********************* ********************* ************** NOTICE ********************* ********************* ************** This document was converted from WordPerfect or Word to ASCII Text format. Content from the original version of the document such as headers, footers, footnotes, endnotes, graphics, and page numbers will not show up in this text version. All text attributes such as bold, italic, underlining, etc. from the original document will not show up in this text version. Features of the original document layout such as columns, tables, line and letter spacing, pagination, and margins will not be preserved in the text version. If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ********************* ********************* ********************* ** PUBLIC NOTICE FEDERAL COMMUNICATIONS COMMISSION 445 12th STREET, S.W. WASHINGTON, D.C. 20554DA 99-2780 News media information (202) 418-0500 Fax-On-Demand (202) 418-2830 Internet: http://www.fcc.gov Released: December 10, 1999 Proposed First Quarter 2000 Universal Service Contribution Factor CC Docket No. 96-45 In this Public Notice, the Common Carrier Bureau announces the proposed universal service contribution factor for the first quarter of 2000. Fifth Circuit Decision and Revised Rules for Calculating the Contribution Factor On July 30, 1999, a three-judge panel of the United States Court of Appeals for the Fifth Circuit (Fifth Circuit) issued an opinion in Texas Office of Public Utility Counsel v. FCC. In that opinion, the Fifth Circuit affirmed in part, reversed in part, and remanded in part the Commission's Universal Service Order. Among other things, the Fifth Circuit ruled on two issues regarding the assessment of universal service contributions. Specifically, the Fifth Circuit: (1) reversed the Commission's decision to assess contributions based on the intrastate revenues of universal service contributors; and (2) reversed and remanded for further consideration the Commission's decision to assess contributions based on the international revenues of contributors having interstate revenues. In response to the court's rulings, the Commission adopted an order on October 8, 1999 that amended its contribution rules. Specifically, the Commission removed intrastate revenues from the contribution base, so that universal service contributions are now calculated using a single contribution factor based on interstate and international end-user telecommunications revenues. The Commission also exempted from the contribution base the international revenues of interstate carriers whose interstate revenues account for less than 8 percent of their combined interstate and international revenues. USAC Projections of Demand and Administrative Expenses Pursuant to section 54.709(a)(3) of the Commission's rules, the Universal Service Administrative Company (USAC) submitted the following projections of demand and administrative expenses for the first quarter of 2000: ($ millions) Program Projected Program Support Admin. Expenses Application of Balance From Prior Period Application of Interest Income Application of Periodic True-Ups Total Program Collectio n Schools and Libraries 552.710 9.790 (57.250) (6.914) (6.423) 491.913 Rural Health Care 2.230 0.770 (0.000) (0.042) (0.458) 2.500 High-Cost 498.126 1.001 (0.000) (0.600) (3.314) 495.213 Low Income 128.708 0.316 (0.000) (0.530) (4.117) 124.377 TOTAL 1181.774 11.877 (57.250) (8.086) (14.312) 1114.003 USAC reports that, based on current data, it does not believe that it will need to disburse the full amount of funds that it was authorized to collect for the first year of the schools and libraries program. Specifically, USAC estimates that the schools and libraries program will have an unused balance of approximately $229 million after all disbursements related to the first program year have been made. According to USAC, this remaining balance will occur because: (1) although USAC has made funding commitments to certain schools and libraries, it has received no indication that the services requested have been or will be provided; (2) some schools and libraries ultimately may use only a portion of the funds committed to them; and (3) a portion of the funds reserved to pay for successful appeals of funding denials is not likely to be needed. We anticipate that USAC will be able to determine the actual amount of the unused balance in March 2000. We direct USAC to apply one-quarter of the estimated unused balance to reduce the collection requirement for the schools and libraries program in the first quarter of 2000. This action is consistent with Commission rules and precedent directing that unused contributions be credited back to contributors. Specifically, at the end of the fourth quarter of 1998, the rural health care program had a balance of approximately $86 million because collections accrued faster than actual demand for program support. To ensure that unused collections were credited back to contributors, the Commission directed that the unused balance be applied over two quarters to reduce the contribution factors. Because the unused balance projected for the schools and libraries program is an estimate at this time, however, we find that it would be prudent to apply only one-quarter of the estimated unused balance to reduce the contribution factor in the first quarter of 2000. When USAC files its projections of program demand and administrative expenses for the second quarter of 2000, it shall supply an updated estimate of the remaining balance that may be applied to reduce the collection requirement for the schools and libraries program in subsequent quarters of 2000. USAC Projections of Industry Revenues USAC submitted estimated end-user telecommunications revenues for January through June 2000 based on information contained in the September 1999 Telecommunications Reporting Worksheet (FCC Form 499-S). The amount is as follows: Total Interstate and International End-User Telecommunications Revenues from January 1, 1999 - June 30, 1999: $38.352364 billion Contribution Base To determine the quarterly contribution base, we first reduce the six-month estimate of interstate and international end-user telecommunications revenues by the projected amount that will be exempted from the contribution base as a result of the limited international exception. Next, we estimate quarterly revenues by dividing the resulting six-month revenue estimate by two. Then, we decrease the revenue estimate by one percent to account for uncollectible contributions. Accordingly, the contribution base for the first quarter of 2000 is as follows: Quarterly Contribution Base for Universal Service Support Mechanisms ((Interstate and International - International Exception) / 2) - Uncollectibles ($38.352364 billion - $0.059041 billion / 2) - 1% $18.955195 billion Proposed Contribution Factor Using this quarterly contribution base, and the total program collection requirement from the table above, the proposed contribution factor for the first quarter of 2000 is as follows: Contribution Factor for Universal Service Support Mechanisms Total Program Collection / Contribution Base $1.114003 billion / $18.955195 billion 0.058770 If the Commission takes no action regarding the proposed contribution factor within the 14-day period following release of this Public Notice, the contribution factor shall be deemed approved by the Commission. USAC shall then use the contribution factor to calculate universal service contributions for the first quarter of 2000. For further information, contact Jack Zinman, Accounting Policy Division, Common Carrier Bureau, at (202) 418-7400.