[Federal Register Volume 63, Number 17 (Tuesday, January 27, 1998)]
[Notices]
[Pages 3892-3894]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-1834]
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FEDERAL COMMUNICATIONS COMMISSION
[CC Docket No. 96-45 and 97-160; DA 97-2623]
Universal Service
AGENCY: Federal Communications Commission.
ACTION: Notice.
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SUMMARY: In this Public Notice, released December 16, 1997, the Common
Carrier Bureau revises and approves universal service contribution
factors for the first quarter of 1998. These factors will be used to
calculate first quarter contributions to universal service.
FOR FURTHER INFORMATION CONTACT: Diane Law, Common Carrier Bureau,
Accounting and Audits Division, (202) 418-7400, or via E-mail to
dlaw@fcc.gov.''
SUPPLEMENTARY INFORMATION: In the Universal Service Order released on
May 8, 1997, the Commission established new federal universal service
support mechanisms consistent with the Communications Act of 1934, as
amended.1 The Commission required all telecommunications
carriers that provide interstate telecommunications services, providers
of interstate telecommunications, and payphone service providers to
contribute to the federal universal service support
mechanisms.2 The Commission found that contributions for the
schools, libraries, and rural health care support mechanisms would be
based on interstate, intrastate, and international end-user
telecommunications revenues.3 The Commission also found that
contributions for the high cost, rural, and insular and low-income
support mechanisms would be based on interstate and international end-
user telecommunications revenues.4
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\1\ Federal-State Joint Board on Universal Service, Report and
Order, 12 FCC Rcd 8776 (1997) (Universal Service Order).
\2\ Universal Service Order, 12 FCC Rcd at 9173-9178, 9183-9185.
\3\ Universal Service Order, 12 FCC Rcd at 9203, 9205.
\4\ Universal Service Order, 12 FCC Rcd at 9200, 9202-9203.
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On July 18, 1997, the Commission released an Order directing the
National Exchange Carrier Association (NECA) to create an independently
functioning not-for-profit subsidiary, the Universal Service
Administrative Company (USAC), through which it will administer
temporarily certain aspects of the federal universal service support
mechanisms.5 The Commission also directed NECA to create two
independent, not-for-profit entities, Schools and Libraries Corporation
and Rural Health Care Corporation, to administer certain aspects of the
schools, libraries, and rural health care support
mechanisms.6 The Commission instructed USAC, Schools and
Libraries Corporation, and Rural Health Care Corporation to submit
projections of demand and administrative expenses for their respective
support mechanisms for the first quarter of 1998 to the Commission at
least sixty days before the start of the first quarter of
1998.7 USAC also was required to compile total interstate,
intrastate, and international end-user telecommunications revenues and
submit that information to the Commission.8 The Commission
stated that it would publish these figures and the proposed quarterly
contribution factors in a Public Notice.9
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\5\ Changes to the Board of Directors of the National Exchange
Carrier Association, Inc., Federal-State Joint Board on Universal
Service, Report and Order and Second Order on Reconsideration, CC
Dockets No. 97-21, 96-45, FCC 97-253 (rel. July 18, 1997) (NECA
Report and Order).
\6\ NECA Report and Order at para. 57.
\7\ NECA Report and Order at para. 47.
\8\ NECA Report and Order at paras. 43-48. See also 47 CFR
54.709(a)(2), (3), and 54.711(b).
\9\ NECA Report and Order at para. 48.
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On November 13, 1997, using the information submitted on October
31, 1997 by the Universal Service Administrative Company (USAC),
Schools and Libraries Corporation, and Rural Health Care Corporation
(collectively, the administrative corporations), the Accounting and
Audits Division (Division) announced the proposed universal service
contribution factors for the first quarter of 1998.10
Pursuant to the Commission's rules, those contribution factors would
have been deemed approved on November 28, 1997 if the Commission had
taken no action regarding the proposed contribution
factors.11 On November 26, 1997, however, the Division
extended the review period for the proposed first quarter 1998
universal service contribution factors until December 5,
1997.12 On December 5, 1997, the Division further extended
the period of time during which the Commission could modify the
proposed universal service contribution factors for the first quarter
of 1998 until December 12, 1997.13 On December 12, 1997, the
Division extended the review period for the proposed contribution
factors until December 16, 1997.14
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\10\ Proposed First Quarter Universal Service Contribution
Factors, Public Notice, DA 97-2392 (rel. Nov. 13, 1997). On November
19, 1997, AT&T filed comments on the November 13th Public Notice.
See Letter from Rick D. Bailey, AT&T, to Magalie Roman Salas, FCC,
dated November 19, 1997.
\11\ 47 CFR 54.709(a)(3).
\12\ Extended Review Period for First Quarter Universal Service
Contribution Factors, Public Notice, DA 97-2510 (rel. Nov. 26,
1997).
\13\ Further Extension of Review Period for First Quarter
Universal Service Contribution Factors, Public Notice, DA 97-2560
(rel. Dec. 5, 1997).
\14\ Additional Extension of Review Period for First Quarter
Universal Service Contribution Factors, Public Notice, DA 97-2600
(rel. Dec. 12, 1997).
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On December 16, 1997, the Commission released the Third Order on
Reconsideration in CC Docket 96-45. In that Order, the Commission
concluded that it could reduce the maximum amounts collected during the
first six months of 1998 for the schools and libraries and rural health
care support mechanisms without jeopardizing the sufficiency of the
support mechanisms.\15\ Consistent with the Commission's action on
reconsideration, in this Public Notice, the Bureau revises the
projections of demand for the low income and rural health care support
mechanisms and
[[Page 3893]]
approves revised universal service contribution factors for the first
quarter of 1998.
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\15\ Federal-State Joint Board on Universal Service, Third Order
on Reconsideration, CC Docket 96-45, FCC 97-411 (rel. Dec. 16,
1997).
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The Commission concluded in the Third Order on Reconsideration in
CC Docket 96-45 that it should not impose unnecessary financial burdens
on service provider contributors to universal service by collecting
funds that exceed demand. Accordingly, the Bureau has reviewed all of
the administrative corporations' projections and has determined that
the estimated demand for the low income support mechanism appears to be
too high. Based on our analysis, we project that annual demand for the
low income support mechanism should be approximately $500
million.15a This annual figure of $500 million yields a
quarterly demand projection of $125 million, instead of the $136.3
million projected by USAC. Therefore, we find that the first quarter
projection of demand for the low income support mechanism should be
$125 million.
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\15a\ This $500 million projection of annual demand is based on
the following: According to the 1997 Monitoring Report, 5.2 million
customers participated in Lifeline in 1996. Monitoring Report, CC
Docket No. 87-339, May 1997, pgs. 86-87, table 2.3. Assuming
participation rates among existing customers remain constant, low
income support for existing Lifeline participants will be $436
million for the year. (5.2 million people times $7, which is the
maximum amount of federal support for Lifeline subscribers in states
that provide matching funds, multiplied by 12 months). In the
Universal Service Order, the Commission estimated that, by extending
the low income support mechanism to non-participating states,
approximately 1.9 million new low-income consumers would become
eligible for the support mechanism. Universal Service Order, 12 FCC
Rcd at 8966, n. 903. Assuming one-third of eligible consumers
participate in the support mechanism and that non-participating
states do not provide matching funds, low income support for new
Lifeline participants will be $40 million for the year. (627,000
people (.33 x 1.9 million people) x $5.25 (the maximum amount of
federal support for Lifeline subscribers in states that do not
provide matching funds) x 12 months). We have assumed a one-third
participation rate because the participation rate for Washington
D.C.'s low income program is 32.3 percent. Chesapeake and Potomac
Tel. Co., Formal Case No. 850, Order No. 9927, page 166 (rel. Jan.
29, 1992). In the Universal Service Order, the Commission estimated
that annual funding for LinkUp will increase to $23.6 million.
Universal Service Order, 12 FCC Rcd at 8966, n. 903. Thus, the
projection of annual low income demand is approximately $500
million. ($436 million plus $40 million plus $23.6 million).
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The Bureau also adjusts the first quarter total program costs for
the rural health care support mechanism, consistent with the Third
Order on Reconsideration in CC Docket 96-45, from $100 million to $25
million.16
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\16\ The Rural Health Care Corporation may collect up to $25
million in the first quarter of 1998. Third Order on Reconsideration
at para. 4.
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On November 26, 1997, the Commission released the Second Order on
Reconsideration in CC Docket No. 96-45, which authorized the
Administrator to bill contributors and collect contributions on a
monthly, rather than a quarterly basis.17 That Order will
reduce the interest income for the first quarter of 1998.18
The amount of interest earned for the high cost and low income support
mechanisms decreased because contributions will be collected on a
monthly, as opposed to quarterly, basis, while support will continue to
be distributed on a monthly basis. As a result of the 75-day window
filing period, initial support for the schools and libraries and rural
health care support mechanisms will be distributed in the second
quarter.19 The amount of interest earned for the schools and
libraries and rural health care support mechanisms decreased slightly.
Accordingly, we have adjusted the projected amount of interest income.
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\17\ Changes to the Board of Directors of the National Exchange
Carrier Association, Inc., Federal-State Joint Board on Universal
Service, Second Order on Reconsideration in CC Docket 97-21, CC
Docket Nos. 97-21, 96-45, FCC 97-400 (rel. Nov. 26, 1997).
\18\ In calculating interest income, USAC, Schools and Libraries
Corporation, and Rural Health Care Corporation assumed payments for
the entire quarter would arrive on January 1, 1998. USAC assumed the
first payments for the high cost and low income support mechanisms
would be distributed at the end of February. Schools and Libraries
Corporation and Rural Health Care Corporation assumed that the first
payments for the schools, libraries, and rural health care support
mechanisms would be distributed 40 days after January 1, 1998.
\19\ Schools and Libraries Corporation and Health Care
Corporation Adopt Length of Filing Windows, Public Notice, DA 97-
2349 (rel. Nov. 6, 1997). See also 47 CFR 69.616, 69.618(a)(7),
69.619(a)(7) (instructing the Schools and Libraries and Rural Health
Care Corporations to authorize USAC to submit payments within 20
days of the receipt of requisite forms and instructing USAC to
distribute payments within 20 days of receiving authorization). We
anticipate that the window period for Schools and Libraries
Corporation and Rural Health Care Corporation will not begin before
the second week in January 1998, funds will not be distributed until
after the 75-day window period has closed, and approximately 40 days
have passed (20 days for submission of payments, 20 days to
distribute payments, pursuant to 47 CFR 69.616, 69.618(a)(7),
69.619(a)(7)). Thus, payments for the schools and libraries and
rural health care support mechanisms will not be distributed until
May 1998.
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Therefore, first quarter projections of demand and administrative
expenses are as follows (revised figures are in bold):\20\
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\20\ Administrative expenses appear to be high relative to
projected quarterly demand, because start-up costs have been
allocated to the first quarter. We anticipate that administrative
expenses will total less than two percent of annual program costs.
[In millions of dollars]
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Total
Program Program Administrative Interest program
demand expenses income costs
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Schools and Libraries.................................... 299.3 2.7 (2.0) 300.0
Rural Health Care........................................ 23.0 \20\2.2 (0.2) 25.0
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Subtotal............................................. 322.3 4.9 (2.2) 325.0
High Cost................................................ 434.0 1.1 (1.0) 434.1
Low Income............................................... 125.0 0.6 (0.3) 125.3
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Subtotal............................................. 559.0 1.7 (1.3) 559.4
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Total................................................ 881.3 6.6 (3.5) 884.4
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[[Page 3894]]
Based on information contained in the Universal Service Worksheets,
FCC Form 457, USAC submitted the following information regarding end-
user telecommunications revenues on November 13, 1997:
Total Interstate, Intrastate, and International End-User
Telecommunications Revenues from January 1, 1997-June 30, 1997: $89.827
billion.
Total Interstate and International End-User Telecommunications
Revenues from January 1, 1997-June 30, 1997: $35.001 billion.\21\
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\21\ Letter from William Stern, NECA to Secretary, FCC, dated
November 13, 1997.
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USAC recommended that, in calculating the contribution bases, the
Commission adjust end-user telecommunications revenues downward to
account for possible uncollectible contributions and possible errors in
the projections of demand and administrative expense. The proposed
contribution factors set forth in the November 13, 1997 Public Notice
thus were based on USAC's recommended contribution bases.\22\ The
revised contribution factors set forth below, however, are based on
contribution bases that include no adjustments for uncollectibles or
errors in projection. Based on the low level of carrier-to-carrier
uncollectibles for access charges,\23\ we have concluded that projected
levels of uncollectible contributions should be minimal. Furthermore,
given the quarterly evaluation of demand, we find that we do not need
to take into account possible errors in projections when setting the
contribution factors. Any projection-related errors can be corrected in
subsequent quarters.\24\
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\22\ Letter from John A. Ricker, NECA to Universal Service
Branch, dated November 10, 1997.
\23\ The Commission estimates that carrier-to-carrier
uncollectible rates are 0.2 percent. This estimate was calculated
using 1996 ARMIS data. (1996 ARMIS 4301, Traffic Sensitive Total
Uncollectibles (Column R, Row 1060) divided by Traffic Sensitive
Total Revenues (Column R, Row 1090)).
\24\ See also Letter from Rick D. Bailey, AT&T, to Magalie Roman
Salas, FCC, dated November 19, 1997 at page 4.
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Finally, we note that the contribution factors proposed by USAC and
set forth in the Public Notice were derived by dividing quarterly total
program costs by revenues for a six-month period. Although these
factors, if approved, would have been used to collect funds for the
first quarter, they would have been applied to the six-month revenues
reported on individual contributor's Universal Service Worksheets. To
obtain contribution factors that will be applied to revenues that
approximate first quarter revenues, the revised contribution factors
set forth below are based on contribution bases that are divided by
two. This results in a more accurate portrayal of the contribution
factors but does not change the amounts collected.
Based on the figures submitted by USAC, Schools and Libraries
Corporation, and Rural Health Care Corporation, and revised as set
forth above, the approved contribution factors for the first quarter of
1998 are as follows:
Contribution factor for the schools and libraries and rural health
care support mechanisms:
Total Program Costs / Contribution Base (Interstate, International,
and Intrastate) = $0.325 billion / ($89.827 billion / 2) = 0.0072.
Contribution factor for the high cost and low income support
mechanisms:
Total Program Costs / Contribution Base (Interstate and
International) = $0.559 billion / ($35.001 billion / 2) = 0.0319.
These factors are the approved first quarter 1998 universal service
contribution factors. To calculate contributions, USAC shall multiply
these factors by one half of contributors' end-user telecommunications
revenues for January 1, 1997 through June 30, 1997, as reported on
Universal Service Worksheets. USAC will bill and collect those
contributions on a monthly basis.
For further information, contact Diane Law, Universal Service
Branch, Accounting and Audits Division, Common Carrier Bureau, at (202)
418-7382.
Federal Communications Commission.
Timothy A. Peterson,
Deputy Division Chief, Common Carrier Bureau.
[FR Doc. 98-1834 Filed 1-26-98; 8:45 am]
BILLING CODE 6712-01-P
