PUBLIC NOTICE![](media/image1.png){width="0.95in"
height="0.9055555555555556in"}

FEDERAL COMMUNICATIONS COMMISSION

445 12th STREET, S.W.

WASHINGTON, D.C. 20554 **DA 00-1272**

News media information 202/418-0500 Fax-On-Demand 202/418-2830 Internet:
http://www.fcc.gov ftp.fcc.gov

**Released: June 9, 2000**

**Proposed Third 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 third quarter of 2000.[^1]

## Rules for Calculating the Contribution Factor

Contributions to the federal universal service support mechanisms are
determined using a quarterly contribution factor calculated by the
Commission. Under section 54.709 of the Commission's rules, the
Commission shall calculate the quarterly contribution factor based on
the ratio of total projected quarterly costs of the universal service
support mechanisms to total end-user interstate and international
telecommunications revenues.[^2]

## USAC Projections of Demand and Administrative Expenses

Pursuant to section 54.709(a)(3) of the Commission's rules,[^3] the
Universal Service Administrative Company (USAC) submitted the following
projections of demand and administrative expenses for the third quarter
of 2000: [^4]

(\$ millions)

+---------------+-------+-------+----------+--------+--------+-------+
| Program       | Proj  | A     | App      | Appli  | Appli  | Total |
|               | ected | dmin. | lication | cation | cation | Pr    |
|               | Pr    | Exp   | of       |        | of     | ogram |
|               | ogram | enses | Balance  | of     | Pe     | Colle |
|               | Su    |       | From     | In     | riodic | ction |
|               | pport |       | Prior    | terest | Tr     |       |
|               |       |       | Period   | Income | ue-Ups |       |
+---------------+-------+-------+----------+--------+--------+-------+
| Schools and   | 554   | 7     | (        | (1     | (1     | 35    |
| Libraries     | .8539 | .6461 | 170.155) | 5.926) | 9.836) | 6.583 |
+---------------+-------+-------+----------+--------+--------+-------+
| Rural Health  | 4.634 | 0     | (0.000)  | (      | (      | (0.   |
| Care          |       | .5662 |          | 0.008) | 5.203) | 0108) |
+---------------+-------+-------+----------+--------+--------+-------+
| High-Cost     | 48    | 1     | (0.000)  | (      | (2     | 464   |
|               | 5.858 | .1974 |          | 0.600) | 1.617) | .8384 |
+---------------+-------+-------+----------+--------+--------+-------+
| Low Income    | 13    | 0     | (0.000)  | (      | 1.254  | 134   |
|               | 3.060 | .2744 |          | 0.530) |        | .0584 |
+---------------+-------+-------+----------+--------+--------+-------+
| Interstate    | 16    | 0     | (0.000)  | (      | (      | 162   |
| Access        | 2.500 | .2467 |          | 0.000) | 0.000) | .7467 |
+---------------+-------+-------+----------+--------+--------+-------+
| TOTAL         | 134   | 9.931 | (        | (1     | (4     | **    |
|               | 0.906 |       | 170.155) | 7.064) | 5.402) | 1118. |
|               |       |       |          |        |        | 216** |
+---------------+-------+-------+----------+--------+--------+-------+

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.[^5]
Specifically, USAC estimates that the schools and libraries program will
have an unused balance of approximately \$340 million.[^6] According to
USAC, this remaining balance occurred for a number of reasons: (1)
although USAC has made funding commitments to certain schools and
libraries, it received no indication that the services requested have
been or will be provided; (2) some schools and libraries ultimately used
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.[^7]

We direct USAC to apply one-half of the estimated unused balance to
reduce the collection requirement for the schools and libraries support
mechanism in the third quarter of 2000. This action is consistent with
Commission rules and precedent directing that unused contributions be
credited back to contributors.[^8] Because disbursements for Year 1 of
the schools and libraries support mechanism are now nearly complete,[^9]
we direct USAC to apply one half of the unused balance to offset
collections for the schools and libraries support mechanism in the third
quarter of 2000.[^10] When USAC files its projections of program demand
and administrative expenses for the fourth 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
support mechanism in the fourth quarter of 2000.

**[USAC Projections of Industry Revenues]{.underline}**

USAC submitted estimated end-user telecommunications revenues for July
through December 1999 based on information contained in the April 2000
Telecommunications Reporting Worksheet (FCC Form 499-A).[^11] The amount
is as follows:

Total Interstate and International End-User Telecommunications Revenues

from July 1, 1999 -- December 31, 1999: \$40.80616 billion

## Contribution Base

To determine the quarterly contribution base, we first divide the
six-month estimate of interstate and international end-user
telecommunications revenues by two. Then, we decrease the revenue
estimate by one percent to account for uncollectible contributions.[^12]
Accordingly, the quarterly contribution base for the third quarter of
2000 is as follows:

Quarterly Contribution Base for Universal Service Support Mechanisms

(Six Month Interstate and International Revenues / 2) - Uncollectibles

(\$40.80616 billion / 2) - 1%

\$20.199049 billion

**[Proposed Contribution Factor]{.underline}**

Using this quarterly contribution base, and the total program collection
requirement from the table above, the proposed contribution factor for
the third quarter of 2000 is as follows:

Contribution Factor for Universal Service Support Mechanisms

Total Program Collection / Quarterly Contribution Base

\$1.118216 billion / \$20.199049 billion

**0.055360**

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.[^13]
USAC shall then use the contribution factor to calculate universal
service contributions for the third quarter of 2000.

For further information, contact Praveen Goyal, Accounting Policy
Division, Common Carrier Bureau, at (202) 418-7400, TTY (202) 418-0484.

[^1]: *See* 47 C.F.R. § 54.709(a).

[^2]: *See* 47 C.F.R. § 54.709(a)(2).

[^3]: 47 C.F.R. § 54.709(a)(3).

[^4]: *See* Federal Universal Service Support Mechanisms Fund Size
    Projections & Contribution Base For the Third Quarter 2000 (filed by
    USAC May 2, 2000) (*USAC Filing for Third Quarter 2000*); Federal
    Universal Service Support Mechanisms Supplemental Report Regarding
    Fund Size Projections & Contribution Base For the Third Quarter 2000
    (filed by USAC June 2, 2000) (*USAC Supplemental Filing for Third
    Quarter 2000*). These projections include the additional demand and
    expenses resulting from the Commission's new interstate access
    universal service support mechanism, and from modifications to the
    Lifeline program, both of which were adopted in the recent *CALLS
    Order.* *See Access Charge Reform, Price Cap Performance Review for
    Local Exchange Carriers, Low-Volume Long Distance Users,
    Federal-State Joint Board on Universal Service*, Sixth Report and
    Order in CC Docket Nos. 96-262 and 94-1, Report and Order in CC
    Docket No. 99-249, Eleventh Report and Order in CC Docket No. 96-45,
    FCC 00-193 (rel. May 31, 2000) (*CALLS Order*); *see also* 47 C.F.R.
    §§ 54.800-54.809 (interstate access universal service support
    mechanism rules), 47 C.F.R. §§ 54.403 (Lifeline rules as revised by
    the *CALLS Order*). In the *CALLS Order*, the Commission appointed
    USAC as the administrator for the new interstate access support
    mechanism and directed USAC's High Cost and Low Income Committee to
    oversee the operation of the mechanism. *See CALLS Order* at ¶ 226.

[^5]: *See* *USAC Filing for Third Quarter 2000* at 29-30.

[^6]: USAC projects that the schools and libraries program will have a
    total balance of approximately \$448 million in unused funds after
    all disbursements related to the first program year have been made.
    Some of this amount has already been credited back to contributors
    in offsets against collections for the first and second quarters of
    2000. *See* *Proposed First Quarter 2000 Universal Service
    Contribution Factor*, CC Docket No. 96-45, Public Notice, DA 99-2780
    (rel. Dec. 10, 1999) (applying one-quarter of estimated unused
    schools and libraries balance to offset projected expenses in the
    first quarter of 2000); *Proposed Second Quarter 2000 Universal
    Service Contribution Factor*, CC Docket No. 96-45, Public Notice, DA
    00-517 (rel. Mar. 7, 2000) (applying one-quarter of estimated unused
    schools and libraries balance to offset projected expenses in the
    second quarter of 2000). Adjusting for these offsets, USAC estimates
    that there will be \$340.31 million in unused Year 1 funds. *See
    USAC Filing for Third Quarter 2000* at 29-30.

[^7]: *See* Federal Universal Service Programs Fund Size Projections &
    Contribution Base For the Second Quarter 2000 at 27 (filed by USAC
    Feb. 1, 2000) (*USAC Filing for Second Quarter 2000*).

[^8]: *See* 47 C.F.R. § 54.507. 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. *See Proposed First Quarter 1999 Universal
    Service Contribution Factors and Proposed Actions*, CC Docket No.
    96-45, Public Notice, FCC 98-318 at 3-4 (rel. Dec. 4, 1998).

[^9]: *See USAC Filing for Third Quarter 2000* at 26-27, 29-30.

[^10]: *Cf. Proposed First Quarter 2000 Universal Service Contribution
    Factor*, CC Docket No. 96-45, Public Notice, DA 99-2780 (rel. Dec.
    10, 1999) (applying one-quarter of estimated unused schools and
    libraries balance to offset projected expenses in the first quarter
    of 2000); *Proposed Second Quarter 2000 Universal Service
    Contribution Factor*, CC Docket No. 96-45, Public Notice, DA 00-517
    (rel. Mar. 7, 2000) (applying one-quarter of estimated unused
    schools and libraries balance to offset projected expenses in the
    second quarter of 2000).

[^11]: *See USAC Filing for Third Quarter 2000* at 31-32. Funding bases
    for the third and fourth quarters of 2000 are determined by
    subtracting the revenues reported for January through June 1999 (on
    the September 1999 Worksheet) from the revenues reported for January
    through December 1999 (on the April 2000 Worksheet).

[^12]: *See* *USAC Filing for Third Quarter 2000* at 32.

[^13]: *See* 47 C.F.R. § 54.709(a)(3).