Troubling Notice “Reminds” ETCs of New Requirements Relating to Selling Their Businesses
The FCC’s Wireline Competition Bureau released a Public Notice yesterday “reminding” ETCs of several restrictions on the sale of an ETC’s business. The notice states that “Commission approval is required in advance of any transfer of ownership or control of an ETC with an approved Lifeline compliance plan,” citing footnote 1,000 of the 2012 Lifeline Reform Order as its authority for this proposition. The problem is that footnote 1,000 does not quite say this. What it does say is (emphasis added):
In the event there is a change in ownership control of an existing Lifeline-only ETC that received forbearance of the facilities-based requirement, designated prior to December 29, 2011, and that Lifeline-only ETC is acquired by a telecommunications carrier that does not meet the definition of a facilities-based carrier under section 214(e)(1)(A), the controlling carrier may not rely on the existing Lifeline-only ETC’s compliance plan and must submit a compliance plan for Bureau approval as detailed in paragraph 379 [of the 2012 Lifeline Reform Order] before receiving reimbursement from the program.
The language of this footnote is limited to (1) changes in ownership, (2) of a carrier that was designated an ETC prior to December 29, 2011 and most importantly (3) transactions where the buyer is another telecommunications carrier. It does not—by its own terms—apply to acquisitions by entities or persons that are not themselves telecommunications carriers. Nor does it apply to ETCs that were designated after December 29, 2011. And neither the notice nor the footnote it relies upon address asset acquisitions, such as the purchase of customer bases, equipment, etc. that do not involve the purchase of ownership interests or other types of corporate control.
Later in the notice, the Bureau relies on a 2010 case involving Allied Wireless in an attempt to support its “reminder.” In that case, Allied Wireless—a telecommunications carrier—acquired the assets of an ETC, including customers receiving another form of universal service support from the High Cost fund. The Bureau found that it needed to first approve Allied Wireless as an ETC before it could receive the support. While this case did involve an asset transaction, the buyer was a telecommunications carrier. In short, the Bureau has cited no support that an acquisition by a non-telecommunications carrier is subject to any pre-approval requirements. We strongly advise potential buyers or sellers to not forge ahead with such deals without competent counsel given the obvious (but inadequately drafted or supported) intent of the notice, but we seriously question the Bureau’s characterization of current requirements.