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United States Government Accountability Office: 
GAO: 

Report to Congressional Requesters: 

August 2012: 

Federal Communications Commission: 

Regulatory Fee Process Needs to Be Updated: 

GAO-12-686: 

GAO Highlights: 

Highlights of GAO-12-686, a report to congressional requesters. 

Why GAO Did This Study: 

FCC must by law assess annual regulatory fees on telecommunications 
entities to recover its entire appropriation—about $336 million in 
fiscal year 2011. The entities from which FCC collects fees fall into 
one of five main industry sectors (broadcast, cable, wireline, 
wireless, and international) and are assigned to one of 86 fee 
categories, such as paging services. Recently, FCC stated that it was 
planning to consider reforms to its regulatory fee process. GAO was 
asked to examine (1) FCC’s process for assessing regulatory fees among 
industry sectors, (2) FCC’s regulatory fee collections over the past 
10 years, and (3) alternative approaches to assessing regulatory fees. 
GAO reviewed FCC data and documents, interviewed officials from FCC 
and the telecommunications industry, and, to identify alternative 
approaches to assessing regulatory fees, met with five fee-funded U.S. 
and Canadian regulatory agencies. 

What GAO Found: 

The Federal Communications Commission (FCC) assesses regulatory fees 
among industry sectors and fee categories based on obsolete data, with 
limited transparency. The Communications Act requires FCC to base its 
regulatory fees on the number of full-time equivalents (FTE) that 
perform regulatory tasks in certain bureaus, among other things. FCC 
based its fiscal year 2011 regulatory fee assessments on its fiscal 
year 1998 division of FTEs among fee categories. It has not updated 
the FTE analysis on which it bases its regulatory fees, in part to 
avoid fluctuations in fees from year to year. FCC officials stated 
that the agency has complied with its statutory authority by dividing 
fees among fee categories based on FTE data—-although the data is from 
fiscal year 1998-—since the statute does not prescribe a specific time 
for FCC to update its FTE analysis. As a result, after 13 years in a 
rapidly changing industry, FCC has not validated the extent to which 
its fees correlate to its workload. Major changes in the 
telecommunications industry include the increasing use of wireless and 
broadband services and a convergence of telecommunications industries. 
Moreover, FCC’s practice is inconsistent with federal guidance on user 
fees. As a result of FCC’s use of obsolete data in assessing 
regulatory fees, companies in some fee categories may be subsidizing 
companies in others. FCC officials said it has become more challenging 
to align current FTEs to the 86 fee categories given the increasingly 
cross-cutting nature of FCC’s work, raising the potential that FCC’s 
fee categories may also be out of date. FCC’s regulatory fee process 
also lacks transparency because of the limited nature of the 
information FCC has published on it. This has made it difficult for 
industry and other stakeholders to understand and provide input on fee 
assessments. On July 17, 2012, FCC released a regulatory fee reform 
Notice of Proposed Rulemaking (NPRM) proposing changes to FCC’s 
regulatory fee program related to many issues raised in this report. 

On average over the past 10 years, FCC collected 2 percent more in 
regulatory fees than it was required to collect. Prior to fiscal year 
2008, FCC’s annual appropriations stated that any excess regulatory 
fees remained available until expended; since 2008, FCC’s annual 
appropriations have prohibited the use of any excess fees from the 
current year or previous years without an appropriation by Congress. 
As a result, $66 million in excess fees currently resides in an 
account at the Department of Treasury that cannot be used without 
congressional action. The account has increased by an average of $6.7 
million per year for fiscal years 2006 through 2011. Congress has not 
provided for the disposition of these accumulating excess funds. 

Approaches of other fee-funded regulatory agencies could be 
instructive as FCC considers reforms. For example, the Nuclear 
Regulatory Commission, Federal Energy Regulatory Commission, and 
Canadian Radio-television and Telecommunications Commission assess 
fees based on an annually or biennially updated analysis of costs by 
industry sector. Regarding excess fees, officials at five other fee-
funded regulatory agencies stated that their agencies either apply 
excess fees as an adjustment to the subsequent year’s fees or refund 
them. 

What GAO Recommends: 

Congress should consider whether FCC’s excess fees should be 
appropriated for FCC’s use or, if not, what their disposition should 
be. FCC should perform an updated FTE analysis and require at least 
biennial updates going forward; determine whether and how to revise 
the current fee schedule, including the number of fee categories; 
increase the transparency of its regulatory fee process; and consider 
the approaches of other fee-funded regulatory agencies. FCC agreed 
with GAO’s recommendations. 

View [hyperlink, http://www.gao.gov/products/GAO-12-686]. For more 
information, contact Mark L. Goldstein at (202) 512-2834 or 
goldsteinm@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

FCC's Assessment of Regulatory Fees Is Based on Obsolete Data and 
Lacks Transparency: 

FCC Has Collected $66 Million in Excess Fees That Is Unavailable 
without Further Congressional Action: 

Alternative Approaches Could Be Instructive as FCC Considers Reforms 
to Its Regulatory Fee Process: 

Conclusions: 

Matter for Congressional Consideration: 

Recommendations for Executive Action: 

Agency Comments: 

Appendix I: Objectives, Scope and Methodology: 

Appendix II: Comments from the Federal Communications Commission: 

Appendix III: GAO Contact and Staff Acknowledgments: 

Tables: 

Table 1: Examples of FCC Fee Categories within Each Industry Sector: 

Table 2: Telecommunications Industry Changes, Fiscal Years 1998 to 
2011, as Measured by Basis Used to Set FCC Regulatory Fees: 

Table 3: FCC's Regulatory Fee Collections, Fiscal Years 2002 to 2011: 

Figures: 

Figure 1: FCC's Regulatory Fee Assessment Process: 

Figure 2: FCC's Division of Regulatory Fees among Industry Sectors, 
Fiscal Years 1998 and 2011: 

Figure 3: FCC's Division of Regulatory Fees versus Costs by Core 
Bureau, Fiscal Year 2008: 

Abbreviations: 

CNCS: Canadian Nuclear Safety Commission: 

CRTC: Canadian Radio-television and Telecommunications Commission: 

FCA: Farm Credit Administration: 

FCC: Federal Communications Commission: 

FERC: Federal Energy Regulatory Commission: 

FNPRM: Further Notice of Proposed Rulemaking: 

FTE: full-time equivalent: 

ITTA: Independent Telephone and Telecommunications Alliance: 

NCTA: National Cable and Telecommunications Association: 

NPRM: Notice of Proposed Rulemaking: 

NRC: Nuclear Regulatory Commission: 

VoIP: voice over Internet protocol: 

Y2K: year 2000: 

[End of section] 

United States Government Accountability Office: 
Washington, DC 20548: 

August 10, 2012:
The Honorable Henry A. Waxman:
Ranking Member:
Committee on Energy and Commerce:
House of Representatives: 

The Honorable Anna G. Eshoo:
Ranking Member:
Subcommittee on Communications and Technology:
Committee on Energy and Commerce:
House of Representatives: 

The Federal Communications Commission (FCC), which regulates 
interstate and international communications by radio, television, 
wire, satellite, and cable in the United States, must by law assess 
and collect annual regulatory fees from the entities it regulates. 
These fees are designed to recover FCC's operating costs, covering its 
enforcement, policy and rulemaking, international, and user 
information activities.[Footnote 1] In recent appropriation acts, 
Congress has directed FCC to recover its entire appropriation--about 
$336 million for fiscal year 2011--through the collection of these 
regulatory fees.[Footnote 2] The entities from which FCC collects fees 
fall into one of five main industry sectors (broadcast, cable, 
wireline, wireless, and international) and are assigned to 1 of 86 fee 
categories. FCC has referred to the process as a "zero-sum 
proposition" because, since FCC is directed to collect a specified 
amount by Congress, if FCC reduces the fees of one industry sector or 
fee category, others must pay more.[Footnote 3] Recently, concerns 
have been raised that FCC's regulatory fee process does not align with 
today's communications industry and may provide a competitive 
advantage to some industries while disadvantaging others. In fiscal 
years 2008, 2011, and 2012, FCC stated that it was planning to 
consider reforms to its regulatory fee process, in part because the 
communications industry had changed dramatically since 1994 when FCC's 
regulatory fee process was first authorized, while FCC's division of 
regulatory fees among industry sectors and fee categories had changed 
very little. 

To offset FCC's annual appropriation through regulatory fees, FCC 
determines how to divide the amount to be collected among the five 
industry sectors and fee categories within each industry sector. 
[Footnote 4] FCC also determines a rate to charge entities within each 
fee category.[Footnote 5] FCC sets the rates of different fee 
categories on various bases. For example, FCC sets the rate for 
wireline telephone companies on a per-revenue-dollar basis--$.00375 
per revenue dollar in fiscal year 2011, for total expected collections 
from the industry of about $148 million.[Footnote 6] On the other 
hand, FCC sets the rate for wireless telephone companies on a per 
subscriber basis[Footnote 7]--$0.17 per subscriber in fiscal year 
2011, for total expected collections from the industry of about $51 
million. Figure 1 illustrates the process FCC uses to assess and 
collect regulatory fees each year. 

Figure 1: FCC's Regulatory Fee Assessment Process: 

[Refer to PDF for image: process illustration] 

Appropriation: 
FCC receives an annual appropriation from Congress. It must set fees 
to collect this amount from companies it regulates.  

Dividing fees by industry sector: 
FCC determines the percentage of its total collection it will attempt 
to collect from each industry sector and fee category.  

Setting fee rates: 
In order to attempt to collect the amount (percentage of total 
collection) established for each industry sector and fee category: 

FCC divides the amount by the total number of revenue dollars, 
subscribers, or other basis for the fee to set a rate to charge each 
company. 

Fees divided by number of revenue dollars, subscribers, or other basis 
equals fee rate. 

Source: GAO presentation of FCC information. 

Note: In some cases, FCC charges each company within a fee category a 
flat fee. For example, within the media industry sector, FCC has 
divided broadcast television stations into 10 fee categories (5 for 
VHF stations and 5 for UHF stations) based on market share. Each 
television station within each fee category pays the same flat fee. 

[End of figure] 

In response to your request that we review FCC's regulatory fee 
process, we reviewed (1) FCC's process for assessing regulatory fees 
among industry sectors and the results of this process, (2) FCC's 
regulatory fee collections over the past 10 years compared to the 
amount FCC was directed to collect by Congress, and (3) alternative 
approaches to assessing regulatory fees that could be instructive as 
FCC considers reforming its process. To examine FCC's regulatory fee 
process and annual regulatory fee collections, we reviewed, among 
other things, relevant statutes and budgetary documents, FCC 
documents, and FCC fee-collection data. We spoke with internal and 
external stakeholders, including FCC officials, media and 
telecommunications trade associations, and companies from each of the 
five main industry sectors that paid FCC regulatory fees in fiscal 
year 2010. To identify alternatives to FCC's current regulatory fee 
process, we selected, met with, and reviewed documents from five U.S. 
or Canadian agencies based on the criteria that they, like FCC, be 
independent regulatory commissions that recover the majority or all of 
their costs through annual fees assessed on regulated entities. The 
agencies included (1) Canadian Nuclear Safety Commission (CNSC), (2) 
Canadian Radio-television and Telecommunications Commission (CRTC), 
(3) Farm Credit Administration (FCA), (4) Federal Energy Regulatory 
Commission (FERC), and (5) Nuclear Regulatory Commission (NRC). 

We conducted this performance audit from May 2011 to August 2012 in 
accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. More detailed 
information on our methodology can be found in appendix I. 

Background: 

Section 9 of the Communications Act authorizes FCC to collect 
regulatory fees annually.[Footnote 8] These regulatory fees do not 
include application fees or revenue from spectrum auctions. The 
statute directs FCC to do the following: 

* Assess and collect regulatory fees to recover the costs of FCC's 
regulatory activities, defined by section 9 as consisting of its 
enforcement, policy and rulemaking, user information, and 
international activities--in the amount required in FCC's 
appropriation acts. 

* Derive these fees by determining the full-time equivalent 
(FTE)[Footnote 9] number of employees performing these regulatory 
activities in three named bureaus and other FCC offices--adjusted to 
take into account various factors that are reasonably related to the 
benefits to the fee payors, including factors determined by FCC to be 
in the public interest. (According to FCC officials, the three bureaus 
named in section 9--the Private Radio, Mass Media, and Common Carrier 
Bureaus--have since been reorganized and renamed as the Wireless 
Telecommunications Bureau, the Media Bureau, the Wireline Competition 
Bureau, and the International Bureau.): 

* Make mandatory adjustments. FCC maintains and is required annually 
to revise a schedule of regulatory fees to reflect proportionate 
increases or decreases in the amount of the appropriation to be 
recovered as well as changes in the number of licensees or other units 
required to pay the fees assessed. 

* Make permitted amendments as necessary. FCC is required to amend the 
schedule if FCC determines that the schedule must be amended to comply 
with the statute's requirement that the fees be derived by determining 
FTEs (as outlined above), adjusted to take into account factors 
reasonably related to the benefits the fee payor receives from FCC 
regulation, among other things. 

In recent years, Congress has included language in FCC's annual 
appropriation act setting specific percentages of the appropriation 
FCC is to offset with collected regulatory fees. This percentage has 
risen from 38 percent in 1994, when section 9 first went into effect, 
to over 99 percent starting in 2004, to 100 percent starting in 2009. 
[Footnote 10] In fiscal year 2011, FCC's appropriation, and hence the 
total in regulatory fees it was to use as offsets, was about $336 
million. According to FCC officials, this appropriation funded about 
1,556 FTEs in FCC's 11 offices and 7 bureaus. The 7 bureaus include 
the (1) Consumer and Governmental Affairs, (2) Enforcement, (3) 
International, (4) Media, (5) Public Safety and Homeland Security, (6) 
Wireless Telecommunications, and (7) Wireline Competition Bureaus. 

The five industry sectors in which FCC has typically grouped 
regulatory fee payors include: (1) wireline services, (2) wireless 
services, (3) cable services, (4) broadcast services, and (5) 
international services. At times, FCC has combined cable and broadcast 
into an industry sector it calls media--aligning the four industry 
sectors with four FCC bureaus--wireline with the Wireline Competition 
Bureau, wireless with the Wireless Telecommunications Bureau, media 
with the Media Bureau, and international with the International 
Bureau. As shown in Table 1, within most of these industry sectors are 
a number of fee categories. 

Table 1: Examples of FCC Fee Categories within Each Industry Sector: 

Industry sector: Wireline; 
Number of fee categories, fiscal year 2011: 1; 
Examples of fee categories within industry sector: Wireline telephone. 

Industry sector: Wireless; 
Number of fee categories, fiscal year 2011: 14; 
Examples of fee categories within industry sector: Wireless telephone, 
paging, broadband radio service; and a number of fee categories 
considered small wireless, such as aviation aircraft, aviation ground, 
marine coast, and amateur vanity call signals. 

Industry sector: Cable/Media; 
Number of fee categories, fiscal year 2011: 2; 
Examples of fee categories within industry sector: Cable television 
systems, Cable access relay service. 

Industry sector: Broadcast/Media; 
Number of fee categories, fiscal year 2011: 60; 
Examples of fee categories within industry sector: UHF and VHF 
Television stations (divided into different markets), AM and FM radio 
stations (divided into different classes and by population served). 

Industry sector: International; 
Number of fee categories, fiscal year 2011: 9; 
Examples of fee categories within industry sector: Submarine cable 
(divided into 5 fee categories based on capacity); 
earth station satellites; international bearer circuits (terrestrial 
and satellite services); geostationary space stations, including 
direct broadcast satellite television operators; nongeostationary 
space stations. 

Industry sector: Total for all industry sectors; 
Number of fee categories, fiscal year 2011: 86. 

Source: GAO analysis of FCC information. 

[End of table] 

Each year, FCC sets a rate for each fee category that is used to 
calculate how much each company within that category owes in 
regulatory fees. FCC assesses this rate on various bases. For example, 
the rate for wireline telephone companies is set per revenue dollar 
(for those revenues subject to fees);[Footnote 11] the rate for 
wireless telephone companies and cable television operators is based 
on the number of subscribers; the rate for geostationary orbit space 
stations, including operators of direct-broadcast satellite 
television, is based on the number of satellites; and broadcast 
television and radio licensees pay a flat fee that is set based on 
market reach characteristics, such as the size of the market area or 
population served.[Footnote 12] Entities that provide services in more 
than one fee category--such as a company that offers wireline and 
wireless services--must pay regulatory fees for each fee category 
commensurate with the service provided. 

Each year, FCC issues a Notice of Proposed Rulemaking (NPRM) in which 
it proposes how it will assess fees by industry sector and fee 
category for that fiscal year. FCC receives comments on the NPRM and 
may make adjustments before issuing a Report and Order establishing 
assessment rates for each year's regulatory fees. FCC also establishes 
a due date for payment. Entities that are late in paying their 
assessed fees are assessed an additional one-time 25 percent statutory 
penalty,[Footnote 13] and FCC will take no action on any applications 
or other requests for benefits from such an entity until its past due 
assessment is paid. According to FCC officials, while the timing of 
this process varies somewhat from year to year, the assessment is 
collected in time for FCC to process payment and forward it to the 
Department of Treasury by the end of the fiscal year on September 30. 
For example, in fiscal year 2011, the NPRM was issued on May 3, 2011, 
and comments were accepted until June 9, 2011. The Report and Order 
was released on July 22, 2011, and the assessed fees were due on 
September 16, 2011. 

FCC's Assessment of Regulatory Fees Is Based on Obsolete Data and 
Lacks Transparency: 

FCC's Regulatory Fee Assessments: 

From fiscal year 1998 through its most recent assessment for fiscal 
year 2011, FCC has based its division of regulatory fees among 
industry sectors and fee categories on its fiscal year 1998 division 
of FTEs among fee categories. FCC determined this fiscal year 1998 
division of FTEs among fee categories through a cost-accounting system 
that FCC abandoned in fiscal year 1999 because of problems described 
in greater detail below.[Footnote 14] In subsequent years, FCC 
continued to use the same basic division of fees among fee categories 
established in fiscal year 1998, with some adjustments to the rates of 
certain fee categories, based on (for example) concerns about 
overburdening particular industries.[Footnote 15] These adjustments 
were not based on any FTE analysis and have had relatively minor 
effects on the division of regulatory fees by industry sector that FCC 
established in fiscal year 1998, as shown in figure 2. 

Figure 2: FCC's Division of Regulatory Fees among Industry Sectors, 
Fiscal Years 1998 and 2011: 

[Refer to PDF for image: 2 pie-charts] 

Fiscal year 1998, FCC directed to collect $163 million: 
Wireline: 48%; 
Cable: 18%; 
Media: 15%; 
Wireless: 14%; 
International: 5%. 

Fiscal year 2011, FCC directed to collect $336 million: 
Wireline: 44%; 
Cable: 18%; 
Media: 14%; 
Wireless: 17%; 
International: 7%. 

Source: GAO analysis of FCC data. 

[End of figure] 

Statutory Framework: 

In fiscal year 1994, when FCC first implemented the Communications Act 
regulatory fee statute, FCC used the fee schedule Congress had 
included as a starting point in the statute. That schedule, which was 
developed based on information provided to Congress by FCC, set annual 
regulatory fees for 46 fee categories that FCC was to follow until FCC 
amended the schedule.[Footnote 16] The fee schedule established 
numerous fee categories--46--assessed on different bases, including a 
flat fee basis, a per subscriber basis, a per antenna basis, and 
others. While FCC has made changes to this fee schedule over the 
years, including adding and altering fee categories, the basic 
elements of its structure--established based on the telecommunications 
industry as it existed in 1994, and in the context of directing FCC to 
collect fees to cover 38 percent of its appropriation instead of the 
100 percent that FCC has been directed to collect since fiscal year 
2009--have continued to guide FCC's regulatory fee assessment. 

The Communications Act requires FCC to develop accounting systems 
necessary for the agency to determine whether and how the fee schedule 
should be adjusted to comply with the statute's requirement that FCC 
base its regulatory fees on the number of FTEs performing regulatory 
tasks, among other things.[Footnote 17] The act does not specify that 
the system should be a cost accounting system--FCC was free to 
interpret this requirement according to its perceived needs. 
Nevertheless, in its Reports and Orders for the 2 years following 
1994, FCC discussed its plans to develop a cost-accounting system to 
guide its division of fees among fee categories. FCC implemented this 
cost-accounting system, which relied on employees' coding of time and 
attendance report entries, for fiscal years 1997 and 1998, using it as 
the basis for dividing fees among fee categories. At the time, FCC 
stated that its purpose in using a cost-accounting system based on 
employees' time card entries was to ensure that fee collections from 
each category of service approximated, to the extent possible, FCC's 
actual costs to regulate each fee category.[Footnote 18] 

FCC abandoned the use of this system to track costs according to fee 
category after fiscal year 1998 because the agency found use of the 
system to be problematic.[Footnote 19] Specifically, according to FCC 
officials, basing its division of fees on employees' time card entries 
caused too much fluctuation in fees from year to year--because of a 
combination of annual changes in workload, employee errors in 
completing time sheets, and various other factors. FCC found that over 
the 1997 to 1998 period, the rate assessed to all entities in a fee 
category could increase by more than 25 percent from the prior year--
beyond any increase because of increases in the total amount in 
regulatory fees FCC was required to collect.[Footnote 20] FCC 
officials stated that these fluctuations were especially problematic 
for small service providers that could least absorb unpredictable 
increases in fees. 

According to FCC officials, FCC has continued to rely on the 1998 
division of regulatory fees as the basis of its fee division through 
fiscal year 2011. It has done so in spite of the problems FCC 
identified with the system and even though this approach put FCC at 
risk of dividing the regulatory fee burden among entities in different 
industries based on obsolete data. FCC officials stated that while the 
statute requires FCC to amend its regulatory fees if FCC determines 
such amendment is necessary to comply with the FTE-based requirement, 
among other things, the statute does not prescribe a specific time at 
which FCC must make such a determination.[Footnote 21] Furthermore, 
according to FCC officials, while FCC has maintained information on 
how its FTEs are distributed among the four core bureaus--which 
generally track with the four industry sectors--FCC does not have 
information on how its current FTEs are divided among the fee 
categories in the current fee schedule. 

As a result, for 13 years, FCC has not validated the extent to which 
its division of fees among industry sectors and fee categories 
correlates with its current division of FTEs among industry sectors 
and fee categories. Major changes have occurred in the 
telecommunications industry since 1998, as described below, making it 
likely that FCC's fiscal year 1998 FTE analysis no longer reflects 
FCC's current regulatory priorities. As explained later in the report, 
FCC's failure to update its FTE analysis is inconsistent with federal 
guidance on user fees, which, among other things, emphasizes the 
importance of regularly updating analyses to ensure that fees are set 
based on relevant information. 

Changes in the Telecommunications Industry since 1998: 

The major changes that have occurred in the telecommunications 
industry over the past 14 years dramatically increase the likelihood 
that FCC's current division of fees among fee categories has become 
obsolete. In 2008, FCC stated in a Further Notice of Proposed 
Rulemaking that major industry changes since 1994 included the 
significant increase of wireless, broadband, and voice over Internet 
protocol ("VoIP"), and discussed the fact that FCC itself had 
reorganized several times to reflect industry changes. FCC 
acknowledged that there could be several areas in which the regulatory 
fee process could be revised and improved to better reflect the 
current industry.[Footnote 22] Two former FCC commissioners told us 
that the significant increase in broadband and wireless services, the 
increasing convergence of telecommunications industries, and the 
transition to digital television are major changes that have occurred 
since fiscal year 1998 that have affected FCC's workload and 
priorities. 

Changes in FCC's estimates of subscribers, revenues, or other bases 
used to set the annual regulatory fee rates for different fee 
categories also indicate major changes in the balance of 
telecommunications industries from fiscal years 1998 to 2011. 
According to FCC's estimates (see table 2), measures of some 
industries grew by over 50 percent--including the wireless telephone 
industry, for which the number of subscribers grew by over 400 
percent--while measures of other industries declined by over 40 
percent, including VHF television stations, for which the number of 
stations declined by 48 percent. In comparison to these dramatic 
shifts, relatively small changes in the percent of the total 
regulatory fees expected to be paid by these industries have occurred. 
For example, while the wireline telephone industry's estimated 
revenues on which fees are assessed declined by 44 percent from fiscal 
year 1998 to fiscal year 2011, the percentage of total regulatory fees 
this industry is expected to pay declined by 4 percentage points, from 
48 percent to 44 percent of total fees. And while the wireless 
telephone industry's estimated number of subscribers grew 437 percent 
during this time period, the percentage of the total regulatory fees 
the cell phone industry is expected to pay grew only 5 percentage 
points--from 10 to 15 percent of the total regulatory fees. According 
to FCC officials, there is not always a straightforward relationship 
between growth in the number of subscribers, revenues, or other basis 
used to determine the fee rate of a fee category and the amount of 
work FCC performs related to that fee category, and thus these 
shifting numbers do not offer a clear guide as to how or even the 
extent to which the division of FCC's regulatory fees among industry 
sectors should be realigned. Nevertheless, they reinforce the 
magnitude of the changes that have occurred, and underscore the 
likelihood that FCC's division of fees among fee categories may no 
longer correlate to its current division of FTEs. (See table 2.): 

Table 2: Telecommunications Industry Changes, Fiscal Years 1998 to 
2011, as Measured by Basis Used to Set FCC Regulatory Fees: 

Industry and basis used by FCC to set regulatory fees: VHF television 
stations (number of stations); 
Fiscal year 1998 estimated number of the basis used by FCC to set 
regulatory fees: 499; 
Fiscal year 2011 estimated number of the basis used by FCC to set 
regulatory fees: 261; 
Percent change, fiscal year 1998 to 2011: -48%. 

Industry and basis used by FCC to set regulatory fees: Wireline 
telephone (revenues)[A]; 
Fiscal year 1998 estimated number of the basis used by FCC to set 
regulatory fees: $70,103,000,000; 
Fiscal year 2011 estimated number of the basis used by FCC to set 
regulatory fees: $39,500,000,000; 
Percent change, fiscal year 1998 to 2011: -44%. 

Industry and basis used by FCC to set regulatory fees: Cable (number 
of subscribers); 
Fiscal year 1998 estimated number of the basis used by FCC to set 
regulatory fees: 66,000,000; 
Fiscal year 2011 estimated number of the basis used by FCC to set 
regulatory fees: 63,400,000; 
Percent change, fiscal year 1998 to 2011: -4%. 

Industry and basis used by FCC to set regulatory fees: AM/FM radio 
stations (number of stations); 
Fiscal year 1998 estimated number of the basis used by FCC to set 
regulatory fees: 8,646; 
Fiscal year 2011 estimated number of the basis used by FCC to set 
regulatory fees: 10,285; 
Percent change, fiscal year 1998 to 2011: 19%. 

Industry and basis used by FCC to set regulatory fees: UHF television 
stations (number of stations); 
Fiscal year 1998 estimated number of the basis used by FCC to set 
regulatory fees: 668; 
Fiscal year 2011 estimated number of the basis used by FCC to set 
regulatory fees: 866; 
Percent change, fiscal year 1998 to 2011: 30%. 

Industry and basis used by FCC to set regulatory fees: Geostationary 
space stations, including operators of direct broadcast satellite 
television service (number of satellites); 
Fiscal year 1998 estimated number of the basis used by FCC to set 
regulatory fees: 46; 
Fiscal year 2011 estimated number of the basis used by FCC to set 
regulatory fees: 87; 
Percent change, fiscal year 1998 to 2011: 89%. 

Industry and basis used by FCC to set regulatory fees: Wireless 
telephone[B] (number of subscribers); 
Fiscal year 1998 estimated number of the basis used by FCC to set 
regulatory fees: 55,540,000; 
Fiscal year 2011 estimated number of the basis used by FCC to set 
regulatory fees: 298,000,000; 
Percent change, fiscal year 1998 to 2011: 437%. 

Source: GAO analysis of FCC data. 

[A] Revenue dollars have not been adjusted for inflation. 

[B] The fee category that includes wireless telephones is called 
commercial wireless radio services. It includes specialized mobile 
radio services, public coast stations, public mobile radio, cellular, 
800 MHz air-ground radiotelephone, offshore radio services and 
broadband personal communications services. 

[End of table] 

FCC's Office of the Managing Director has published some information 
that further suggests that FCC is basing its division of regulatory 
fees among fee categories on data that do not correlate with industry 
trends and FCC's current workload. In fiscal year 2008, FCC issued a 
Further Notice of Proposed Rulemaking (FNPRM) specifically to consider 
reforms to its regulatory fee process. In a separate public notice 
issued after FCC adopted the 2008 FNPRM, the Office of the Managing 
Director provided some updated information on FCC's costs by core 
bureau.[Footnote 23] According to FCC officials, the core bureaus 
correlate to the four industry sectors of wireless telecommunications, 
wireline telecommunications, media, and international.[Footnote 24] 
This information demonstrated substantial misalignment between the 
division of regulatory fees by industry sector as presented in FCC's 
fiscal year 2008 FNPRM and FCC's costs by bureau in the Wireless, 
Wireline, and International Bureaus as presented in the public notice, 
as shown in figure 3--although FCC officials did not include any 
information at the more granular level of fee category. For example, 
in fiscal year 2008, the wireless industry paid about 17 percent of 
the regulatory fees while the Wireless Telecommunications Bureau 
incurred about 27 percent of FCC's total costs. In contrast, the 
wireline industry paid about 47 percent of the total fees while the 
Wireline Competition Bureau incurred about 23 percent of FCC's total 
costs. FCC did not comprehensively reform its process as a result of 
this FNPRM.[Footnote 25] 

Figure 3: FCC's Division of Regulatory Fees versus Costs by Core 
Bureau, Fiscal Year 2008: 

[Refer to PDF for image: 2 pie-charts] 

Fiscal year 2008 regulatory fees distributed by the industry sector: 
Wireline: 47%; 
Cable: 17%; 
Broadcast: 14%; 
Wireless: 17%; 
International: 6%. 

Fiscal year 2008 FCC total costs by core bureau: 
Wireline Competition: 23%; 
Media: 30%; 
Wireless Telecommunications: 27%; 
International: 20%. 

Source: FCC. 

[End of figure] 

Federal User Fee Guidance: 

FCC's inaction in updating its FTE analysis is inconsistent with 
federal guidance on user fees. We recognize that federal guidance on 
user fees for the most part assumes that the fees are to be set based 
on a cost-recovery scheme, which differs from the Communications Act's 
requirement that FCC base its regulatory fees on FTEs, among other 
things.[Footnote 26] FTEs--the basic measure of levels of employment 
used in the federal budget[Footnote 27]--are not the same as costs. 
FTE information is often readily available and can be a useful proxy 
for cost, but FTE information does not necessarily reflect total cost 
because, for example, it would neither distinguish between higher and 
lower cost FTEs, nor would it include other costs, such as 
contractors, training, equipment, or facilities' costs.[Footnote 28] 

Nevertheless, many of the general principles of federal user fee 
guidance remain relevant in considering FCC's FTE analysis. First, 
federal guidance emphasizes the importance of reviewing fees regularly 
to check the extent to which they are properly aligned. For example, 
OMB Circular No. A-25, which, among other things, provides guidance to 
agencies regarding their assessment of user charges under other 
statutes, directs agencies that have user fees to review the user fees 
biennially in order to assure, among other things, that existing 
charges are adjusted to reflect unanticipated changes in costs or 
market values. The fact that the Communications Act directs FCC to 
base its fees on FTEs does not negate the applicability of the 
guidance regarding the regularity with which the basis of the fees 
(i.e., FTEs) should be reviewed. The reason that regular review is 
part of the guidance is to assure that fees are adjusted to reflect 
changes that may have occurred over time in the agency's distribution 
of work among fee categories--which could be measured by costs or FTEs. 

Second, according to federal financial-accounting standards, cost 
information should be reported in a timely manner and on a regular 
basis and should be reliable and useful in making decisions. This 
standard does not require the use of a particular type of costing 
system or methodology, stating that agency and program management is 
in the best position to select a type of costing system to meet its 
needs. However, the standard requires that a methodology, once 
adopted, be used consistently in order to provide results that can be 
compared from year to year--with improvements and refinements made as 
necessary. In FCC's case, given the statutory framework of its 
regulatory fee program, this principle pertains to FTEs rather than 
costs. Given the problems FCC encountered with using its cost-
accounting system to analyze FTEs by fee categories in fiscal year 
1998, these standards would suggest that FCC could have considered 
alternate methodologies--or improvements to its cost-accounting 
system--to address the problems described. However, FCC's decision to 
freeze its division of regulatory fees by fee category on fiscal year 
1998 data that came from the cost-accounting system FCC abandoned, 
rather than addressing the problems or choosing a different 
methodology, is inconsistent with the goal of such standards. This 
decision, over time, has resulted in FCC not having FTE information 
that is timely, reliable, or comparable from year to year to guide its 
decisions on how to divide regulatory fees. 

Probable Cross-Subsidization between Industry Sectors: 

In prior work, we have stated that agencies that do not review and 
adjust fees regularly run the risk of undercharging or overcharging 
users, raising equity concerns.[Footnote 29] Moreover, because FCC is 
directed in its annual appropriation acts to collect a certain amount 
of money in regulatory fees each year, if its division of fees among 
fee categories is misaligned with its FTEs by fee category, then some 
entities are most likely overpaying, essentially cross-subsidizing 
entities in other fee categories, which are underpaying. 

FCC's regulatory fees are unlikely to ever equal the exact cost of 
regulating the corresponding fee category for several reasons. First, 
since FCC is required to collect 100 percent of its appropriation 
through regulatory fees, including funding for items that are not 
specifically regulatory activities--such as general overhead--the 
regulated industries are being assessed to pay for more than the 
number of FTEs required for their regulation. Second, FCC is directed 
by statute to base its fee assessment on FTEs, which may not represent 
actual regulatory costs. According to FCC officials, because it is not 
possible to precisely assign the costs of regulation on a service-by-
service basis, and because the act requires FTE-based assessment and 
does not require amending the fee schedule to mirror all changes in 
regulatory costs, some regulated entities pay more than the direct 
cost of their regulation. 

Third, exemptions create cross subsidization, as could some other 
policy decisions. FCC, as required by statute, has exempted some 
groups of entities, such as nonprofits, from paying fees, and has at 
times exercised its statutory discretion by reducing the fee rates of 
certain fee categories when it determined that doing so would benefit 
the public interest. In prior work, we have pointed out that while 
exemptions can promote one kind of equity by factoring the users' 
ability to pay into the fee-rate formula, such provisions may also 
increase cross-subsidies among users.[Footnote 30] We have stated that 
in applying exemptions, agencies may purposefully choose to set fees 
in such a way that cross subsidization occurs in order to promote 
other policy goals. However, we have also stated that generally, fees 
should be aligned with the costs of the activities for which the fee 
is collected, unless there is a policy decision not to align them. 
Without a current FTE analysis by fee category, it is not possible to 
determine the extent that cross subsidization is occurring between fee 
categories, or which fee categories are cross subsidizing other fee 
categories. However, any cross subsidization that is occurring not 
because of a decision to promote a policy goal but because the FTE 
analysis on which FCC bases its fees is obsolete, is not consistent 
with general user fee principles. 

According to officials in many industry associations and companies we 
spoke with in the wireline, wireless, cable, and international 
industry sectors, FCC's regulatory fees are typically passed along to 
the consumer, either in a line item on the bill or bundled into the 
general cost of service. One potential effect of cross subsidization, 
therefore, is that, if entities in different fee categories are 
directly competing for the same customers, cross subsidization could 
result in competitively disadvantaging entities in one fee category 
over another. As discussed in the next section, some stakeholders told 
us that the regulatory fees are small enough that they do not have a 
significant financial impact on the companies that pay the fees. 
However, several industry stakeholders in the wireline and cable 
television industry sectors told us that FCC's current regulatory fee 
process is competitively disadvantaging certain industries and that 
FCC's use of multiple bases for setting fee rates makes it more 
difficult for industry stakeholders to compare the rates assessed to 
different fee categories--and thus more difficult to determine the 
extent to which the fees are fair and equitable. 

These views were echoed in formal comments to FCC's regulatory fee 
FNPRM in 2008, when FCC last requested comments on substantial reform 
to its regulatory fee process. For example, in response to the 2008 
FNPRM, the National Cable and Telecommunications Association (NCTA), a 
trade association for the U.S. cable industry, argued that FCC 
assesses higher regulatory fees on cable operators than it does on 
direct broadcast satellite television operators. According to the 
cable association, the direct broadcast satellite television industry 
is a direct competitor to cable, and thus its lower regulatory fee 
burden could give it a competitive advantage. The cable association 
argued that every type of multichannel video-programming distributor, 
including cable, telephone, and direct broadcast satellite providers 
of multichannel video service, should pay the same regulatory fee rate 
in order to ensure that no entity received the competitive benefit of 
lower fees based solely on the technology it used. Moreover, the cable 
association's staff told us that because the cable television 
industry's fee rate is set on a per-subscriber basis and the direct 
broadcast satellite television operator industry's fee rate is set on 
a per-satellite basis, it was not possible to compare the fees as 
stated in FCC's published information in order to assess their 
fairness. For the cable association to determine how its members' fees 
compared to the fees of direct broadcast satellite television 
operators on a per-subscriber basis, the association had to do its own 
analysis using company data. In its 2008 comments to the FNPRM, the 
cable association also suggested that all providers of voice service 
and multichannel video programming distributors--including cable, 
telephone, and direct broadcast satellite providers--should pay on a 
per-subscriber basis instead of the three different bases--per revenue 
dollar, per subscriber, and per satellite--used today. 

In another example, the Independent Telephone and Telecommunications 
Alliance (ITTA), which represents a number of mid-size wireline 
telephone companies, argued that under FCC's regulatory fee process, 
wireline companies had higher per-subscriber fees than wireless 
companies. ITTA argued that this higher per-subscriber rate was not 
justified because, due to the convergence among technologies since 
1994, many of FCC's expenditures related to telecommunications issues 
now related equally to wireline and wireless providers. According to 
ITTA, the effect of the different fee rates assessed to wireline and 
wireless telephone providers was that providers of similar voice 
services--and their customers--assumed dissimilar responsibility in 
bearing FCC's regulatory costs. 

ITTA called for both wireline and wireless providers' regulatory fees 
to be assessed on the basis of revenue, instead of the current 
situation, in which wireline companies pay fees based on revenue while 
wireless companies pay fees based on subscribership. Interestingly, in 
fiscal year 1994, FCC assessed the fees of both wireline and wireless 
telephone entities on the basis of subscribers, as put forth in the 
fee schedule in the Communications Act.[Footnote 31] For fiscal year 
1995, FCC amended the schedule by, among other things, changing its 
basis for assessing regulatory fees on the wireline telephone industry 
from a subscriber to a revenue basis.[Footnote 32] In making this 
change, FCC stated in the Report and Order that a revenue-based 
methodology would equitably distribute the fee requirement in a 
competitively neutral manner, and that it was FCC's intention to 
consider changing wireless carriers' fees to a revenue basis in future 
years. However, FCC has not done so, although wireless providers 
report the same revenue information to FCC that wireline providers do. 
In addition, one commenter to a recent NPRM suggested that FCC use 
revenue as the basis for assessing regulatory fees on media fee 
categories. According to FCC officials, because FCC does not currently 
require industries in the media fee categories to report any revenue 
information to FCC, in order for FCC to assess media companies on the 
basis of revenue, FCC would have to rely on the honor system in 
determining entities' fee obligations, or establish new reporting 
requirements, which would be burdensome to FCC and industry. 

FCC did not summarize or comment on the proposals submitted by the 
cable association and ITTA to the fiscal year 2008 FNPRM, even though 
ITTA re-submitted its proposal in response to the fiscal year 2009 
NPRM. Instead, FCC exercised its administrative discretion to resolve 
all the outstanding matters stemming from the FNPRM at a later time in 
a separate Report and Order. More than 3 years later, no separate 
Report and Order has been issued addressing these industry 
associations' comments. According to NCTA and ITTA officials, the 
associations stopped submitting formal comments to FCC because FCC's 
lack of responsiveness discouraged them from doing so--but both 
associations continue to see the current regulatory fee assessment as 
not based on any valid FTE analysis and as causing competitive 
disadvantage to their industry. 

Effect of Fees on Industry and Consumers: 

Most companies we spoke with stated that FCC's regulatory fees have 
little to no direct financial impact on the company, given the 
relatively small size of the fees--for example, wireline telephone 
companies were to pay $.00375 per assessable revenue dollar in fiscal 
year 2011, while wireless telephone companies were to pay $0.17 per 
subscriber. However, officials at the National Association of 
Broadcasting stated that the payment of regulatory fees is a bigger 
issue for small stations. These officials stated that because 
consumers do not pay directly for broadcast radio or television, 
broadcasting entities cannot pass regulatory fees on to consumers but 
must incorporate the fee payment into operating costs to be paid with 
general operating revenue. The National Association of Broadcasters 
and one broadcast company we spoke with stated that at a time when 
some broadcasting companies are laying off employees because of 
financial difficulties, FCC's regulatory fees may equal the cost of 
one or more employees that the company could not afford to keep 
because of the regulatory fees. This potential impact on companies 
underscores the importance that FCC assess regulatory fees on a fair 
and equitable basis--and that it have updated information on FTEs with 
which to do so. 

The effect of regulatory fees on consumers is difficult to assess, in 
part because of the relatively low cost of the fees. For example, if a 
wireless telephone company passed its fiscal year 2011 regulatory fee 
directly on to consumers, the fee would have increased the bill of 
each consumer by $0.17 for the year. On the other hand, 
representatives of a wireline telephone company we spoke with stated 
that many of their customers are rural, low income, elderly people who 
are affected by any increase in their phone bill caused by regulatory 
fees. 

Challenges Related to Regulatory Fee Reform: 

According to FCC officials, the agency has not revised its assessment 
of fees among fee categories since fiscal year 1998 in part because it 
is difficult to propose and implement reforms given its need to 
collect regulatory fees by the end of each fiscal year. In addition, 
FCC officials stated that because the agency had received only a 
limited number of comments to its 2008 FNPRM, FCC had decided not to 
undertake major reform at that time. However, as described above, 
federal guidance on user fees recommends that agencies review their 
fees biennially--including the costs that the fees are reimbursing. 
Moreover, by not periodically analyzing FTEs by fee category and 
adjusting its division of regulatory fees based on this analysis, FCC 
may have put itself into a situation where, in order to adjust 
regulatory fees based on an updated FTE analysis, FCC may have to 
figure out how to handle large swings in fees for some fee categories. 
For example, we found that when another agency waited 9 years before 
performing a review of its cost-based fees, the result was that the 
average fee increased by 86 percent, causing the new fee schedule to 
be widely questioned.[Footnote 33] 

Another issue, according to FCC officials, is that assigning 
regulatory costs among the 86 fee categories has become more 
challenging, given the increasingly cross-cutting nature of FCC's 
work. Staff we spoke with in the Wireline, Wireless, and Media Bureaus 
stated that, generally, their work focuses on the industry sector 
directly related to their bureau, and that when FCC works on issues 
that cut across more than one bureau, staff from each relevant bureau 
will work together. However, staff in the Wireless and Media Bureaus 
stated that it would be very difficult to track their activities at 
the level of fee category. Moreover, staff we spoke with in the 
International and Enforcement Bureaus stated that their work was so 
cross cutting that they did not think it would make sense to track it 
according to industry sector--much less according to fee category. 
This issue is not isolated to FCC's assessment of regulatory fees. In 
recent work, we found that the increasingly cross-cutting nature of 
FCC's work has caused FCC to reconsider how to handle some regulatory 
activities.[Footnote 34] For example, as companies that once provided 
a distinct service (such as cable and telephone companies) have 
shifted to providing bundles of services (voice, video, and data 
services) over a broadband platform, new debates have arisen at FCC 
regarding how rules previously intended for a specific industry and 
service should be applied to companies now providing multiple 
services. These concerns bring up some additional questions--whether 
FCC's use of 86 fee categories may also be obsolete in the current 
regulatory environment, and whether FCC's difficulties in keeping its 
process current may be in part because its statutory framework is 
based on a telecommunications environment that no longer exists. 
However, since FCC has not attempted to track FTEs by fee category 
since fiscal year 1998, we were not able to determine the extent to 
which changes since fiscal year 1998--including the increasing amount 
of cross-cutting work--would affect FCC's ability to distribute its 
FTEs among the fee categories or what the outcome of such an analysis 
would be. 

In the fiscal year 2012 regulatory fee NPRM, released on May 4, 2012, 
FCC stated that it planned to undertake two separate NPRMs to consider 
reforms to the regulatory fee process. FCC stated that it would issue 
a Report and Order finalizing its decision on all issues raised in the 
reform proceedings, including new cost allocations and revised 
regulatory fees, in sufficient time to allow for their implementation 
in fiscal year 2013.[Footnote 35] On July 17, 2012, FCC released an 
NPRM on regulatory fee reform.[Footnote 36] As discussed in our agency 
comments section, this NPRM proposes some fundamental changes to FCC's 
regulatory fee program that relate to many of the concerns raised in 
this report. 

FCC's Current Regulatory Fee Process Lacks Transparency: 

FCC has not been transparent in describing its regulatory fee process 
in its recent annual NPRMs and Reports and Orders. This lack of 
transparency has resulted in uncertainty among some industry 
associations about FCC's regulatory fee process; some told us that the 
lack of transparency has made it more difficult for them to comment or 
provide input on FCC's regulatory fee process. In prior work, we have 
reported that the regulatory process is used to provide information on 
fees to Congress and stakeholders and to solicit stakeholder input. 
Therefore, we have reported that, when an agency has authority to 
adjust a fee through the regulatory process, as a first step towards 
improved transparency, it should make available to the public 
substantive information about recent and projected program costs and 
fee collections through its notices in the Federal Register. Relevant 
information includes the agency's new fee rates, descriptions of the 
costs of the program, projected program costs and fee collections, and 
the assumptions the agency used to make those projections.[Footnote 37] 

FCC's recent annual Reports and Orders on regulatory fees include 
FCC's fee rates, along with the total FCC is required to collect as 
directed in its appropriations act and how much it expects to collect 
from each fee category. However, since FCC has not performed any 
current FTE analysis, there is no discussion of FCC's current FTEs or 
costs related to each fee category. Moreover, FCC does not clearly 
explain in any of the Reports and Orders after fiscal year 2002 that 
the division of regulatory fees among fee categories is based on a 
fiscal year 1998 FTE analysis that was never updated. This lack of 
information in FCC's regulatory-fee-related NPRMs and Reports and 
Orders has limited the ability of industry stakeholders to understand 
exactly how FCC has been determining its assessment of regulatory fees 
in recent years, and may have limited stakeholders' ability to 
effectively provide input to this process. 

Another area where FCC has not been transparent is in describing the 
effects of its adjustments on other fee payors. Each year, FCC's 
regulatory-fee-related NPRMs and Reports and Orders include any 
proposed or actual adjustments and tables detailing the resulting 
regulatory fees for all payors. However, those tables have not 
explicitly shown how adjustments to the rates of certain fee 
categories have affected the rates of the other fee categories, or the 
total FCC must attempt to collect from other fee categories. 
Consequently, it is difficult to use FCC's information to determine 
how FCC got from the previous year's regulatory fee rates to the 
current year's regulatory fee rates. 

For example, in the fiscal year 2010 Report and Order, FCC stated that 
because the revenue base upon which the wireline telephone industry's 
fee rate is calculated had been decreasing for several years, FCC had 
determined it would best serve the public interest to set the wireline 
telephone industry's fiscal year 2010 fee rate at $0.00349 per revenue 
dollar. In a footnote, FCC elaborated that because the wireline 
telephone industry's revenue data was lower than expected, if FCC had 
not decided to set the wireline telephone rate at $0.00349 per revenue 
dollar, the rate would have increased to $0.00364 per revenue dollar. 
However, FCC did not explain what this change in rates translated to 
in terms of the amount of revenue it expected to collect in fees from 
the wireline telephone industry. Moreover, while FCC stated in the 
Report and Order that reducing the fees paid by the wireline telephone 
industry would increase the fees paid by licensees in other service 
categories, and the resulting regulatory fees are detailed in FCC's 
Report and Order, FCC did not specifically show the fee increase for 
each regulatory fee category caused solely by this policy decision. In 
November 2011, FCC officials told us that this policy decision had 
resulted in reducing the total expected fees to be collected from the 
wireline telephone industry by approximately $12 million, and that FCC 
instead attempted to collect this $12 million by raising the rates of 
all the other fee categories based on the existing division of fees 
among fee categories. This $12 million is reflected in the regulatory 
fee tables set forth in FCC's Order. However, the limited information 
on how various adjustments affect each fee category reduces the ease 
with which industry stakeholders or other interested parties can 
understand the effects of FCC's current process--including the policy 
decisions FCC has made without any updated FTE analysis. 

FCC Has Collected $66 Million in Excess Fees That Is Unavailable 
without Further Congressional Action: 

FCC's Regulatory Fee Collections: 

On average, FCC collected 2 percent more each year in regulatory fees 
than it was required to collect in its annual appropriations acts over 
the past 10 fiscal years.[Footnote 38] FCC under collected regulatory 
fees in 1 year--2003--and over collected regulatory fees in 9 years. 
For example, it overcollected regulatory fees by 5 percent--$13 
million--in fiscal year 2005. (See table 3.) 

Table 3: FCC's Regulatory Fee Collections, Fiscal Years 2002 to 2011: 

Fiscal Year: 2002; 
Amount of regulatory fees FCC was required to collect: $219 million; 
Amount of regulatory fees FCC collected: $220 million; 
Percentage difference between fees required to collect and fees 
collected: 1%. 

Fiscal Year: 2003; 
Amount of regulatory fees FCC was required to collect: $269 million; 
Amount of regulatory fees FCC collected: $266 million; 
Percentage difference between fees required to collect and fees 
collected: -1%. 

Fiscal Year: 2004; 
Amount of regulatory fees FCC was required to collect: $273 million; 
Amount of regulatory fees FCC collected: $285 million; 
Percentage difference between fees required to collect and fees 
collected: 5%. 

Fiscal Year: 2005; 
Amount of regulatory fees FCC was required to collect: $280 million; 
Amount of regulatory fees FCC collected: $293 million; 
Percentage difference between fees required to collect and fees 
collected: 5%. 

Fiscal Year: 2006; 
Amount of regulatory fees FCC was required to collect: $299 million; 
Amount of regulatory fees FCC collected: $308 million; 
Percentage difference between fees required to collect and fees 
collected: 3%. 

Fiscal Year: 2007; 
Amount of regulatory fees FCC was required to collect: $290 million; 
Amount of regulatory fees FCC collected: $297 million; 
Percentage difference between fees required to collect and fees 
collected: 2%. 

Fiscal Year: 2008; 
Amount of regulatory fees FCC was required to collect: $312 million; 
Amount of regulatory fees FCC collected: $325 million; 
Percentage difference between fees required to collect and fees 
collected: 4%. 

Fiscal Year: 2009; 
Amount of regulatory fees FCC was required to collect: $342 million; 
Amount of regulatory fees FCC collected: $342 million[A]; 
Percentage difference between fees required to collect and fees 
collected: 0%. 

Fiscal Year: 2010; 
Amount of regulatory fees FCC was required to collect: $336 million; 
Amount of regulatory fees FCC collected: $342 million; 
Percentage difference between fees required to collect and fees 
collected: 2%. 

Fiscal Year: 2011; 
Amount of regulatory fees FCC was required to collect: $336 million; 
Amount of regulatory fees FCC collected: $342 million; 
Percentage difference between fees required to collect and fees 
collected: 2%. 

Source: GAO analysis of FCC data. 

[A] FCC collected $81,000 more in regulatory fees than it was directed 
to collect in fiscal year 2009. 

[End of table] 

According to FCC officials, FCC attempts to meet its regulatory fee 
target each year but is unable to ensure it will collect exactly the 
amount required by Congress because there are multiple variables that 
can affect the final amount collected. Key variables that can cause 
FCC to collect more or less than it expected are late payments, FCC's 
use of preliminary data in setting fee rates, refunds, and 
bankruptcies. Regarding late payments, FCC counts all regulatory fee 
payments that arrive in a fiscal year as part of that year's 
regulatory fee collections, even if the imposed assessment was 
incurred in a prior year. FCC officials stated that each year some 
entities do not pay the fees owed that year, while some entities pay 
fees owed from prior years. According to FCC officials, because in any 
given year, FCC does not know exactly how much of the year's owed fees 
are not going to be paid in the year they are due, or how much in late 
payments will come in from prior years, late payments can affect the 
total amount of regulatory fees collected for the year. We found that 
the percentage of FCC's total annual regulatory fee collections that 
was made up of late payments varied from 1 to 3 percent for fiscal 
years 2005 to 2011. 

FCC's use of preliminary data to set fees also can cause FCC to 
collect more or less than it expected and can at times lead to FCC's 
having to refund companies some of their prior year's fees, which can 
also affect the total collected. In order to charge fees based on 
current year data and to publish the final fee rates in the Report and 
Order in time for entities to pay by the end of the fiscal year, FCC 
must set the fee rate for some large fee categories--including 
wireline telephones, wireless telephones, and cable, among others--
based on preliminary industry information. For example, until fiscal 
year 2011, FCC relied on preliminary estimates provided to FCC by 
wireline telephone entities to estimate the total amount of revenue 
dollars in the wireline telephone industry.[Footnote 39] In 
combination with FCC projections based on past years' collections and 
economic conditions, FCC set the wireline telephone fee rate based on 
this preliminary industry data. Wireline telephone entities determine 
the amount of fees they owe by multiplying the fee rate as published 
in FCC's annual Report and Order by their final revenue dollars, as 
reported by the entities typically after FCC had already set the rate 
for the fiscal year. If, in aggregate, the total final amount of 
revenue dollars in the industry was significantly higher or lower than 
the estimate FCC used to set the fee rate, FCC would collect more or 
less than it expected. 

In fiscal year 2011, FCC automated the input of annual revenue data 
provided by wireline providers to FCC so FCC would have actual instead 
of estimated revenue information to use in setting regulatory fees for 
wireline telephone companies. According to FCC officials, this change 
should improve FCC's ability to predict how much total revenue 
wireline telephone entities will pay fees on, and therefore improve 
the accuracy of the rate it sets for the wireline telephone fee 
category in terms of meeting its target collection amount from that 
fee category. However, even so, wireline telephone entities can revise 
their final revenue numbers for an entire year after the revenue 
information has been submitted. According to FCC officials, if some 
wireline telephone entities pay their regulatory fees based on the 
revenue information submitted in one fiscal year, but then revise 
their revenue numbers downward after the end of the fiscal year, the 
filer may be entitled to a refund in the following year, which also 
can affect FCC's ability to collect exactly the targeted amount in the 
next fiscal year. According to FCC officials, refunds can be sought on 
other grounds, too, and such filings cannot be predicted by FCC. In 
addition, according to FCC officials, FCC is an unsecured creditor 
when it comes to a licensee filing for bankruptcy and FCC often does 
not receive unpaid assessments from the bankruptcy court. Therefore, 
bankruptcies can also affect FCC's ability to collect its target 
amount. 

Excess Regulatory Fees: 

Any regulatory fees collected above what FCC was directed to collect 
in its annual appropriations are considered excess fees. As explained 
earlier, since 2008, FCC's annual appropriations have prohibited the 
use of any excess fees from the current year or previous years without 
an appropriation by Congress. Prior to fiscal year 2008, FCC's annual 
appropriations stated that any excess regulatory fees remained 
available until expended. According to FCC officials, FCC obligated 
excess regulatory fees in fiscal years 1996 to 1998 to fund programs 
to help FCC with changes related to the year 2000 technology 
transition (sometimes referred to as Y2K), and it obligated excess 
regulatory fees from 2001 to 2003[Footnote 40] in order to meet 
critical physical security needs in fiscal year 2004.[Footnote 41] 
According to FCC officials, FCC has deposited all excess fee 
collections into a separate account with the Department of Treasury. 
[Footnote 42] As of fiscal year 2011, the account held approximately 
$66 million, which represents about 2 percent of the $2.9 billion FCC 
was required to collect in regulatory fees from fiscal year 2002 to 
2010.[Footnote 43] FCC has collected on average $6.7 million in excess 
fees annually from fiscal year 2006 to 2011, and so the account has 
steadily increased. FCC's tendency to over collect rather than under 
collect regulatory fees over the past 10 years also suggests that as 
long as Congress does not provide for their disposition, total excess 
funds will continue to increase. Congress has not provided for the 
disposition of the funds. 

According to FCC officials, FCC has reported to Congress and the 
Department of Treasury on its excess regulatory fees. However, FCC has 
not been fully transparent with regard to informing industry 
stakeholders or others about these excess fees. FCC officials stated 
that FCC has kept Congress informed of the excess fees during periodic 
briefings with appropriators, and FCC provides an annual report to 
Treasury that identifies the total amount of regulatory fees it has 
collected for the past year, including the extent to which its 
collections vary from the amount FCC is required to collect. FCC also 
published the amount of excess fees collected in its fiscal year 2011 
Annual Financial Report and its fiscal year 2013 budget estimate to 
Congress. However, FCC has not published the amount of excess fees 
collected in its NPRMs or Reports and Orders. In prior work, we have 
reported that the regulatory process is used to provide information on 
fees to stakeholders and to solicit stakeholder input.[Footnote 44] 
Therefore, when an agency has authority to adjust a fee through the 
regulatory process, it should make substantive information about 
recent and projected fee collections, among other things, available to 
the public through notices in the Federal Register. FCC has included 
projected fee collections for the current fiscal year in its NPRMs and 
Reports and Orders, but it has not disclosed the actual amount 
collected the prior year or disclosed any information on the total in 
excess fees collected in previous years. As a result, some industry 
associations we spoke with were aware that FCC had collected excess 
regulatory fees, but most did not know that the amount of FCC's excess 
collections had grown to about $66 million. 

Alternative Approaches Could Be Instructive as FCC Considers Reforms 
to Its Regulatory Fee Process: 

We identified alternative approaches that could be instructive as FCC 
considers reforms to its regulatory fee process. These alternative 
approaches include (1) ensuring that the division of fees among fee 
categories is aligned with a reasonably current measure of the 
division of regulatory activities among fee categories, and (2) taking 
specific steps to promote transparency in the regulatory fee process. 
In addition, we identified how these agencies are applying any excess 
fees. 

We identified these alternative approaches through examining the 
regulatory fee processes of five other regulatory fee-funded agencies 
in the U.S. and Canada: the Nuclear Regulatory Commission (NRC), 
Federal Energy Regulatory Commission (FERC), Farm Credit 
Administration (FCA), Canadian Radio-television and Telecommunications 
Commission (CRTC), and the Canadian Nuclear Safety Commission (CNSC). 
Because these agencies perform regulatory functions and recover many, 
if not all, of their costs through annual fees paid by regulated 
entities, we believe their processes may be instructive to FCC and 
Congress in considering reforms to FCC's current regulatory fee 
process. In addition, while four of the agencies regulate different 
industries, CRTC regulates some of the same industries as FCC, 
including, according to CRTC officials, the telecommunications 
industry--which encompasses wireline and wireless telephone providers--
and the broadcast industry--which encompasses radio, television, and 
cable distribution operators. Each of the five agencies, like FCC, has 
different, specific statutory authority authorizing its collection of 
annual regulatory fees to help fund the agency or to reimburse the 
Department of Treasury for its annual appropriation.[Footnote 45] 
FERC, for example, which has regulatory authority over the hydropower, 
oil pipeline, natural gas, and electric industries, derives its fee-
collecting authorities from the Federal Power Act for the hydropower 
industry and the Omnibus Budget Reconciliation Act of 1986 for the 
oil, natural gas and electricity industries.[Footnote 46] 
Nevertheless, we believe approaches used by these agencies may be 
instructive for FCC as it considers reforms to its regulatory fee 
process. For more information on the criteria used to select these 
agencies, see appendix I. 

Ensuring Data Used to Align Fees with Regulatory Activities Is 
Reasonably Current: 

As we described previously, FCC has acknowledged the need to revisit 
its division of fees among fee categories to reflect regulatory and 
staffing changes that have occurred since 1998. However, it has not 
yet done so. We found that NRC, CRTC, and FERC divide fees among fee 
categories based on current or recent data by industry sector. The 
other two agencies we met with either have only one fee category (FCA) 
or do not collect most fees through a rate assessed to a category of 
fee payors (CNSC). 

According to officials at NRC, CRTC, and FERC, each agency aligns its 
assessment of annual fees by industry sector with an annually or 
biennially updated analysis of costs by industry sector. Officials at 
NRC specifically stated that keeping the agency's fees aligned with 
annually or biennially updated costs was essential to ensuring that 
the fees were fair and equitable. If one industry sector gets more in 
services or regulatory activities from NRC in one year compared to the 
previous year, then that sector will pay a higher proportion of the 
total regulatory fees. NRC officials stated that they consider it part 
of NRC's mission as a regulatory agency to ensure that the link 
between costs and fees is apparent, and officials at both NRC and CRTC 
told us that it is important that the regulated industries understand 
the rationale for the assessed fees. As stated previously, the 
Communications Act identifies FTEs as FCC's basis for deriving 
regulatory fees. Nevertheless, the methods these three agencies use to 
keep their alignment of costs and fees updated may be instructive to 
FCC. 

According to NRC officials, NRC updates its cost analysis for its 
larger fee categories annually and its smaller fee categories 
biennially. The officials added that NRC's regulatory fees are based 
on the proportional cost of direct and indirect services provided to 
an industry sector, as determined by NRC's program offices, compared 
to the total fee-funded budget--and there is a direct link between the 
resources planned in the budget and the distribution of regulatory 
fees. For example, NRC officials stated that because the nuclear 
reactor category accounted for approximately 88 percent of the NRC fee-
funded budget in fiscal year 2010, the nuclear reactor category was 
responsible for approximately 88 percent of the fees collected for 
fiscal year 2010. NRC officials told us that because they analyze 
costs for NRC's larger fee categories annually and revise their 
division of fees accordingly by industry sector, at times an industry 
sector's proportion of fees has risen or fallen compared to the 
previous year. However, NRC officials stated that the industries they 
regulate are generally aware of what work NRC plans to do related to 
each industry sector--in part because NRC informs industry of its 
plans during its budget process. 

CRTC also links the division of its fees by fee category to its costs 
for regulating each fee category, and CRTC updates its cost analysis 
and its fee assessment annually. One element of CRTC's process that 
may be instructive to FCC in considering reforms is that while 
according to CRTC officials, CRTC regulates many of the same 
converging industries in Canada that FCC regulates in the United 
States, CRTC has only two fee categories for assessing regulatory 
fees: telecommunications and broadcast. Like FCC, CRTC regulates 
wireline telephone, wireless telephone, direct broadcast satellite and 
cable television operators, broadcast television, and radio.[Footnote 
47] However, CRTC has one broadcast fee category that includes radio 
stations, television stations, and cable and direct broadcast 
satellite television operators. All pay the same rate on the same 
basis--the licensee's fee revenues for the most recently completed 
year. In contrast, FCC has 62 fee categories for the same broadcasting 
services, and different bases for different fee categories, including, 
among others, a flat fee for each fee category of broadcast television 
and radio station, a per-subscriber fee rate for cable television, and 
a per-satellite fee rate for direct broadcasting satellite television 
operators. 

In another example, CRTC's telecommunications fee category encompasses 
wireless telephone services and wireline telephone services. The rate 
for the telecommunications fee category is set on the same basis used 
to set the rate for the broadcast industry--the licensee's fee 
revenues for the most recently completed year. In contrast, FCC has 
separate fee categories for wireless telephone services and wireline 
telephone services--and the two fee categories pay different rates set 
on different bases, with the wireless telephone rate set on a per-
subscriber basis and the wireline telephone rate set on a per-revenue-
dollar basis. 

CRTC officials told us that having two fee categories--both with fee 
rates determined on the basis of revenue--makes it relatively easy for 
CRTC to align costs to a fee category, even given the increasing 
convergence of industry and the cross-cutting nature of CRTC's work. 
CRTC officials told us they track CRTC's direct costs according to 
these fee categories in CRTC's activity-based cost system annually. 
Because most mission-related staff are assigned to work centers 
aligned with either the broadcasting or the telecommunications 
industries, CRTC officials said it is administratively easy to track 
costs according to these fee categories. For staff working on cross-
cutting issues related to both categories, management estimates how 
much time each staff has spent on each of the two fee categories. 
[Footnote 48] CRTC then divides the total amount in fees it must 
collect between the two fee categories based on its costs associated 
with each fee category. Indirect costs for internal services provided 
to the entire agency--such as, among other things, human resources, 
legal services, and accounting--are divided among the two fee 
categories consistent with the distribution of direct costs. 

FERC also tracks its costs by industry sector and fee category 
annually and then assesses fees in alignment with its costs. FERC 
officials told us that FERC's time and attendance system tracks the 
time staff spends directly on each fee category through activity codes 
aligned with particular fee categories. This assessment of time spent 
on each industry forms the basis of the assessment of fees. Similar to 
CRTC, indirect costs are assessed among the fee categories based on 
the assessment of direct costs incurred by industry sector. 

Making the Assessment Process Transparent: 

NRC takes specific steps that facilitate industry and public 
understanding of how the agency distributes and assesses regulatory 
fees that go beyond FCC's provision of information on this topic. NRC 
officials stated that NRC's chief financial officer has consistently 
emphasized the importance of transparency in setting fees. According 
to NRC officials, transparency is important because the fees impact 
NRC's stakeholders, and therefore stakeholders should be able to 
understand how the fees are derived. While both FCC and NRC publish 
NPRMs and Final Orders regarding each year's fees, NRC also publishes 
the workpapers it has used to determine the fees and rates in its 
NPRMs and Final Orders to further promote transparency. These 
workpapers contain detailed cost data that form NRC's basis for 
setting its fees for each industry sector. NRC's website has a link to 
an electronic docket that contains its regulatory-fee-related NPRM, 
Final Order, and workpapers, such that one can see how NRC went from 
its detailed cost data to its final fee-setting rule. As described 
previously, in recent years, FCC has not included this level of detail 
in its NPRMs and Reports and Orders related to its regulatory fees. 
Moreover, in addition to providing these supporting workpapers on its 
website, NRC staff told us they also meet with industry stakeholders 
periodically to help ensure the stakeholders understand the assessment 
process and how the fee rates are determined. 

Handling of Excess Fees: 

As mentioned earlier, FCC may not obligate any excess fees it receives 
without an appropriation from Congress. In contrast, officials at all 
five agencies we met with told us their agency has a form of annual 
adjustment or "true-up" mechanism such that any excess fees collected 
are either applied as an adjustment to the next year's fees or are 
refunded. Four of the five agencies apply any excess fees collected 
toward the next year's fee assessment, while one agency issues a 
refund. For example, according to NRC's fiscal year 2011 Annual 
Financial Report, NRC applies collections that exceed its budget 
authority to offset subsequent years' appropriations. According to 
FERC officials, at year-end, FERC calculates a required subsequent 
year adjustment based on the difference between the amounts assessed 
and actual costs. CRTC officials told us that they make an adjustment 
to the subsequent year's assessments based on the difference between 
the fees collected--based on estimated costs--and annual expenditures. 
FCA officials stated that FCA also makes adjustments for overpayments 
in the current year to fees owed the following year. Lastly, CNSC 
officials told us they refund fees collected in excess of actual 
costs. As a result of these procedures, the fees paid to these five 
agencies are ultimately used to fund the regulatory agency or are 
refunded. 

Conclusions: 

The Communications Act states that FCC is to derive regulatory fees 
from the number of FTEs in certain bureaus performing regulatory 
activities, but the act does not specifically state how frequently FCC 
must reexamine its FTEs to assure its regulatory fees are aligned with 
FCC's current work priorities. FCC has relied on this lack of clarity 
to justify continuing to use 1998 data as the basis for its assessment 
of regulatory fees--in spite of the vast changes to the 
telecommunications industry that have occurred, including significant 
convergence of technologies and changes in the nature of the 
industries that FCC regulates. Federal user fee guidance, accounting 
standards, and the practices of other agencies we met with all stress 
the importance of using timely, regularly updated data to guide 
decisions, with federal user fee guidance directing agencies to review 
user fees biennially to assure that charges are adjusted to reflect 
changes that have occurred. In addition, although FCC has made 
incremental changes to the fee schedule first established in the 
Communications Act and implemented by FCC in fiscal year 1994, FCC has 
not considered more holistic changes to the way regulatory fees are 
assessed. In part, FCC's difficulties in keeping its process current 
may be because its statutory framework is based on a 
telecommunications environment that no longer exists. The large number 
of fee categories--86 in fiscal year 2011--may have contributed to 
FCC's difficulties in keeping the division of fees aligned with the 
current regulatory activities on which it spends its time. 
Furthermore, FCC's lack of transparency in disclosing its methodology 
for dividing regulatory fees among fee categories and the different 
methodologies FCC uses to calculate fee rates for different industries 
have made it difficult for stakeholders to understand and comment on 
FCC's decisions related to its regulatory fee process. 

On July 17, 2012, FCC released an NPRM on regulatory fee reform, 
which, as described in our agency comments section, contains proposals 
that respond to many of the concerns raised in this report. The 
processes of other regulatory fee-funded agencies, both in the United 
States and internationally, may be instructive for FCC as it considers 
such issues as re-aligning its division of regulatory fees and 
increasing the transparency of the process. We acknowledge the 
inherent difficulties in reforming the process. Because of the zero-
sum nature of FCC's regulatory fees, any significant changes to FCC's 
assessment of regulatory fees among industry sectors and fee 
categories would most likely result in fee increases for some sectors 
and fee decreases for other sectors. Not only is this likely to be 
controversial to some industry stakeholders, but this change--and any 
analysis required to better align regulatory fees to FCC's division of 
FTEs by fee category--is likely to be time consuming and require some 
FCC resources, if done comprehensively. Some potential changes, such 
as changes to the bases on which FCC assesses regulatory fees--could 
add new administrative burdens on FCC or industry stakeholders. The 
likely effects of changes to its current fee assessment will need to 
be carefully analyzed by FCC. In releasing the regulatory fee reform 
NPRM, FCC has taken an important first step in this challenging reform 
effort, but significant analysis and decisions remain to be made by 
FCC. 

Lastly, over time, FCC has collected approximately 2 percent more on 
average than is required in its annual appropriations acts. Because 
recent annual appropriations do not permit FCC to use any of these 
excess fees without congressional action, they currently have grown to 
$66 million and, absent any change in FCC's statutory authority and 
method of collecting fees, are likely to continue to increase. The 
decision of how to dispose of these excess regulatory fees as well as 
how to handle any future excess collections is a policy choice for 
Congress to make. 

Matter for Congressional Consideration: 

Congress should consider whether FCC's excess fees (approximately $66 
million through fiscal year 2011) should be appropriated for FCC's 
use, or, if not, what the disposition of these funds should be, and 
whether to change FCC's annual appropriations language to permit 
reconciliation of excess collections or to govern FCC's handling of 
any future excess collections. 

Recommendations for Executive Action: 

We recommend that the Chairman of the FCC, as part of FCC's effort to 
reform its regulatory fee process, take the following three actions: 

* Determine whether and how the current fee schedule should be 
revised--including an overall analysis of the appropriate number of 
categories and bases for calculating rates--to reflect the current 
telecommunications industry and FCC's regulatory activities, and in 
consideration of the processes of other regulatory fee-funded agencies 
that may be instructive, including, if appropriate, proposing to 
Congress any needed changes to its current statutory authority. 

* Perform an updated FCC FTE analysis by fee category and establish a 
process to assure that the FTE analysis be performed at least 
biennially, consistent with federal guidance on user fees. 

* Increase the transparency of FCC's regulatory fee process by 
describing in each future year's NPRM and subsequent report, in 
sufficient detail for stakeholders to understand, the methodology and 
analysis used to divide fees among fee categories, including the year 
any FTE data used was collected, any additional information needed to 
explain the effect of other adjustments, and the amount of excess fees 
collected. 

Agency Comments: 

FCC provided written comments on a draft of this report by letter 
dated July 17, 2012. These comments are summarized below and are 
reprinted in appendix II. FCC agreed with our recommendations and 
stated that an NPRM on regulatory fee reform, released on July 17, 
2012, addressed them. FCC stated that the NPRM sets forth three goals 
to guide FCC in its reform initiative: fairness, administrability, and 
sustainability. FCC stated that to achieve these goals, the Commission 
has proposed a series of fundamental changes to its regulatory fee 
program that include, but are not limited to, proposals contained in 
our recommendations. For example, FCC stated that, consistent with our 
recommendations, the NPRM seeks comment on (1) using updated fiscal 
year 2012 FTE data to calculate regulatory fees, (2) whether reducing 
the number of regulatory fee categories would be advisable, and (3) 
whether the different bases on which regulatory fees are currently 
calculated should be reduced or made uniform among all services. FCC 
stated that, consistent with our recommendation to consider the 
processes of other regulatory fee-funded agencies, it would place a 
copy of our final report in the record of the rulemaking so that 
interested parties could comment on our recommendations and analyses. 
Regarding our recommendation that FCC review its division of FTEs at 
least biennially, FCC stated that its NPRM seeks comment on the 
frequency with which FCC should revisit its division of FTEs, such as 
annually. Furthermore, FCC stated that it would implement our 
recommendation to increase the transparency of its rulemaking process 
in its next annual regulatory fee proceeding, for fiscal year 2013. 
Finally, regarding our matter for congressional consideration related 
to excess fees, FCC stated that should Congress decide to examine 
these or any other issues regarding regulatory fees, FCC would provide 
any information Congress may request. We recognize that the proposals 
contained in FCC's NPRM are responsive to our recommendations. In 
light of FCC's lack of action after its 2008 FNPRM on regulatory fee 
reform, it remains critical that FCC continue to move forward on 
analyzing its proposals and determining how best to update its 
regulatory fee process. 

As agreed with your offices, unless you publicly announce the contents 
of this report earlier, we plan no further distribution until 30 days 
from the date of this report. At that time, we will send copies to the 
Chairman of FCC and other interested parties. In addition, the report 
will be available at no charge on the GAO website at [hyperlink, 
http://www.gao.gov]. 

If you or your staffs have any questions about this report, please 
contact me at (202) 512-2834 or goldsteinm@gao.gov. Contact points for 
our Offices of Congressional Relations and Public Affairs may be found 
on the last page of this report. GAO staff who made major 
contributions to this report are listed in appendix III. 

Signed by: 

Mark L. Goldstein: 
Director: 
Physical Infrastructure Issues: 

[End of section] 

Appendix I: Objectives, Scope and Methodology: 

In response to your request to review FCC's regulatory fee process, we 
examined (1) FCC's process for assessing regulatory fees among 
industry sectors and the results of this process, (2) FCC's regulatory 
fee collections over the past 10 years compared to the amount it was 
directed to collect by Congress, and (3) alternative approaches to 
assessing and collecting regulatory fees that could be instructive for 
FCC as it considers reforms to its process. 

In examining FCC's regulatory fee process, we reviewed relevant 
federal statutes, federal appropriations acts, congressional reports 
and hearing transcripts, FCC documents, and GAO reports. We spoke to 
stakeholders, including officials at FCC, industry trade associations, 
and fee-paying companies. Specifically, among others, we reviewed the 
following documents: 

* Statute establishing FCC's regulatory fee-collecting authority 
(Section 9 of the Communications Act of 1934): 

* FCC's appropriations acts, fiscal years 1994 to 2011: 

* Conference Report to Accompany the Federal Communications Commission 
Authorization Act of 1991, Sept. 17, 1991: 

* Hearing transcript, House Energy and Commerce Subcommittee on 
Communications and Technology Hearing on President Obama's Fiscal 2013 
Budget Proposal for the Federal Communications Commission, February 
16, 2012: 

* FCC Notices of Proposed Rulemakings, Further Notice of Proposed 
Rulemaking, and Reports and Orders related to FCC's collection of 
regulatory fees, fiscal years 1994 through 2012: 

* FCC budget justifications, fiscal years 2005 to 2013: 

* FCC internal documentation of its regulatory fee methodology: 

* FCC internal documentation related to its core financial system, 
Genesis: 

* FCC strategic plans, 2009 to 2014 and 2012 to 2016: 

* FCC annual financial reports, fiscal years 2010 and 2011: 

* Prior GAO work on FCC, regulatory agencies, and user fees: 

* Federal guidance on user fees and cost accounting, including the 
Office of Management and Budget's Circular No. A-25 and the Statement 
of Federal Financial Accounting Standards 4. 

We also spoke with stakeholders from the following entities: 

* FCC--Office of the Managing Director, Enforcement Bureau, 
International Bureau, Media Bureau, Wireless Telecommunications 
Bureau, Wireline Competition Bureau: 

* Two former FCC commissioners: 

* Industry associations--American Association of Paging Carriers, CTIA-
The Wireless Association, Independent Telephone & Telecommunications 
Alliance, National Association of Broadcasters, National Cable and 
Telecommunications Association, US Telecom: 

* Fee-paying Companies--Commonwealth Broadcasting, Critical Alert 
Systems, DIRECTV, Gannett Company Inc./Multimedia Holdings Corp., 
Intelsat, KRIS-TV, Level 3 Communications, Mainline Broadcasting, 
Midcontinent Media, People's Telco, Quincy Newspapers (regarding its 
TV and radio interests), Southern Utah Telephone Company, Windstream 
Communications, and WUBU-FM: 

To select the fee-paying companies (listed above) to interview about 
their perspectives on FCC's regulatory fee process, we began with a 
list of companies provided by FCC. Our criteria for selecting 
companies from the FCC list were as follows: 

* companies from each industry sector (wireless, wireline, 
broadcasting, cable, international); 

* companies from a variety of fee codes within the industry sectors; 
and: 

* an emphasis on small companies, as they may be less well represented 
in associations, less likely to submit public comments to regulatory 
fee rulemakings, and regulatory fees may impact them more. 

Within each industry sector and fee category, we selected companies 
using these criteria and a few additional constraints. For example, if 
an FM radio station in a small market appeared to be owned by a 
company that also owned a station in a large market, then we treated 
it as large. Also, in most cases, companies were selected based on the 
fee categories in which they conducted their primary business, not on 
secondary business they might also have conducted. 

To understand FCC's regulatory fee collections over the past 10 years 
compared to the amount it was directed to collect by Congress, we (1) 
met with officials to discuss FCC fee collection process and timeline 
and (2) analyzed FCC regulatory fee collection data from FCC's 
internal financial system, Genesis, by FCC's "payment type code" from 
fiscal year 2002 to fiscal year 2011. We assessed the reliability of 
the data through reviewing documentation on Genesis, and through 
interviews supplemented with questionnaires to knowledgeable agency 
officials on Genesis and related internal controls. We determined that 
the data were sufficiently reliable for determining FCC's total 
regulatory fee collections, including by industry sector, for fiscal 
years 2002 through 2011, and for determining the amount of late 
payments in each of those years. We compared this fee collection data 
with the amount Congress appropriated to FCC for each respective year. 
FCC's payment type codes are codes FCC assigns to identify the fee 
category for which a regulatory fee payment is associated with. FCC 
officials also provided us with a cross-reference that associated 
payment type codes with the main industry sectors used in our review 
(i.e., Broadcast, Cable, Wireline, Wireless, and International.) 
Subsequently, we analyzed the fee payment data by industry sector to 
understand the extent, if any, to which excess fees collected were 
associated with a particular industry sector and to analyze the 
influence of late payments on the total amount collected. We also 
spoke with a budgeting and forecasting expert, who provided background 
information and context related to FCC's use of estimates and 
forecasts in setting regulatory fees. 

To identify alternative approaches to FCC's regulatory fee process 
that could be instructive as FCC considers reforms to its current 
process, we reviewed the regulatory fee processes of several foreign 
and domestic federal agencies. In selecting comparative agencies, we 
narrowed our scope to those agencies that were similar enough to FCC 
in mission and fee process such that possibly instructive alternatives 
could be identified. FCC is an independent agency that regulates 
interstate and international communications by radio, television, 
wire, satellite and cable, and that assesses annual regulatory fees to 
offset its entire annual appropriation from Congress. We therefore 
selected independent regulatory commissions that recover the majority 
or all of their costs through annual fees assessed on regulated 
entities, including, in the U.S., the (1) Nuclear Regulatory 
Commission, (2) Federal Energy Regulatory Commission, and (3) The Farm 
Credit Administration. In order to include an agency that regulates 
industries that are similar to those regulated by FCC, we also 
included (4) the Canadian Radio-television and Telecommunications 
Commission (CRTC). Lastly, after receiving a recommendation from an 
official at CRTC, we included (5) the Canadian Nuclear Safety 
Commission, the Nuclear Regulatory Commission's Canadian counterpart. 

We conducted this performance audit from May 2011 to August 2012 in 
accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. 

[End of section] 

Appendix II: Comments from the Federal Communications Commission: 

Federal Communications Commission: 
Washington, D.C. 20554: 

July 17, 2012: 

Mark L. Goldstein: 
Director, Physical Infrastructure Issues: 
U.S. Government Accountability Office: 
441 G Street, NW: 
Washington, DC 20548: 

Dear Mr. Goldstein: 

Thank you for the opportunity to review and comment on the Government 
Accountability Office's (GAO) draft Report entitled Regulatory Fee 
Process Needs To Be Updated (GAO-12-686) concerning the assessment and 
collection of annual regulatory fees from the entities regulated by 
the Federal Communications Commission (FCC or Commission).[Footnote 1] 
The Commission is responsible for implementing Congress' directives in 
section 9 of the Communications Act of 1934, as amended,[Footnote 2] 
and the draft Report contains thoughtful analyses and proposals 
regarding our implementation of the statute. We are pleased to have 
this opportunity to review and comment on it. 

After describing the study and its conclusions, the GAO makes three 
specific recommendations on how the FCC could improve its 
administration of the regulatory fee process.[Footnote 3] These 
recommendations are addressed in a pending Notice of Proposed 
Rulemaking on Regulatory Fee Reform (Fee Reform NPRM).[Footnote 4] The 
Fee Reform NPRM sets forth three goals to guide the Commission in its 
reform initiative: fairness, administrability, and sustainability. To 
achieve these goals the Commission proposes a series of fundamental 
changes to its regulatory fee program that include, but are not 
limited to, proposals contained in the draft Report's recommendations. 

The GAO first recommends that the Commission determine whether and how 
the current schedule of regulatory fees should be revised to reflect 
the current telecommunications industry and the Commission's 
regulatory activities. The GAO states that this reevaluation should 
include an overall analysis of the appropriate number of individual 
fee categories and the bases on which fees are calculated. The GAO 
further states that the Commission should consider in its analysis the 
processes of other agencies that are funded by regulatory fees and, if 
appropriate, propose legislation needed to implement any needed 
changes to the FCC's current statutory authority. 

The GAO's second recommendation is that the Commission recalculate the 
full-time equivalent number of employees(FTEs) assigned to each fee 
category and establish a process to assure that this analysis is 
performed at least biennially, consistent with general federal guidance 
on user fees.[Footnote 5] The GAO's third and final recommendation is 
that the Commission increase the transparency of its regulatory fee 
process by describing in each future year's NPRM and subsequent order 
the methodology and analysis used to allocate between fees among fee 
categories and by providing additional information on the year in 
which any cited FTE data was collected, the effect of any other 
adjustments made to the fees, and the amount of excess fees collected 
in previous years. 

Consistent with the Commission's goals of fairness and 
administrability and with the GAO's recommendations, the Fee Reform 
NPRM seeks comment on replacing the Fiscal Year (FY) 1998 FTE data now 
used to calculate regulatory fees with updated FY 2012 FTE data. .
Interested parties are also asked to address the related issues of how 
to assure that any resulting reallocation of FTEs within and among the 
FCC's bureaus is fair and equitable, and how the Commission might 
mitigate any significant increase in regulatory fees that may result 
from such reallocations. The Fee Reform NPRM also seeks comment on 
whether reducing the number of regulatory fee categories would be 
advisable, and whether new fee categories should be created for new 
telecommunications services like broadband. Interested parties are 
also asked to address whether the different bases on which regulatory 
fees are currently calculated (for example, numbers of subscribers, 
size of market served, or revenues) should be reduced or made uniform 
among all services. Consistent with the GAO's recommendation that the 
Commission consider the processes of other regulatory fee-funded 
agencies in evaluating its own proposed reforms, we will place a copy 
of the GAO's final Report in the record of the rulemaking so that 
interested parties may comment on the Report's recommendations and 
analyses. 

Transparency is an essential element of fairness and administrability. 
In line with the GAO's recommendations on enhanced disclosure of 
information on our cost allocation methodology and the amount of fees 
it produces, the Commission plans to implement this recommendation, 
and as many other reforms as possible, in the next annual (FY 2013) 
regulatory fee proceeding. 

Finally, in order to assure the sustainability of the reforms adopted 
in this proceeding, the Fee Reform NPRM seeks comment on how to assure 
that fees remain accurately calibrated to reflect the dynamism and 
convergence in the telecommunications industry and will be equitably 
distributed among regulatees. Consistent with the GAO's specific 
recommendation that the FCC review its FIE allocations at least 
biennially, the Fee Reform NPRM seeks comment on the frequency with 
which the Commission should revisit its allocations, specifically 
asking whether this reexamination should be undertaken at regular 
intervals, such as annually, or in response to comments by fee payors 
in the context of the annual regulatory fee collection NPRM. As to the
GAO's recommendation regarding changes to the Commission's current 
statutory authority, should Congress decide to address these issues, 
the Commission stands ready to provide whatever information Congress 
may request. 

Finally, the GAO proposes that Congress consider whether any excess 
regulatory fee collections should be appropriated for the Commission's 
use, or, if not, what the disposition of these funds should be. The 
GAO also suggests that Congress consider amending the Commission's 
annual appropriations language to permit reconciliation of excess 
collections or to otherwise specify how the Commission is to handle 
any future excess collections. Should Congress decide to examine these 
issues, or any other issues regarding regulatory fees, the
Commission will of course provide whatever information Congress may 
request. 

The fact that the regulatory fee reform proposals embodied in the 
GAO's three recommendations dovetail so completely with the objectives 
and proposals in the Commission's Fee Reform NPRM demonstrates 
consensus on the need for reform and important issues that must be 
carefully considered in achieving it. We are grateful to the GAO for 
its contribution to this effort and appreciate the opportunity to 
comment on the draft Report. 

Sincerely, 

Signed by: 

David Robbins: 
Managing Director: 

Attachment: 

Appendix II Footnotes: 

1. Government Accountability Office, Regulatory Fee Process Needs to 
be Updated, GAO 12-686 (Aug. 2012) (GAO draft Report or draft Report). 

2. 47 U.S.C. § 159. 

3. GAO draft Report at 37. 

4. In the Matter of Procedures for Assessment and Collection of 
Regulatory Fees, MD Docket No. 12-201, FCC 12-77, July 13, 2012. We 
have attached a copy of the Fee Reform NPRM for your reference. 

5. GAO Draft Report at 37. 

[End of section] 

Appendix III: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Mark L. Goldstein, (202) 512-2834 or goldsteinm@gao.gov: 

Staff Acknowledgments: 

In addition to the contact above, Tammy Conquest (Assistant Director), 
Juan P. Avila, Russell Burnett, Patrick Dudley, Fred Evans, Colin 
Fallon, Bob Homan, Bert Japikse, Jacqueline M. Nowicki, Joshua Ormond, 
Steve Rabinowitz, and Alwynne Wilbur made key contributions to this 
report. 

[End of section] 

Footnotes: 

[1] Act of June 19, 1934, ch. 652, § 9, 48 Stat. 1064, as amended 
(codified at 47 U.S.C. § 159). Throughout this report, the 1934 Act as 
amended is referred to as the Communications Act; specific provisions 
are cited to the United States Code. 

[2] See the Full-Year Continuing Appropriations Act, 2011, Pub. L. No. 
112-10, Div. B, § 1101(a)(6), 125 Stat. 38, 103 (2011), for the 
appropriations act language specifying that the applicable level, 
authority and conditions of funding for fiscal year 2011 continued to 
be as provided by the Consolidated Appropriations Act, 2010, Pub. L. 
No. 111-117, 123 Stat. 3034, 3184-3185 (2009) for agencies previously 
funded by that act. The level set by Congress in the Consolidated 
Appropriations Act, 2010 for FCC was $335,794,000 of offsetting 
collections to be assessed and collected by FCC pursuant to the 
Communications Act. 

[3] In the Matter of Assessment and Collection of Regulatory Fees for 
fiscal year 2004, 19 FCC Rcd. 11662, 11666 (2004). 

[4] FCC refers to its process of dividing the amount to be collected 
among fee categories as all allocation process. 

[5] Each year, FCC designates either a rate, based on revenues, 
subscribers, or another basis, or a flat fee for each of the 86 fee 
categories. 

[6] What we refer to in this report as the fee category for wireline 
telephone companies, FCC refers to as the fee category for interstate 
telecommunications service providers. According to FCC, providers 
subject to this fee category typically identify themselves using one 
or more of the following descriptions: competitive access provider, 
competitive local exchange carrier (CLEC); incumbent local exchange 
provider (ILEC); interconnected voice over internet protocol (VoIP) 
provider; or interexchange carrier, among others. Only certain 
revenues of these companies are used in computing the regulatory fees 
they pay. 

[7] FCC's fee category for wireless telephone (cell phone) providers 
is called the Commercial Mobile Radio Service (CMRS) fee category. In 
this report, we refer to this fee category as the wireless telephone 
fee category. 

[8] 47 U.S.C. § 159. FCC also collects application fees from companies 
for activities such as license applications, renewals or requests for 
modification. These fees are deposited in the General Fund of the 
Treasury and cannot be used by FCC. 47 U.S.C. § 158(e). 

[9] An FTE reflects the total number of regular straight-time hours 
(i.e., not including overtime or holiday hours) worked by employees 
divided by the number of compensable hours applicable to each fiscal 
year. Annual leave, sick leave, and compensatory time off and other 
approved leave categories are considered to be "hours worked" for 
purposes of defining FTE employment. 

[10] Departments of Commerce, Justice, and State, the Judiciary, and 
Related Agencies Appropriations Act, 1994, Pub. L. No. 103-121, 107 
Stat 1153, 1166-1167 (1993); Omnibus Appropriations Act, 2009, Pub. L. 
No. 111-8, 123 Stat. 524, 657 (2009). As the appropriation acts make 
clear, the collected fees are treated as offsetting receipts. Unlike 
offsetting collections, which are available for obligation by the 
agency without further legislative action, offsetting receipts cannot 
be used without being appropriated. GAO, A Glossary of Terms Used in 
the Federal Budget Process. [hyperlink, 
http://www.gao.gov/products/GAO-05-734SP] (Washington, D.C.: Sept. 
2005). Congress has indicated in recent FCC appropriation acts that 
offsetting receipts collected in a given fiscal year are not available 
to FCC beyond the amount initially appropriated. Fees collected in 
excess of the amount appropriated may not be obligated without 
additional congressional action. 

[11] The wireline telephone company regulatory fee rate is based on 
billed interstate and international end-use revenues for local and 
most toll services. Other types of revenue are excluded from the 
regulatory fee calculation. 

[12] Specifically, the fee categories for commercial television 
stations are based on whether the station is broadcasting on VHF or 
UHF frequencies and the size of the Nielsen Designated Market Area. 
The fee categories for commercial radio stations are based on the 
class of station and population served. 

[14] 47 U.S.C. § 159(c)(1). 

[15] In a fiscal year 2008 Further Notice of Proposed Rulemaking, FCC 
stated that FCC's division of fees among fee categories was based on 
FCC's 1994 calculation of FTEs devoted to each regulatory fee 
category. See In the Matter of Assessment and Collection of Regulatory 
Fees for Fiscal Year 2008, 24 FCC Rcd. 6389, 6401 (2008). According to 
FCC officials, the 2008 FNPRM should have referred to FCC's fiscal 
year 1998 calculation of FTEs. FCC staff confirmed that the FTE 
analysis was last conducted in 1998. Since 1994, FCC has used its 
authority under section 9 to modify the service categories and amounts 
set out in the Schedule of Regulatory Fees in order to reflect changes 
in the number of payment units, additions and changes in the services 
subject to the fee requirement, and the benefits derived from FCC's 
activities, and to simplify the structure of the schedule. See 
Appendix F, "Detailed Guidance on Who Must Pay Regulatory Fees," 
Assessment and Collection of Regulatory Fees for Fiscal Year 2000, 15 
FCC Rcd. 14478, 14539 (2000). FCC has continued to use FTE data 
compiled in fiscal year 1998 to determine the proportion of the total 
regulatory fees assigned to each fee category. 

[15] Based on FCC-provided information, we determined that the 
cumulative effect of all of the adjustments made by FCC was that for 
fiscal year 2011, FCC expected the wireline telephone industry to pay 
about $8.6 million less than it would have paid had FCC based fees 
only on the division established by its fiscal year 1998 FTE analysis. 
In turn, FCC expected the other industry sectors to pay more ($2.1 
million more for the wireless industry; $3.4 million more for the 
cable industry, $2.6 million more for the media industry, and $1.2 
million more for the international industry). 

[16] In 1991, the House of Representatives, in a bill that would have 
established FCC's authority to charge regulatory fees, adopted a 
proposed annual fee schedule that was informed by information provided 
by FCC on how FCC allocated its costs among bureaus and service 
categories. The legislation did not become law in 1991. However, the 
fee provisions that became law in 1993 were virtually identical to 
those in the 1991 bill, with the exception of the level of the fees 
themselves. See H.R. Rep. 102-207, 102ND Cong. (1991). 

[17] As previously stated, FCC is required to base its regulatory fees 
on the number of FTEs performing regulatory tasks in three named 
bureaus plus other FCC offices, as adjusted to take into account 
factors that are reasonably related to the benefits provided by FCC's 
activities to those entities paying the fee, including factors 
determined by FCC to be in the public interest. 

[18] This system, as described in the 1997 Report and Order, was in 
line with federal cost accounting guidance in that it identified 
direct costs, such as payroll and other direct costs, and assigned 
these costs to fee categories via program codes recorded by employees 
on their time sheets in what appeared to be a rational and systematic 
manner. In addition, it allocated other indirect costs pro-rata to 
direct costs and distributed overhead costs based on predetermined 
allocation formulas. However, as the system is no longer in use, we 
were unable to validate the extent to which it met federal cost 
accounting standards. See In the Matter of Assessment and Collection 
of Regulatory Fees for Fiscal Year 1997, 12 FCC Rcd. (1997). 

[19] In the Matter of Assessment and Collection of Regulatory Fees for 
Fiscal Year 2004, 19 FCC Rcd. 11665. 

[20] In the Matter of Assessment and Collection of Regulatory Fees for 
Fiscal Year 1997, 12 FCC Rcd. 17161, 17165 (1997). 

[21] 47 U.S.C. §159(b)(3) states in pertinent part that "The 
Commission shall, by regulation, amend the Schedule of Regulatory Fees 
if the Commission determines that the Schedule requires amendment to 
comply with the requirements of paragraph (1)(A)." 

[22] In the Matter of Assessment and Collection of Regulatory Fees for 
Fiscal Year 2008, 24 FCC Rcd 6388, 6401 (2008). FCC has also stated 
that the statute does not require amendment to the fee schedule to 
mirror all changes in regulatory costs. See In the Matter of 
Assessment and Collection of Regulatory Fees for Fiscal Year 2004, 19 
FCC Rcd., 11665. 

[23] Public Notice, 23 FCC Rcd. 14581 (2008). 

[24] According to the information provided by the managing director's 
office, in creating a chart to show fiscal year 2008 total costs by 
core bureau (see second pie chart of figure 3), FCC staff identified 
the total estimated costs (both direct and indirect costs) associated 
with the regulatory activities performed by the four bureaus named in 
the chart. Estimated indirect costs were comprised of the expenses 
incurred by the remaining FCC offices and bureaus. Estimated indirect 
costs were allocated among the four bureaus named in the chart based 
on their number of FTEs. Estimated costs associated with operating 
FCC, such as financial operations and human resources, were allocated 
to each bureau and office based on the number of FTEs in each 
operating unit, and then allocated to the four bureaus named in the 
chart based on their number of FTEs. 

[25] In the order following this FNPRM, released in May 2009, FCC 
adopted proposals to eliminate two regulatory fee categories--
international fixed public radio and international high frequency 
broadcast stations--and stated that the outstanding matters stemming 
from the FNPRM might be decided at a later time in a separate Report 
and Order. See In the Matter of Assessment and Collection of 
Regulatory Fees for Fiscal Year 2009, 24 FCC Rcd. 5966, footnote 4 
(2009). 

[26] User fees are assessed to users for goods or services provided by 
the federal government that provide special benefits to identifiable 
recipients above and beyond what is normally available to the public. 
User fees are normally related to the cost of the goods or services 
provided. See Office of Management and Budget, Circular No. A-25 
Revised, (July 8, 1993) and GAO, A Glossary of Terms Used in the 
Federal Budget Process, [hyperlink, 
http://www.gao.gov/products/GAO-05-734SP] (Washington, D.C.: September 
2005). Regulatory transactions are one type of cost-based user fee. 
See GAO, Federal User Fees: A Design Guide, [hyperlink, 
http://www.gao.gov/products/GAO-08-386SP] (Washington, D.C.: May 29, 
2008). In addition, the Chief Financial Officers Act of 1990, codified 
as positive law at 31 U.S.C. ch. 9 requires an agency's CFO to review 
user fees, among other things, on a biennial basis, and make 
recommendations on revising those charges to reflect costs incurred. 
31 U.S.C. § 902(a)(8). The CFO Act does not apply to FCC, but 
demonstrates good government practice. 

[27] Office of Management and Budget, Circular No. A-11, (Aug. 18, 
2011). 

[28] GAO, Streamlining Government: Opportunities Exist to Strengthen 
OMB's Approach to Improving Efficiency, [hyperlink, 
http://www.gao.gov/products/GAO-10-394] (Washington, D.C.: May 7, 
2010). 

[29] In past work we defined equity to mean that everyone pays their 
fair share, acknowledging that the definition of fair share can have 
multiple facets. See [hyperlink, 
http://www.gao.gov/products/GAO-08-386SP]. 

[30] [hyperlink, http://www.gao.gov/products/GAO-08-386SP]. 

[31] See 47 U.S.C. § 159(g) (Schedule of Regulatory Fees); see also 
Implementation of Section 9 of the Communications Act, Assessment and 
Collection of Regulatory Fees for Fiscal Year 1994, 9 FCC Rcd. 5333,¶ 
9 (1994) recon. denied, 10 FCC Rcd. 12759 ¶12 (1995). 

[32] See In the Matter of Assessment and Collection of Regulatory Fees 
for Fiscal Year 1995, 10 FCC Rcd. 13512, 13519 (1995). 

[33] See GAO, Federal User Fees: Additional Analyses and Timely 
Reviews Could Improve Immigration and Naturalization User Fee Design 
and USCIS Operations, [hyperlink, 
http://www.gao.gov/products/GAO-09-180] (Washington, D.C.: Jan. 23, 
2009). 

[34] GAO, FCC Management: Improvements Needed in Communication, 
Decision-Making Processes, and Workforce Planning, [hyperlink, 
http://www.gao.gov/products/GAO-10-79] (Washington, D.C., Dec. 17, 
2009). 

[35] In the Matter of Assessment and Collection of Regulatory Fees for 
Fiscal Year 2012, FCC 12-48 (May 4, 2012). 

[36] In the Matter of Procedures for Assessment and Collection of 
Regulatory Fees, FCC 12-77, July 17, 2012. 

[37] [hyperlink, http://www.gao.gov/products/GAO-08-386SP], p. 35. 

[38] In fiscal year 2002, FCC was directed to collect 89 percent of 
its appropriation in regulatory fees. In fiscal year 2003, FCC was 
directed to collect 99 percent of its appropriation. For fiscal years 
2004 to 2008, FCC was directed to collect all but $1 million of its 
appropriation in regulatory fees, and since fiscal year 2009, FCC has 
been directed to collect 100 percent of its appropriation in 
regulatory fees. 

[39] Only certain wireline telephone companies' revenues are used in 
setting their fee. In this paragraph, we are referring to those 
revenues. 

[40] Disbursements from FCC's excess regulatory fee account were made 
through fiscal year 2006. 

[41] FCC was unable to identify the purposes for which it obligated 
excess regulatory fee collection prior to fiscal year 1999 because FCC 
does not retain records prior to fiscal year 2000. 

[42] According to FCC officials, for fiscal year 2003, the 1 year out 
of the past 10 that FCC under collected its regulatory fees (by $5 
million, or about 2 percent), FCC reimbursed the Department of 
Treasury the amount that it collected in regulatory fees and notified 
the Department of Treasury and Congress. According to FCC officials, 
no further action was taken. As a result, FCC did not fully offset its 
appropriation for fiscal year 2003. 

[43] At the end of fiscal year 2011, FCC's excess collections account 
had a balance of $66 million dollars, of which $5.3 million dollars 
had been deposited prior to fiscal year 2002. Because of limitations 
with FCC's data, GAO was unable to determine a year-by-year breakdown 
of excess collections for fiscal years prior to 2002. 

[44] [hyperlink, http://www.gao.gov/products/GAO-08-386SP]. 

[45] Some of the agencies also collect hourly fees for specific 
regulatory work done in addition to the annual regulatory fees which 
are the focus of this report. 

[46] See Act of June 10, 1920, ch. 285, 41 Stat. 1063 (codified at 16 
U.S.C. § 803, § 823a) and Pub. L. No. 99-509, § 3401, 100 Stat. 1874 
(1986) (codified at 42 U.S.C. § 7178). 

[47] Some of the industry sectors FCC regulates are regulated in 
Canada by another Canadian agency, Industry Canada, including the 
submarine cable industry. In addition, unlike FCC, CRTC does not 
manage spectrum, which is managed by Industry Canada. 

[48] Before CRTC began estimating the time staff spent on cross-
cutting issues, officials told us they had used an activity-based 
costing system to account for all staff time spent on each category. 
CRTC leadership later asked the managers in each category to estimate 
the distribution of staff time. According to officials we met with, 
the estimates were close enough to the results of the activity-based 
costing system that CRTC determined it wasn't cost-effective to 
continue using its activity-based costing system for this purpose. 

[End of section] 

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