DA 02-1409

Released: June 13, 2002

**WIRELINE COMPETITION BUREAU ANNOUNCES NO CHANGE IN THIRD**

**QUARTER 2002 UNIVERSAL SERVICE CONTRIBUTION FACTOR**

**CC Docket No. 96-45**

In this Public Notice, the Wireline Competition Bureau announces that
the second quarter 2002 universal service contribution factor of
0.072805 that was proposed on March 8, 2002 and became effective on
March 22, 2001 for the second quarter of 2002[^1] will remain unchanged
for the third quarter of 2002.[^2]

Today, the Commission released the *First Report and Order* in CC Docket
No. 02-6, concluding that unused funds from the schools and libraries
support mechanism will be applied to stabilize the collection
requirement for universal service for no more than the next three
quarters, beginning with third quarter 2002.[^3] Thereafter, unused
funds from the schools and libraries support mechanism will be carried
forward to increase disbursements to schools and libraries in subsequent
years. The Commission's action will help ensure the predictability of
contribution obligations and reduce contributions to universal service
by contributors and their customers, without jeopardizing the
sufficiency of the universal service support mechanisms.

Under section 54.709 of the Commission's rules, the quarterly
contribution factor is based on the ratio of total projected quarterly
costs of the universal service support mechanisms to total end-user
interstate and international telecommunications revenues, net of prior
period actual contributions.

Pursuant to section 54.709(a)(3) of the Commission's rules, the
Universal Service Administrative Company (USAC) has projected that
program demand and administrative expenses for the third quarter of 2002
will be approximately \$1.505370 billion.[^4] USAC also has submitted
estimated end-user telecommunications revenues of \$18.683892 for
January through March 2002 based on information contained in the First
Quarter 2002 Telecommunications Reporting Worksheet.[^5] Taking into
account USAC's estimate of \$1.352348 in actual contributions in the
first quarter of 2002 as well as uncollectible contributions of one
percent, we project a contribution base of \$17.158229 billion.[^6] If
these inputs are applied to the formula in section 54.709(a)(2) of the
Commission's rules, a third quarter 2002 contribution factor of 0.087735
results. This is a significant and unanticipated increase from the
second quarter contribution factor of 0.072805. In fact, this would
represent the single largest quarterly increase in the contribution
factor since the current revenue-based contribution methodology was
adopted.

However, because of the actions taken today, we are able to announce no
change in the contribution factor for third quarter 2002. Thus, the
third quarter 2002 contribution factor will remain 0.072805. Consistent
with the *First Report and Order*, we direct USAC to apply sufficient
unused funds from Funding Year 2 of the schools and libraries support
mechanism to maintain the third quarter contribution factor at 0.072805.
When USAC files its projections of program demand and administrative
expenses for the fourth quarter of 2002, it shall supply an updated
estimate of the remaining balance that may be applied to stabilize the
collection requirement as necessary for fourth quarter 2002 and first
quarter 2003.

If the Commission takes no action regarding the projections of demand
and administrative expenses and the proposed contribution factor within
the 14-day period following release of this Public Notice, they shall be
deemed approved by the Commission.[^7] USAC shall use the contribution
factor to calculate universal service contributions for the third
quarter of 2002. USAC includes these amounts in invoices sent to
contributors. Contribution payments are due on the dates shown on the
invoice. Contributors will pay interest for each day for which the
payments are late. Contributors failing to pay contributions in a timely
fashion may be subject to the enforcement provisions of the
Communications Act of 1934, as amended, and any other applicable law. In
addition, contributors may be billed by USAC for reasonable costs of
collecting overdue contributions.[^8]

For further information, contact Diane Law Hsu, Telecommunications
Access Policy Division, Wireline Competition Bureau, at (202) 418-7400,
TTY (202) 418-0484.

[^1]: *Proposed Second Quarter 2002 Universal Service Contribution
    Factor*, CC Docket No. 96-45, Public Notice, DA 02-562 (rel. Mar. 8,
    2002).

[^2]: We note that the third quarter 2002 contribution factor implements
    the Commission's modified contribution methodology rules to
    eliminate prior-period contributions from the contribution base.
    This action was designed to reduce the disparity between the
    contribution factor and carriers' universal service line items. *See
    Federal-State Joint Board on Universal Service, 1998 Biennial
    Regulatory Review - Streamlined Contributor Reporting Requirements
    Associated with Administration of Telecommunications Relay Service,
    North American Numbering Plan, Local Number Portability, and
    Universal Service Support Mechanisms, Telecommunications Services
    for Individuals with Hearing and Speech Disabilities, and the
    Americans With Disabilities Act of 1990, Administration of the North
    American Numbering Plan and North American Numbering Plan Cost
    Recovery Contribution Factor and Fund Size, Number Resource
    Optimization, Telephone Number Portability, Truth-in-Billing and
    Billing Format*, CC Docket Nos. 96-45, 98-171, 90-571, 92-237,
    99-200, 95-116, 98-170, Further Notice of Proposed Rulemaking and
    Report and Order, FCC 02-43, paras. 113-115 (rel. Feb. 26, 2002)*.*

[^3]: *See* *Schools and Libraries Universal Service Support Mechanism*,
    CC Docket No. 02-6, First Report and Order, FCC 02-XXX (rel. June
    13, 2002).

[^4]: *See* Federal Universal Service Support Mechanisms Fund Size
    Projections for the Third Quarter 2002, available at
    \<http://www.universalservice.org/overview/ filings\> (filed May 31,
    2002) (*USAC Filing for Third Quarter 2002 Projections*). *See also*
    Federal Universal Service Support Mechanisms Fund Size Quarterly
    Contribution Base for the Third Quarter 2002, available at
    \<http://www.universalservice.org/overview/ filings\> (filed May 2,
    2002) (*USAC Filing for Third Quarter 2002 Contribution Base*).

[^5]: *See USAC Filing for Third Quarter 2002 Contribution Base* at 4.
    The revenue base on which contributions are assessed in the third
    quarter of 2002 is derived from the revenues reported on the First
    Quarter 2002 Telecommunications Reporting Worksheet. *See id*.

[^6]: *See id.* at 5.

[^7]: *See* 47 C.F.R. § 54.709(a)(3).

[^8]: *See* 47 C.F.R. §54.713.