FCC Order Would Allow Barring More USF ‘Bad Actors’
The FCC Wednesday released an order allowing the agency to come down hard on those trying to defraud the Universal Service Fund program. Under previous rules, the FCC could “debar” from participation in the program only those found to have defrauded the schools and libraries program. The rule change expands enforcement throughout the program. “Debarment of applicants, service providers, consultants, or others who have defrauded the USF is necessary to protect the integrity of the universal service program,” the order said. “We do not find any reason to exclude the high-cost, rural health care, or low-income programs from our debarment rules.”
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More rule changes are pending. The order was developed by the Office of Managing Director after a June 2005 rulemaking. The Wireline Bureau is examining fine-tuning of the regulations.
The rule change follows years of high-profile USF abuses. One was the case of tiny Cass County Telephone in Missouri. Kenneth Matzdorff, one of the company’s owners, was charged with helping the Gambino crime family launder money and defraud the USF. In June 2005, when the FCC issued a proposed rulemaking, Commissioner Jonathan Adelstein strongly urged expansion of the debarment rules.
Separately, parties that owe the program money will pay a higher interest rate. The order notes that since 2004, the Universal Service Administrative Company has referred to the FCC for collection more than 1,700 cases involving $95.7 million in delinquent contributions. Interest rates under the program have varied. The order calls for the prime lending rate plus 3.5 percent.
“Interest and penalties will compensate the USF for the time value of money, and also facilitate enforcement action against carriers who have substantial delinquencies,” the order said. “This will ensure, as well, that contributions to the USF are equitable and nondiscriminatory in that those who create additional administrative burdens will pay for them.” Late payers face financial penalties as well.
The order said all program participants will receive with their monthly invoices a notice describing sanctions risked by late payers. “The date of payment on the invoice is the due date,” the notice warns. “If full payment is not received by the date due, the debt is delinquent.”
The order describes how long program participants must retain records for auditing purposes. A five-year data retention requirement applies to the high-cost, schools and libraries and rural health care programs. All carriers contributing to the program must retain records for five years. “Recordkeeping requirements not only prevent waste, fraud, and abuse, but also protect applicants and service providers in the event of vendor disputes,” the FCC said. Among other rule changes, the order adopts performance measures for the universal service program and for USAC.