resellers that provide de-tariffed international services must comply with public disclosures requirements of CFR 42.10 and 42.11. Specifically, CFR Sec. 42.10(a) requires non-dominant IXCs to make available to the public information concerning its current rates, terms and conditions for all of its international and interstate services and detail how the public may obtain the information. Although called service information in the regulations, the contents of this requirement more or less constitute a tariff. This point is reinforced in CRF 42.11 (a), which requires a non-dominant IXC to maintain the same information, regarding price and service, for submission to the commission and to state regulatory commissions regarding all of the carriers international and interstate service offerings. This information must be maintained in a way that allows the reseller to produce it within 10 business days if requested by the commission or any state regulatory commission. The result is resellers still are required to maintain rate and service information as if they filed a tariff even though they are not required to file such information with the FCC. Not surprisingly, most resellers in the market do not maintain this information and few are prepared to remit this information within 10 days.

3. In regard to de-tariffed resellers and the permissive filing of tariffs, CFR 61.19 Sec. (b) allows reseller to file tariffs if they are common carriers that are non-dominant in the provision of international and domestic services for dialaround 1+ services (for example, those using the carriers carrier access code). As many resellers have branched into this service arena since 2000, this permissive filing with the FCC may be a wise move in order to seek protection under the filed-rate doctrine in state or federal courts in consumer claims. However, very few resellers in this service area have filed this permissive tariff, though it would be to their benefits.

4. Under CFR Sec. 63.21 (c) common carriers must file annual reports of overseas telecommunications traffic pursuant to CRF 43.61(a) (1), (2) and (3), which require resale carriers engaged international services in the continental United States, off-shore and in any country outside the United States, to file a report with the commission no later than July 31 of each year for service actually provided in the preceding calendar year. This information must include actual traffic and revenue data for each and every service provided, divided among services billed in the United States, outside the United States, and services transiting the United States. In essence, what Form 499-A is to end-user service reporting for USF contributions, the overseas traffic report is (or will be) to the FCC for international services. Similar to USF contribution reporting, the overseas telecommunication traffic report has a quarterly report element required for the carriers aggregate minutes of facilities resale switched telephone traffic for:

• Services billed in the United States are greater than 1.0 percent of the total of international traffic for all U.S. carriers published in the commissions annual report of international telecommunications traffic;
• Services billed outside the United States are greater than 1.0 percent of the total of international traffic for all U.S. carriers published in the commissions annual report of international telecommunications traffic;
• Services billed in the United States for any foreign country are greater than 2.5 percent of the total of international traffic for that country for all U.S. carriers published in the commissions annual report of international telecommunications traffic;
• Services billed outside the United States for any foreign country are greater than 2.5 percent of the total of international traffic for that country for all U.S. carriers published in the commissions annual report of international telecommunications traffic.

The result for resellers is that this information should be reported, regardless of whether or not they have in the past. Review of the FCCs annual report of international telecommunications traffic clearly shows a historic lack of input and data from the resale side of the industry. The FCC is aware of this, and there are numerous internal rumblings within the FCC that enforcement of these regulations will become a reality in the very near future. The prime motive behind this effort is to improve record keeping at the FCC, and its associated institutions, required by statue and regulations. Since the 499-A reporting of end-user traffic has significantly increased through USAC, the FCC can now crosscheck reported international traffic in that call path between carriers. Likewise, carriers and resellers reporting international traffic must now prove-up on traffic previously reported as international in the 499-A.

5. Finally, there are two prohibitions related to the reseller at the international level that are worth knowing. These include customer proprietary network information and unlawful disclosure by entities outside the United States. Pursuant to CFR 63.21 (e) and (f), Section 214 resellers are prohibited from having access to or making use of specific U.S. customer proprietary network information that is derived from a foreign network unless the Section 214 reseller obtains approval from that U.S. based customer. Most of the U.S. customers mentioned in this regulation are non-dominant U.S. based resellers engaged in resale at the international level. Should a reseller seek this kind of information, the reseller first must notify the U.S. customer and require the foreign carrier to disclose the information only upon written request. Likewise, U.S. resellers also are prohibited from receiving from a foreign carrier any proprietary or confidential information pertaining to a competing U.S. carrier obtained by the foreign carrier in the course of its normal business dealings, unless the competing U.S. carrier provides its permission in writing. The purpose is to protect the integrity of U.S. resold networks built in other countries from our jurisdiction. While there have been few documented administrative forfeiture or enforcement actions by the FCC on this prohibition, the increased growth of resellers at the international level, and their contact with PTTs, both within the United States and internationally, raises the potential for violations of this provision being brought before the FCC for administrative remedy.

For most resellers, the reporting requirements and international prohibitions attached to their Section 214 authority are not unknown and often are learned through the school of hard knocks. The caveat in this kind of learning curve is the FCC reserves the right to review a carriers authorization and, if warranted, impose additional requirements pursuant to CFR 63.21(g) for all the requirements of presented above. Unlike state regulatory fines or penalties, violations of these regulations, reports and conduct can lead to a provider defending its Section 214 authority itself. If it loses, it officially is out of telecom as a common carrier. For this reason, it is crucial for providers to familiarize themselves with Section 214 authority and learn the requirements before they become problems as this will be an area of increased regulatory activity in 2004.