Between the FCC, USAC, and remitting telecom taxes, owners of small MSPs are unnecessarily afraid of the unknown.
The telecommunication services industry is a multi-billion dollar industry that carries mission-critical components of nearly every company in the country. Due to the vital nature of these services to the economy, expansive laws have been established by the Federal Communications Commission (FCC) to regulate telephone, television, and radio communications. Not surprisingly, this red tape has become an obstacle for companies seeking to sell telecommunication services. But the truth is, much of what MSPs think about the FCC is false, especially insofar as selling voice services is concerned. Here are the top five misconceptions about the FCC with regard to telecom.
Misconception #1: If you want to sell phone services to your customers under your own brand, you have to build your own phone network.
FALSE. Only the industry giants possess the resources required to build networks, so you only need to find a trusted partner. Selling phone service under your own brand simply requires you to be a reseller or an agent. Depending on which one you choose determines whether you’ll need to establish a relationship with the FCC.
Misconception #2: Registering as a reseller of local and long-distance phone services in the U.S. is complicated.
FALSE. Registering with the FCC is a well-understood process. To provide domestic local and long-distance phone service, the FCC simply requires the filing of Form 499, registration with the Universal Service Administrative Company (USAC), and submission of two documents: a CALEA Manual and CPNI Policy. To provide international phone service, the FCC requires the filing of Form 214. Simply put, if you’re filing sales tax, this is just one of those things.
Misconception #3: The costs of registering and complying with FCC regulations make it unprofitable for small companies to resell phone services.
FALSE. There are no fees for registering with the FCC or USAC for filing the annual Form 499-A. Form 214 does require a one-time filing fee of $1,500, and the cost for legal guidance — should you need it — is about $3,000. The good news is, to offset these expenses, registered companies can charge customers a recurring Regulatory Recovery Fee (RRF). Check your phone bill, it’s there somewhere. And it’s not something that remitted to any government agency, so you determine what to charge and keep it.
Misconception #4: It is difficult to determine and correctly bill your customers for USF, state, and local telecom taxes.
FALSE. The Universal Service Fund (USF) calculation simply involves the multiplication of the USF covered revenues billed to all customers and a factor defined by USAC each quarter. Depending on the amount of telecom revenue collected each quarter, a company is required to complete Form 499Q or 499A and remit collected monies to the USF, which, much like sales taxes, have no net impact on a company’s bottom line. State and local telecom taxes are based on the zip code of the end user location, so any applicable telecom taxes are readily available from each state’s website.
Misconception #5: There is no difference between an agent and a reseller.
FALSE. Agents are, essentially, commissioned salespeople who usually can’t set prices, aren’t responsible for billing customers, and don’t register with the FCC. Resellers, on the other hand, set their own prices, maintain their billing relationship with their customers, and must register with the FCC. The added responsibility allows resellers to collect RRF (to offset expenses for billing) and keep USF fees until no longer de minimus.
Though many small MSPs consider becoming a phone company a daunting proposition, selling phone service is actually incredibly profitable and likely far easier than you think. D3UC’s white label, cloud-based communication services allow companies to provide phone plans to customers under their own name. Whether you’re considering a reseller or an agent model, contact us today to start exploring your options about generating monthly recurring revenues with profits of 50% to 100%.