[Federal Register: April 1, 2003 (Volume 68, Number 62)]
[Rules and Regulations]
[Page 15669-15672]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr01ap03-8]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 54
[CC Docket Nos. 96-45, 98-171, 90-571, 92-237, 99-200, 95-116, 98-170;
FCC 03-58]
Federal-State Joint Board on Universal Service
AGENCY: Federal Communications Commission.
ACTION: Final rule.
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SUMMARY: In this document, the Commission addresses petitions for
interim waiver and several petitions for reconsideration of rules
recently adopted in the Interim Contribution Methodology Order
regarding the assessment and recovery of contributions to the federal
universal service support mechanisms.
DATES: Effective April 1, 2003.
FOR FURTHER INFORMATION CONTACT: Paul Garnett, Attorney or Diane Law
Hsu, Deputy Division Chief, Wireline Competition Bureau,
Telecommunications Access Policy Division, (202) 418-7400.
SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Order
and Second Order on Reconsideration in CC Docket Nos. 96-45, 98-171,
90-571, 92-237, 99-200, 95-116, 98-170; FCC 03-58, released on March
14, 2003. The full text of this document is available for public
inspection during regular business hours in the FCC Reference Center,
Room CY-A257, 445 Twelfth Street, SW., Washington, DC, 20554.
I. Introduction
1. In this Order, we address petitions for interim waiver and
several petitions for reconsideration of rules recently adopted in the
Interim Contribution Methodology Order, 67 FR 79525, December 30, 2002,
regarding the assessment and recovery of contributions to the federal
universal service support mechanisms. We grant local exchange carriers'
request for an interim waiver of Sec. 54.712 of the Commission's rules
to permit such carriers to continue to recover through the federal
universal service line item certain contribution costs associated with
Centrex customers on a per-line basis from multi-line business
customers, pending action on petitions for reconsideration of this
rule. In addition, we grant, in part, petitions filed by the United
States Telecommunications Association (USTA) and SBC Communications
Inc. (SBC) seeking reconsideration of Sec. 54.712 to permit eligible
telecommunications carriers (ETCs) to recover contribution costs
associated with Lifeline customers' occasional interstate revenues
through a universal service pass-through charge for such customers. We
also address petitions filed by the National Exchange Carrier
Association, Inc. (NECA), Verizon Wireless, and WorldCom, Inc.
(WorldCom), and clarify how the Universal Service Administrative
Corporation (USAC) shall conduct the universal service contribution
true-up processes for revenues from 2002 and 2003. Finally, we grant,
in part, a petition for reconsideration filed by AT&T Corp. (AT&T)
requesting that the Commission announce the universal service
contribution factor as a percentage rounded up to the nearest tenth of
a percent.
II. Discussion
1. Centrex. In this Order, we grant, in part, petitions for interim
waiver filed by BellSouth, National Exchange Carrier Association
(NECA), National Telecommunications Cooperative Association (NTCA),
Organization for the Promotion and Advancement of Small
Telecommunications Companies (OPASTCO), SBC, and Verizon (Petitioners)
of Sec. 54.712(a) of our rules as it applies to the multi-line
business customers of local exchange carriers, pending the Commission's
resolution of petitions for reconsideration of the rule. We find
Petitioners have demonstrated special circumstances to warrant
deviation from our rule and that the public interest would be served by
granting a limited interim waiver. Therefore, we waive Sec. 54.712 on
an interim basis to enable local exchange carriers to continue to
recover federal universal service contribution costs through universal
service line items using the equivalency ratios established for Centrex
lines under our rules governing the Presubscribed Interexchange Carrier
Charge (PICC). Until the Commission resolves pending petitions for
reconsideration of Sec. 54.712, local exchange carriers that utilize
the PICC equivalency ratios when recovering contribution costs from
Centrex customers will be permitted to recover a share of their
contributions associated with the subscriber line charge for a specific
Centrex line from their multi-line business customers in a given state.
3. Under Sec. Sec. 69.131 and 69.158 of our rules, local exchange
carriers have the option of recovering their contribution costs from
Centrex customers through a universal service line item that uses the
equivalency ratios established for Centrex lines under our rules
governing the PICC. In the Access Charge Reform Reconsideration Order,
the Commission adopted, for purposes of the PICC, a ratio of up to nine
Centrex lines to one PBX trunk. The Commission subsequently granted
local exchange carriers the option of applying this equivalency ratio
to the recovery of universal service contribution costs from Centrex
customers.
4. In the Interim Contribution Methodology Order, the Commission
adopted a general prohibition on the recovery of amounts in excess of
contribution obligations through federal universal line-item charges.
As discussed, the Commission concluded such action would prevent
carriers from recovering unrelated costs through universal service line
items and from averaging contribution costs across all end-user
customers. In addition, it would alleviate end-user confusion regarding
universal service line items.
5. We conclude that special circumstances exist that warrant
interim waiver of the rule. Petitioners have noted a potential
inconsistency between Sec. Sec. 54.712, 69.131, and 69.158. They
assert that if carriers are not permitted to increase recovery charges
for multi-line business customers, they may be unable to continue to
apply an equivalency ratio to Centrex universal service pass-through
charges as permitted by Sec. Sec. 69.131 and 69.158 of our rules and
still recover their contribution costs from their customers. They note
the Commission did not indicate its intent in the Interim Contribution
Methodology Order to overturn its existing policy of permitting local
exchange carriers to apply an equivalency ratio to Centrex customer
universal service pass-through charges. To the contrary, they argue
that the Commission recognized that it may be appropriate to continue
applying the one-ninth equivalency ratio to Centrex customer lines in
the event that a connection-based universal service contribution
methodology is adopted.
6. The petitions for reconsideration of this issue raise important
issues we intend to resolve expeditiously. In the meanwhile, we believe
the public interest would be served by granting a limited waiver of the
general prohibition on averaging contribution
[[Page 15670]]
costs among different customers for contribution costs not recovered by
operation of the Centrex equivalency ratios to preserve the status quo
for a limited period of time. Grant of this interim waiver does not
represent a substantive change in Commission policy. To the contrary,
grant of this interim waiver is only provided to allow carriers to
continue an existing Commission policy, while we examine that policy
and contribution issues more broadly. Until the Commission addresses
pending petitions for reconsideration of this issue, local exchange
carriers will be permitted to continue to average such unrecovered
contribution costs across multi-line business customers.
7. Moreover, this interim waiver will prevent an unintended
increase in universal service pass-through charges on current Centrex
users, pending the Commission's determination of the merits of the
petitions for reconsideration on this and other related issues. Because
most local exchange carriers currently apply the PICC equivalency
ratios to Centrex universal service pass-through charges, the limited
waiver we grant today will minimize changes in universal service line
items for multi-line business customers in the immediate term, while
carriers otherwise implement the new rule on April 1, 2003. In
particular, we note that several organizations representing state
agencies have submitted letters in support of this action. These
commenters note that state governments rely heavily on Centrex service
and would be disproportionately affected by increases in universal
service line item charges resulting from denial of the interim waiver.
We intend to weigh these and other arguments in reviewing the pending
petitions for reconsideration.
8. We emphasize the limited nature of our action today. This waiver
is limited to the narrow issue of how to accommodate existing
Commission policies that the Commission did not directly address in the
Interim Contribution Methodology Order. Except for this limited
exception, all carriers (including local exchange carriers) will
continue to be subject to broader limitations on the recovery of
contribution costs through federal universal service line-item charges.
9. Lifeline. In addition, we grant, in part, petitions filed by SBC
and USTA to reconsider Sec. 54.712(b) of our rules, as it applies to
the recovery of contributions associated with Lifeline customers.
Specifically, we amend Sec. 54.712(b) to permit ETCs to recover from
Lifeline customers contribution costs associated with the provision of
interstate telecommunications services that are not supported by the
Commission's universal service mechanisms. ETCs have always been free
to recover such amounts from these customers in the past, and the
Commission did not intend to preclude such recovery when it adopted the
interim modifications in the Interim Contribution Methodology Order.
10. Sections 54.712(a) and (b) read together prohibit ETCs from
recovering any contribution costs associated with Lifeline customers
either from Lifeline customers directly or through a federal universal
service line-item charge assessed on all other customers. When the
Commission adopted Sec. 54.712(b), it reasoned that because
``customers of Lifeline services do not generate assessable interstate
telecommunications revenues for ETCs, the relevant assessment rate and
contribution amounts recovered from such customers would be zero.'' In
particular, the Commission focused on the fact that Lifeline customers
are not obligated to pay a subscriber line charge, which typically is a
major source of interstate revenue for an ETC. Several large local
exchange carriers, however, point out that customers of Lifeline
services do in fact generate occasional interstate telecommunications
revenues from interstate telecommunications services, such as one-time
presubscribed interexchange carrier (PIC) change charges and other
interstate intraLATA toll charges. These charges, however, are not
associated with services subject to Lifeline discounts and, in any
event, should not generate substantial contribution amounts. Therefore,
we find that ETCs should not be prohibited from recovering these
minimal contributions associated with these occasional interstate
charges from Lifeline customers.
11. Moreover, this modification will ensure that ETCs are not
disadvantaged by our recovery limitations if they provide both local
and long distance services to customers who participate in the Lifeline
program. The combination of Sec. Sec. 54.712(a) and (b) could prohibit
ETCs that provide both local and long distance services from recovering
their contributions associated with such customer's long distance
charges through any universal service line items. Interexchange
carriers that only provide long distance services to customers who also
qualify for Lifeline, however, have always been permitted to recover
their contribution costs from these customers and still are free to do
so under the current rules. We do not believe this disparity in
recovery practices is competitively neutral. Accordingly, we will amend
our rules to permit ETCs to recover contribution costs associated with
interstate long distance charges from Lifeline customers.
12. True-Up Process for 2002 and 2003. In response to petitions for
reconsideration filed by NECA, Verizon Wireless, and WorldCom, we
clarify how USAC will true up annual revenue data filed by contributors
on the FCC Form 499-A against quarterly revenue data filed on the FCC
Form 499-Q. Specifically, we clarify that USAC shall only apply the
annual true-up to revenue periods for which universal service
contributions actually were assessed. The annual true-ups for calendar
year 2002 and 2003 revenues, therefore, will not apply to revenues from
the fourth quarter of 2002 and the first quarter 2003. As discussed, we
deny other proposed modifications to USAC's true-up procedures or to
the methodologies for calculating contributions to other support
programs.
13. During the third quarter of each calendar year, USAC uses
annual revenue data provided by contributors in the FCC Form 499-A to
perform a true-up to quarterly revenue data submitted by contributors
in FCC Form 499-Qs for the prior calendar year. As necessary, USAC
refunds or collects from contributors any over-payments or under-
payments. If the combined quarterly revenues reported by a contributor
are greater than those reported on its annual revenue report (FCC Form
499-A), then a refund is provided to the contributor based on an
average of the two lowest contribution factors for the year. If the
combined quarterly revenues reported by a contributor are less than
those reported on its FCC Form 499-A, USAC collects the difference from
the contributor using an average of the two highest contribution
factors for the year.
14. Because the purpose of the annual true-up is to ensure that
interstate telecommunications providers contribute appropriate amounts
to the universal service mechanisms based on quarterly revenue data, we
agree with WorldCom and Verizon Wireless that USAC should only apply
the true-up to revenue periods for which universal service
contributions actually were assessed. If USAC applied the true-up to
revenue periods for which universal service contributions were not
assessed, certain providers' contribution obligation could potentially
be increased or decreased. Consistent with this conclusion, we direct
USAC not to apply the annual true-ups for calendar
[[Page 15671]]
years 2002 and 2003 to revenues from the fourth quarter 2002 and first
quarter 2003.
15. The true-up for calendar year 2002 revenues will apply to
revenues reported for the first three quarters of 2002, which were the
basis for assessments in the third and fourth quarters of 2002 and the
first quarter of 2003. The true-up for calendar year 2002 revenues will
not apply to revenues reported for the fourth quarter of 2002. USAC
will subtract revenues reported for the fourth quarter of 2002 from
annual revenues reported on the FCC Form 499-A to arrive at an estimate
of a contributor's actual revenues for the first three quarters of
2002. Consistent with USAC's current true-up procedures, USAC will then
compare this amount to the sum of revenues reported for the first three
quarters of 2002 to determine whether a refund or additional collection
is warranted. Refunds will be based on the average of the two lowest
contribution factors applied to revenues reported for the first three
quarters of 2002. Additional collections will be based on the average
of the two highest contribution factors applied to revenues reported
for the first three quarters of 2002.
16. The true-up for calendar year 2003 revenues will apply to
revenues projected for the second through fourth quarters of 2003. The
true-up for calendar year 2003 revenues will not apply to revenues
projected for the first quarter of 2003. USAC will subtract revenues
projected for the first quarter of 2003 from annual revenues reported
on the FCC Form 499-A to arrive at an estimate of a contributor's
actual revenues for the second through fourth quarters of 2003. USAC
will then compare this amount to the sum of revenues projected for the
second through fourth quarters of 2003 to determine whether a refund or
collection is appropriate. In subsequent years, the annual true-up will
continue to apply to any and all revenue periods for which
contributions are assessed.
17. We deny NECA's proposal to conduct additional true-ups on a
quarterly basis. In addition to the annual true-up, NECA proposes a
quarterly true-up mechanism in which a contributor's quarterly revenue
projections would be compared to the corresponding quarter's actual
revenue filed six months later. Under NECA's proposal, any difference
between projections and actual revenues would be applied to the
relevant contribution factor for that calendar quarter to arrive at a
true-up amount. We disagree with NECA that quarterly true-ups are
appropriate because it is more difficult for contributors to project
revenues than report historical revenues. As the Commission noted in
the Interim Contribution Methodology Order, although the modified
contribution methodology relies on the ability of contributors to
project gross-billed and collected revenues, it only requires
contributors to project for the upcoming quarter, which should minimize
the potential for inaccurate estimates. In addition, contributors may
correct their projections up to 45 days after the due date of each FCC
Form 499-Q. We also note that by eliminating penalties for over-or
under-reporting, NECA's quarterly true-up proposal would reduce
incentives created under current true-up procedures for contributors to
accurately forecast their revenues for the upcoming quarter. We
therefore decline to adopt NECA's proposal at this time.
18. Timing of Revised Safe Harbor for Mobile Wireless Providers. We
also reject Verizon Wireless's contention that the Commission
retroactively changed reporting requirements for mobile wireless
providers by requiring mobile wireless providers that choose to report
their interstate telecommunications revenues based on an interim safe
harbor to report an increased percentage of interstate revenues for the
fourth quarter of 2002 and the first quarter of 2003. In the Interim
Contribution Methodology Order, the Commission increased to 28.5 the
interim safe harbor that provides cellular, broadband Personal
Communications Service, and certain Specialized Mobile Radio providers
with the option of assuming that a fixed percentage of their
telecommunications revenues are interstate with the presumption of
reasonableness. The Commission's decision to increase the mobile
wireless safe harbor was based, in large part, on traffic studies
conducted in the third quarter of 2002 by five unnamed large national
mobile wireless providers. In the Interim Contribution Methodology
Order, the Commission left unchanged mobile wireless providers' option
of reporting actual interstate telecommunications revenues if they are
able to do so.
19. Contrary to Verizon Wireless's contention, the rules adopted in
the Interim Contribution Methodology Order do not impact revenues
reported prior to January 29, 2003, the effective date of the order.
The requirements adopted in the Interim Contribution Methodology Order
only apply to future reporting obligations. For example, contributors
to the federal universal service programs first reported revenues for
the fourth quarter of 2002 and the first quarter of 2003 on the FCC
Form 499-Q filed on February 3, 2003. Moreover, the increased interim
safe harbor for mobile wireless providers will apply to universal
service contributions beginning in the second quarter of 2003. These
contributions will be based on projected revenues for the second
quarter of 2003, which contributors reported on the February 3, 2003,
FCC Form 499-Q.
20. The Commission also did not retroactively change revenue
reporting requirements for other Commission programs, such as Local
Number Portability, Numbering Administration, and Telecommunications
Relay Service. The reporting of fourth quarter 2002 revenues for
purposes of calculating assessment to other Commission programs will
not occur until April 1, 2003. Contributions to these other programs
are based on annual revenues reported on April 1st of each year.
Assessments to these other programs based on calendar year 2002
revenues will not be billed until beginning in the third quarter of
2003. Likewise, reporting of revenues for the first quarter of 2003 for
these other Commission programs will not occur until April 1, 2004, and
will not be assessed until beginning in the third quarter of 2004.
Therefore, we conclude that our decision to apply the revised interim
wireless safe harbor to revenues reported for the fourth quarter of
2002 and the first quarter of 2003 does not constitute retroactive
changes to reporting obligations or to contribution obligations.
21. Rounding Up the Contribution Factor. Finally, we grant, in
part, a petition for reconsideration filed by AT&T requesting that the
Commission announce the universal service contribution factor as a
percentage rounded up to the nearest tenth of a percent. Sprint and
Verizon support AT&T's request. We direct the Wireline Competition
Bureau (Bureau) to announce a contribution factor rounded up to the
nearest tenth of a percent (e.g., .073 or 7.3 percent). In order to
allow an individual contributor the ability to recover the full amount
of its contribution obligation through its federal universal line item,
we also direct the Bureau to account for contribution factor rounding
when calculating the circularity discount factor.
22. In the past, the Bureau has announced a contribution factor
rounded to the nearest 1/10,000th of a percent (e.g., .072805). AT&T
has asserted that some of its billing systems can only accommodate a
factor of three digits beyond the decimal point. Our decision today
that the contribution
[[Page 15672]]
factor be rounded up to the nearest tenth of a percent, and that
rounding be accounted for when calculating circularity, accommodates
concerns expressed by AT&T and others that billing system limitations,
when coupled with the recovery limitations in Sec. 54.712 of our
rules, may inhibit some carriers' ability to recover a portion of their
contribution costs through their federal universal service line-item
charges. This action also will prevent carriers from recovering amounts
in excess of contribution obligations. We therefore conclude that each
quarter the Bureau shall announce a contribution factor rounded up to
the nearest tenth of a percent.
III. Regulatory Flexibility Act Certification
23. The Regulatory Flexibility Act of 1980, as amended (RFA), see
generally 5 U.S.C. 601-612, requires that a regulatory flexibility
analysis be prepared for notice-and-comment rule making proceedings,
unless the agency certifies that ``the rule will not, if promulgated,
have a significant economic impact on a substantial number of small
entities.'' 5 U.S.C. 605(b). The RFA generally defines the term ``small
entity'' as having the same meaning as the terms ``small business,''
``small organization,'' and ``small governmental jurisdiction.'' In
addition, the term ``small business'' has the same meaning as the term
``small business concern'' under the Small Business Act. A ``small
business concern'' is one which: (1) Is independently owned and
operated; (2) is not dominant in its field of operation; and (3)
satisfies any additional criteria established by the Small Business
Administration (SBA). As required by the RFA, an Initial Regulatory
Flexibility Analysis (IRFA) was incorporated in the First Further
Notice, 67 FR 11254, March 13, 2002. The Commission sought written
public comment on the proposals in the First Further Notice, including
comment on the IRFA. In the Interim Contribution Methodology Order, the
Commission included a Final Regulatory Flexibility Analysis (FRFA) that
conformed to the RFA.
24. In the Second Order on Reconsideration, we eliminate Sec.
54.712(b) of the Commission's rules, in order to permit eligible
telecommunications carriers (ETCs) to recover from Lifeline customers
contribution costs associated with the provision of interstate
telecommunications services, such as occasional interstate charges and
interstate long distance charges, that are not supported by the
Commission's universal service mechanisms. By eliminating this
restriction on cost recovery, the Second Order on Reconsideration will
have a beneficial, deregulatory impact on all ETCs with such customers,
including small entity ETCs. We also note that this action will have no
impact on the universal service contribution obligations of ETCs and
should only minimally impact their contribution recovery practices. We
therefore conclude that a FRFA is not required here because the Second
Order on Reconsideration will have no significant economic impact on a
substantial number of small entities.
IV. Ordering Clauses
25. Pursuant to sections 1-4, 201-202, 254, and 405 of the
Communications Act of 1934, as amended, and Sec. 1.108 of the
Commission's rules, this Order and Second Order on Reconsideration is
adopted.
26. Pursuant to sections 1, 4(i), 254 and 405 of the Communications
Act of 1934, as amended, and Sec. Sec. 1.3, 1.429 of the Commission's
rules, that the Verizon Telephone Companies, SBC Communications Inc.,
and BellSouth Corporation Joint Petition for Interim Waiver and the
National Exchange Carrier Association, Inc., National
Telecommunications Cooperative Association, Organization for the
Promotion and Advancement of Small Telecommunications Companies Joint
Petition for Interim Waiver are granted to the extent indicated herein.
27. Pursuant to section 405 of the Communications Act of 1934, as
amended, and Sec. 1.429 of the Commission's rules, the petitions for
reconsideration filed by the United States Telecommunications
Association and SBC Communications Inc. are granted to the extent
indicated herein.
28. Pursuant to section 405 of the Communications Act of 1934, as
amended, and Sec. 1.429 of the Commission's rules, the petition for
reconsideration filed by the National Exchange Carrier Association,
Inc. is denied.
29. Pursuant to section 405 of the Communications Act of 1934, as
amended, and Sec. 1.429 of the Commission's rules, the petition for
reconsideration filed by WorldCom, Inc. is granted.
30. Pursuant to section 405 of the Communications Act of 1934, as
amended, and Sec. 1.429 of the Commission's rules, the petition for
reconsideration filed by the Verizon Wireless is granted, in part, and
denied, in part, to the extent indicated herein.
31. Pursuant to section 405 of the Communications Act of 1934, as
amended, and Sec. 1.429 of the Commission's rules, the petition for
reconsideration filed by AT&T Corp. is granted to the extent indicated
herein.
32. Section 54.712 of the Commission's rules, is amended as set
forth, effective April 1, 2003.
List of Subjects 47 CFR Part 54
Reporting and recordkeeping requirements, Telecommunications,
Telephone.
Federal Communications Commission.
Marlene H. Dortch,
Secretary.
Final Rules
0
For the reasons discussed in the preamble, the Federal Communications
Commission amends 47 CFR part 54 as follows:
PART 54--UNIVERSAL SERVICE
Subpart H--Administration
0
1. The authority citation for part 54 continues to read as follows:
Authority :47 U.S.C. 1, 4(i), 201, 205, 214, and 254 unless
otherwise noted.
Sec. 54.712 [Amended]
0
2. In Sec. 54.712, remove and reserve paragraph (b).
[FR Doc. 03-7702 Filed 3-31-03; 8:45 am]
BILLING CODE 6712-01-U