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 Federal  Communications  Commission  FCC  02-  329
 1
 Before  the  Federal  Communications  Commission
 Washington,  D.  C.  20554
 In  the  Matter  of
 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
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 CC  Docket  No.  96-  45
 CC  Docket  No.  98-  171
 CC  Docket  No.  90-  571
 CC  Docket  No.  92-  237  NSD  File  No.  L-  00-  72
 CC  Docket  No.  99-  200
 CC  Docket  No.  95-  116
 CC  Docket  No.  98-  170
 REPORT  AND  ORDER
 AND  SECOND  FURTHER  NOTICE  OF  PROPOSED  RULEMAKING
 Adopted:  December  12,  2002  Released:  December  13,  2002
 Comment  Date:  30  days  from  publication  in  the  Federal  Register.  Reply  Comment  Date:  60  days  from  publication  in  the  Federal  Register.
 By  the  Commission:  Chairman  Powell,  Commissioners  Abernathy,  Copps  and  Martin  issuing  separate  statements;  Commissioner  Adelstein  not  participating.
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 Federal  Communications  Commission  FCC  02-  329
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 TABLE  OF  CONTENTS
 Page
 I.  INTRODUCTION  AND  OVERVIEW...............................................................................  3
 II.  BACKGROUND  .................................................................................................................  6
 A.  The  Act.....................................................................................................................  6
 B.  The  Current  Methodology........................................................................................  7
 C.  History  of  Contribution  Methodology  Proceeding  ................................................  10
 III.  REPORT  AND  ORDER....................................................................................................  12
 A.  Modified  Revenue-  Based  Assessment  Methodology  ............................................  13  1.  Mobile  Wireless  Safe  Harbor.....................................................................  13
 2.  Assessment  on  Projected  Collected  Revenues...........................................  17
 B.  Recovery  of  Universal  Service  Contributions  .......................................................  23  1.  Recovery  Limitations.................................................................................  23
 2.  Labeling  of  Line-  Item  Charges..................................................................  32
 IV.  SECOND  FURTHER  NOTICE  OF  PROPOSED  RULEMAKING  .................................  32
 A.  Connections-  Based  Methodology  with  Mandatory  Minimum  Obligation  ............  36
 B.  Splitting  Connection-  Based  Contributions  Between  Switched  Transport  and  Access  Providers  .............................................................................................  40
 C.  Telephone  Number-  Based  Assessments................................................................  44
 V.  PROCEDURAL  MATTERS  .............................................................................................  46
 A.  Final  Regulatory  Flexibility  Analysis....................................................................  46
 B.  Paperwork  Reduction  Act  Analysis  .......................................................................  56
 C.  Initial  Regulatory  Flexibility  Act  Analysis............................................................  56
 D.  Initial  Paperwork  Reduction  Act  of  1995  Analysis  ...............................................  59
 E.  Comment  Filing  Procedures  ..................................................................................  60
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 F.  Ex  Parte  Presentations............................................................................................  61
 VI.  ORDERING  CLAUSES....................................................................................................  61
 Appendix  A    Final  Rules
 Appendix  B    List  of  Commenters
 Appendix  C    Revised  Form  499-  Q  and  Instructions
 I.  INTRODUCTION  AND  OVERVIEW
 1.  In  this  Report  and  Order  (Order)  and  Second  Further  Notice  of  Proposed  Rulemaking  (Second  Further  Notice),  we  take  interim  measures  to  maintain  the  viability  of  universal  service
 in  the  near  term  --  a  fundamental  goal  of  this  Commission  --  while  we  consider  further  long-  term  reforms.  First,  we  increase  to  28.5  percent  the  current  interim  safe  harbor  that  allows  cellular,
 broadband  Personal  Communications  Service  (PCS),  and  certain  Specialized  Mobile  Radio  (SMR)  providers  to  assume  that  15  percent  of  their  telecommunications  revenues  are  interstate.  1
 We  also  require  wireless  telecommunications  providers  to  make  a  single  election  whether  to  report  actual  revenues  or  to  use  the  revised  safe  harbor  for  all  affiliated  entities  within  the  same
 safe  harbor  category.  2  In  addition,  we  seek  to  improve  competitive  neutrality  among  contributors  by  modifying  the  existing  revenue-  based  methodology  to  require  universal  service
 contributions  based  on  contributor-  provided  projections  of  collected  end-  user  interstate  and  international  telecommunications  revenues,  instead  of  historical  gross-  billed  revenues.  These
 changes  will  be  implemented  with  the  FCC  Form  499-  Q  filed  on  February  1,  2003.  We  conclude  that  our  actions  to  modify  the  current  revenue-  based  contribution  methodology  will  sustain  the
 universal  service  fund  and  increase  the  predictability  of  support  in  the  near  term,  while  we  continue  to  examine  more  fundamental  reforms.
 2.  In  light  of  these  changes,  we  also  conclude  that  telecommunications  carriers  may  not  recover  their  federal  universal  service  contribution  costs  through  a  separate  line  item  that
 includes  a  mark-  up  above  the  relevant  contribution  factor  beginning  April  1,  2003.  Limiting  the  federal  universal  service  line-  item  charge  to  an  amount  that  does  not  exceed  the  contribution
 factor,  set  quarterly  by  the  Commission,  will  increase  billing  transparency  and  decrease
 1  See  Federal-  State  Joint  Board  on  Universal  Service,  CC  Docket  No.  96-  45,  Memorandum  Opinion  and  Order  and
 Further  Notice  of  Proposed  Rulemaking,  13  FCC  Rcd  21252,  21258-  59,  paras.  13-  15  (1998)  (Interim  CMRS  Safe  Harbor  Order).  In  this  Order,  we  use  the  term  mobile  wireless  to  refer  to  these  non-  paging  Commercial  Mobile
 Radio  Service  (CMRS)  providers  and  not  fixed  wireless  providers.  2
 So,  for  example,  if  in  a  given  period  a  wireless  telecommunications  provider  reports  actual  revenues  for  one  affiliated  paging  provider,  it  will  be  required  to  report  actual  interstate  telecommunications  revenues  for  all  other
 affiliated  paging  providers.
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 confusion  for  consumers  about  the  amount  of  universal  service  contributions  that  are  passed  through  by  carriers.  Carriers  will  continue  to  have  the  flexibility  to  recover  legitimate
 administrative  costs  from  consumers  through  other  means.
 3.  Although  the  interim  measures  we  adopt  today  will  improve  the  current  contribution  methodology,  they  do  not  address  our  concerns  regarding  the  long-  term  viability  of  any  revenue-based
 system.  In  the  First  Further  Notice,  we  observed  that  interstate  telecommunications  revenues  are  becoming  increasingly  difficult  to  identify  as  customers  migrate  to  bundled
 packages  of  interstate  and  intrastate  telecommunications  and  non-  telecommunications  products  and  services.  3  This  has  increased  opportunities  to  mischaracterize  revenues  that  should  be
 counted  for  contribution  purposes.  Such  mischaracterization  may  result  in  decreases  in  the  assessable  revenue  base.  Increased  competition  also  is  placing  downward  pressure  on  interstate
 rates  and  revenues,  which  also  contributes  to  the  decline  in  the  contribution  base.  4  For  example,  traditional  long-  distance  providers  increasingly  are  entering  local  markets  at  the  same  time  that
 competitive  and  incumbent  local  exchange  carriers  are  increasingly  providing  long-  distance  services.  Customers  also  are  migrating  to  mobile  wireless  and  Internet-  based  services.  As  we
 recently  noted,  these  changes  have  led  to  fluctuations  in  the  contribution  base  and  rising  contribution  obligations.  5
 4.  The  Commission  initiated  this  proceeding  to  consider  alternatives  or  modifications  to  a  revenue-  based  system.  6  An  analysis  of  the  record  reveals  interest  in  a  connection-  based
 methodology  that  would  assess  carriers  based  on  their  provision  of  connectivity  to  interstate  networks,  regardless  of  how  many  minutes  of  use  or  revenues  are  derived  from  a  connection.  A
 3  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,  17  FCC  Rcd  3752  (2002)  (First  Further  Notice).  4
 See  id.  at  3755-  56,  paras.  7-  9.  5
 See  Schools  and  Libraries  Universal  Service  Support  Mechanism,  First  Report  and  Order,  CC  Docket  No.  02-  6,  17  FCC  Rcd  11521,  11522-  11524,  paras.  1-  3  (2002)  (authorizing  use  of  unused  funds  from  schools  and  libraries
 support  mechanism  to  prevent  further  increases  to  the  contribution  factor  in  the  third  and  fourth  quarters  of  2002  and  the  first  quarter  of  2003).
 6  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,  CC  Docket  Nos.  96-  45,  98-  171,  90-  571,  92-  237,  99-  200,  95-  116,  Notice  of  Proposed  Rulemaking,  16  FCC  Rcd  9892,  9894-  96,
 paras.  2-  6  (2001)  (2001  Notice).
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 substantial  number  of  parties  across  various  industry  segments  now  support  adoption  of  a  connection-  based  assessment  methodology.  7  In  addition,  four  out  of  five  state  members  of  the
 Federal-  State  Joint  Board  on  Universal  Service  (Joint  Board)  recommend  adoption  of  a  connection-  based  system  for  calculating  universal  service  contributions,  while  the  fifth  member
 proposes  assessing  contributions  on  a  combination  of  connections,  capacity,  and  terminating  minutes  of  use.  8
 5.  Although  many  parties  agree  that  a  connection-  based  contribution  methodology  will  best  ensure  the  long-  term  viability  of  the  Commissions  universal  service  mechanisms  as  the
 telecommunications  marketplace  continues  to  evolve,  they  differ  on  how  best  to  implement  such  a  mechanism.  Key  areas  of  disagreement  include  whether  to  make  the  provider  of  the  end-  user
 connection  (most  often  the  local  exchange  carrier)  solely  responsible  for  contributions  or  whether  that  responsibility  should  be  shared  between  the  access  (e.  g.,  local  exchange  carrier)  and
 transport  (e.  g.,  interexchange  carrier)  providers.  9  Commenters  also  disagree  on  how  best  to  calculate  assessments  for  higher-  capacity  connections.  10  Moreover,  parties  have  expressed
 concern  that  they  cannot  estimate  assessments  for  multi-  line  business  connections  without  access  to  more  reliable  data  on  the  number  and  capacity  of  non-  switched  (e.  g.,  special  access  or  private
 line)  connections.  11
 6.  We  conclude  that  it  is  appropriate  to  further  study  long-  term  reforms  of  the
 7  Interest  in  a  connection-  based  methodology  spans  across  various  industry  segments.  See  generally  ASCENT
 Comments;  ATA  Comments;  BellSouth  Reply  Comments;  C&  W  Reply  Comments;  Home  et  al.  Comments;  ITAA  Comments;  Qwest  Reply  Comments;  SBC  Comments;  Sprint  Comments;  Letter  from  Walter  McCormick,  United
 States  Telecom  Association,  to  Marlene  H.  Dortch,  Federal  Communications  Commission,  filed  Oct.  21,  2002  (USTA  Oct.  21  Ex  Parte);  VON  Reply  Comments.  NRTA  and  OPASTCO  support  adoption  of  a  flat-  fee
 mechanism.  See  NRTA  and  OPASTCO  Comments.  The  Coalition  for  Sustainable  Universal  Service  (CoSUS),  representing  various  interexchange  carriers  and  end-  users,  also  supports  adoption  of  a  connection-  based  mechanism.
 The  original  membership  of  CoSUS  was  comprised  of  Ad  Hoc  Telecommunications  Users  Committee  (Ad  Hoc),  AT&  T,  e-  commerce  &  Telecommunications  Users  Group  (eTUG),  Level  3  Communications,  and  WorldCom.  See
 CoSUS  Comments  at  1-  4.  Ad  Hoc  and  AT&  T,  which  continue  to  support  some  form  of  a  connection-  based  mechanism,  are  no  longer  members  of  CoSUS.  See  Letter  from  James  S.  Blaszak,  Counsel  for  Ad  Hoc
 Telecommunications  Users  Committee,  to  Marlene  H.  Dortch,  Federal  Communications  Commission,  filed  Oct.  3,  2002  (Ad  Hoc  Oct.  3  Ex  Parte)  (asserting  that  the  Commission  should  adopt  a  contribution  assessment  methodology
 based  on  working  telephone  numbers  and  connections-  based  assessments  for  special  access  and  private  lines);  Letter  from  Robert  W.  Quinn,  Jr.,  AT&  T,  to  Marlene  Dortch,  Federal  Communications  Commission,  filed  Oct.  22,  2002
 (AT&  T  Oct.  22  Ex  Parte).  8
 Letter  from  G.  Nanette  Thompson,  State  Chair  of  the  State  Joint  Board  Members,  to  Chmn.  Michael  K.  Powell,  Federal  Communications  Commission,  filed  Aug.  7,  2002  (State  Joint  Board  Ex  Parte).
 9  See  infra  paras.  16-  18.
 10  See,  e.  g.,  CoSUS  Comments;  Qwest  Comments;  SBC/  BellSouth  Comments;  Letter  from  Jamie  M.  (Mike)  Tan,
 SBC  Communications,  Inc.,  to  Marlene  Dortch,  Federal  Communications  Commission,  filed  Oct.  10,  2002  (SBC  Oct.  10  Ex  Parte).
 11  See,  e.  g.,  Nextel  Reply  Comments  at  7;  Letter  from  W.  Scott  Randolph,  Director  Regulatory  Affairs  of  Verizon,  to
 Marlene  H.  Dortch,  Federal  Communications,  dated  Oct.  29,  2002  (Verizon  Oct.  29  Ex  Parte),  at  Attachment,  pg.  7.
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 contribution  methodology.  12  In  this  Second  Further  Notice,  we  seek  comment  on  whether  to  retain  a  revenue-  based  system  and  specific  aspects  of  three  connection-  based  proposals  in  the
 record.  First,  we  ask  for  comment  on  a  proposed  contribution  methodology  that  would  impose  a  minimum  contribution  obligation  on  all  interstate  telecommunications  carriers  and  a  flat  charge
 for  each  end-  user  connection  depending  on  the  nature  or  capacity  of  the  connection.  Next,  we  seek  comment  on  a  proposal  to  assess  all  connections  based  purely  on  capacity.  Under  this
 proposal,  contribution  obligations  for  each  switched  end-  user  connection  would  be  shared  between  access  and  transport  providers.  Finally,  we  seek  comment  on  a  proposal  to  assess
 providers  of  switched  connections  based  on  their  working  telephone  numbers.  We  remain  committed  to  adopting  a  contribution  methodology  that  will  ensure  the  continued  viability  of
 universal  service  as  the  marketplace  continues  to  evolve.
 II.  BACKGROUND
 A.  The  Act
 7.  The  assessment  and  recovery  of  universal  service  contributions  are  governed  by  the  statutory  framework  established  by  Congress  in  the  Act.  13  Section  254(  b)  instructs  the
 Commission  to  establish  universal  service  support  mechanisms  with  the  goal  of  ensuring  the  delivery  of  affordable  telecommunications  services  to  all  Americans,  including  consumers  in
 high-  cost  areas,  low-  income  consumers,  eligible  schools  and  libraries,  and  rural  health  care  providers.  14  Section  254(  d)  of  the  Act  states  that  [  e]  very  telecommunications  carrier  that
 provides  interstate  telecommunications  services  shall  contribute,  on  an  equitable  and  nondiscriminatory  basis,  to  the  specific,  predictable,  and  sufficient  mechanisms  established  by
 the  Commission  to  preserve  and  advance  universal  service.  15
 12  See,  e.  g.,  Letter  from  Cellular  Telecommunications  and  Internet  Association,  Qwest  Communications,
 International,  Inc.,  United  States  Telecom  Association,  Verizon  Communications,  Verizon  Wireless,  to  Marlene  H.  Dortch,  Federal  Communications  Commission,  dated  Oct.  25,  2002  (Interim  Revenue  Coalition  Ex  Parte).
 13  Communications  Act  of  1934,  as  amended,  47  U.  S.  C.    201,  202,  254.  The  Telecommunications  Act  of  1996
 amended  the  Communications  Act  of  1934.  See  Telecommunications  Act  of  1996,  Pub.  L.  No.  104-  104,  110  Stat.  56  (1996)  (1996  Act).
 14  47  U.  S.  C.    254(  b).
 15  47  U.  S.  C.    254(  d).  See  also  47  U.  S.  C.    254(  b)(  4),  (5)  (providing  that  Commission  policy  on  universal  service
 shall  be  based,  in  part,  on  the  principles  that  contributions  should  be  equitable  and  nondiscriminatory,  and  support  mechanisms  should  be  specific,  predictable,  and  sufficient).  The  Commission  adopted  the  additional  principle  that
 federal  support  mechanisms  should  be  competitively  neutral,  neither  unfairly  advantaging  nor  disadvantaging  particular  service  providers  or  technologies.  See  Federal-  State  Joint  Board  on  Universal  Service,  CC  Docket  No.
 96-  45,  Report  and  Order,  12  FCC  Rcd  8776,  8801-  03,  paras.  46-  51  (1997),  as  corrected  by  Federal-  State  Joint  Board  on  Universal  Service,  Erratum,  CC  Docket  No.  96-  45,  FCC  97-  157  (rel.  June  4,  1997),  and  Erratum,  13  FCC
 Rcd  24493  (1997),  affd  in  part,  revd  in  part,  remanded  in  part  sub  nom,  Texas  Office  of  Public  Utility  Counsel  v.  FCC,  183  F.  3d  393  (5  th  Cir.  1999),  cert.  denied  530  U.  S.  1210  (2000),  cert.  dismissed,  531  U.  S.  975  (2000)
 (Universal  Service  Order).
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 8.  In  addition  to  the  specific  universal  service  provisions  of  section  254,  sections  201(  b)  and  202(  a)  of  the  Act  govern  carrier  services  and  charges.  16  Section  201(  b)  requires  that  all
 carrier  charges,  practices,  classifications,  and  regulations  for  and  in  connection  with  interstate  communications  service  be  just  and  reasonable,  and  gives  the  Commission  jurisdiction  to  enact
 rules  to  implement  that  requirement.  17  Section  202(  a)  prohibits  unjust  or  unreasonable  discrimination  in  connection  with  the  provision  of  communications  services.  Section  202(  a)
 also  prohibits  carriers  from  making  or  giving  any  undue  or  unreasonable  preference  or  advantage  to  any  particular  person,  class  of  persons,  or  locality,  or  to  subject  any  particular
 person,  class  of  persons,  or  locality  to  any  undue  or  unreasonable  prejudice  or  disadvantage.  18
 B.  The  Current  Methodology
 9.  In  the  1997  Universal  Service  Order,  the  Commission  decided  to  assess  contributions  on  contributors  gross-  billed  end-  user  telecommunications  revenues.  19  The  Commission  did  so
 after  considering  the  Recommended  Decision  of  the  Joint  Board  and  the  record  developed  at  that  time.  20  Specifically,  the  Commission  concluded  that  assessments  based  on  end-  user
 telecommunications  revenues  would  be  competitively  neutral,  would  be  easy  to  administer,  and  would  eliminate  some  economic  distortions  associated  with  an  assessment  based  on  gross
 telecommunications  revenues.  21
 10.  In  addition,  the  Commission  declined  to  adopt  a  mandatory  end-  user  surcharge  for  recovery  of  universal  service  contributions  by  telecommunications  providers,  agreeing  with  the
 state  members  of  the  Joint  Board  that  a  mandatory  end-  user  surcharge  would  dictate  how  carriers  recover  their  contribution  obligations  and  would  violate  Congresss  mandate.  22  The
 Commission  expressed  concern  that  mandating  recovery  through  an  end-  user  surcharge  might  affect  contributors  flexibility  to  offer,  for  example,  bundled  services  or  new  pricing  options,
 16  See  47  C.  F.  R.    201(  b),  202(  a).
 17  47  C.  F.  R.    201(  b).
 18  47  C.  F.  R.    202(  a).
 19  See  Universal  Service  Order,  12  FCC  Rcd  at  9206-  07,  paras.  843-  44.  Contributions  for  the  high-  cost  and  low-income
 support  mechanisms  were  based  on  interstate  and  international  end-  user  telecommunications  revenues,  while  contributions  for  the  schools  and  libraries  and  rural  health  care  support  mechanisms  initially  were  based  on
 intrastate,  interstate,  and  international  end-  user  telecommunications  revenues.  Following  a  decision  by  the  United  States  Court  of  Appeals  for  the  Fifth  Circuit,  the  Commission  established  a  single  contribution  base  for  all  universal
 service  support  mechanisms  based  on  interstate  and  international  revenues.  See  Federal-  State  Joint  Board  on  Universal  Service,  Access  Charge  Reform,  Sixteenth  Order  on  Reconsideration  and  Eighth  Report  and  Order  in  CC
 Docket  No.  96-  45  and  Sixth  Report  and  Order  in  CC  Docket  No.  96-  262,  15  FCC  Rcd  1679,  1685-  86,  para.  15  (1999)  (Eighth  Report  and  Order).
 20  Federal-  State  Joint  Board  on  Universal  Service,  CC  Docket  No.  96-  45,  Recommended  Decision,  12  FCC  Rcd  87
 (Jt.  Bd.  1996).  21
 Universal  Service  Order,  12  FCC  Rcd  at  9206-  09,  paras.  844-  50.  22
 Id.  at  9210-  11,  para.  853.
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 possibly  resulting  in  fewer  options  for  consumers.  23  Instead,  the  Commission  allowed  contributors  to  decide  for  themselves  whether,  how,  and  how  much  of  their  universal  service
 contributions  to  recover  from  their  customers.  24  The  Commission  required  only  that  contributors  not  shift  more  than  an  equitable  share  of  their  contributions  to  any  customer  or  group  of
 customers,  and  that  contributors  provide  accurate,  truthful,  and  complete  information  regarding  the  nature  of  the  charge.  25
 11.  In  the  Second  Order  on  Reconsideration,  the  Commission  set  forth  the  specific  method  of  computation  for  universal  service  contributions.  26  The  Commission  also  designated
 the  Universal  Service  Administrative  Company  (USAC)  as  the  neutral  entity  responsible  for  administering  the  universal  service  support  mechanisms,  including  billing  contributors,
 collecting  contributions  to  the  universal  service  support  mechanisms,  and  disbursing  universal  service  support  funds.  27  The  Commission  required  contributors  to  report  their  end-  user
 telecommunications  revenues  to  USAC  on  a  Telecommunications  Reporting  Worksheet  (Worksheet)  semi-  annually.  28  Contributions  were  based  on  the  reporting  of  billed  end-  user
 23  Id.
 24  Id.
 25  Id.  at  9199,  para.  829.  We  note  that  the  Commission  originally  prohibited  incumbent  local  exchange  carriers  from
 recovering  universal  service  costs  from  end  users,  and  instead  required  incumbent  local  exchange  carriers  to  recover  universal  service  costs  through  access  charges.  See  id.  at  9200,  para.  830.  The  United  States  Court  of  Appeals  for
 the  Fifth  Circuit  held  that  incumbent  local  exchange  carrier  recovery  of  universal  service  contributions  through  access  charges  constituted  an  implicit  subsidy,  and  the  Commissions  rules  permitting  that  practice  to  continue  at  an
 incumbent  local  exchange  carriers  discretion  violated  section  254(  e)  of  the  Act.  See  COMSAT  Corp.  v.  FCC,  250  F.  3d  931,  938-  40  (5  th  Cir.  2001).  The  Commission  therefore  amended  its  rules  to  prohibit  local  exchange  carriers
 from  recovering  contributions  to  the  universal  service  mechanisms  through  access  charges  imposed  on  interexchange  carriers.  See  47  C.  F.  R.    69.  4(  d).
 26  Changes  to  the  Board  of  Directors  of  the  National  Exchange  Carrier  Association,  Inc.,  Federal-  State  Joint  Board
 on  Universal  Service,  CC  Docket  Nos.  96-  45,  97-  21,  Report  and  Order  and  Second  Order  on  Reconsideration,  12  FCC  Rcd  18400  (1997)  (Second  Order  on  Reconsideration).
 27  See  id.  at  18423-  24,  para.  41;  see  also  47  C.  F.  R.    54.  701.
 28  Second  Order  on  Reconsideration,  12  FCC  Rcd  18400,  Appendix  B;  see  also  47  C.  F.  R.    54.  711(  a)  (providing
 that  [  c]  ontributions  shall  be  calculated  and  filed  in  accordance  with  the  Telecommunications  Reporting  Worksheet  .  .  .  .);  Second  Order  on  Reconsideration,  12  FCC  Rcd  at  18424,  para.  43,  18442,  para.  80,  18501-  02,  Appendix  C.
 The  Commission  adopted  the  Worksheet  and  attached  it  as  Appendix  C  to  the  Second  Reconsideration  Order.  Subsequent  to  its  issuance  of  the  Second  Order  on  Reconsideration,  in  an  effort  to  reduce  administrative  burdens  on
 contributors,  the  Commission  consolidated  carrier  reporting  requirements.  See  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,  CC  Docket  98-  171,  Report  and  Order,  14  FCC  Rcd  16602  (1999)  (Consolidated  Reporting  Order);  see  also
 Common  Carrier  Bureau  Announces  Release  of  September  Version  of  Telecommunications  Reporting  Worksheet  (FCC  Form  499-  S)  for  Contributions  to  the  Universal  Service  Support  Mechanisms,  CC  Docket  No.  98-  171,  Public
 Notice,  DA  99-  1520  (rel.  July  30,  1999);  Common  Carrier  Bureau  Announces  Release  of  Telecommunications  Reporting  Worksheet  (FCC  Form  499-  A)  for  April  1,  2000  Filing  by  All  Telecommunications  Carriers,  CC  Docket
 No.  98-  171,  Public  Notice,  15  FCC  Rcd  16434  (Com.  Car.  Bur.  2000).
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 telecommunications  revenues  from  the  prior  year.  Therefore,  the  interval  between  the  accrual  of  revenues  by  contributors  and  the  assessment  of  universal  service  contributions  based  on  those
 revenues  originally  was  12  months.  29
 12.  The  Commission  also  has  implemented  various  rules  and  guidelines  intended  to  reduce  administrative  burdens  for  certain  categories  of  contributors.  For  example,  the
 Commission  established  interim  safe  harbors  for  wireless  telecommunications  providers.  As  an  alternative  to  reporting  their  actual  interstate  telecommunications  revenues,  CMRS  providers
 currently  may  report  a  fixed  percentage  of  revenues  ranging  from  one  to  fifteen  percent  of  total  end-  user  telecommunications  revenues.  30  The  Commissions  rules  also  provide  a  safe  harbor  for
 the  reporting  of  telecommunications  revenues  when  bundling  telecommunications  services  with  customer  premises  equipment  or  information  services.  31
 13.  In  addition,  the  Commission  has  adopted  Truth-  in-  Billing  rules  to  improve  consumers  understanding  of  their  telephone  bills.  These  rules  require,  among  other  things,  that
 charges  on  consumer  wireline  telephone  bills  must  be  accompanied  by  a  brief,  clear,  non-misleading,  plain  language  description  of  the  service  or  services  rendered.  32  In  the  Truth-  In-Billing
 proceeding,  the  Commission  also  adopted  a  guideline  that  line  item  charges  associated  with  federal  regulatory  action  should  be  identified  through  standard  and  uniform  labels  used  by
 all  telecommunications  providers  (other  than  CMRS  carriers).  33  In  the  TIB  Order  and  FNPRM,  the  Commission  focused  primarily  on  three  types  of  line-  item  charges  that  result  from  federal
 regulatory  action:  (1)  universal  service-  related  fees;  (2)  subscriber  line  charges;  and  (3)  local  number  portability  charges.  It  sought  comment  on  specific  standard  labels  to  be  used  for  these
 29  Last  year,  the  Commission  reduced  the  interval  between  the  accrual  of  revenues  by  contributors  and  assessment  of
 universal  service  contributions  based  on  those  revenues  from  12  months  to  an  average  interval  of  six  months.  See  Federal-  State  Joint  Board  on  Universal  Service,  Petition  for  Reconsideration  filed  by  AT&  T,  CC  Docket  No.  96-  45,
 Report  and  Order  and  Order  on  Reconsideration,  16  FCC  Rcd  5748,  paras.  1-  2  (2001)  (Quarterly  Reporting  Order).  The  Commission  concluded  that  the  shortened  interval  allows  contributions  to  more  accurately  reflect  market  trends
 influencing  carrier  revenues,  such  as  the  entry  of  new  providers  into  the  interstate  marketplace.  Id.  at  5751-  52,  para.  9.
 30  See  Interim  CMRS  Safe  Harbor  Order,  13  FCC  Rcd  at  21258-  60,  paras.  13-  15.  Although  slightly  less  than  a
 majority  of  CMRS  providers  subject  to  the  15  percent  safe  harbor  avail  themselves  of  that  safe  harbor,  those  that  do  represent  the  vast  majority  of  revenues  reported  by  CMRS  providers  in  this  category.
 31  See  Policy  and  Rules  Concerning  Interstate,  Interexchange  Marketplace,  Implementation  of  Section  254(  g)  of  the
 Communications  Act  of  1934,  as  amended,  1998  Biennial  Regulatory  Review    Review  of  Customer  Premises  Equipment  And  Enhanced  Services  Unbundling  Rules  In  the  Interexchange,  Exchange  Access  And  Local  Exchange
 Markets,  CC  Docket  Nos.  96-  61,  98-  183,  Report  and  Order,  16  FCC  Rcd  7418,  7446-  48,  paras.  47-  54  (2001)  (Bundling  Order).
 32  47  C.  F.  R.    64.2401(  b).
 33  Truth-  in-  Billing  and  Billing  Format,  CC  Docket  No.  98-  170,  Report  and  Order  and  Further  Notice  of  Proposed
 Rulemaking,  14  FCC  Rcd  7492,  7525-  26,  para.  54,  7522-  25,  paras.  49-  53  (TIB  Order  and  FNPRM),  reconsideration  granted  in  part,  Order  on  Reconsideration,  15  FCC  Rcd  6023  (2000),  Errata,  15  FCC  Rcd  16544  (Com.  Car.  Bur.
 2000).
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 charges.  34
 C.  History  of  Contribution  Methodology  Proceeding
 14.  As  part  of  its  efforts  to  ensure  the  long-  term  stability  and  sufficiency  of  the  universal  service  support  system  in  an  increasingly  competitive  marketplace,  the  Commission  began  a
 proceeding  to  revisit  its  universal  service  contribution  methodology  in  May  2001.  35  In  the  2001  Notice,  the  Commission  sought  comment  generally  on  whether  and  how  to  streamline  and  reform
 both  the  contribution  assessment  methodology  and  the  manner  in  which  contributors  may  elect  to  recover  the  costs  of  contributions  from  their  customers.  36  Among  other  things,  the  Commission
 sought  comment  on  whether  to  modify  the  existing  revenue-  based  methodology,  as  well  as  whether  to  replace  that  methodology  with  one  that  assesses  contributions  on  the  basis  of  a  flat-fee
 charge,  such  as  a  per-  line  charge.  37  The  Commission  also  sought  comment  on  whether  to  require  carriers  that  choose  to  recover  universal  service  contributions  from  their  customers
 through  line  items  to  do  so  through  a  uniform  universal  service  line  item  that  corresponds  to  the  contribution  assessment.  38
 15.  Seeking  to  further  develop  the  record  regarding  various  proposals  submitted  in  response  to  the  2001  Notice,  we  released  a  Further  Notice  of  Proposed  Rulemaking  and  Report
 and  Order  in  February  2002.  39  Specifically,  we  sought  more  focused  comment  on  a  proposal  to  replace  the  existing  revenue-  based  assessment  mechanism  with  one  based  on  the  number  and
 capacity  of  connections  provided  to  a  public  network.  40  In  the  First  Further  Notice,  we  also  invited  commenters  to  supplement  the  record  with  any  new  arguments  or  data  on  proposals  to
 retain  or  modify  the  existing,  revenue-  based  assessment  methodology.  41  Moreover,  we  sought  additional  comment  on  possible  reforms  to  the  manner  in  which  carriers  recover  contribution
 costs  from  their  customers.  42
 16.  Commenters  responding  to  the  First  Further  Notice  generally  discussed  two  paths  for  reform  of  the  universal  service  contribution  system:  (1)  modification  of  the  existing  revenue-based
 mechanism;  or  (2)  adoption  of  a  connection-  based  mechanism.  Commenters  in  favor  of  retaining  a  revenue-  based  system,  for  example,  have  argued  that  the  Commission  should  base
 34  See  id.  at  7523-  25,  paras.  51-  52,  7537,  para.  71.
 35  See  2001  Notice,  16  FCC  Rcd  9892  (2001).
 36  Id.  at  9894,  para.  2.
 37  Id.
 38  Id.
 39  See  First  Further  Notice,  17  FCC  Rcd  at  3754,  para.  2.
 40  Id.
 41  Id.
 42  Id.
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 contributions  on  collected  or  projected  interstate  and  international  telecommunications  revenues,  rather  than  gross-  billed  or  historical  end-  user  telecommunications  revenues,  maintaining  that
 these  measures  would  eliminate  the  need  for  carriers  to  engage  in  complex  calculations  to  account  for  variables  like  uncollected  revenues,  credits,  and  the  need  to  recover  universal  service
 contributions  from  a  declining  revenue  base.  43  Other  commenters  asserted  that  the  Commission  should  revisit  the  interim  mobile  wireless  safe  harbor  in  light  of  the  significant  migration  of
 interstate  telecommunications  revenues  from  wireline  to  mobile  wireless  providers.  44
 17.  On  the  other  hand,  several  commenters,  including  all  of  the  state  members  of  the  Joint  Board,  asserted  that  the  Commission  should  adopt  some  form  of  a  connection-  based
 mechanism.  45  The  essential  difference  among  the  various  connection-  based  proposals  put  forth  in  the  record  is  their  treatment  of  different  industry  segments  and  types  of  customers.  The
 Coalition  for  Sustainable  Universal  Service  (CoSUS),  for  example,  proposed  a  connection-  based  system  that  would  initially  charge  residential  or  single-  line  business  connections,  including
 mobile  wireless  connections,  a  flat  monthly  amount  of  $1.00  per  connection,  and  paging  connections  $0.25  per  connection,  with  the  remaining  universal  service  funding  needs  being
 recovered  through  capacity-  based  assessments  on  multi-  line  business  connections.  46  Under  the  CoSUS  proposal,  assessment  rates  would  be  adjusted  as  needed  to  account  for  growth  in  the
 number  and  capacity  of  connections  and  universal  service  funding  requirements.  47
 18.  Variations  of  the  CoSUS  connection-  based  proposal  would  fix  the  $1.00  per  connection  charge  on  residential,  single-  line  business,  and  wireless  connections  for  five  years,  48
 or  maintain  the  relative  contribution  burdens  paid  by  the  wireline  and  wireless  industry  segments  based  on  the  interim  safe  harbor  established  under  the  current  revenue-  based  system.  49  The
 43  See,  e.  g.,  Allied  Comments  at  11-  12;  Arch  Comments  at  10-  12;  CPUC  Comments  at  8-  9;  Verizon  Comments  at  5;
 Verizon  Wireless  Comments  at  16;  Cf.  FW&  A  Comments  at  11-  12;  USCC  Comments  at  13  (arguing  against  the  use  of  projected  revenue  data  as  a  means  to  reform  the  contribution  system).
 44  See,  e.  g.,  Allied  Comments  at  11;  ALTS  Reply  Comments  at  4;  FW&  A  Comments  at  9-  10;  NASUCA  Comments
 at  6-  7;  NECA  Comments  at  3-  4;  Nebraska  Comments  at  5-  7;  NRTA  and  OPASTCO  Comments  at  11  n.  25;  NTCA  Comments  at  5-  6;  USCC  Comments  at  9-  10.  Several  CMRS  carriers,  in  fact,  have  acknowledged  that  the  current
 mobile  wireless  safe  harbor  percentage  may  be  too  low.  See,  e.  g.,  Letter  from  Mitchell  F.  Brecher,  Counsel  for  TracFone  Wireless,  Inc.,  to  Marlene  H.  Dortch,  Federal  Communications  Commission,  filed  Oct.  4,  2002  (TracFone
 Oct.  4  Ex  Parte);  Letter  from  Michael  Altschul,  Cellular  Telecommunications  and  Internet  Association,  to  Marlene  H.  Dortch,  Federal  Communications  Commission,  filed  Sep.  30,  2002  (CTIA  Traffic  Studies  Ex  Parte).
 45  See,  e.  g.,  Ad  Hoc  Comments  at  2;  BellSouth  Reply  Comments  at  8-  9;  CoSUS  Comments  at  9-  12;  C&  W  Reply
 Comments  at  7;  Home  et  al.  Comments  at  3-  4;  ITAA  Comments  at  3;  Qwest  Reply  Comments  at  3;  SBC  Comments  at  5;  Sprint  Comments  at  2;  State  Joint  Board  Ex  Parte  at  1-  3.  As  previously  noted,  NRTA  and  OPASTCO  support
 a  connection-  based  contribution  mechanism.  See  NRTA  and  OPASTCO  Comments  at  4.  46
 See  CoSUS  Comments  at  12-  17.  47
 Id.  at  15.  48
 See,  e.  g.,  State  Joint  Board  Ex  Parte  at  3.  49
 See  Sprint  Comments  at  3.
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 connection-  based  proposal  jointly  submitted  by  SBC  and  BellSouth  would  split  connection-based  contribution  assessments  between  access  and  interstate  transport  providers,  without
 distinguishing  between  residential  and  business  connections,  and  assess  telecommunications  services  not  tied  to  connections  based  on  revenue.  50  The  SBC/  BellSouth  proposal  also  would
 impose  assessments  on  all  connections  provided  by  Internet  service  providers,  both  facilities-based  and  non-  facilities-  based.  51  Under  an  alternative  version  of  the  SBC  and  BellSouth
 proposal,  connection-  based  assessments  would  only  be  split  between  the  access  and  transport  providers  when  the  switched  access  and  transport  elements  are  not  provided  on  a  bundled  basis
 (i.  e.,  the  end  user  does  not  buy  switched  local  service  and  interstate  long-  distance  service  from  the  same  carrier).  52  Under  this  proposal,  a  revenue-  based  assessment  would  be  assigned  to  the
 transport  component  of  such  a  switched  connection  and  would  be  recovered  from  both  presubscribed  and  non-  presubscribed  long-  distance  providers  based  on  their  interstate
 telecommunications  revenues.  53  Ad  Hoc  and  AT&  T  also  have  advocated  a  contribution  assessment  methodology  based  on  working  telephone  numbers  and  connection-  based
 assessments  for  special  access  and  private  lines.  54  Still  other  commenters  favor  a  connection-based  mechanism  that  would  treat  presubscribed  interexchange  lines  or  customer  accounts  as
 connections  subject  to  a  connection-  based  assessment.  55
 III.  REPORT  AND  ORDER
 19.  As  noted  above,  we  adopt  several  modifications  to  the  current  revenue-  based  system  to  ensure  the  sufficiency  and  predictability  of  universal  service  while  we  consider  reforms  to
 sustain  the  universal  service  fund  for  the  long  term.  To  address  concerns  raised  in  the  record  that  the  current  interim  safe  harbor  for  mobile  wireless  providers  is  inappropriate  in  light  of  changing
 50  See  SBC  Comments  at  5.  Under  the  SBC/  BellSouth  proposal,  access  services  include  switched  access  and
 special  access  over  the  wireline  telephone  network,  cable  telephony,  wireless,  one-  way  paging,  dedicated  Internet  access,  and  a  private  line  access  link  to  a  packet-  switched  data  network  or  other  network,  while  interstate  transport
 services  include  traditional  interexchange  long  distance  service,  private  line  transport  service,  packet-  switched  transport  service,  and  the  interstate  transport  associated  with  Internet  traffic  or  other  content  provided  over  an
 Internet  connection.  Id.  at  9.  51
 Id.  at  5.  52
 See  Letter  from  David  J.  Hostetter,  SBC  Telecommunications,  Inc.,  and  W.  W.  (Whit)  Jordan,  BellSouth  Corporation,  to  Marlene  Dortch,  Federal  Communications  Commission,  filed  Nov.  5,  2002  (SBC/  BellSouth  Nov.  5
 Ex  Parte).  53
 See  id.  at  1.  54
 Ad  Hoc  Oct.  3  Ex  Parte  at  3;  AT&  T  Oct.  22  Ex  Parte.  55
 See,  e.  g.,  NRTA  and  OPASTCO  Comments  at  12  n.  26  (noting  that  assessments  could  be  made  on  the  basis  of  presubscribed  lines).  State  Commissioner  Jaber  supports  a  modified  connection-  based  mechanism  that  would  treat
 customer  accounts  presubscribed  to  IXCs  as  connections.  See  State  Joint  Board  Ex  Parte  at  Attachment,  page  2.
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 market  conditions,  we  raise  the  safe  harbor  from  15  to  28.5  percent.  56  We  establish  an  all-  or-nothing  rule  for  affiliated  wireless  telecommunications  providers  when  determining  whether  to
 report  actual  interstate  telecommunications  revenues  or  to  avail  themselves  of  the  wireless  safe  harbor  percentages.  57  We  also  modify  the  current  revenue-  based  methodology  by  basing
 contributions  on  a  percentage  of  projected  collected,  instead  of  historical  gross-  billed,  interstate  and  international  end-  user  telecommunications  revenues  reported  by  contributors  on  a  quarterly
 basis.  58  In  light  of  the  modifications  we  adopt  today,  we  conclude  that  carriers  may  not  mark  up  universal  service  line  item  amounts  above  the  contribution  assessment  rate.  59  Finally,  we  revise
 our  Lifeline  rules  to  prohibit  all  Eligible  Telecommunications  Carriers  (ETCs)  from  recovering  contribution  costs  from  their  Lifeline  customers.
 A.  Modified  Revenue-  Based  Assessment  Methodology
 1.  Mobile  Wireless  Safe  Harbor
 a.  Background
 20.  In  1998,  in  response  to  concerns  raised  by  certain  wireless  telecommunications  providers  regarding  difficulties  associated  with  distinguishing  between  their  interstate  and
 intrastate  revenues,  the  Commission  adopted  interim  safe  harbors  for  CMRS  providers  to  use  when  reporting  interstate  telecommunications  revenues  for  universal  service  contribution
 purposes.  60  Specifically,  cellular,  broadband  PCS,  and  digital  SMR  providers  61  may  assume  that  no  more  than  15  percent  of  their  cellular,  broadband  PCS,  and  SMR  telecommunications
 revenues  are  interstate.  62  The  current  interim  safe  harbor  percentage  for  mobile  wireless  providers  was  based  on  the  nationwide  average  percentage  of  interstate  wireline  traffic  reported
 in  1997  for  purposes  of  the  Dial  Equipment  Minute  (DEM)  weighting  program,  which  is  the  predecessor  of  local  switching  support.  63  The  current  interim  safe  harbor  percentages  for  paging
 56  See,  e.  g.,  Ad  Hoc  Oct.  3  Ex  Parte  at  7;  ALTS  Reply  Comments  at  4;  FW&  A  Comments  at  9;  Interim  Revenue
 Coalition  Ex  Parte  at  2;  NASUCA  Comments  at  6-  7;  Nebraska  Comments  at  5-  7;  NRTA  and  OPASTCO  Comments  at  11  n.  25;  Time  Warner  et  al.  Comments  at  18;  USTA  Oct.  21  Ex  Parte  at  4.
 57  See,  e.  g.,  Interim  Revenue  Coalition  Ex  Parte  at  2;  USTA  Oct.  21  Ex  Parte  at  2.
 58  See  infra  paras.  29-  32.
 59  See  infra  paras.  45-  51.
 60  Id.;  see  also  Interim  CMRS  Safe  Harbor  Order,  13  FCC  Rcd  at  21254-  58,  paras.  5-  12.
 61  The  interim  safe  harbor  for  mobile  wireless  providers  applies  to  SMR  providers  that  primarily  provide  wireless
 telephony  rather  than  dispatch  or  other  mobile  services.  A  digital  SMR  provider  operates  more  like  a  cellular  provider  than  a  SMR  provider.  Digital  SMR  service  offers  consumers  dispatch  capabilities  over  much  broader
 geographic  areas,  along  with  a  unique  combination  of  fully  integrated  services,  such  as  cellular  and  broadband  PCS  service.  Nextel  is  an  example  of  a  digital  SMR  provider.
 62  See  Interim  CMRS  Safe  Harbor  Order,  13  FCC  Rcd  at  21258-  59,  para.  13.
 63  Id.  at  21257,  para.  11,  21259,  para.  13  n.  25.
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 providers  and  analog  SMR  providers  that  do  not  primarily  provide  wireless  telephony  are  12  percent  and  one  percent,  respectively.  64  Currently,  carriers  may  pick  and  choose  which  affiliated
 legal  entities  report  actual  interstate  telecommunications  revenues  or  the  safe  harbor  percentage  of  revenues,  rather  than  making  their  election  on  a  company-  wide  basis,  including  all  affiliated
 entities.  65  An  entity  that  elects  to  report  a  percentage  of  interstate  telecommunications  revenues  that  is  less  than  the  relevant  safe  harbor  percentage  is  required  to  document  the  method  used  to
 calculate  its  percentage  and  make  that  information  available  to  the  Commission  or  USAC  upon  request.  66  In  the  current  proceeding  to  reform  the  universal  service  contribution  system,  the
 Commission  sought  comment  on  whether  to  continue  or  modify  the  interim  safe  harbors,  citing,  among  other  things,  the  significant  migration  of  interstate  telecommunications  revenues  from
 wireline  to  mobile  wireless  providers.  67
 b.  Discussion
 21.  Based  on  the  record  before  us,  we  raise  the  current  safe  harbor  for  mobile  wireless  providers  from  15  percent  to  28.5  percent.  68  We  conclude  that  a  15  percent  interim  mobile
 wireless  safe  harbor  no  longer  reflects  the  extent  to  which  mobile  wireless  consumers  utilize  their  wireless  phones  for  interstate  calls,  particularly  in  light  of  the  increased  substitution  of
 wireless  for  traditional  wireline  service.  69  According  to  revenue  data  included  on  the  latest  FCC  Form  499-  Q,  it  appears  that  43  percent  of  mobile  wireless  filers,  representing  78  percent  of
 mobile  wireless  end-  user  telecommunications  revenues,  currently  avail  themselves  of  the  mobile  wireless  safe  harbor.  70  As  noted  by  several  commenters,  revising  the  mobile  wireless  safe  harbor
 is  appropriate  because  it  is  no  longer  based  on  actual  market  conditions.  71  Increasing  the  interim  mobile  wireless  safe  harbor  will,  therefore,  help  to  ensure  that  universal  service  contributions
 64  Id.  at  21259-  60,  paras.  14-  15.
 65  As  evidenced  by  FCC  Form  499  filings,  carriers  may  file  actual  interstate  telecommunications  for  one  affiliated
 legal  entity,  while  other  affiliated  legal  entities  file  revenue  information  based  on  the  interim  safe  harbors.  66
 Interim  CMRS  Safe  Harbor  Order,  13  FCC  Rcd  at  21257-  58,  para.  11.  67
 See  2001  Notice,  16  FCC  Rcd  at  9904-  05,  para.  24;  see  also  First  Further  Notice,  17  FCC  Rcd  at  3757-  59,  paras.  11-  16.
 68  See,  e.  g.,  CTIA  Traffic  Studies  Ex  Parte;  FW&  A  Comments  at  9-  10;  NASUCA  Comments  at  6-  7;  NECA
 Comments  at  3-  4;  Nebraska  Comments  at  5-  7;  Ohio  PUC  Reply  Comments  at  4;  Letter  from  John  W.  Kure,  Executive  Director    Federal  Policy  and  Law,  Qwest  Communications,  to  Marlene  H.  Dortch,  Federal
 Communications  Commission,  filed  Oct.  24,  2002  (Qwest  Oct.  24  Ex  Parte)  at  Attachment,  pg.  11;  USTA  Oct.  21  Ex  Parte  at  2;  Verizon  Oct.  29  Ex  Parte  at  2;  Letter  from  John  T.  Scott,  III,  Verizon  Wireless,  to  William  F.  Maher,
 Federal  Communications  Commission,  filed  Nov.  27,  2002.  69
 See  CTIA  Traffic  Studies  Ex  Parte;  see  also  FW&  A  Comments  at  9-  10;  NASUCA  Comments  at  6-  7;  NECA  Comments;  Time  Warner  et  al.  Comments  at  18.
 70  We  note  that  this  calculation  was  made  at  the  legal  entity  level  and  not  the  holding  company  level.
 71  See,  e.  g.,  Allied  Comments  at  11;  ALTS  Reply  Comments  at  4;  NASUCA  Comments  at  6-  7;  Nebraska  Comments
 at  5-  7;  NRTA  and  OPASTCO  Comments  at  11  n.  25.
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 remain  equitable  and  non-  discriminatory.  Such  action  also  will  improve  the  near-  term  viability  of  the  universal  service  mechanisms  by  ensuring  that  the  contribution  base  more  accurately
 reflects  todays  marketplace.
 22.  We  increase  the  interim  safe  harbor  for  mobile  wireless  providers  to  28.5  percent  based  on  information  provided  in  the  record  by  the  wireless  industry.  According  to  CTIA,  six  of
 its  wireless  service  provider  members  have  conducted  traffic  studies  using  various  methodologies  and  assumptions.  Five  unnamed  large  national  mobile  wireless  providers
 reported  interstate  minutes  of  use  that  range  from  19.6  percent  to  28.5  percent,  while  one  niche  provider,  TracFone,  reported  interstate  usage  of  10  percent.  72  Most  participants  in  the  CTIA
 survey  utilized  minutes  of  use  as  a  proxy  for  revenues  and  identified  the  jurisdictional  nature  of  a  call  based  on  the  originating  cell  site  and  the  terminating  area  code.  73  There  appeared  to  be  a
 split  among  participants  as  to  whether  to  include  both  outgoing  and  incoming  calls  in  their  traffic  studies.  We  conclude  it  is  appropriate  to  revise  the  safe  harbor  for  mobile  wireless  providers  to
 correspond  to  the  highest  estimate  of  minutes  of  use  provided  by  the  wireless  carriers.  Setting  the  safe  harbor  at  the  high  end  of  the  range  of  estimates  provided  by  the  wireless  studies  should
 provide  mobile  wireless  providers  an  incentive  to  report  their  actual  interstate  telecommunications  revenues  if  they  are  able  to  do  so.
 23.  The  American  Association  of  Paging  Carriers  (AAPC)  asserted  that  the  safe  harbor  for  non-  nationwide  paging  carriers  should  be  reduced  to  1  percent,  but  did  not  submit  traffic
 studies  or  other  data  to  support  its  assertion.  74  Therefore,  we  find  that  the  record  developed  at  this  time  does  not  support  adjustment  of  the  safe  harbors  for  analog  SMR  and  paging  providers.  75
 Accordingly,  the  safe  harbors  for  analog  SMR  and  paging  providers  will  remain  at  one  percent  and  12  percent,  respectively.
 24.  Mobile  wireless  providers  availing  themselves  of  the  revised  interim  safe  harbor  will  be  required  to  report  28.5  percent  of  their  telecommunications  revenues  as  interstate  beginning
 with  fourth  quarter  2002  revenues  reported  on  the  February  1,  2003,  FCC  Form  499-  Q.  Mobile  wireless  providers  will  still  have  the  option  of  reporting  their  actual  interstate
 telecommunications  revenues.  We  note  that  mobile  wireless  providers  must  provide  documentation  to  support  the  reporting  of  actual  interstate  telecommunications  revenues  upon
 request.
 72  See  CTIA  Traffic  Studies  Ex  Parte  at  3-  4.
 73  Id.
 74  See  Letter  from  Kenneth  Hardman,  Counsel  for  American  Association  of  Paging  Carriers,  to  Marlene  H.  Dortch,
 Federal  Communications  Commission,  filed  Nov.  25,  2002.  We  note  that  the  interim  safe  harbor  for  paging  carriers  was  established  based  on  paging  carriers  reported  interstate  revenues.  See  Interim  CMRS  Safe  Harbor  Order,  13
 FCC  Rcd  at  21260,  para.  14.  75
 See  Letter  from  Kenneth  D.  Patrick,  Counsel  for  Arch  Wireless  Operating  Company,  Inc.,  to  Marlene  H.  Dortch,  Federal  Communications  Commission,  filed  Oct.  31,  2002.
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 25.  In  order  to  ensure  that  contributions  remain  equitable  and  nondiscriminatory,  we  also  adopt  an  all-  or-  nothing  rule  for  wireless  telecommunications  providers  seeking  to  avail
 themselves  of  the  safe  harbors.  76  Under  this  rule,  wireless  providers  will  continue  to  be  permitted  to  report  revenues  at  either  the  legal  entity  level  or  on  a  consolidated  basis,  but  will  be
 required  to  decide  whether  to  report  either  actual  or  safe  harbor  revenues  for  all  of  their  affiliated  legal  entities  within  the  same  safe  harbor  category  (i.  e.,  28.5  percent,  12  percent  or  1  percent).  77
 We  conclude,  in  the  interests  of  consistency,  equity,  and  fairness,  that  such  a  contributor  that  chooses  to  determine  actual  interstate  telecommunications  revenues  for  one  of  its  affiliated
 entities  must  do  so  for  all  affiliated  entities  within  the  same  safe  harbor  category.  Likewise,  wireless  telecommunications  providers  must  use  the  safe  harbor  for  all  affiliated  carriers  within
 the  same  category  if  they  choose  to  use  it  for  one.  As  previously  noted,  the  Commission  created  the  interim  safe  harbors  because  wireless  providers  asserted  at  the  time  that  they  have  difficulty
 distinguishing  their  interstate  and  intrastate  revenues.  78  If  a  wireless  telecommunications  provider  can  and  does  separate  its  interstate  revenues  from  intrastate  revenues  for  universal
 service  contribution  purposes,  we  find  that  it  is  reasonable  to  presume  that  its  affiliates  subject  to  the  same  safe  harbor  can  employ  the  same  measures  to  report  their  interstate  revenues.  It  is
 inappropriate,  therefore,  to  allow  affiliated  wireless  providers  to  pick  and  choose  which  entities  use  the  interim  safe  harbors.
 26.  Beginning  with  the  first  Form  499-  Q  filing  following  the  effective  date  of  this  Order,  wireless  providers,  including  mobile  wireless  providers,  paging  providers,  and  analog  SMR
 providers,  shall  determine  whether  to  report  revenues  based  on  the  interim  wireless  safe  harbors  at  the  affiliated-  company  level,  as  opposed  to  the  legal-  entity  level,  as  is  the  case  today.  Under
 this  new  requirement,  if  one  wireless  entity  chooses  to  report  and  contribute  based  on  actual  interstate  telecommunications  revenues,  all  affiliated  companies  subject  to  the  same  safe  harbor
 must  do  the  same.  Conversely,  if  one  wireless  entity  chooses  to  utilize  the  interim  safe  harbors,  all  affiliated  companies  in  the  same  safe  harbor  category  must  also  use  the  safe  harbor.  79  For
 purposes  of  this  requirement  and  consistent  with  section  3(  1)  of  the  Act,  we  define  affiliate  as  a  person  that  (directly  or  indirectly)  owns  or  controls,  is  owned  or  controlled  by,  or  is  under
 common  ownership  or  control  with,  another  person.  80
 76  See,  e.  g.,  Interim  Revenue  Coalition  Ex  Parte  at  2;  USTA  Oct.  21  Ex  Parte  at  2.
 77  For  example,  if  a  wireless  telecommunications  provider  uses  the  interim  safe  harbor  for  its  paging  services,  all  of
 its  affiliated  legal  entities  must  also  use  the  safe  harbor  for  paging  services.  That  same  wireless  telecommunications  provider  could  choose  to  report  actual  interstate  telecommunications  revenues  for  its  affiliates  that  provide  mobile
 wireless  services.  78
 See  supra  para.  20.  79
 We  note  that  this  requirement  will  not  impose  additional  reporting  obligations.  Contributors  may  continue  to  file  by  legal  entity  or  on  a  consolidated  basis.  Contributors,  however,  must  determine  whether  to  report  actual  interstate
 revenues  for  each  filer  at  the  affiliated-  entity  level.  80
 47  U.  S.  C.    153(  1).
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 27.  In  addition  to  the  universal  service  support  mechanisms,  consistent  with  existing  Commission  practice,  revenues  reported  on  the  Form  499-  A  will  continue  to  be  used  in
 administering  the  Telecommunications  Relay  Services,  North  American  Numbering  Plan,  Local  Number  Portability  programs,  as  well  as  the  regulatory  fees  administration  program  for  wireline
 telecommunications  providers.  81  We  can  see  no  reason  to  permit  carriers  to  use  a  different  safe  harbor  for  revenue  reporting  for  purposes  of  these  other  programs.  Thus,  we  conclude  that  our
 actions  taken  here  to  revise  the  interim  mobile  wireless  safe  harbor  and  modify  the  reporting  of  data  by  wireless  providers  on  the  499-  A  also  will  apply  to  assessments  for  the  mechanisms
 established  for  Telecommunications  Relay  Services,  the  North  American  Numbering  Plan,  and  the  Local  Number  Portability  programs.
 2.  Assessment  on  Projected  Collected  Revenues
 a.  Background
 28.  Currently,  universal  service  contributions  are  based  on  a  percentage  of  historical  gross-  billed  revenues.  82  As  we  have  previously  noted,  however,  the  telecommunications
 marketplace  has  changed  rapidly  as  technologies  have  evolved  since  adoption  of  the  current  system  in  1997.  83  The  2001  Notice  sought  comment  on  whether,  among  other  things,  to  assess
 contributions  based  on  projected  collected  revenues.  84  In  the  First  Further  Notice,  we  asked  commenters  to  supplement  the  record  with  any  new  arguments  or  data  regarding  proposals  to
 modify  the  revenue-  based  system.  85  Some  commenters  asserted  that  the  Commission  should  retain  the  existing  system,  while  other  commenters  proposed  various  modifications,  including
 reliance  on  current  or  projected  revenues  rather  than  gross-  billed  revenues,  as  well  as  assessment  on  collected  or  net-  booked  revenues.  86  Several  commenters,  however,  indicated  that  modifying
 the  existing  revenue-  based  system  would  not  address  problems  implicating  the  long-  term  sustainability  of  the  system.  87
 81  See  47  C.  F.  R.    52.  17,  52.  32,  64.  604(  c)(  5)(  iii)(  A).  Regulatory  fees  for  CMRS  providers  are  based  on  units
 served,  not  on  revenues.  82
 See  Universal  Service  Order,  12  FCC  Rcd  at  9206-  07,  paras.  843-  44.  83
 See  First  Further  Notice,  17  FCC  Rcd  at  3755-  59,  paras.  7-  14.  84
 2001  Notice,  16  FCC  Rcd  at  9902-  9904,  paras.  18-  23.  85
 See  First  Further  Notice,  17  FCC  Rcd  at  3789-  90,  para.  84.  86
 See  Allied  Comments  at  11-  12;  Arch  Comments  at  10-  12;  CPUC  Comments  at  8-  9;  Verizon  Comments  at  5;  Verizon  Wireless  Comments  at  16.  See  also  Letter  from  Lawrence  E.  Sarjeant,  United  States  Telecom  Association,
 to  Chairman  Michael  K.  Powell  and  Commissioners  Kathleen  Q.  Abernathy,  Michael  Copps,  and  Kevin  Martin,  Federal  Communications  Commission,  filed  Nov.  26,  2002,  at  3  (suggesting  that  contributions  should  be  based  on
 gross-  billed  interstate  retail  revenue  adjusted  by  a  carrier-  specific  factor  to  account  for  non-  collectible  amounts).  87
 See,  e.  g.,  BellSouth  Reply  Comments  at  5;  CoSUS  Reply  Comments  at  14-  21;  WorldCom  Reply  Comments  at  6-  8.
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 b.  Discussion
 29.  Based  on  our  experience  with  the  current  collection  methodology,  we  now  find  it  appropriate  to  modify  this  aspect  of  the  methodology  to  promote  competitive  neutrality  and  to
 simplify  the  assessment  and  recovery  of  universal  service  contributions  for  carriers  and  consumers.  We  therefore  conclude  that,  instead  of  assessing  universal  service  contributions
 based  on  revenues  accrued  as  much  as  six  months  prior,  USAC  will  assess  contributions  based  on  projections  provided  by  contributors  of  their  collected  end-  user  interstate  and  international
 telecommunications  revenues  for  the  following  quarter.  Because  contributors  will  be  assessed  in  the  period  for  which  revenues  are  projected,  the  modified  methodology  will  eliminate  the
 interval  between  the  accrual  of  revenues  and  the  assessment  of  universal  service  contributions  based  on  those  revenues.  The  modified  methodology  also  will  result  in  minimal  changes  to
 current  reporting  requirements.  88  The  revised  methodology  therefore  will  base  assessments  on  revenue  data  that  is  more  reflective  of  current  market  conditions,  without  significantly  increasing
 administrative  costs  for  contributors  and  USAC.  89  We  view  this  and  other  changes  we  make  to  the  revenue-  based  system  to  be  interim  measures  while  we  consider  the  approaches  raised  in  the
 Second  Further  Notice.
 30.  We  also  conclude  that  the  revised  contribution  methodology  ensures  that  contributions  to  universal  service  support  mechanisms  continue  to  operate  in  a  competitively
 neutral  manner.  90  As  noted  by  several  commenters,  the  current  contribution  system  based  on  historical  revenues  creates  competitive  advantages  for  new  entrants  and  contributors  with
 increasing  interstate  telecommunications  revenues,  while  disadvantaging  those  carriers  with  declining  revenues.  91  Interexchange  carriers,  for  example,  which  currently  contribute  more  than
 60  percent  of  universal  service  contributions,  are  particularly  disadvantaged  by  the  so-  called  lag  that  results  because  they  have  experienced  sharp  declines  in  their  interstate  revenues.  92
 Because  contributions  are  assessed  on  revenues  from  six  months  prior,  carriers  with  decreasing  revenues  must  recover  their  contributions  from  a  revenue  base  smaller  than  the  one  assessed.  By
 basing  contribution  assessments  on  projected  collected  end-  user  interstate  and  international
 88  See  infra  discussion  at  paras.  33-  37.
 89  See  USAC  Comments  to  2001  Notice  at  12.
 90  See,  e.  g.,  CPUC  Comments  at  8-  9;  CU  et  al.  Comments  at  7;  Verizon  Comments  at  5.
 91  See,  e.  g.,  Ad  Hoc  Comments  at  2-  3;  CoSUS  Comments  at  29-  31;  Sprint  Comments  at  2;  Verizon  Wireless
 Comments  at  16.  92
 See,  e.  g.,  Ad  Hoc  Comments  at  2-  3;  C&  W  Reply  Comments  at  4;  CoSUS  Comments  at  6-  11;  Sprint  Comments  at  2-  3;  WorldCom  Comments  at  2-  3.  See  also  AT&  T  Corp.,  S.  E.  C.  Form  10-  Q,  filed  Aug.  14,  2002  (consumer
 services  revenue  declined  21.  6%,  or  $1.  7  billion,  for  the  first  six  months  of  2002  compared  with  the  corresponding  period  in  2001)  (AT&  T  2  nd  Quarter  2002  10-  Q);  WorldCom  Inc.,  S.  E.  C.  Form  10-  Q,  filed  May  15,  2002  (consumer
 revenues,  which  include  domestic  voice  communications  service  for  consumer  customers,  for  the  first  three  months  of  2002  decreased  11.  7%  over  the  prior  year  period);  Sprint  Corp.,  S.  E.  C.  Form  10-  Q,  filed  Aug.  6,  2002  (voice
 revenues  from  its  Global  Markets  Division  decreased  12%  in  the  first  six-  months  of  2002  compared  with  the  corresponding  period  in  2001).
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 telecommunications  revenues,  as  opposed  to  historical  gross-  billed  revenues,  the  modified  mechanism  mitigates  the  anti-  competitive  effects  of  the  current  system.  This,  in  turn,  helps  to
 ensure  the  sufficiency  and  stability  of  the  universal  service  fund.
 31.  Although  concerns  have  been  expressed  about  the  potential  volatility  of  basing  contributions  on  projected  revenues,  the  mechanisms  we  adopt  today  minimize  such  concerns.
 The  change  to  a  projected  collected  revenue  approach  also  complements  measures  we  take  to  address  carrier  recovery  practices.  As  discussed  below,  we  conclude  that  carriers  may  not
 recover  their  federal  universal  service  contribution  costs  through  a  separate  line  item  that  includes  a  mark-  up  above  the  relevant  contribution  factor.  93  Contributors  currently  recover  from
 consumers  amounts  in  excess  of  the  relevant  assessment  rate  in  part  to  account  for  the  fact  that  they  are  obligated  to  pay  universal  service  assessments  on  gross-  billed  revenues  from  up  to  six
 months  prior.  By  eliminating  the  interval  between  the  reporting  of  revenue  and  assessment  on  that  revenue  and  by  excluding  uncollectibles  from  a  providers  contribution  obligation,  we
 eliminate  these  reasons  for  carriers  to  mark  up  universal  service  charges.
 32.  For  purposes  of  our  revised  contribution  methodology,  collected  end-  user  revenues  refers  to  gross-  billed  end-  user  interstate  and  international  telecommunications  revenues  less
 estimated  uncollectibles.  94  We  define  uncollectibles  as  the  percentage  of  interstate  and  international  telecommunications  revenues  that  the  contributor  anticipates  will  not  be  collected
 from  end-  user  customers.  95  Contributors  must  make  best  efforts  to  collect  interstate  and  international  telecommunications  revenues,  including  any  federal  universal  service  pass-  through
 charges,  before  characterizing  revenues  as  uncollectible.  As  we  discuss  below,  these  projected  uncollectibles  will  be  trued  up  against  actual  uncollectibles  reported  on  the  FCC  Form  499-  A.  96
 This  percentage  should  be  calculated  in  accordance  with  Generally  Accepted  Accounting  Principles.  97  Contributors  will  report  their  uncollectible  percent  on  the  Form  499  filings  (i.  e.,
 Forms  499-  Q  and  499-  A),  which  will  be  modified  to  collect  additional  information  about  uncollectibles  consistent  with  the  rules  adopted  in  this  Order.  98
 33.  Because  the  projected  collection  approach  we  adopt  is  similar  to  the  existing
 93  See  infra  paras.  45-  55.
 94  See  2001  Notice,  16  FCC  Rcd  at  9903,  para.  22  n.  57.
 95  Contributors  should  not  include  so-  called  unbillables  in  their  projections  of  uncollectibles.  See  infra.  para.  56.
 See  also  Letter  from  Patrick  H.  Merrick,  AT&  T  to  Marlene  H.  Dortch,  Federal  Communications  Commission,  filed  Dec.  4,  2002.
 96  See  infra.  paras.  36-  37.
 97  General  Accepted  Accounting  Principles  (GAAP)  encompasses  the  conventions,  rules,  and  procedures  necessary
 to  define  accepted  practice  in  the  preparation  of  financial  statements  in  the  United  States.  The  Financial  Accounting  Standards  Board  (FASB)  is  currently  the  primary  authority  to  establish  GAAP  for  all  companies.  Carriers  subject  to
 the  Uniform  System  of  Accounts  would  derive  this  figure  from  the  amount  recorded  in  Account  5301,  Uncollectible  Revenue  -  Telecommunications.  See  also  Qwest  Comments  to  the  2001  Notice  at  4.
 98  See  infra  Appendix  C.
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 contribution  methodology,  it  will  be  relatively  easy  for  both  USAC  and  contributors  to  administer  and  implement  this  modification  to  our  current  methodology  while  we  consider  other
 reforms  to  the  current  system.  Consistent  with  our  existing  policy,  contributors  will  continue  to  file  a  Form  499-  Q  on  a  quarterly  basis  and  the  Form  499-  A  on  an  annual  basis.  The  Commission
 and  USAC  will  also  continue  to  set  contribution  factors  on  a  quarterly  basis  using  the  same  timeframes  as  the  current  methodology.  Under  the  revised  methodology,  however,  in  addition  to
 filing  the  Form  499-  Q  to  report  historical  gross-  billed  revenues  from  the  prior  quarter,  contributors  also  will  project  their  gross-  billed  and  collected  end-  user  interstate  and  international
 telecommunications  revenues  for  the  upcoming  quarter.  We  believe  that  this  will  not  be  burdensome  for  contributors,  as  they  need  to  develop  such  projections  for  their  own  internal
 business  purposes.  Consistent  with  current  procedures,  contributors  will  have  the  option  of  certifying  as  to  the  confidential  nature  of  such  projections  on  the  FCC  Form  499-  Q.
 34.  We  note  that  we  retain  the  requirement  for  an  officer  to  certify  to  the  truthfulness  and  accuracy  of  the  FCC  Form  499-  A  submitted  to  the  Administrator.  We  also  will  require  an
 executive  officer  to  certify  that  the  projections  of  gross-  billed  and  collected  revenues  included  in  the  FCC  Form  499-  Q  represent  a  good-  faith  estimate  based  on  company  policies  and  procedures.
 To  ensure  that  contributors  report  correct  information  on  the  FCC  Form  499-  A,  we  require  all  contributors  to  maintain  records  and  documentation  to  justify  the  information  reported  in  the
 Form  499-  A  for  three  years.  We  also  will  require  filers  to  maintain  records  detailing  the  methodology  used  to  determine  projections  in  the  Form  499-  Q  for  three  years.  Filers  will  be
 required  to  provide  such  records  and  documentation  to  the  Commission  and  USAC  upon  request.  99
 35.  Under  the  modified  methodology,  contributors  will  continue  to  include  pass-  through  charges,  if  any,  as  part  of  their  projection  of  collected  end-  user  revenues.  In  order  to  eliminate
 circularity,  however,  the  Administrator  will  reduce  each  providers  contribution  obligation  by  a  circularity  discount  factor  representing  the  providers  projected  contributions  to  universal  service
 in  the  upcoming  quarter.  100  Prior  to  each  quarter,  we  will  announce  a  contribution  factor  equal  to  the  projected  universal  service  funding  requirement  for  the  upcoming  quarter  (projected  revenue
 requirement)  divided  by  an  adjusted  contribution  base.  101  As  discussed  below,  carriers  will  be  prohibited  from  marking  up  their  federal  universal  service  line  item  above  this  contribution
 factor.  102  In  order  to  calculate  an  individual  providers  contribution,  USAC  then  will  reduce  the
 99  We  also  note  that  persons  willfully  making  false  statements  in  the  Worksheets  can  be  punished  by  fine  or
 imprisonment  under  title  18  of  the  United  States  Code.  See  18  U.  S.  C.    1001.  100
 Under  current  procedures,  USAC  excludes  each  contributors  actual  universal  service  contributions  from  its  assessable  gross-  billed  interstate  telecommunications  revenues.  See  First  Further  Notice,  17  FCC  Rcd  at  3801-  02,
 paras.  113-  116.  This  eliminates  one  cause  for  contributors  to  recover  amounts  in  excess  of  the  contribution  factor.  101
 The  adjusted  contribution  base  will  equal  the  total  projected  collected  end-  user  interstate  telecommunications  revenues  for  the  upcoming  quarter  reported  on  the  FCC  Form  499-  Q  minus  the  projected  revenue  requirement.  One
 percent  will  be  deducted  to  account  for  contributions  that  USAC  cannot  collect  from  telecommunications  providers.  102
 See  infra  discussion  at  paras.  45-  51.
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 providers  unadjusted  contribution  obligation  (i.  e.,  its  projected  collected  end-  user  revenues  times  the  contribution  factor)  by  an  amount  equal  to  its  contribution  obligation  times  the
 circularity  discount  factor.  The  circularity  discount  factor  will  equal  one  minus  an  amount  equal  to  the  adjusted  contribution  base  divided  by  total  projected  end-  user  interstate  and  international
 telecommunication  revenues.  USAC  will  send  contributors  a  firm  bill  each  month  based  on  the  above-  described  calculation.  Therefore,  we  do  not  anticipate  the  need  for  a  reserve  fund,
 because  contributors  will  be  billed  monthly  based  on  their  reported  projected  collected  revenues,  the  same  amounts  used  to  calculate  the  contribution  factor.
 36.  Although  our  modified  mechanism  relies  on  the  ability  of  contributors  to  project  gross-  billed  and  collected  revenues  on  a  quarterly  basis,  it  only  requires  contributors  to  project
 for  the  upcoming  quarter,  which  should  minimize  the  potential  for  inaccurate  estimates.  Similar  to  existing  policies,  contributors  will  have  an  opportunity  to  correct  their  projections  up  to  45
 days  after  the  due  date  of  each  Form  499-  Q  filing  and  through  the  annual  true-  up  process.  We  find  it  appropriate  to  modify  the  current  requirement  that  revisions  be  filed  by  the  due  date  of  the
 next  Form  499-  Q  (which  effectively  provides  90  days  for  revisions)  in  light  of  the  changes  to  the  methodology  we  adopt  today.  In  particular,  we  believe  it  necessary  to  eliminate  incentives  for
 contributors  to  revise  their  revenue  projections  after  the  announcement  of  the  contribution  factor  for  the  upcoming  quarter  in  order  to  reduce  their  contribution  obligations  and  to  otherwise  reduce
 the  likelihood  of  a  shortfall  in  universal  service  funding  in  a  given  calendar  quarter.  USAC  will  use  the  actual  revenue  data  provided  by  contributors  on  the  FCC  Form  499-  A  to  perform  annual
 true-  ups  to  the  quarterly  projected  revenue  data  submitted  by  contributors  during  the  prior  calendar  year.  103  As  necessary,  USAC  will  then  refund  or  collect  from  contributors  any  over-payments
 or  under-  payments.  If  the  combined  quarterly  projected  revenues  reported  by  a  contributor  are  greater  than  those  reported  on  its  annual  revenue  report  (Form  499-  A),  then  a
 refund  will  be  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  annual  revenue  report  (Form  499-  A),  then  USAC  will  collect  the  difference  from  the  contributor  using  an  average  of  the  two  highest  contribution  factors  from  that  year.
 This  approach  is  consistent  with  the  existing  system.  104
 37.  We  direct  USAC  to  begin  implementation  of  the  revised  reporting  requirements,  consistent  with  our  modifications  to  ensure  that  carriers  begin  contributing  based  on  projected
 collected  end-  user  revenues,  in  the  next  quarterly  filing  to  occur  on  February  1,  2003.  Therefore,  the  contribution  factor  for  the  second  quarter  of  2003  will  be  based  on  projected  collected  end-
 user  interstate  and  international  telecommunications  revenues.  As  part  of  the  transition  to  the  modified  contribution  system,  contributors  must  begin  providing  information  concerning  their
 projected  collected  end-  user  interstate  and  international  telecommunications  revenues  (i.  e.,  anticipated  end-  user  revenues  and  estimated  uncollectibles)  for  the  upcoming  quarter  with  the
 103  See  Telecommunications  Reporting  Worksheet,  FCC  Form  499-  A,  OMB  3060-  0855  (February  2002)  (FCC  Form
 499-  A).  We  will  revise  FCC  Form  499-  A  at  a  later  date,  consistent  with  the  rules  and  policies  outlined  in  this  Order.  104
 See  generally  Quarterly  Reporting  Order,  16  FCC  Rcd  at  5752-  53,  para.  12.
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 filing  of  the  modified  499-  Q  on  February  1,  2003,  to  reflect  projections  for  the  second  quarter  of  2003.  In  order  to  provide  USAC  with  a  full  year  of  projected  revenues  with  which  to  conduct
 the  annual  true  up  for  2003  revenues,  contributors  also  will  be  required  to  include  projected  collected  revenues  for  the  first  quarter  of  2003  on  the  499-  Q  that  will  be  filed  on  February  1,
 2003.  As  discussed  above,  subsequent  499-  Qs  will  only  include  historical  revenues  from  the  prior  calendar  quarter  and  projected  revenues  for  the  upcoming  quarter.  The  FCC  Form  499-  A,
 which  must  be  filed  on  April  1,  2003,  will  include  historical  gross-  billed  revenues  for  the  period  of  January  2002  through  December  2002.  Subsequent  FCC  Form  499-  As  will  include  historical
 gross-  billed  revenues  and  actual  collected  end-  user  interstate  and  international  telecommunications  revenues  for  the  relevant  reporting  year.
 38.  At  this  time,  we  decline  to  adopt  a  pure  collect-  and-  remit  system,  as  proposed  by  some  commenters.  105  Under  such  a  system,  carriers  would  include  a  prescribed  universal  service
 contribution  line-  item  on  customer  bills  and  would  only  be  required  to  remit  to  USAC  those  contributions  actually  collected  from  end-  user  customers.  Although  such  a  collect-  and-  remit
 system  would  eliminate  the  need  for  carriers  to  mark-  up  line  items  to  reflect  uncollectibles  and  other  factors,  we  share  concerns  about  such  a  proposal  raised  in  the  record.  106
 39.  This  form  of  a  collect-  and-  remit  system  would  likely  reduce  incentives  for  carriers  to  recover  universal  service  contributions  from  their  customers,  thereby  risking  the  overall
 predictability  and  sufficiency  of  the  universal  service  fund.  Unlike  the  revised  methodology  we  adopt,  a  provider  would  not  be  required  to  contribute  unless  the  customer  actually  paid  the
 universal  service  charge  on  its  bill.  Thus,  this  form  of  a  collect-  and-  remit  system  would  relieve  carriers  of  any  risk  associated  with  the  recovery  of  universal  service  contributions,  which  would
 lessen  carrier  incentives  to  collect  such  charges.  107  This,  in  turn,  would  make  it  more  difficult  to  maintain  a  predictable,  sufficient  fund.  In  contrast,  under  our  modified  revenue-  based
 methodology,  if  a  customer  refuses  to  pay  a  universal  service  pass-  through  charge  on  its  bill,  but  pays  the  remaining  charges  on  the  bill,  the  carriers  assessment  would  only  be  reduced  by  the
 percentage  of  its  total  revenues  that  it  could  not  collect  from  that  customer.  108  In  addition,
 105  See  ALTS  Comments  at  4;  AT&  T  Comments  at  8,  10-  11;  AWS  Comments  at  11-  12;  CoSUS  Comments  at  14;
 Nextel  Comments  at  22-  23;  Sprint  Comments  at  3;  Verizon  Comments  at  5;  Working  Assets  Comments  at  5-  6;  WorldCom  Comments  at  7-  8.
 106  See,  e.  g.,  ACS  Reply  Comments  at  10  (asserting  that  collect  and  remit  rewards  inefficiency  and  unfairly  shifts
 burden  to  companies  that  do  collect);  NRTA  &  OPASTCO  Comments  at  22-  23  (stating  that  a  collect  and  remit  system  threatens  the  sufficiency  and  predictability  of  universal  service  funding,  and  violates  section  254(  d)  by
 placing  contribution  obligations  on  end-  users);  Texas  Reply  Comments  at  2-  3  (indicating  that  collect  and  remit  system  would  violate  section  254  of  the  Act  by  impermissibly  shifting  contribution  obligations  to  end-  users);  USCC
 Comments  at  13-  14  (stating  that  a  collect  and  remit  system  would  lead  to  the  demise  of  the  federal  universal  service  fund).
 107  See,  e.  g.,  ACS  Reply  Comments  at  10;  Time  Warner  et  al.  Comments  at  20;  USCC  Comments  at  13-  14.
 108  For  example,  if  a  customer  refused  to  pay  a  $1.  00  line  item,  but  paid  the  remaining  $9.  00  of  its  total  $10.  00  bill,
 the  carrier  would  discount  its  assessable  revenues  by  its  10%  uncollectible  percentage.  Assuming  a  10  percent  contribution  factor,  it  would  contribute  $0.  90  for  that  customer  ($  9.00  x  .10).  Under  a  collect  and  remit  system,  if  a
 (continued....)
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 because  we  would  not  be  able  to  predict  with  accuracy  how  many  assessments  contributors  would  collect  from  end-  user  customers  and  remit  to  USAC  in  a  given  calendar  quarter,  a  collect-and-
 remit  system  would  create  the  possibility  of  shortfalls  in  the  universal  service  fund.  USAC  would  need  to  establish  a  significant  reserve  fund  to  account  for  such  potential  shortfalls.  109  This
 form  of  a  collect-  and-  remit  system  would  also  pose  complex  implementation  details  (for  example,  how  carriers  would  treat  partial  payment  of  customer  bills)  that  we  avoid  by  adopting
 our  modified  methodology.
 B.  Recovery  of  Universal  Service  Contributions
 40.  In  this  Order,  we  also  take  steps  to  address  consumer  concerns  regarding  disparate  contributor  recovery  practices.  We  conclude  that  telecommunications  carriers  may  not  recover
 their  federal  universal  service  contribution  costs  through  a  separate  line  item  that  includes  a  mark  up  above  the  relevant  contribution  factor.  Contributing  carriers  still  will  have  the  flexibility  to
 recover  their  contribution  costs  through  their  end-  user  rates  if  they  so  choose  and  to  recover  any  administrative  or  other  costs  they  currently  recover  in  a  universal  service  line-  item  through  their
 customer  rates  or  through  another  line  item.  110  Contributors  will  also  have  the  flexibility  to  express  the  line  item  either  as  a  flat  amount  or  a  percentage,  as  long  as  the  line  item  does  not
 exceed  the  total  amount  associated  with  the  contribution  factor,  or  the  actual  percentage  thereof.  Consistent  with  the  universal  service  goals  of  the  Act,  we  also  extend  the  prohibition  on  recovery
 of  universal  service  contributions  from  Lifeline  customers  to  all  ETCs,  including  competitive  local  exchange  carriers  (CLECs)  and  CMRS  providers  designated  as  ETCs.
 1.  Recovery  Limitations
 a.  Background
 41.  The  statutory  framework  established  by  Congress  in  the  Act  governs  the  recovery  of  universal  service  contributions  by  telecommunications  carriers.  Sections  201(  b)  and  202(  a)
 govern  common  carrier  services  and  charges.  111  Section  201(  b)  requires  that  all  charges,  practices,  classifications,  and  regulations  for  and  in  connection  with  interstate  communications
 (...  continued  from  previous  page)  customer  refused  to  pay  the  $1.  00  federal  universal  service  line  item,  the  carrier  would  contribute  nothing  for  that
 customer.  109
 In  contrast,  under  our  modified  methodology,  we  will  be  able  to  predict  with  a  greater  degree  of  accuracy  the  total  amount  of  contributions  in  a  given  quarter  because  the  amount  of  a  providers  contribution  will  be  based  on
 projected  collected  revenues  reported  on  the  FCC  Form  499-  Q.  Therefore,  a  reserve  fund  will  not  be  necessary.  110
 See  47  C.  F.  R.    69.  131,  69.  158.  111
 47  U.  S.  C.    201(  b),  202(  a).  Because  sections  201  and  202  of  the  Act  only  apply  to  common  carriers  or  telecommunications  carriers,  and  not  to  the  broader  category  of  telecommunications  providers  that  are  currently
 subject  to  universal  service  contribution  obligations  pursuant  to  the  Commissions  authority  under  section  254(  d)  of  the  Act,  throughout  this  section  we  refer  to  the  recovery  obligations  of  carriers,  not  contributors.  See  id.;  see
 also  47  U.  S.  C.    153(  44),  153(  46).
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 Federal  Communications  Commission  FCC  02-  329
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 service  be  just  and  reasonable,  and  gives  the  Commission  jurisdiction  to  enact  rules  to  implement  that  requirement.  112  Section  202(  a)  prohibits  unjust  or  unreasonable  discrimination  in
 connection  with  the  provision  of  communications  services.  Section  202(  a)  also  prohibits  providers  from  making  or  giving  any  undue  or  unreasonable  preference  or  advantage  to  any
 particular  person,  class  of  persons,  or  locality,  or  to  subject  any  particular  person,  class  of  persons,  or  locality  to  any  undue  or  unreasonable  prejudice  or  disadvantage.
 42.  As  discussed  above,  carriers  currently  have  the  flexibility  to  recover  their  contribution  obligations  in  any  manner  that  is  equitable  and  nondiscriminatory.  113  To  the  extent  that  carriers
 recover  their  contribution  costs  through  a  separate  line  item  on  customer  bills,  they  must  accurately  describe  the  nature  of  the  charge.  114  In  the  Universal  Service  Order,  the  Commission
 rejected  proposals  to  impose  a  mandatory  end-  user  universal  service  surcharge  on  customer  bills,  stating  that  a  mandatory  surcharge  might  affect  contributors  flexibility  to  offer  bundled  services
 or  new  pricing  options,  possibly  resulting  in  fewer  options  for  consumers.  115
 43.  In  the  First  Further  Notice,  we  sought  comment  on  whether  and  how  to  regulate  the  recovery  of  universal  service  contribution  costs.  We  also  noted  that,  in  looking  at  whether  the
 current  system  was  effective  in  carrying  out  the  Act,  we  must  balance  the  duty  to  make  sure  the  collection  process  is  fair  and  reasonable  to  consumers  with  the  need  to  give  carriers  the
 maximum  flexibility  to  respond  to  market  forces.  116  We  also  expressed  concern  that  even  though  the  contribution  factor  is  uniform  for  all  interstate  telecommunications  carriers,  recovery
 practices  vary  widely  among  different  carriers,  and  among  different  customer  classes.  117  These  concerns  were  shared  by  many  commenters  in  this  proceeding.  For  example,  commenters
 expressed  concern  that  disparate  recovery  of  universal  service  contributions  confuses  consumers.  118  Other  commenters  suggested  that  the  Commission  require  that  contributing  carrier
 line  items  match  the  contribution  factor.  119  Other  commenters,  however,  urged  that  the  Commission  allow  carriers  to  retain  flexibility  in  their  contribution  recovery  practices.  120
 44.  In  the  First  Further  Notice,  we  sought  comment  on  proposals  to  reconcile  concerns
 112  47  U.  S.  C.    201(  b).
 113  See  Universal  Service  Order  12  FCC  Rcd  at  9206-  07,  para  844.
 114  Id.  at  9199,  para.  829,  9211-  12,  para.  855.
 115  See  id.
 116  See  First  Further  Notice,  17  FCC  Rcd  at  3791,  para.  89.
 117  Id.  at  3760-  61,  paras.  18-  19.
 118  See,  e.  g.,  Ad  Hoc  Oct.  3  Ex  Parte  at  5-  6;  CPUC  Comments  at  14;  CU  et  al.  Comments  at  20-  21;  GSA  Comments
 at  8-  9;  NASUCA  Comments  at  17;  SBC  Comments  at  4;  Working  Assets  Comments  at  6.  119
 CPUC  Comments  at  14;  CU  et  al.  Comments  at  20;  GSA  Comments  at  8;  Home  et  al.  Comments  at  13;  NASUCA  at  17;  Texas  PUC  Comments  at  2;  Working  Assets  Comments  at  6.
 120  See,  e.  g.,  AT&  T  Comments  at  7;  Sprint  Comments  at  5;  Verizon  Comments  at  8.
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 Federal  Communications  Commission  FCC  02-  329
 about  the  equity  and  transparency  of  carrier  recovery  practices  with  the  need  for  carriers  to  retain  flexibility  to  respond  to  market  forces.  Specifically,  we  sought  comment  on  whether  to  continue
 providing  carriers  with  flexibility  in  the  recovery  of  universal  service  contribution-  related  costs.  Alternatively,  we  asked  whether  to  require  carriers  that  elect  to  recover  contributions  through  a
 separate  line  item  to  make  that  line-  item  amount  or  percentage  rate  uniform  for  all  customers.  121  We  also  sought  comment  on  whether  to  continue  allowing  carriers  to  mark  up  their  universal
 service  line  items  to  account  for  uncollectibles  and  administrative  costs.  In  addition,  we  sought  comment  on  whether  to  require  carriers  that  elect  to  impose  a  separate  universal  service  line-  item
 charge  to  describe  the  line  item  as  the  Federal  Universal  Service  Fee.  Finally,  we  asked  whether  to  prohibit  all  telecommunications  carriers  from  recovering  universal  service  costs  from
 Lifeline  customers.  122
 b.  Discussion
 45.  In  this  Order,  consistent  with  the  goals  of  the  Act  and  this  Commission  for  universal  service,  we  adopt  rules  related  to  contribution  recovery  that  will  ensure  that  federal  universal
 service  line  items  on  customer  bills  accurately  reflect  the  extent  of  a  carriers  contribution  obligations,  while  at  the  same  time  maximizing  fairness  and  flexibility  for  carriers.  First,  in  light
 of  the  modifications  to  the  contribution  methodology  adopted  herein,  beginning  April  1,  2003,  carriers  may  not  mark  up  universal  service  line-  item  amounts  above  the  relevant  contribution
 factor.  Second,  we  extend  our  current  prohibition  on  the  recovery  of  contribution  costs  from  Lifeline  customers  to  all  ETCs.
 46.  Although  the  contribution  factor  is  uniform  for  all  contributors,  universal  service  line  items  currently  vary  widely  among  carriers,  and  often  significantly  exceed  the  amount  of  the
 contribution  factor.  The  contribution  factor  for  the  fourth  quarter  of  2002  is  approximately  7.28  percent,  but  the  federal  universal  service  line  items  assessed  on  residential  customers  by  the  three
 largest  interexchange  carriers  significantly  exceed  this  amount.  123  Interexchange  carriers  have  attributed  this  difference  to  the  lag  between  the  reporting  and  assessment  of  revenues,
 uncollectibles,  and  administrative  costs.  Moreover,  carriers  may  charge  their  business  customers  lower  line  items  than  they  charge  residential  consumers,  even  though  the  assessment  rate  is
 uniform.  124
 121  See  First  Further  Notice,  17  FCC  Rcd  at  3794,  paras.  95-  96.
 122  Id.  at  3793-  94,  para.  94.
 123  See  Proposed  Fourth  Quarter  2002  Universal  Service  Contribution  Factor,  Public  Notice,  CC  Docket  No.  96-  45,
 DA  02-  2221  (rel.  Sept.  10,  2002)  (Fourth  Quarter  2002  Contribution  Public  Notice)  (providing  second  quarter  2002  estimate  of  interstate  and  international  end-  user  telecommunications  revenues  of  $18.  488  billion).
 124  See,  e.  g.,  http://  www.  att.  com  (AT&  Ts  Universal  Connectivity  Charge  for  residential  customers  is  11  percent,
 while  its  charge  for  business  customers  is  9.6  percent);  Sprint  Terms  and  Conditions  of  Service,  available  at  http://  www.  sprint.  com  (Sprints  Carrier  Universal  Service  Charge  for  residential  customers  is  9.6  percent,  while
 its  charge  for  business  customers  is  8.3  percent);  MCI  General  Service  Agreements,  available  at  http://  www.  mci.  com  (MCIs  Federal  Universal  Service  Fee  for  residential  customers  is  9.  9  percent,  while  its
 (continued....)
 25
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 47.  Such  practices  are  not,  however,  confined  to  the  major  interexchange  carriers.  An  analysis  of  federal  universal  service  line-  item  charges  across  industry  segments  reveals  that  such
 charges  often  bear  little  or  no  relationship  to  the  amount  of  the  assessment.  For  example,  several  mobile  wireless  providers  include  flat  universal  service  line-  item  charges  on  customer  bills  that
 bear  little  or  no  apparent  relationship  to  an  individual  customers  interstate  calling  or  the  amount  of  interstate  telecommunications  revenues  the  mobile  telecommunications  carrier  reports  to
 USAC,  the  fund  administrator.  In  addition,  some  incumbent  LECs  have  flat  federal  universal  service  line-  item  charges  that  exceed  the  product  of  their  subscriber  line  charge  and  the  relevant
 contribution  factor.  125  Several  carriers  also  charge  customers  large,  up-  front  universal  service  fees  that  are  apparently  unrelated  to  the  amount  of  their  assessment  for  that  customer.  126  In
 addition,  some  interexchange  carriers  entirely  exempt  specific  customers  or  customer  classes,  such  as  dial-  around  customers,  from  universal  service  pass-  through  charges.  127
 48.  We  acknowledge  that  carriers  in  the  past  may  have  marked  up  their  universal  service  line  items  above  the  relevant  assessment  amount  to  account  for  uncollectibles  and  other  factors.
 We  are  concerned,  however,  that  the  flexibility  provided  under  our  current  rules  may  have  enabled  some  companies  to  include  other  completely  unrelated  costs  in  their  federal  universal
 service  line  items.  Some  commenters,  for  example,  allege  that  carriers  include  service-  related  costs  in  their  federal  universal  service  line  items  in  order  to  reduce  their  service-  related
 charges.  128
 (...  continued  from  previous  page)  charge  for  small  business  customers  is  9.3  percent).  Effective  January  1,  2003,  MCI  has  announced  plans  to  further
 increase  its  Federal  Universal  Service  Fee  for  residential  customers  from  9.9  percent  to  10.  5  percent.  See  http://  www.  mci.  com/  mci_  service_  agreement/  res_  most_  recent_  info.  jsp.
 125  See,  e.  g.,  BellSouth  Telecommunications,  Inc.,  Tariff  FCC  No.  1,  Sections  4.7(  A),  issued  Jun.  17,  2002,  4.7(  E),
 issued  Sep.  16,  2002  ($  0.48  per  line  per  month  "Federal  Universal  Service  Charge"  for  residential  customers  equivalent  to  an  assessment  rate  of  approximately  8  percent  based  on  subscriber  line  charge  of  $6.  00  per  primary
 line  per  month);  Pacific  Bell  Telephone  Company  Tariff  FCC  No.  1,  Sections  4.  7(  A),  issued  Jun.  17,  2002,  4.7(  G),  issued  Sep.  16,  2002  ($  0.42  per  line  per  month  "Federal  Universal  Service  Fee"  for  residential  customers  in
 California  equivalent  to  an  assessment  rate  of  approximately  9.38  percent  based  on  subscriber  line  charge  of  $4.  48  per  line  per  month);  Qwest  Corporation  Tariff  FCC  No.  1,  Sections  4.7.1,  issued  Aug.  5,  2002,  13.  21,  issued  Jun.
 18,  2002  ($  0.56  per  line  per  month  "Federal  Universal  Service  End  User  Charge"  for  residential  customers  in  Iowa  equivalent  to  an  assessment  rate  of  approximately  11.5  percent  based  on  subscriber  line  charge  of  $4.  87  per  line  per
 month);  Verizon  Tariff  F.  C.  C.  No.  1,  Sections  4.1.7.1(  A),  issued  Jun.  28,  2002,  4.1.7.1(  H),  issued  Oct.  15,  2002  ($  0.59  per  line  per  month  "Federal  Universal  Service  Fund"  surcharge  for  residential  customers  in  the  District  of
 Columbia  equivalent  to  an  assessment  rate  of  approximately  15.  28  percent  based  on  subscriber  line  charge  of  $3.  86  per  line  per  month).
 126  Under  one  carriers  surcharge,  a  customer  that  makes  a  $0.  19  one  minute  call  would  be  charged  a  $1.  20  (or  over
 600%)  universal  service  fee.  For  examples  of  such  practices  visit  <http://  www.  1010phonerates.  com>.  127
 See  Susan  McGovern,  AT&  T  Boosts  Subscriber  Charges  to  Recoup  USF  Contributions,  TR  DAILY,  Jan.  3,  2002,  at  3.
 128  See,  e.  g.,  Ad  Hoc  Comments  at  19-  21;  CU  et  al.  Comments  at  18;  NASUCA  Comments  at  17  (asserting  that
 carriers  game  their  universal  service  fund  line-  items).
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 49.  Based  on  our  experience  over  the  course  of  the  last  three  years,  we  believe  it  is  necessary  to  provide  greater  clarity  about  the  practices  we  deem  reasonable  to  protect  consumers.
 In  light  of  the  changes  to  the  contribution  methodology  adopted  herein,  we  conclude  that  the  practice  of  marking  up  federal  universal  service  line-  item  charges  above  the  relevant  assessment
 amount  will  be  prohibited  prospectively.  We  reject  proposals  to  address  such  practices  on  a  case-  by-  case  basis  through  enforcement  proceedings.  129  Using  our  enforcement  authority  to
 address  such  a  systemic  problem  would  not  be  an  efficient  use  of  the  Commissions  resources.  We  conclude  that  a  rule  of  general  application  will  be  far  more  effective  in  ensuring  that  such
 practices  do  not  occur  in  the  future  after  we  have  adjusted  our  contribution  methodology.  Once  carriers  contributions  are  assessed  on  the  basis  of  projected  collected  interstate  and  international
 revenues,  carriers  may  not  mark  up  federal  universal  service  line-  item  charges  above  the  relevant  contribution  factor.  This  position  is  supported  by  the  state  members  of  the  Joint  Board,  as  well
 as  a  number  of  commenters.  130  Any  carrier  that  applies  a  federal  universal  service  line-  item  charge  above  the  relevant  assessment  amount  could  be  subject  to  enforcement  action  for
 violating  the  rules  we  adopt  herein.
 50.  The  elimination  of  mark-  ups  in  carrier  universal  service  line  items  will  also  alleviate  end-  user  confusion  regarding  the  universal  service  line  item.  Specifically,  the  amount  of  a
 carriers  federal  universal  service  line  item  will  not  exceed  the  relevant  interstate  telecommunications  portion  of  the  bill  times  the  relevant  contribution  factor.  This  result  should
 eliminate  a  significant  portion  of  the  consumer  frustration  and  confusion  pertaining  to  universal  service  line  items.  This  requirement  also  should  foster  a  more  competitive  market  by  better
 enabling  customers  to  comparison  shop  among  carriers.  This  furthers  our  goal  of  promoting  transparency  for  the  end  user  in  order  to  facilitate  informed  customer  choice.
 51.  Therefore,  beginning  April  1,  2003,  carriers  that  elect  to  recover  their  contribution  costs  through  a  separate  line  item  may  not  mark  up  the  line  item  above  the  relevant  contribution
 factor.  To  the  extent  that  a  carrier  recovers  its  contribution  costs  through  a  line  item,  that  line  item  may  not  exceed  the  relevant  assessment  rate.  So,  for  example,  if  the  contribution  factor  is
 7.28  percent,  a  carriers  federal  universal  service  line-  item  cannot  exceed  7.  28  percent  of  the  total  amount  of  the  interstate  portion  of  charges  for  telecommunications  service  on  each
 customers  bill.  131  Likewise,  if  a  carrier  chooses  to  express  its  federal  universal  service  line-  item  charge  as  a  flat  amount,  that  amount  may  not  exceed  the  interstate  telecommunications  portion  of
 the  bill  times  the  relevant  contribution  factor.  In  addition,  we  no  longer  will  permit  carriers  
 129  See,  e.  g.,  Time  Warner  et  al.  Comments  at  25-  26.
 130  See,  e.  g.,  State  Joint  Board  Ex  Parte  at  3.
 131  For  local  exchange  carriers,  the  subscriber  line  charge  represents  the  interstate  portion  of  the  bill.  For
 interexchange  carriers,  all  charges  associated  with  interstate  calling  are  interstate.  For  CMRS  providers,  the  portion  of  the  total  bill  that  is  deemed  interstate  will  depend  on  whether  the  carrier  reports  actual  revenues  or  utilizes  the
 safe  harbor.  For  wireless  telecommunications  providers  that  avail  themselves  of  the  interim  safe  harbors,  the  interstate  telecommunications  portion  of  the  bill  would  equal  the  relevant  safe  harbor  percentage  times  the  total
 amount  of  telecommunications  charges  on  the  bill.
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 whether  wireline  or  wireless    to  average  contribution  costs  across  all  end-  user  customers  when  establishing  federal  universal  service  line-  item  amounts.  132  Similarly,  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.
 52.  We  recognize  that  these  changes  may  require  modifications  in  billing  practices  for  certain  carriers.  Accordingly,  this  requirement  will  not  become  effective  until  April  1,  2003.
 We  will  monitor  closely  carrier  compliance  with  these  new  requirements  and  will  take  appropriate  action  if  it  appears  carriers  are  not  complying  with  our  rules.
 53.  We  stress  that  this  rule  only  applies  to  carriers  that  choose  to  recover  their  contribution  costs  through  a  line  item.  Carriers  will  continue  to  have  flexibility  to  recover  their
 contribution  costs  through  their  rates  or  through  a  line  item.  133  In  this  way,  we  accommodate  entities  such  as  payphone  and  prepaid  wireless  providers  that  are  unable,  for  practical  or  business
 reasons,  to  recover  universal  service  contribution  costs  through  a  line  item.  In  addition,  carriers  will  have  the  flexibility  to  express  the  line  item  either  as  a  flat  amount  or  as  a  percentage,  as  long
 as  the  line  item  does  not  exceed  the  interstate  telecommunications  portion  of  a  customers  bill  times  the  relevant  contribution  factor.
 54.  We  have  taken  steps  in  this  Order  to  address  some  of  the  reasons  for  mark-  ups  to  federal  universal  service  line-  item  charges  by  eliminating  the  interval  between  the  accrual  and
 assessment  of  revenues  and  allowing  carriers  to  reduce  their  assessable  revenues  by  an  uncollectible  percentage.  134  We  also  previously  have  eliminated  circularity  from  contribution
 assessment  by  excluding  contributors  actual  universal  service  contributions  from  their  assessable  revenues  base.  135  We  acknowledge  that  contributors  may  continue  to  incur  some
 administrative  costs  associated  with  the  collection  of  the  universal  service  charges  from  end  users  that  may  not  be  recovered  through  a  federal  universal  service  line  item.  We  clarify  that  we
 do  not  believe  it  appropriate  for  carriers  to  characterize  these  administrative  and  other  costs  as  regulatory  fees  or  universal  service  charges  after  April  1,  2003.  These  costs,  in  our  view,  are  no
 different  than  other  costs  associated  with  the  business  of  providing  telecommunications  service  and  may  be  recovered  through  rates  or  other  line  item  charges.  We  conclude  it  is  unreasonable
 to  describe  an  amount  as  a  universal  service  regulatory  fee  when  that  amount  varies  from  the
 132  Carriers  may  charge  all  their  end-  user  customers  the  same  flat  federal  universal  service  line-  item  charge  so  long
 as  that  amount  does  not  exceed  the  contribution  factor  times  the  interstate  telecommunications  revenues  derived  from  any  individual  customer.
 133  We  note  that  incumbent  local  exchange  carriers  are  required  to  recover  their  federal  universal  service
 contribution  costs  through  a  line  item,  which  may  be  combined  for  billing  purposes  with  another  rate  element.  See  47  C.  F.  R.    69.  131,  69.  158.
 134  See  supra  paras.  29-  32.
 135  See  First  Further  Notice,  17  FCC  Rcd  at  3801,  para.  113.  We  now  instead  exclude  contributors  projected
 contributions  in  order  to  address  the  circularity  issue.  See  supra  para.  35.
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 contribution  factor  mandated  by  the  regulator.  Carriers,  therefore,  may  not  include  administrative  costs  in  line  items  that  are  characterized  as  federal  universal  service  contribution
 recovery  charges.  In  particular,  a  carrier  may  not  describe  an  amount  as  a  regulatory  fee  relating  to  universal  service  when  that  amount  exceeds  the  contribution  factor  times  the  interstate
 telecommunications  revenues  on  the  customers  bill  after  April  1,  2003.
 55.  Carriers  that  are  not  rate-  regulated  by  this  Commission,  namely  interexchange  carriers,  CMRS  providers,  and  competitive  local  exchange  carriers,  will  have  the  same  flexibility
 that  exists  today  to  recover  legitimate  administrative  and  other  related  costs.  In  particular,  such  costs  can  always  be  recovered  through  these  carriers  rates  or  through  other  line  items.  The  rule
 that  we  adopt  today  does  not  prevent  any  legitimate  cost  recovery.  Administrative  costs  of  incumbent  local  exchange  carriers  (ILECs)  subject  to  rate-  of-  return  regulation  solely  related  to
 implementation  and  compliance  with  the  contribution  methodology  will  be  included  in  their  cost  accounting  and  therefore  will  be  part  of  their  end-  user  revenue  requirement.  As  for  carriers
 subject  to  price  cap  regulation,  we  do  not  anticipate  that  administrative  costs  associated  with  our  contribution  methodology  will  be  extraordinary.  136  Nothing  in  this  Order  modifies  our  existing
 Truth-  in-  Billing  requirements.  137
 56.  We  are  not  persuaded  by  AT&  Ts  argument  that  it  has  no  means  to  recover  certain  contribution  costs  it  categorizes  as  unbillable.  AT&  T  has  argued  that  it  is  unable  to  recover  its
 universal  service  contribution  costs  when  certain  local  exchange  carriers  perform  billing  functions  on  its  behalf,  but  do  not  include  a  universal  service  line-  item  charge  on  AT&  Ts
 portion  of  the  bill.  138  For  example,  AT&  T  states  that  it  is  prevented  from  including  a  separate  universal  service  line-  item  charge  on  the  bills  of  presubscribed  customers  served  by  certain  rural
 LECs.  139  Likewise,  AT&  T  states  that  it  is  unable  to  pass  through  universal  service  contribution  costs  when  Regional  Bell  Operating  Companies  and  other  incumbent  LECs  bill  on  AT&  Ts
 behalf  for  dial-  around,  collect  calling,  and  other  casual  calling  services  on  customer  accounts  for  which  AT&  T  is  not  the  presubscribed  interexchange  carrier.  140
 57.  We  reiterate  that  carriers,  such  as  AT&  T,  that  are  not  rate  regulated  remain  free  to  recover  fully  their  universal  service  contributions  from  their  customers.  Indeed,  we  note  that
 other  interexchange  carriers  dispute  AT&  Ts  argument  that  such  amounts  cannot  be
 136  See  47  C.  F.  R.    61.  45(  d)(  1)(  vi).
 137  See  TIB  Order  and  NPRM,  14  FCC  Rcd  7510,  para.  28,  7516,  para.  37,  7522-  25,  paras.  49-  53.  See  also  47
 C.  F.  R.    64.  2401.  138
 See  Letter  from  Patrick  H.  Merrick,  AT&  T,  to  Marlene  H.  Dortch,  Federal  Communications  Commission,  filed  Dec.  4,  2002  at  4  (AT&  T  Dec.  4  Ex  Parte).  But  see  Letter  from  Marybeth  M.  Banks,  Sprint,  to  Marlene  H.  Dortch,
 Federal  Communications  Commission,  filed  Dec.  3,  2002  (Sprint  Dec.  3  Ex  Parte).  139
 See  AT&  T  Dec.  4  Ex  Parte  at  4.  140
 Id.
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 recovered.  141  Therefore,  we  conclude  there  is  no  need  to  permit  carriers  to  treat  such  revenues  as  uncollectibles.  142  Our  decision  to  continue  to  assess  such  interstate  revenues  is  competitively
 neutral,  because  all  carriers  will  be  assessed  at  the  same  contribution  factor  for  such  revenues  and  will  be  subject  to  the  same  contribution  recovery  limitations.  Moreover,  we  have  concerns
 with  any  approach  that  would  remove  a  significant  amount  of  revenues  from  the  contribution  base  for  business  reasons  that  are  within  a  contributors  control.
 58.  We  find  that,  in  such  instances,  interexchange  carriers  may,  consistent  with  sections  201  and  254(  g),  charge  customers  a  combined  charge  that  includes  service-  related  and  federal
 universal  service  recovery  charges.  Thus,  for  example,  if  a  customers  long-  distance  charges  totaled  $15  and  the  contribution  factor  was  10  percent,  the  interexchange  carrier  could  direct  the
 LEC  to  bill  the  customer  one  $16.50  charge.  The  label  for  the  combined  charge,  however,  must  not  indicate  that  the  charge  consists  solely  of  a  federal  universal  service  charge  and  must  not
 otherwise  be  misleading.  The  interexchange  carrier  must  also  inform  customers  of  the  component  amounts  of  the  combined  charge  upon  request  and  retain  documentation  of  the
 component  amounts  for  three  years.  We  also  find  that  it  would  be  unreasonable  for  a  LEC,  when  it  is  performing  a  billing  and  collection  function  for  an  interexchange  carrier,  to  refuse  to
 implement  in  a  timely  manner  any  rate  changes  necessitated  by  the  imposition  of  such  combined  interexchange  carrier  charges.
 59.  In  addition,  AT&  T  has  asserted  that  it  may  be  prevented  by  existing  contracts  from  recovering  its  universal  service  contributions  from  certain  business  customers.  143  We  find  that
 the  recovery  limitations  adopted  herein  constitute  a  change  in  universal  service  policy  that  was  not  anticipated  at  the  time  existing  contracts  were  signed.  Therefore,  we  conclude  contributors
 should  be  afforded  a  fresh  look  at  existing  contracts  and  may  be  permitted  to  renegotiate  contractual  terms  that  prohibit  the  pass  through  of  universal  service  recovery  charges.
 60.  We  emphasize  that  the  rules  we  adopt  today  do  not  require  the  filing  of  new  tariffs,  but  may  result  in  revisions  to  existing  tariffs.  We  note  that  the  Commission  has  detariffed  most
 interstate  services  offered  by  interexchange  carriers.  144  Further,  CLECs  and  CMRS  providers  do
 141  See  Sprint  Dec.  3  Ex  Parte  at  3.
 142  If  a  carrier  believes  that  it  has  special  circumstances  that  warrant  deviation  from  the  rules,  that  carrier  may
 request  a  waiver  of  the  Commissions  rules.  See  47  C.  F.  R.    1.3.  143
 See  id.  144
 See  Policy  and  Rules  Concerning  the  Interstate,  Interexchange  Marketplace,  Implementation  of  Section  254(  g)  of  the  Communications  Act  of  1934,  CC  Docket  No.  96-  61,  Order  on  Reconsideration,  12  FCC  Rcd  15014  (1997);
 Policy  and  Rules  Concerning  the  Interstate,  Interexchange  Marketplace,  Implementation  of  Section  254(  g)  of  the  Communications  Act  of  1934,  CC  Docket  No.  96-  61,  Second  Order  on  Reconsideration  and  Erratum,  14  FCC  Rcd
 6004  (1999);  Domestic,  Interexchange  Carrier  Detariffing  Order  Takes  Effect,  CC  Docket  No.  96-  61,  Public  Notice,  DA  00-  1028  (Com.  Car.  Bur.  May  9,  2000);  MCI  WorldCom,  Inc.  v.  FCC,  209  F.  3d  760  (D.  C.  Cir.  2000);  Policy
 and  Rules  Concerning  the  Interstate,  Interexchange  Marketplace,  Implementation  of  Section  254(  g)  of  the  Communications  Act  of  1934,  CC  Docket  No.  96-  61,  Order,  15  FCC  Rcd  22321  (2001);  see  also  2000  Biennial
 Regulatory  Review,  Policy  and  Rules  Concerning  the  International,  Interexchange  Marketplace,  IB  Docket  No.  00-  (continued....)
 30
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 not  tariff  their  federal  universal  service  line  items  with  the  Commission.
 61.  Because  carriers  cannot  include  mark  ups  in  their  federal  universal  service  line  item,  we  need  not  address  whether  such  charges  should  be  uniform  across  customer  classes.  We  also
 need  not  adopt  an  interim  safe  harbor  for  mark  ups.
 62.  Consistent  with  the  record  developed  in  this  proceeding,  we  prohibit  all  eligible  telecommunications  carriers  from  recovering  contribution  costs  from  their  Lifeline  customers.  145
 Under  our  current  rules,  ILECs  may  not  recover  universal  service  contributions  from  Lifeline  customers,  while  other  carriers  may  do  so.  146  We  find  that  extending  the  prohibition  on  recovery
 of  universal  service  contributions  from  Lifeline  customers  to  all  ETCs,  including  CLECs  and  CMRS  providers  designated  as  ETCs,  will  promote  equitable  and  nondiscriminatory
 contributions,  consistent  with  section  254  of  the  Act.  Prohibiting  recovery  of  universal  service  contributions  from  Lifeline  customers  also  helps  to  increase  subscribership  by  reducing
 qualifying  low-  income  consumers  monthly  basic  local  service  charges,  consistent  with  our  rules.  147  We  also  conclude  that  our  actions  here  further  the  universal  service  goals  of  the  Act  by
 helping  to  ensure  that  low-  income  consumers  have  access  to  telecommunications  and  information  services.  148
 63.  While  we  believe  that  the  adoption  of  rules  in  this  Order  will  greatly  reduce  the  amount  of  customer  confusion  surrounding  contribution  recovery  issues,  the  Consumer  and
 Governmental  Affairs  Bureau  will  continue  to  monitor  complaints  and  consumer  calls  received  on  this  topic.  In  addition,  the  Consumer  and  Governmental  Affairs  Bureau  will  continue  its
 educational  and  outreach  programs  regarding  federal  universal  service.  149  We  expect  the
 (...  continued  from  previous  page)  202,  Report  and  Order,  16  FCC  Rcd  10647  (2001)  (requiring  mandatory  detariffing  of  international  interexchange
 services  provided  by  non-  dominant  providers  with  limited  exceptions  for  dial-  around,  local  exchange  carrier  implemented  services,  inbound  collect  calling,  and  on-  demand  Mobile  Satellite  Systems).
 145  See,  e.  g.,  ACS  Reply  Comments  at  10-  11;  NRTA  and  OPASTCO  Comments  at  23-  24;  Ohio  PUC  Reply
 Comments  at  7;  Texas  Reply  Comments  at  1.  146
 See  generally  Federal-  State  Joint  Board  on  Universal  Service,  Multi-  Association  Group  (MAG)  Plan  for  Regulation  of  Interstate  Services  of  Non-  Price  Cap  Incumbent  Local  Exchange  Carriers  and  Interexchange
 Carriers,  CC  Docket  Nos.  96-  45  &  00-  256,  Fourteenth  Report  and  Order  and  Twenty-  Second  Order  on  Reconsideration  and  Report  and  Order,  16  FCC  Rcd  11244  (2001)  (Rural  Task  Force  Order).
 147  See  47  C.  F.  R.    54.  401,  54.  403.
 148  47  U.  S.  C.    254(  b).
 149  The  Consumer  and  Governmental  Affairs  Bureau  currently  conducts  outreach  directed  at  educating  consumers
 about  all  aspects  of  the  Commissions  universal  service  programs,  including  the  contribution  recovery  process.  For  example,  the  Consumer  and  Governmental  Affairs  Bureau  operates  two  consumer  centers  that  consumers  can
 contact  to  obtain  information  on  the  Commissions  universal  service  programs.  The  consumer  centers  may  be  reached  at  1-  888-  CALL-  FCC  (1-  888-  225-  5322)  (voice)  or  1-  888-  TELL-  FCC  (1-  888-  835-  5322)  (TTY).  The
 Consumer  and  Governmental  Affairs  Bureau  also  provides  fact  sheets  on  universal  service  issues  through  the
 Commissions  website.  See  http://  www.  fcc.  gov/  cgb>.
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 Consumer  and  Governmental  Affairs  Bureau  will  educate  consumers  about  the  new  rules  adopted  in  this  order.  In  this  way  we  can  monitor  whether  the  policy  goal  of  fostering
 competition  through  consumer  choice  is  being  met.  If  we  observe  a  sustained  marked  increase  in  consumer  complaints  regarding  the  recovery  of  carrier  contribution  costs,  we  may  revisit  this
 issue  at  that  time.
 2.  Labeling  of  Line-  Item  Charges
 a.  Background
 64.  The  Commissions  Truth-  in-  Billing  rules  require  that  consumer  bills  be  clearly  organized,  clearly  identify  the  service  provider,  highlight  any  new  providers,  and  contain  clear
 and  conspicuous  disclosure  of  information  the  consumer  may  need  to  make  inquiries  about  or  contest  charges.  150  In  the  First  Further  Notice,  we  sought  comment  on  various  potential
 modifications  to  our  Truth-  in-  Billing  rules,  such  as  whether  to  require  carriers  that  elect  to  impose  a  separate  line-  item  charge  on  customer  bills  to  recover  their  contribution  costs  to
 describe  the  line  item  as  the  Federal  Universal  Service  Fee.  151
 b.  Discussion
 65.  At  this  time,  we  decline  to  mandate  a  specific  label  for  federal  universal  service  line-items  pursuant  to  our  Truth-  in-  Billing  rules.  We  will  monitor  how  the  reforms  we  adopt  today
 affect  carrier  recovery  practices  and  will  take  further  action  if  necessary.
 IV.  SECOND  FURTHER  NOTICE  OF  PROPOSED  RULEMAKING
 66.  In  this  Second  Further  Notice,  we  seek  to  further  refine  the  record  in  this  proceeding.  We  are  hopeful  that  we  will  adopt  additional  modifications  to  our  contribution  methodology  to
 ensure  the  continued  viability  of  universal  service  as  the  marketplace  continues  to  develop.
 67.  First,  we  ask  commenters  to  discuss  whether  the  changes  to  the  revenue-  based  methodology  adopted  herein  are  sufficient  to  ensure  the  long-  term  viability  of  universal  service
 as  the  telecommunications  marketplace  evolves.  Should  any  additional  modifications  to  the  revenue-  based  system  be  made?  For  example,  we  seek  comment  on  whether  bundling  of  local
 and  long  distance  services  raises  any  unique  problems  for  wireline  carriers  in  identifying  interstate  telecommunications  revenues  and  how  such  problems  should  be  addressed.
 68.  In  addition,  although  we  have  increased  the  mobile  wireless  safe  harbor  to  28.5  percent,  we  note  that  some  commenters  assert  that,  using  certain  methodologies,  mobile  wireless
 carriers  are  capable  of  determining  their  actual  interstate  end-  user  telecommunications
 150  See  47  C.  F.  R.    64.  2401.
 151  See  First  Further  Notice,  17  FCC  Rcd  at  3797-  98,  para.  103.
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 revenues.  152  If  a  revenue-  based  system  is  retained,  we  seek  comment  on  whether  we  should  abolish  the  safe  harbor  for  mobile  wireless  carriers  and,  if  so,  how  such  carriers  should  determine
 their  actual  interstate  end-  user  telecommunications  revenues.  153  We  specifically  seek  comment  on  whether  minutes  of  use  is  an  appropriate  proxy  for  determining  interstate  revenues  for  mobile
 wireless  providers.  We  also  request  comment  on  whether  the  originating  cell  site  and  the  terminating  area  code  or  NPA  of  a  call  reasonably  approximates  the  jurisdictional  nature  of
 traffic  for  reporting  purposes.  In  addition,  we  seek  comment  on  whether  it  would  be  appropriate  to  include  both  outgoing  and  incoming  calls  in  mobile  wireless  provider  traffic  studies  and
 whether  and  how  to  include  roaming  and  international  minutes  in  such  studies.  We  seek  comment  on  burdens  presented  by  proposed  methodologies  to  determine  interstate  revenues  and
 particularly  invite  comment  from  smaller  mobile  wireless  providers  on  whether  they  face  unique  difficulties  in  identifying  interstate  telecommunications  revenues.  We  also  ask  commenters  to
 discuss  whether  other  CMRS  carriers,  such  as  paging  and  analog  SMR  carriers,  154  are  able  to  determine  their  actual  interstate  end-  user  telecommunications  revenues  and  whether  those  safe
 harbors  should  also  be  abolished.  We  seek  comment  on  how  eliminating  the  safe  harbors  would  affect  wireless  carriers  whose  contributions  to  universal  service  are  de  minimis.
 69.  Although  the  actions  taken  today  will  improve  the  operation  of  our  revenue-  based  methodology  in  the  near  term,  we  remain  concerned  that  any  contribution  system  based  on
 interstate  telecommunications  revenues  will  be  dependent  on  the  ability  of  contributors  to  distinguish  between  interstate  and  intrastate  telecommunications  and  non-  telecommunications
 revenues.  155  Several  commenters  have  argued  that  a  connection-  based  mechanism  may  be  the  best  alternative  to  ensure  the  long-  term  viability  of  the  Commissions  universal  service
 mechanisms  as  the  telecommunications  marketplace  continues  to  evolve.  156  We,  therefore,  seek  additional  comment  on  three  specific  connection-  based  proposals.
 70.  In  the  First  Further  Notice,  we  sought  comment  on  a  specific  proposal  to  base  contributions  on  the  number  and  capacity  of  connections  a  contributor  provides  to  interstate
 networks,  rather  than  revenues.  157  Since  that  time,  a  number  of  parties  across  various  industry  segments,  as  well  as  four  out  of  five  state  members  of  the  Joint  Board,  have  supported  adoption
 152  See,  e.  g.,  USCC  Comments  at  9-  10;  Letter  from  Mitchell  F.  Brecher,  counsel  for  TracFone  Wireless,  Inc.,  to
 Marlene  H.  Dortch,  Federal  Communications  Commission,  filed  Dec.  5,  2002;  Letter  from  L.  Charles  Keller,  counsel  for  Verizon  Wireless,  to  Marlene  H.  Dortch,  Federal  Communications  Commission,  filed  Oct.  28,  2002;
 CTIA  Traffic  Studies  Ex  Parte.  153
 See  id.  at  3-  4.  154
 See  supra  para.  20.  155
 See  discussion  supra  para.  3.  See  also  Ad  Hoc  Comments  at  2;  CompTel  Comments  at  2;  CoSUS  Comments  at  18-  23;  WorldCom  Comments  at  2-  5
 156  See,  e.  g.,  Ad  Hoc  Comments  at  2-  3;  C&  W  Reply  Comments  at  4-  5;  CoSUS  Comments  at  9-  10;  ITAA  Comments
 at  3-  5;  SBC  Comments  at  3-  5;  Qwest  Reply  Comments  at  9.  157
 See  First  Further  Notice,  17  FCC  Rcd  at  3754,  para.  2.
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 of  a  connection-  based  assessment  methodology  and  have  proposed  their  own  variations  of  connection-  based  proposals.  158  Proponents  of  a  connection-  based  methodology  argue  that  such  a
 system  would  provide  a  sufficient  and  predictable  funding  source  for  universal  service  in  a  telecommunications  marketplace  increasingly  characterized  by  new  and  innovative  bundles  of
 intrastate  and  interstate  telecommunications  and  non-  telecommunications  products  and  services,  and  increased  competition  between  wireline  and  wireless  technology  platforms.  159  These
 commenters  point  out  that  the  number  of  connections  historically  has  been  more  stable  than  end-user  interstate  telecommunications  revenues.  160  Commenters  also  point  out  that  connection-based
 assessments  would  eliminate  the  need  for  contributors  to  distinguish  between  interstate  and  intrastate  revenues,  or  revenues  from  telecommunications  and  non-  telecommunications
 services,  as  is  required  under  the  current  methodology.  161  These  commenters  therefore  argue  that  connection-  based  assessments  would  better  accommodate  new  services  and  technologies  as
 they  develop.  Such  a  framework  also  may  be  more  economically  efficient  than  the  current  revenue-  based  methodology,  because  connection-  based  assessments  are  less  likely  to  create
 inefficient  incentives  for  end  users  to  curtail  their  usage  of  interstate  telecommunications  networks.
 71.  The  proponents  of  certain  connection-  based  proposals  argue  that  their  proposals  would  be  consistent  with  the  requirement  of  section  254(  d)  that  every  telecommunications  carrier
 that  provides  interstate  telecommunications  services  contribute  to  the  Commissions  universal  service  mechanisms  on  an  equitable  and  nondiscriminatory  basis.  However,  several  other  parties
 have  expressed  concerns  that  such  proposals  in  the  record  would  be  inconsistent  with  this  statutory  mandate.  162  We  specifically  take  note  of  arguments  that  specific  connection-  based
 proposals  in  the  record  may  be  inconsistent  with  section  254(  d)  s  requirement  that  every  provider  of  interstate  telecommunications  service  contribute  on  an  equitable  basis.  163
 72.  We  conclude  it  is  appropriate  to  further  develop  the  record  on  aspects  of  certain  proposals  to  assess  universal  service  contributions  on  the  number  and  capacity  of  connections.
 We  also  conclude  it  is  appropriate  to  continue  refining  our  analysis  of  the  potential  impacts  on  contributors,  and,  ultimately,  consumers,  of  the  various  proposals.  In  this  Second  Further
 Notice,  we  seek  comment  on  specific  measures  the  Commission  could  take  to  ensure  that  a  connection-  based  contribution  methodology  would  be  consistent  with  the  Act.  First,  we  seek
 158  See,  e.  g.,  CoSUS  Comments  at  2;  SBC/  BellSouth  Comments  at  5-  6;  State  Joint  Board  Ex  Parte  at  2-  3.
 159  See  CoSUS  Reply  Comments  at  19-  20;  Sprint  Reply  Comments  at  4;  WorldCom  Reply  Comments  at  6-  7.
 160  See,  e.  g.,  Ad  Hoc  Comments  at  2-  3;  CoSUS  Comments  at  36-  38;  Sprint  Comments  at  4.  See  also  Universal
 Service  Monitoring  Report,  Federal  and  State  Staff  for  the  Federal-  State  Joint  Board  on  Universal  Service,  Table  6.1  (Oct.  2002)  (Joint  Board  Monitoring  Report)  (showing  growth  in  households  from  78  million  in  1982  to  102  million
 in  2001).  161
 See  CompTel  Comments  at  2;  C&  W  Reply  Comments  at  5-  6;  NRTA  and  OPASTCO  Comments  at  4-  5.  162
 See  47  U.  S.  C.    254(  d).  163
 See,  e.  g.,  ACS  Reply  Comments  at  8-  9;  Arch  Reply  Comments  at  7;  Verizon  Reply  Comments  at  5.
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 comment  on  a  contribution  methodology  that  would  impose  a  minimum  contribution  obligation  on  all  interstate  telecommunications  carriers,  and  a  flat  charge  for  each  end-  user  connection,
 depending  on  the  nature  or  capacity  of  the  connection.  Next,  we  seek  comment  on  a  proposal  to  assess  all  connections  based  purely  on  capacity  (without  regard  to  distinctions  between
 residential/  single-  line  business  and  multi-  line  business  connections),  and  share  contribution  obligations  for  each  switched  end-  user  connection  between  access  and  transport  providers.
 Finally,  we  seek  comment  on  a  proposal  to  assess  providers  of  switched  connections  based  on  their  number  of  working  telephone  numbers.
 73.  We  invite  commenters  to  discuss  potential  advantages  and  disadvantages  of  each  approach,  and  whether  each  satisfies  the  requirements  of  section  254  that  [  e]  very
 telecommunications  carrier  that  provides  interstate  telecommunications  services  .  .  .  contribute,  on  an  equitable  and  nondiscriminatory  basis,  to  the  specific,  predictable,  and  sufficient  [universal
 service  support]  mechanisms.  164  We  urge  commenters  to  submit  data  and  analysis  on  assessment  levels  under  each  approach.  We  further  request  comment  on  the  relative  contribution
 obligations  of  different  industry  segments  under  each  approach.  We  ask  commenters  to  address  the  potential  impacts  of  the  different  methodologies  on  consumers,  both  generally  and  also  on
 residential  consumers  that  place  no  long-  distance  calls.  165  What  would  be  the  impact  of  each  of  the  proposals  on  the  average  residential  customer  and  on  residential  customers  generally?
 Would  the  typical  residential  customer  pay  more,  less,  or  approximately  the  same  amount  of  pass-  through  charges  to  different  carriers  than  they  do  today?
 74.  Commenters  should  also  describe  and  estimate  the  costs  associated  with  the  implementation  of  each  proposal,  including  the  cost  of  any  necessary  billing  system  changes.
 We  also  invite  comment  on  the  reporting  obligations  associated  with  each  of  the  proposals  discussed  below  and  ask  that  commenters  quantify,  to  the  extent  possible,  the  burdens  associated
 with  each  proposal  and  compare  the  relative  burdens.  We  seek  comment  on  whether  it  would  be  appropriate  to  require  contributors  to  report  their  number  and  capacity  of  end-  user  connections
 and/  or  numbers  on  a  monthly  basis,  or  whether  less  frequent  reporting  would  be  adequate.  We  particularly  invite  comment  on  the  potential  administrative  burdens  associated  with  each  of  these
 proposals  from  entities  that  are  small  business  concerns  under  the  Small  Business  Act.  We  also  seek  comment  on  whether  to  continue  basing  contributions  to  the  Telecommunications
 Relay  Service,  Numbering  Administration,  Local  Number  Portability  and  wireline  regulatory  fees  programs  on  annual  revenue  data,  or  whether  contributions  to  these  mechanisms  also  should
 be  based  on  connections  and/  or  numbers.
 164  47  U.  S.  C.    254(  d).
 165  Currently,  residential  consumers  that  have  no  interstate  long-  distance  charges  on  their  wireline  bills  typically  pay
 universal  service  line  items  ranging  from  approximately  $0.42  to  $0.  59  per  line  per  month,  based  on  the  subscriber  line  charge  on  their  local  bills.  See,  e.  g.,  Pacific  Bell  Telephone  Company  Tariff  F.  C.  C.  No.  1,  Sections  4.7(  A),
 issued  Jun.  17,  2002,  4.7(  G),  issued  Sep.  16,  2002;  Verizon  Tariff  F.  C.  C.  No.  1,  Sections  4.1.7.1(  A),  issued  Jun.  28,  2002,  4.  1.  7.  1(  H),  issued  Oct.  15,  2002.
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 A.  Connections-  Based  Methodology  with  Mandatory  Minimum  Obligation
 75.  Under  the  first  approach,  every  telecommunications  carrier  that  provides  interstate  telecommunications  services  would  be  subject  to  a  mandatory  minimum  annual  contribution,
 except  to  the  extent  that  the  providers  contribution  is  de  minimis.  A  providers  contribution  would  be  de  minimis  if  the  provider  received  less  than  $100,000  in  annual  interstate
 telecommunications  revenues.  Residential,  single-  line  business,  payphone,  mobile  wireless,  and  pager  connections  would  be  assessed  a  flat  monthly  fee  (Lifeline  connections  would  be  exempt),
 and  a  residual  amount  would  be  assessed  on  multi-  line  business  connections.  Providers  initially  would  be  assessed  $1.00  per  month  for  each  residential,  single-  line  business,  payphone,  and
 mobile  wireless  connection,  and  $0.10  and  $0.20  per  month,  respectively,  for  each  one-  way  and  two-  way  pager  connection.  Multi-  line  business  connections  would  be  assessed  at  varying
 amounts  based  on  their  classification  into  different  tiers  of  capacity,  at  levels  sufficient  to  cover  residual  funding  requirements.  The  capacity  of  a  connection  would  be  defined  as  the  maximum
 capacity  that  the  end  user  has  ordered  onto  its  premises  in  a  given  month,  regardless  of  the  facility  used  to  provide  that  connection.  166
 76.  Connections  would  be  defined  as  facilities  that  provide  end  users  with  access  to  an  interstate  public  or  private  network,  regardless  of  whether  the  connection  is  circuit-  switched,
 packet-  switched,  wireline  or  wireless,  or  leased  line.  167  International-  only  and  intrastate-  only  connections  would  be  exempt,  because  they  do  not  have  an  interstate  component.  168  In  the  case
 of  a  prepaid  wireless  connection,  a  connection  would  be  defined  as  an  activated  handset  that  is  either  usable  by  a  customer  on  the  last  calendar  day  of  the  month,  or,  if  a  provider  cannot
 determine  whether  a  handset  is  usable  by  a  customer  on  the  last  calendar  day  of  the  month,  one  that  has  sent  or  received  a  call  during  the  calendar  month.  169  PBX  connections  would  be
 assessed  based  on  capacity  as  with  any  other  multi-  line  business  connection,  while  Centrex  connections  would  be  assessed  at  one-  ninth  the  rate  of  a  Tier  1  connection.  170  Private  service
 providers  that  provide  interstate  connections  solely  to  meet  their  internal  needs  (i.  e.,  self-providers)  would  not  be  required  to  contribute  under  this  methodology.  171  Whether  and  how
 166  See  CoSUS  Comments  at  14.
 167  Under  this  definition,  a  cable  telephony  provider  that  provides  a  voice  connection  to  a  public  or  private  interstate
 network  would  be  assessed  for  that  connection.  168
 See  Letter  from  David  Sieradzki,  Counsel  for  BT  North  America,  to  Marlene  Dortch,  Federal  Communications  Commission,  filed  Oct.  23,  2002  (BTNA  Oct.  23  Ex  Parte).
 169  This  definition  takes  into  account  providers  such  as  TracFone,  which  cannot  determine  the  number  of  handsets
 that  may  be  used  by  customers  at  a  point  in  time,  because  customers  purchase  cards  that  provide  minutes  of  use  in  conjunction  with  a  purchased  handset.  TracFone  is,  however,  able  to  determine  whether  connections  have  been  used
 in  a  given  month.  See  TracFone  Oct.  4  Ex  Parte.  170
 See  CoSUS  Comments  at  56.  171
 This  is  consistent  with  our  current  policy.  In  the  Universal  Service  Order,  the  Commission  reasoned  that,  for  self-  providers  of  interstate  telecommunications,  telecommunications  is  incidental  to  their  primary  non-telecommunications
 business.  See  Universal  Service  Order,  12  FCC  Rcd  9185,  para.  799.
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 connections  that  provide  broadband  Internet  access  whether  over  cable  modems,  satellites,  wireless,  or  wireline  technology  would  be  assessed  would  be  deferred  pending  action  in  the
 current  proceeding  regarding  classification  of  wireline  broadband  Internet  access.  172
 77.  Under  this  approach,  each  provider  would  report  monthly  the  number  of  its  connections  as  of  the  last  day  of  the  previous  month  to  the  Administrator  and  remit  payments  on
 a  monthly  billing  cycle.  Consistent  with  the  revised  methodology  we  adopt  today,  each  contributor  would  be  permitted  to  adjust  its  monthly  contribution  obligation  to  account  for  the
 percentage  of  monthly  telecommunications  revenues  that  the  contributor  anticipates  would  not  be  collected  from  end  users.  Providers  would  continue  to  report  telecommunications  revenues
 annually  for  purposes  of  determining  whether  a  filer  is  subject  to  minimum  contribution  obligations  or  qualifies  for  the  de  minimis  exemption.  The  annual  FCC  Form  499-  A  revenue
 filing  would  also  be  used  to  calculate  contributions  for  Telecommunications  Relay  Service,  Numbering  Administration,  Local  Number  Portability,  and  regulatory  fees,  which  would
 continue  to  be  assessed  using  the  revenue-  based  methodology.  173  The  FCC  Form  499-  A  also  would  continue  to  be  used  for  true-  up  purposes  if,  for  example,  uncollectible  rates  reported  on  a
 monthly  or  quarterly  basis  are  reconciled  with  actual  uncollectibles  reported  on  an  annual  basis.  There  would  be  a  one-  year  transition  period  to  allow  providers  to  modify  billing  systems,  and  to
 allow  the  Administrator  time  to  compile  data  necessary  to  finalize  the  calculation  of  initial  assessment  rates.  Assessments  for  residential,  single-  line  business,  payphone,  pager,  and  mobile
 wireless  connections  could  be  adjusted  annually,  while  assessment  levels  for  multi-  line  business  connections  could  be  adjusted  quarterly  to  account  for  fluctuations  in  demand  on  the  fund  and
 the  number  and  capacity  of  connections.  174
 78.  We  seek  comment  generally  on  the  benefits  and  drawbacks  of  this  proposal.  We  also  seek  comment  in  particular  on  the  following  aspects  of  this  approach.  First,  we  seek  comment
 on  the  operation  of  a  minimum  contribution  requirement.  Under  one  variation,  telecommunications  providers  would  continue  reporting  their  annual  interstate
 telecommunications  revenues  on  the  FCC  Form  499-  A.  175  If  a  telecommunications  provider
 172  See  Appropriate  Framework  for  Broadband  Access  to  the  Internet  over  Wireline  Facilities,  Universal  Service
 Obligations  of  Broadband  Providers,  CC  Docket  No.  02-  33,  Notice  of  Proposed  Rulemaking,  17  FCC  Rcd  3019  (2002)  (Broadband  NPRM).
 173  We  note  that  CMRS  providers  pay  regulatory  fees  on  a  per-  unit  basis.
 174  A  local  exchange  carriers  Subscriber  Line  Charge  (SLC)  designation  on  a  customers  bill  would  serve  to
 determine  whether  a  fixed  connection  were  a  residential/  single-  line  business  or  multi-  line  business  connection.  SLCs  are  charges  that  are  assessed  by  local  phone  companies  to  recover  some  or  all  of  the  costs  associated  with
 providing  interstate  access  through  the  local  phone  network.  See  Access  Charge  Performance  Review  for  Local  Exchange  Carriers,  Transport  Rate  Structure  and  Pricing,  End  User  Common  Line  Charge,  CC  Docket  Nos.  96-262,
 94-  1,  91-  213,  and  95-  72,  First  Report  and  Order,  12  FCC  Rcd  15982,  16007,  para.  68  (1997)  (Access  Charge  Reform  Order).  The  SLC  designation  would  not  be  used  for  purposes  of  determining  assessments  for  payphone
 connections.  175
 See  generally  47  C.  F.  R.    54.  711  (outlining  contributor  reporting  requirements);  FCC  Form  499-  A.
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 reports  annual  interstate  telecommunications  revenues  greater  than  or  equal  to  $100,000  on  the  Form  499-  A,  regardless  of  whether  it  provides  connections,  it  would  be  subject  to  a  minimum
 total  annual  contribution  obligation  equal  to  a  flat  percentage  of  its  annual  interstate  telecommunications  revenues,  such  as,  for  example,  one  percent.  176  The  minimum  requirement
 would  be  based  on  all  interstate  telecommunications  revenues,  not  end-  user  telecommunications  revenues.  Thus,  wholesale  carriers  would  be  required  to  contribute  directly  to  universal  service.
 Providers  of  connections  could  offset  their  connection-  based  assessments  against  their  minimum  contribution.  If,  however,  the  annual  interstate  telecommunications  revenues  of  a  provider  as
 reported  on  the  FCC  Form  499-  A  were  less  than  $100,000,  it  would  be  exempt  from  either  revenue-  based  or  connection-  based  contribution  obligations.  We  seek  comment  on  this  proposal.
 We  seek  comment  on  whether  it  is  reasonable  to  make  $100,000  the  threshold  for  determining  de  minimis  status,  and  whether  one  percent  or  some  other  percentage  of  interstate
 telecommunications  revenues  should  form  the  basis  of  the  minimum  contribution  requirement.
 79.  We  recognize  that  a  minimum  contribution  requirement  based  on  all  interstate  telecommunications  revenues  may  lead  to  the  double-  counting  of  revenues.  In  the  Universal
 Service  Order,  the  Commission  declined  to  count  wholesale  revenues  in  the  contribution  base,  reasoning  that  counting  such  revenues  would  competitively  disadvantage  resellers.  177  The
 Commission  stated  that  because  resellers  would  likely  be  charged  a  pass-  through  by  the  underlying  facilities-  based  carriers,  and  would,  in  turn,  pass  that  increased  cost  to  customers,
 resellers  would  likely  be  required  to  sell  total  services  at  a  higher  cost  than  would  their  facilities-based  competitors,  whose  prices  would  incorporate  only  one  assessment.  178  We  seek  comment
 on  how  to  address  this  potential  competitive  issue  consistent  with  section  254(  d).
 80.  We  also  seek  comment  on  an  alternative  form  of  minimum  contribution  obligation  on  the  basis  of  revenue-  based  tiers,  whereby  contributors  would  be  assessed  at  increasing
 percentages  of  telecommunications  revenues,  or  increasing  flat-  fee  amounts,  tied  to  their  level  of  interstate  telecommunications  revenues.  We  seek  comment  on  the  appropriate  number  of  tiers,
 and  the  revenue  ranges  within  each  tier.  We  seek  comment  on  whether  such  a  tiered  structure  may  create  incentives  to  mischaracterize  revenues  in  order  to  be  assessed  at  a  lower  tier,  and  if
 so,  how  such  incentives  may  be  minimized.
 81.  In  addition,  we  seek  comment  on  the  appropriate  assessment  levels  for  multi-  line  business  connections  based  on  capacity.  Specifically,  we  seek  comment  on  the  following  four-tier
 structure:
 176  Mobile  wireless  providers  would  be  permitted  to  use  a  safe  harbor  under  which  they  would  assume  for  reporting
 purposes  that  28.  5  percent  of  telecommunications  revenues  are  interstate,  though  such  providers  could  report  based  on  a  different  percentage  based  on  actual  interstate  revenues.  Wireless  telecommunications  providers  also  would
 have  the  option  of  using  the  interim  safe  harbors  of  12  percent  and  one  percent  for  pager  providers  and  analog  SMR  providers,  respectively.
 177  See  Universal  Service  Order,  12  FCC  Rcd  at  9206-  07,  paras.  843-  47.
 178  Id.
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 Tier  Capacity  Assessment  x  Tier  1  Rate  Tier  1  Up  to  725  Kbps  1
 Tier  2  726  Kbps  -  5  Mbps  16  Tier  3  5.01  Mbps  -  90  Mbps  224
 Tier  4  Greater  than  90  Mbps  336
 Multi-  line  business  connections  with  maximum  capacity  up  to  725  Kbps  would  be  assessed  at  the  Tier  1  rate;  multi-  line  business  connections  with  maximum  capacity  between  726  Kbps  and  5
 Mbps  would  be  assessed  at  16  times  the  Tier  1  rate;  and  so  on.  We  invite  commenters  to  submit  a  projection  of  the  Tier  1  rate  under  this  proposed  methodology,  and  to  submit  data  supporting
 such  a  projection.
 82.  Unlike  the  CoSUS  proposal  submitted  in  the  record,  which  contained  three  tiers,  179  this  methodology  would  add  a  fourth  tier  in  order  to  more  equitably  assess  higher-  bandwidth
 connections  and  reduce  the  impact  of  changing  to  a  connection-  based  methodology  on  small  multi-  line  business  customers.  For  example,  while  the  CoSUS  plan  would  assess  an  OC-  3
 connection  with  a  capacity  of  155.52  Mbps,  or  2016  times  the  capacity  of  a  voice-  grade  connection,  at  40  times  the  Tier  1  rate,  this  plan  would  assess  such  a  connection  at  the  rate  of  336
 times  the  rate  of  a  voice-  grade  connection.  We  seek  comment  on  whether  such  modifications  to  the  CoSUS  plan  would  help  to  mitigate  potentially  inequitable  burdens  on  small  businesses  by
 ensuring  that  higher  capacity  connections  typically  sold  to  larger  businesses  are  assessed  at  a  rate  that  reflects  to  a  greater  degree  their  increased  capacity.  We  also  seek  comment  on  whether
 these  factors  approximately  reflect  market  pricing  of  various  typical  services  such  as  T-  1,  DS-  3,  and  OC-  3.  Further,  we  seek  comment  on  whether  there  may  be  instances  in  which  a  given  tier
 inappropriately  encompasses  categories  of  connections  that  provide  quite  different  levels  of  connectivity  to  interstate  networks.  For  example,  both  a  fractional  T-  1  connection  with  a
 maximum  capacity  of  768  Mbps  and  a  T-  1  with  a  capacity  of  1.544  Mbps  would  fall  within  the  second  tier  and  would  therefore  be  assessed  at  the  same  rate,  despite  the  difference  in  capacity.
 We  seek  comment  on  the  treatment  under  this  approach  of  these  and  other  services,  and  whether  the  assessment  rates  for  each  tier  are  reasonable  in  light  of  the  goals  and  mandates  of  the  statute.
 83.  We  seek  comment  on  the  capacity  ranges  for  each  tier.  As  the  Commission  recognized  in  the  First  Further  Notice,  because  movement  to  an  adjacent  tier  would  result  in  a
 significant  increase  in  contribution  obligations,  a  tiered  approach  potentially  could  deter  some  multi-  line  business  customers  from  purchasing  certain  thresholds  of  additional  capacity.  180  We
 seek  comment  specifically  on  whether,  in  order  to  minimize  possible  market  distortions,  the  ranges  of  these  four  capacity  tiers  would  result  in  more  common  service  offerings  falling  within
 179  CoSUS  proposed  a  first  tier  for  connections  with  a  capacity  of  less  than  1.5  Mbps;  a  second  tier  for  connections
 with  capacity  between  1.  5  Mbps  and  45  Mbps;  and  a  third  tier  for  connections  with  a  capacity  of  at  least  45  Mbps.  See  CoSUS  Comments  at  14.  The  tiers  under  that  plan  would  be  assessed,  respectively,  at  the  Tier  1  level,  five
 times  the  Tier  1  level,  and  40  times  the  Tier  1  level.  See  id.  at  66.  180
 See  First  Further  Notice,  17  FCC  Rcd  at  3775,  para.  54;  USCC  Comments  at  3-  4;  Verizon  Comments  at  12.
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 a  given  tier.  For  example,  a  typical  T-  1  connection  with  a  maximum  downstream  capacity  of  1.544  Mbps  should  fall  well  within  the  parameter  of  the  second  tier,  well  below  the  upper  range
 of  5  Mbps  and  sufficiently  higher  than  the  lower  threshold  of  726  Kbps.  We  seek  comment  on  whether  locating  the  break  points  in  this  manner  would  ensure  that  a  higher  or  lower  tier  will  not
 unexpectedly  capture  a  common  service  offering  if  a  given  provider  offers  it  with  slightly  different  capacity.
 84.  We  also  seek  comment  on  the  impact  of  this  proposal  on  residential  customers.  If  the  single-  line  connection  rate  were  set  at  $1.00  per  month,  would  residential  households,  as  a
 whole,  pay  more,  less,  or  about  the  same  as  they  would  under  the  newly  modified  revenue-  based  system?  What  percentage  of  households  would  pay  more  under  a  $1.00  single-  line  connection
 approach  than  they  would  under  the  revenue-  based  approach?  Would  $1.00  be  the  appropriate  monthly  assessment  level  for  single-  line  connections?
 85.  We  recognize  that  this  proposal  would  require  new  regulatory  reporting  requirements.  We  urge  commenters  to  quantify  the  cost  of  changes  to  carrier  billing  systems  and  other  costs
 associated  with  implementation  of  a  new  reporting  requirement.
 B.  Splitting  Connection-  Based  Contributions  Between  Switched  Transport  and  Access  Providers
 86.  Second,  we  seek  comment  on  the  benefits  and  drawbacks  of  a  system  that  would  split  connection-  based  contribution  assessments  between  switched  access  and  interstate  transport
 providers,  would  assess  access  providers  for  non-  switched  connections,  and  would  assess  interstate  telecommunications  services  not  directly  tied  to  connections  based  on  revenues.  181
 Under  such  a  system,  CMRS  providers  and  wireline  carriers  that  provide  both  local  and  interexchange  services  to  the  end  user  would  be  assessed  two  units  per  connection  (one  for
 access  and  one  for  transport),  while  a  LEC  that  does  not  provide  interexchange  service  would  be  assessed  one  unit,  and  the  interexchange  carrier  serving  the  customer  would  be  assessed  one  unit.
 We  invite  commenters  to  project  what  the  monthly  per  unit  assessment  rate  would  be  under  this  proposal.
 87.  This  proposal  is  similar  to  that  proposed  by  SBC/  BellSouth,  although  we  do  not  propose  at  this  time  to  directly  assess  information  service  providers.  182  Connections  would  be
 defined  as  facilities  that  provide  end  users  with  access  to  an  interstate  public  or  private  network,  regardless  of  whether  the  connection  is  circuit-  switched,  packet-  switched,  wireline  or  wireless,
 181  See  SBC  Comments  at  2,  7-  12.  We  note  that  we  are  not  proposing  to  directly  assess  Information  Service
 Providers,  as  proposed  by  SBC  and  BellSouth.  In  addition,  as  originally  proposed,  the  SBC/  BellSouth  proposal  would  have  assessed  both  access  and  transport  providers  for  non-  switched  connections.  In  their  latest  proposal,
 SBC  and  BellSouth  only  propose  to  assess  transport  providers  for  switched  connections.  SBC/  BellSouth  Nov.  5  Ex  Parte  at  3.
 182  See  SBC/  BellSouth  Comments  at  8-  9.
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 or  leased  line.  183  Assessments  would  not  distinguish  between  residential  and  business  connections,  but  rather  would  be  based  purely  on  capacity.  As  a  result,  assessments  on  a  typical
 residential  connection  would  be  higher  than  under  the  first  proposal  discussed  above.  Under  this  proposal,  there  would  be  different  capacity  tiers  for  different  types  of  connections,  as  with  the
 connection-  based  approach  described  above.  184  One-  way  pagers  would  be  treated  as  one-  half  of  an  access  connection,  and  two-  way  pagers  would  be  deemed  to  be  one  access  connection.
 Centrex  lines  would  be  assessed  at  the  rate  of  one-  ninth  that  of  PBX  lines,  consistent  with  treatment  of  Centrex  and  PBX  under  our  current  rules.  185  Intrastate-  only  and  international-  only
 connections  would  be  excluded  from  the  contribution  base.  Self-  providers  would  be  exempt  from  contribution,  and  there  would  be  a  de  minimis  exemption  similar  to  that  described  above,
 such  that  a  provider  would  be  de  minimis  if  it  received  less  than  $100,000  in  annual  interstate  telecommunications  revenues.
 88.  We  seek  comment  on  the  overall  feasibility  of  this  approach.  We  specifically  seek  comment  on  claims  by  interexchange  carriers  that  they  do  not  have  access  to  information  needed
 to  determine  their  switched  transport-  related  contribution  obligation  under  such  a  system.  186  Several  commenters  argue  that  this  information  sharing  has  the  potential  to  create  the  sort  of
 inefficiencies  and  increased  transaction  costs  that  were  associated  with  implementing  the  Presubscribed  Interexchange  Carrier  Charge  (PICC),  which  the  Commission  ultimately  found
 problematic.  187  We  seek  comment  on  whether  such  a  proposal  could  be  structured  in  a  manner  that  creates  incentives  for  the  local  exchange  carrier  to  share  connection  information  with  the
 transport  provider  in  a  timely  fashion.  We  also  seek  comment  on  whether  such  information  sharing  could  lead  to  inequities  among  providers,  in  that  LECs  that  also  provide  long-  distance
 service  would  not  have  to  incur  the  administrative  costs  of  sharing  information  that  a  traditional  stand-  alone  IXC  would  incur.  We  seek  comment  on  the  treatment  of  Lifeline  connections  under
 183  This  definition  could  be  modified  depending  on  which  version  of  this  proposal  is  adopted.
 184  We  note  that  SBC  and  BellSouth  recently  have  proposed  using  up  to  14  capacity  tiers.  See  SBC  Oct.  10  Ex
 Parte.  185
 See  47  C.  F.  R.    69.  158,  69.  153(  e);  NRTA  and  OPASTCO  Comments  at  19-  20;  Verizon  Comments  at  12;  Texas  Comments  at  5.
 186  According  to  CoSUS,  interexchange  carriers  do  not,  as  a  routine  part  of  their  commercial  operations,  have  the
 information  about  their  customers  end  user  access  connections  necessary  to  report  and  pay  [universal  service  fund]  contributions  under  SBC-  BellSouth,  but  would  have  to  obtain  that  information  from  the  [local  exchange  carrier].
 See  Letter  from  John  T.  Nakahata,  Counsel  to  the  Coalition  for  Sustainable  Universal  Service,  to  Marlene  Dortch,  Federal  Communications  Commission,  filed  Sep.  9.  2002  (CoSUS  Sep.  9  Ex  Parte).
 187  See,  e.  g.,  CoSUS  Reply  Comments  at  30-  33;  Sprint  Reply  Comments  at  18.  The  CALLS  Order  eliminated
 residential  and  single-  line  business  PICCs.  See  Access  Charge  Reform,  Price  Cap  Performance  Review  for  Local  Exchange  Carriers,  CC  Docket  Nos.  96-  262  and  94-  1,  Sixth  Report  and  Order,  Low-  Volume  Long  Distance  Users,
 CC  Docket  No.  99-  249,  Report  and  Order,  Federal-  State  Joint  Board  on  Universal  Service,  CC  Docket  No.  96-  45,  Eleventh  Report  and  Order,  15  FCC  Rcd  12962,  12991,  para.  76  (CALLS  Order)  (subsequent  history  omitted).  In
 that  Order,  the  Commission  acknowledged  the  inefficiencies  and  increased  transactional  costs  associated  with  assessing  interexchange  carriers  based  on  presubscribed  lines.  Id.  at  12991-  94,  paras.  76-  81.
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 such  a  proposal,  in  light  of  commenters  statements  that  IXCs  do  not  know  which  of  their  customers  are  Lifeline  customers.  188  We  invite  commenters  to  provide  detailed  information  on
 the  costs  associated  with  such  data-  sharing,  and  to  address  whether  systems  could  be  devised,  and  under  what  time  frame,  to  facilitate  necessary  information  sharing.  Furthermore,  we  seek
 comment  on  the  treatment  under  this  approach  of  customers  that  make  no  long-  distance  calls  in  a  given  month,  because  many  IXCs  do  not  currently  bill  such  customers  on  a  monthly  basis.  189
 89.  As  originally  proposed  by  SBC/  BellSouth,  a  revenue-  based  assessment  would  be  applied  only  to  IXCs  that  do  not  provide  the  transport  portion  of  a  switched  connection  on  a
 presubscribed  basis  (e.  g.,  dial-  around  providers).  190  We  specifically  seek  comment  on  whether  this  approach  would  create  disincentives  for  certain  categories  of  customers,  such  as  high  volume
 users,  to  use  such  non-  presubscribed  services.  We  seek  comment  on  whether  this  approach  would  be  competitively  neutral.  We  also  seek  comment  on  the  frequency  of  such  revenue-  based
 reporting,  and  how  to  calculate  such  revenue-  based  assessments.
 90.  We  seek  comment  on  the  impact  of  this  proposal  on  different  categories  of  customers.  Would  residential  households,  as  a  whole,  pay  more,  less,  or  about  the  same  as  they  would  under
 the  revenue-  based  system?  What  percentage  of  residential  households  would  pay  more  under  this  approach  compared  to  the  revenue-  based  methodology?
 91.  We  recognize  that  this  proposal  would  require  new  regulatory  reporting  requirements.  We  urge  commenters  to  quantify  the  costs  of  charges  to  carrier  billing  systems  and  other  costs
 associated  with  implementation  of  a  new  reporting  requirement.
 92.  We  also  seek  comment  on  two  alternatives  to  this  proposal  that  would  assess  wireline  switched  access  and  transport  providers  partly  on  a  connection  basis,  and  partly  on  a  revenue
 basis.  191  Under  the  first  of  these  alternatives,  wireline  switched  access  providers  would  be  assessed  on  the  basis  of  the  number  and  capacity  of  connections,  and  wireline  switched  transport
 providers  (including  both  presubscribed  and  non-  presubscribed  long-  distance  providers)  would  be  assessed  on  the  basis  of  interstate  end-  user  revenues.  The  second  alternative,  however,  would
 only  split  assessments  between  switched  access  and  transport  providers  when  the  access  and  transport  elements  are  not  provided  by  the  same  wireline  carrier.  192  Under  this  second
 alternative,  the  presubscribed  transport  provider  that  does  not  also  provide  the  access  element  of  a  connection  would  be  assessed  on  a  revenue  basis,  as  would  the  non-  presubscribed  transport
 provider.  The  switched  access  provider  would  be  assessed  the  full  connection-  based  charge  (for  both  access  and  transport)  when  it  provides  both  the  interstate  access  and  transport  elements.
 188  See,  e.  g.,  Sprint  Reply  Comments  at  18-  19.
 189  See  CoSUS  Reply  Comments  at  31.
 190  See  SBC  Comments  at  11.
 191  Under  these  alternatives,  CMRS  providers  would  be  assessed  purely  on  a  connection  basis.
 192  See  SBC/  BellSouth  Nov.  5  Ex  Parte.
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 Thus,  under  either  of  these  alternatives,  only  the  access  provider  would  be  assessed  for  non-switched  connections,  and  providers  of  non-  presubscribed  services  would  be  assessed  on  a
 revenue  basis.
 93.  Under  the  first  of  these  alternatives,  a  capacity-  based  assessment  would  be  assigned  to  each  end-  user  connection.  In  order  to  calculate  assessments  under  this  system,  the  capacity-based
 assessment  assigned  to  each  wireline  switched  end-  user  connection  would  be  divided  equally  between  the  access  provider  and  the  transport  provider.  193  The  transport  portion  of  the
 capacity-  based  assessment  would  be  the  basis  for  determining  the  total  amount  that  would  be  recovered  from  all  switched  long-  distance  providers  on  a  revenue  basis.  For  example,  in  order  to
 determine  revenue-  based  assessments  for  switched  long-  distance  providers  on  an  annual  basis,  the  Commission  would  divide  the  projected  revenue  requirement  for  the  universal  service
 mechanisms  in  the  upcoming  calendar  year  by  the  total  projected  number  of  capacity  units  (including  non-  switched  capacity  units)  for  the  upcoming  calendar  year  in  order  to  determine  a
 monthly  assessment  per  capacity  unit.  That  rate  would  then  be  multiplied  by  the  total  number  of  switched  capacity  units,  resulting  in  the  monthly  total  switched  connection  assessment.  The  total
 switched  long-  distance  revenues  as  reported  on  the  FCC  Form  499-  A,  divided  into  an  amount  equal  to  half  the  total  switched  connection  assessment,  194  would  result  in  a  revenue-  based
 contribution  factor  for  all  switched  transport  providers,  and  those  providers  would  be  assessed  monthly  on  that  factor,  multiplied  by  one  twelfth  of  their  annual  interstate  end-  user
 telecommunications  revenues.
 94.  We  also  seek  comment  on  the  second  alternative,  which  would  only  split  connection-based  assessments  between  interstate  switched  access  and  transport  providers  when  the  access
 and  transport  elements  are  not  provided  by  the  same  carrier.  195  Under  this  second  proposal,  the  switched  access  provider  would  be  assessed  the  full  connection-  based  charge  when  it
 provides  both  the  interstate  access  and  transport  elements.  196
 95.  We  seek  comment  on  how  such  approaches  might  work,  and  the  benefits  and  drawbacks  of  each.  In  particular,  we  seek  comment  on  whether  these  alternative  approaches
 would  avoid  some  of  the  difficulties  commenters  have  cited  regarding  the  sharing  of  information  between  LECs  and  IXCs.  We  also  seek  comment  on  whether  this  proposal  potentially  would
 place  traditional  long  distance  providers  at  a  competitive  disadvantage  when  competing  against  integrated  providers  of  local  and  long  distance.  We  seek  comment  on  whether  continuing  to
 assess  a  major  segment  of  the  industry  on  the  basis  of  revenues  would  adequately  address  our  concerns  about  the  difficulties  associated  with  distinguishing  interstate  from  non-  interstate
 193  For  switched  connections,  the  number  of  access  and  transport  connections  would  be  the  same.
 194  Half  the  switched  connection  assessment  would  equal  12  times  the  projected  switched  capacity  units  times  the
 assessment  rate,  divided  by  2.  195
 See  id.  196
 Id.
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 revenues,  and  other  potential  long-  term  problems  associated  with  a  revenue-  based  methodology.  197  We  invite  comment  on  whether  high-  volume  users  would  have  incentives  to
 purchase  bundled  local  and  long-  distance  service  in  order  to  avoid  revenue-  based  assessments.  We  seek  comment  on  how  frequently  the  Commission  should  determine  revenue-  based
 assessment  rates  for  switched  transport  providers  and  what  reporting  obligations  would  be  necessary  to  calculate  such  assessments.  We  also  seek  comment  on  whether  such  a  proposal
 would  increase  the  administrative  costs  associated  with  complying  with  universal  service  contribution  obligations.  In  addition,  we  seek  comment  on  the  likely  impact  of  these  two
 alternatives  on  residential  customers.
 C.  Telephone  Number-  Based  Assessments
 96.  Third,  we  seek  comment  on  the  benefits  and  drawbacks  of  proposals  to  assess  connections  on  the  basis  of  telephone  numbers.  AT&  T  and  Ad  Hoc  recently  proposed  a
 methodology  that  would  assess  providers  on  the  basis  of  telephone  numbers  assigned  to  end  users  (assigned  numbers),  while  assessing  special  access  and  private  lines  that  do  not  have
 assigned  numbers  on  the  basis  of  the  capacity  of  those  end-  user  connections.  198  We  seek  comment  on  whether  such  a  system  would  provide  a  sufficient  and  sustainable  basis  for  funding
 universal  service.  We  also  ask  whether  the  plan  might  encourage  public  policy  goals  such  as  the  conservation  and  optimization  of  existing  telephone  number  resources.  199  We  seek  comment  on
 whether  a  telephone  number-  based  methodology  would  address  some  of  the  concerns  expressed  by  commenters  regarding  a  connection-  based  approach.  For  instance,  some  commenters  argue
 that  a  flat-  fee  connection-  based  approach  would  be  an  illegal  assessment  on  intrastate  revenues  under  section  2(  b),  because  connections  provide,  in  part,  intrastate  access.  200  We  seek  comment
 on  whether  the  Commissions  exclusive  jurisdiction  over  numbering  resources  addresses  section  2(  b)  concerns  raised  by  some  commenters.  201  We  also  seek  comment  on  whether,  in  conjunction
 with  this  telephone  number-  based  approach,  we  should  impose  a  minimum  contribution  obligation  on  all  providers.  202
 97.  We  seek  comment  on  how  to  implement  a  telephone  number-  based  methodology.
 197  See  supra  paras.  3-  4.
 198  See  AT&  T  Oct.  22  Ex  Parte;  Ad  Hoc  Oct.  3  Ex  Parte.  Assigned  numbers  are  defined  as  numbers  working  in
 the  Public  Switched  Telephone  Network  under  an  agreement  such  as  a  contract  or  tariff  at  the  request  of  specific  end  users  or  customers  for  their  use  .  See  47  C.  F.  R.    52.  15(  f)(  1)(  iii).
 199  See  AT&  T  Oct.  22  Ex  Parte;  Ad  Hoc  Oct.  3  Ex  Parte.
 200  See,  e.  g.,  Verizon  Wireless  Comments  at  7-  9;  47  U.  S.  C.    2(  b)(  1)  ([  N]  othing  in  this  Act  shall  be  construed  to
 apply  or  to  give  the  Commission  jurisdiction  with  respect  to  (1)  charges,  classifications,  practices,  services,  facilities,  or  regulations  for  or  in  connection  with  intrastate  communication  service  by  wire  or  radio  of  any  carrier  .  .
 .  .).  201
 See  47  U.  S.  C.    251(  e)(  1)  (  The  Commission  shall  have  exclusive  jurisdiction  over  those  portions  of  the  North  American  Numbering  Plan  that  pertain  to  the  United  States.)  See  also  AT&  T  Oct.  22  Ex  Parte.
 202  See  supra  at  paras.  78,  80.
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 We  also  invite  commenters  to  estimate  assessment  rates  under  this  proposal.  We  seek  comment  on  how  multi-  line  switched  business  services  such  as  Centrex  and  PBX,  as  well  as  500,  900,  and
 distinctive  ring  numbers,  should  be  treated  under  a  telephone  number-  based  approach.  203  We  also  seek  comment  on  whether  to  assess  telephone  numbers  associated  with  pagers  at  a  lower
 level.  If  certain  telephone  numbers  associated  with  specific  types  of  services,  such  as  electronic  fax  services,  should  be  treated  differently,  we  ask  commenters  to  address  how  we  would  identify
 such  telephone  numbers.  We  seek  comment  on  how  a  telephone  number-  based  methodology  would  assess  ported  telephone  numbers.  In  addition,  we  seek  comment  on  whether  it  would  be
 appropriate  to  assign  lower  telephone  number-  based  assessment  rates  to  local  exchange  carriers  that  do  not  participate  in  1,000  block  number  pooling.  We  ask  commenters  to  discuss  whether
 seasonal-  use  telephone  numbers  and  telephone  numbers  assigned  for  a  customers  intermittent  or  cyclical  use  should  be  assessed  and,  if  so,  at  what  charge.  We  seek  comment  on  whether
 working,  rather  than  assigned,  toll  free  numbers  should  be  assessed.  204  We  ask  commenters  to  discuss  whether  the  Responsible  Organizations  should  be  assessed  for  toll  free  numbers  and
 whether  we  could  assess  such  entities  if  they  are  neither  telecommunications  carriers  nor  providers  of  telecommunications.  205
 98.  We  seek  comment  on  the  relative  impact  of  a  telephone  number-  based  methodology  on  carriers  that  provide  connections  with  smaller  amounts  of  capacity,  such  as  those  provided  to
 residential  and  single-  line  business  users,  compared  to  providers  of  higher-  capacity  connections  to  large  multi-  line  businesses  or  providers  of  smaller-  capacity  connections  to  large  businesses
 with  heavily  used  toll  free  numbers  (e.  g.,  a  national  retail  catalog  company).  We  also  seek  comment  on  whether  there  are  any  numbers  associated  with  special  access  and  private  lines  that
 could  be  assessed.  If  not,  we  ask  commenters  to  discuss  whether  special  access  and  private  lines  should  be  assessed  based  on  the  capacity  of  the  connection,  and  whether  doing  so  would
 sufficiently  offset  possible  inequities  related  to  differences  of  capacity.  We  particularly  seek  comment  on  that  aspect  of  the  Ad  Hoc  and  AT&  T  proposal  that  would  assess  non-  switched
 multi-  line  business  connections  based  on  three  tiers  of  capacity  with  the  same  multipliers  proposed  by  CoSUS.  206  We  seek  comment  on  whether  these  multipliers  would  unfairly
 advantage  contributors  that  provide  high-  capacity  connections,  and  whether  an  increased  number  of  tiers  or  different  tier  levels  may  reduce  such  an  advantage.  Alternatively,  we  seek  comment
 on  whether  to  categorize  connections  into  the  same  four  tiers  described  above,  based  on
 203  See  AT&  T  Oct.  22  Ex  Parte.
 204  A  toll-  free  number  has  working  status  if  it  is  loaded  in  the  Service  Control  Points  and  is  being  utilized  to
 complete  toll  free  service  calls.  See  47  C.  F.  R.    52.  105(  a)(  9).  A  toll-  free  number  is  assigned  when  it  has  specific  subscriber  routing  information  entered  by  the  Responsible  Organization  in  the  Service  Management  System
 database  and  is  pending  activation  in  the  Service  Control  Points.  See  47  C.  F.  R.    52.  103(  a)(  1).  205
 A  Responsible  Organization  is  the  entity  chosen  by  a  toll-  free  subscriber  to  manage  and  administer  the  appropriate  records  in  the  toll  free  Service  Management  System  for  the  toll  free  subscriber.  See  47  C.  F.  R.  
 52.  101(  b).  206
 See  Ad  Hoc  Oct.  3  Ex  Parte  at  3  n.  7.
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 capacity.  207  We  invite  commenters  to  address  in  detail  how  such  a  plan  might  work,  and  note  potential  advantages  and  disadvantages.
 99.  Further,  we  seek  comment  on  whether  a  methodology  basing  assessments  on  telephone  numbers  would  be  easier  for  the  Administrator  to  implement  and  audit  than  other
 connection-  based  proposals  in  the  record.  We  also  seek  comment  regarding  the  process  for  contributors  to  report  telephone  numbers  under  a  telephone  number-  based  methodology.  Section
 52.15(  f)(  6)  of  our  current  rules  requires  telecommunications  carriers  that  receive  numbering  resources  to  file  forecast  and  utilization  reports  twice  per  year.  208  These  reports  include  the
 number  of  assigned  telephone  numbers.  209  This  proposal  therefore  could  rely  upon  existing  reporting  requirements.  We  seek  comment  on  whether  this  semi-  annual  reporting  requirement
 would  be  sufficient  for  universal  service  purposes.  For  example,  would  these  reports  adequately  identify  a  telecommunications  carrier  that  receives  a  telephone  number  from  a  non-  carrier?  We
 seek  comment  on  whether  contributors  should  be  required  to  submit  additional  documentation,  such  as  the  nature  of  the  service  provided  via  the  telephone  number,  or  report  more  frequently,
 perhaps  on  a  monthly  basis.  We  seek  comment  on  other  mechanisms  that  could  be  used  to  identify  the  number  of  telephone  numbers  that  have  been  assigned  to  particular  carriers.  We  ask
 that  commenters  quantify  the  costs  of  changes  to  any  carrier  billing  systems  and  other  costs  associated  with  implementing  this  proposal.
 100.  As  with  the  other  proposals,  we  also  seek  comment  on  the  impact  of  this  proposal  on  different  categories  of  customers.  Would  residential  households,  as  a  whole,  pay  more,  less,
 or  about  the  same  as  they  would  under  a  revenue-  based  system?  What  percentage  of  residential  households  would  pay  more  under  this  approach,  compared  to  the  revenue-  based  methodology?
 V.  PROCEDURAL  MATTERS
 A.  Final  Regulatory  Flexibility  Analysis
 101.  As  required  by  the  Regulatory  Flexibility  Act  of  1980,  as  amended  (RFA),  210  an  Initial  Regulatory  Flexibility  Analysis  (IRFA)  was  incorporated  in  the  First  Further  Notice.  211
 The  Commission  sought  written  public  comment  on  the  proposals  in  the  First  Further  Notice,  including  comment  on  the  IRFA.  This  present  Final  Regulatory  Flexibility  Analysis  (FRFA)
 conforms  to  the  RFA.  212  To  the  extent  that  any  statement  in  this  FRFA  is  perceived  as  creating
 207  See  supra  para.  7.
 208  See  47  C.  F.  R.    52.  15(  f)(  6).
 209  Id.
 210  See  5  U.  S.  C.    603.  The  RFA,  see  5  U.  S.  C.    601  et  seq.,  has  been  amended  by  the  Contract  with  America
 Advancement  Act  of  1996,  Pub.  L.  No.  104-  121,  110  Stat.  847  (1996)  (CWAAA).  Title  II  of  the  CWAAA  is  the  Small  Business  Regulatory  Enforcement  Fairness  Act  of  1996  (SBREFA).
 211  See  First  Further  Notice,  17  FCC  Rcd  at  3808-  18,  paras.  131-  161.
 212  See  5  U.  S.  C.    604.
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 ambiguity  with  respect  to  our  rules  or  statements  made  in  preceding  sections  of  this  Order,  the  rules  and  statements  set  forth  in  those  preceding  sections  shall  be  controlling.
 1.  Need  for,  and  Objectives  of,  the  Report  and  Order
 102.  In  this  Order,  we  take  interim  measures  to  maintain  the  viability  of  universal  service  in  the  near  term  --  a  fundamental  goal  of  this  Commission  --  while  we  consider  further
 long-  term  reforms.  First,  we  increase  to  28.5  percent  the  current  interim  safe  harbor  that  allows  cellular,  broadband  PCS,  and  certain  specialized  SMRS  providers  to  assume  that  15  percent  of
 their  telecommunications  revenues  are  interstate.  213  We  also  will  require  wireless  telecommunications  providers  to  make  a  single  election  whether  to  report  actual  revenues  or  to
 use  the  revised  safe  harbor  for  all  affiliated  entities  within  the  same  safe  harbor  category.  214  In  addition,  we  seek  to  improve  competitive  neutrality  among  contributors  by  modifying  the
 existing  revenue-  based  methodology  to  require  universal  service  contributions  based  on  contributor  provided  projections  of  collected  end-  user  interstate  telecommunications  revenues,
 instead  of  historical  gross-  billed  revenues.  215  We  conclude  that  our  actions  to  modify  the  current  revenue-  based  contribution  methodology  will  sustain  the  universal  service  fund  and  increase  the
 predictability  of  support  in  the  near  term,  while  we  continue  to  examine  more  fundamental  reforms.
 103.  We  also  take  steps  to  protect  consumers  from  unjust  and  unreasonable  universal  service  contribution  recovery  practices.  216  Specifically,  we  conclude  that  telecommunications
 carriers  may  not  recover  their  federal  universal  service  contribution  costs  through  a  separate  line  item  that  includes  a  mark  up  above  the  relevant  contribution  factor.  Limiting  the  federal
 universal  service  line-  item  charge  to  an  amount  that  does  not  exceed  the  contribution  factor,  set  quarterly  by  the  Commission,  will  increase  billing  transparency  and  decrease  confusion  for
 consumers  about  the  amount  of  universal  service  contributions  that  are  passed  through  by  carriers.  Carriers  will  continue  to  have  the  flexibility  to  recover  legitimate  administrative  costs
 from  consumers  through  other  means.  We  find  that  our  modified  contribution  methodology  will  simplify  the  assessment  and  recovery  of  universal  service  contributions  for  all  carriers  and
 consumers,  including  small  entities.
 2.  Summary  of  Significant  Issues  Raised  by  Public  Comments  In  Response  to  the  IRFA
 104.  The  Commission  received  no  comments  specifically  addressing  the  IRFA.  We  did  receive,  however,  some  general  small  entity-  related  comments.  Some  commenters,  for
 213  See  supra  paras.  21-  24.
 214  Id.  at  paras.  25-  27.
 215  Id.  at  paras.  29-  32.
 216  See  generally  discussion  supra  at  Part  III.  B.
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 example,  asserted  that  a  connection-  based  methodology  would  be  inequitable  and  burdensome  for  small  businesses,  particularly  with  respect  to  assessment  of  multi-  line  business  connections
 based  on  the  proposed  tiers  of  capacity  outlined  in  the  First  Further  Notice.  217  Commenters  also  expressed  general  concerns  about  carrier  recovery  practices.  218  Other  commenters  maintained
 that  a  de  minimis  exemption  was  essential  to  any  contribution  system  adopted  by  the  Commission.  219  In  this  Order,  we  modify  the  existing  methodology;  therefore,  issues  raised  with
 respect  to  the  impact  of  a  connection-  based  assessment  on  small  entity  concerns  are  not  directly  implicated  by  our  actions  taken  today.  We  do  note,  however,  that  the  Commission,  concurrent
 with  the  issuance  of  the  Order  adopted  a  Second  Further  Notice  that  seeks  comment  on  specific  aspects  of  three  connection-  based  proposals  in  the  record.  To  the  extent  that  commenters
 continue  to  have  small  entity-  related  concerns,  they  may  submit  comments  in  response  to  the  Second  Further  Notice,  as  discussed  in  detail  below.  220
 105.  In  the  Order,  we  adopt  certain  modifications  to  the  existing  methodology.  221  As  noted  in  the  Order,  we,  among  other  things,  have  adopted  rules  related  to  contribution  recovery
 that  will  increase  billing  transparency  and  decrease  confusion  for  all  consumers,  including  small  entities,  about  the  amount  of  universal  service  contributions  that  are  passed  through  by  carriers,
 while  maximizing  fairness  and  flexibility  for  carriers.  222  By  allowing  carriers  to  contribute  based  on  projections  of  their  collected  end-  user  revenues,  we  eliminate  one  of  the  major  reasons  for
 carriers  to  recover  amounts  in  excess  of  the  relevant  assessment  rate.  223  We  prohibit  carriers  from  marking  up  federal  universal  service  line  items  above  the  contribution  factor.  These
 actions  address  small  entity  concerns  regarding  recovery  practices.  We  have  also  retained  the  de  minimis  exemption  to  ensure  that  compliance  costs  associated  with  contributing  to  universal
 service  do  not  exceed  actual  contribution  amounts.
 3.  Description  and  Estimate  of  the  Number  of  Small  Entities  to  Which  Rules  Will  Apply
 106.  The  RFA  directs  agencies  to  provide  a  description  of,  and,  where  feasible,  an  estimate  of  the  number  of  small  entities  that  may  be  affected  by  the  rules  adopted  herein.  224  The
 217  See,  e.  g.,  Allied  Comments  at  2-  4;  ASCENT  Reply  Comments  at  2-  4;  Beacon  Comments  at  5;  ITA  Reply
 Comments  at  4.  218
 See,  e.  g.,  CPUC  Comments  at  14;  CU  et  al.  Comments  at  20-  21;  NASUCA  Comments  at  17;  Texas  Reply  Comments  at  2.
 219  See,  e.  g.,  AAPC  Comments  at  10;  Allied  Comments  at  9;  ITA  Reply  Comments  at  6-  7;  NECA  Comments  at  7-  8;
 Teletouch  Comments  at  10.  220
 See  infra  paras.  137-  140.  221
 See  generally  discussion  supra  Part  III.  A.  222
 Id.  at  Part  III.  B.  223
 Id.  at  Part  III.  A.  224
 5  U.  S.  C.    604(  a)(  3).
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 RFA  generally  defines  the  term  "small  entity"  as  having  the  same  meaning  as  the  terms  "small  business,"  "small  organization,"  and  "small  governmental  jurisdiction."  225  A  small  organization
 is  generally  any  not-  for-  profit  enterprise  which  is  independently  owned  and  operated  and  is  not  dominant  in  its  field.  226  Nationwide,  as  of  1992,  there  were  approximately  275,801  small
 organizations.  227  Small  governmental  jurisdiction  228  generally  means  governments  of  cities,  counties,  towns,  townships,  villages,  school  districts,  or  special  districts,  with  a  population  of
 less  than  50,000.  229  As  of  1992,  there  were  approximately  85,006  governmental  entities,  total,  in  the  United  States.  230  This  number  includes  38,978  cities,  counties,  and  towns;  of  these,
 37,566,  or  96%,  have  populations  of  fewer  than  50,000.  231  The  Census  Bureau  estimates  that  this  ratio  is  approximately  accurate  for  all  governmental  entities.  Thus,  of  the  85,006
 governmental  entities,  we  estimate  that  81,600  (96%)  are  small  entities.  In  addition,  the  term  "small  business"  has  the  same  meaning  as  the  term  "small  business  concern"  under  the  Small
 Business  Act,  unless  the  Commission  has  developed  one  or  more  definitions  that  are  appropriate  to  its  activities.  232  Under  the  Small  Business  Act,  a  "small  business  concern"  is  one  that:  (1)  is
 independently  owned  and  operated;  (2)  is  not  dominant  in  its  field  of  operation;  and  (3)  meets  any  additional  criteria  established  by  the  Small  Business  Administration  (SBA).  233
 107.  We  have  included  small  incumbent  local  exchange  carriers  in  this  present  RFA  analysis.  As  noted  above,  a  "small  business"  under  the  RFA  is  one  that,  inter  alia,  meets  the
 pertinent  small  business  size  standard  (e.  g.,  a  telephone  communications  business  having  1,500  or  fewer  employees),  and  "is  not  dominant  in  its  field  of  operation."  234  The  SBA's  Office  of
 Advocacy  contends  that,  for  RFA  purposes,  small  incumbent  local  exchange  carriers  are  not  dominant  in  their  field  of  operation  because  any  such  dominance  is  not  "national"  in  scope.  235
 225  5  U.  S.  C.    601(  6).
 226  5  U.  S.  C.    601(  4).
 227  U.  S.  Department  of  Commerce,  Bureau  of  the  Census,  1992  Economic  Census,  Table  6  (special  tabulation  of
 data  under  contract  to  the  Office  of  Advocacy  of  the  U.  S.  Small  Business  Administration).  228
 47  C.  F.  R.    1.1162.  229
 5  U.  S.  C.    601(  5).  230
 U.  S.  Department  of  Commerce,  Bureau  of  the  Census,  1992  Census  of  Governments.  231
 Id.  232
 5  U.  S.  C.    601(  3)  (incorporating  by  reference  the  definition  of  "small  business  concern"  in  5  U.  S.  C.    632).  Pursuant  to  5  U.  S.  C.    601(  3),  the  statutory  definition  of  a  small  business  applies  "unless  an  agency  after
 consultation  with  the  Office  of  Advocacy  of  the  Small  Business  Administration  and  after  opportunity  for  public  comment,  establishes  one  or  more  definitions  of  such  term  which  are  appropriate  to  the  activities  of  the  agency  and
 publishes  such  definition  in  the  Federal  Register."  233
 15  U.  S.  C.    632.  234
 Id.  235
 See  Letter  from  Jere  W.  Glover,  Chief  Counsel  for  Advocacy,  SBA,  to  Chairman  William  E.  Kennard,  Federal  Communications  Commission  (May  27,  1999).  The  Small  Business  Act  contains  a  definition  of  "small  business
 (continued....)
 49
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 We  have  therefore  included  small  incumbent  local  exchange  carriers  in  this  FRFA  analysis,  although  we  emphasize  that  this  RFA  action  has  no  effect  on  Commission  analyses  and
 determinations  in  other,  non-  RFA  contexts.
 108.  Wireline  Carriers  and  Service  Providers  (Wired  Telecommunications  Carriers).  236  The  SBA  has  developed  a  small  business  size  standard  for  Wired
 Telecommunications  Carriers,  which  consists  of  all  such  companies  having  1500  or  fewer  employees.  237  According  to  Census  Bureau  data  for  1997,  there  were  2,225  firms  in  this
 category,  total,  that  operated  for  the  entire  year.  238  Of  this  total,  2,201  firms  had  employment  of  999  or  fewer  employees,  and  an  additional  24  firms  had  employment  of  1,000  employees  or
 more.  239  Thus,  under  this  size  standard,  the  great  majority  of  firms  can  be  considered  small.
 109.  Local  Exchange  Carriers,  Interexchange  Carriers,  Competitive  Access  Providers,  Operator  Service  Providers,  Payphone  Providers,  and  Resellers.  Neither  the  Commission  nor
 SBA  has  developed  a  definition  particular  to  small  local  exchange  carriers  (LECs),  interexchange  carriers  (IXCs),  competitive  access  providers  (CAPs),  operator  service  providers
 (OSPs),  payphone  providers  or  resellers.  The  closest  applicable  definition  for  these  carrier-  types  under  SBA  rules  is  for  Wired  Telecommunications  Carriers.  240  Under  that  SBA  definition,  such
 a  business  is  small  if  it  has  1,500  or  fewer  employees.  241  According  to  our  most  recent  data,  there  are  1,329  incumbent  LECs,  532  CAPs,  229  IXCs,  22  OSPs,  936  payphone  providers  and
 710  resellers.  242  Of  these,  an  estimated  1,024  incumbent  LECs,  411  CAPs,  181  IXCs,  20  OSPs,  933  payphone  providers,  and  669  resellers  reported  that  they  have  1,500  or  fewer  employees;
 305  incumbent  LECs,  121  CAPs,  48  IXCs,  2  OSPs,  3  payphone  providers,  and  41  resellers  reported  that,  alone  or  in  combination  with  affiliates,  they  have  more  than  1,500  employees.  243
 (...  continued  from  previous  page)  concern,"  which  the  RFA  incorporates  into  its  own  definition  of  "small  business."  See  15  U.  S.  C.    632(  a)  (Small
 Business  Act);  5  U.  S.  C.    601(  3)  (RFA).  SBA  regulations  interpret  "small  business  concern"  to  include  the  concept  of  dominance  on  a  national  basis.  13  C.  F.  R.    121.  102(  b).
 236  For  the  limited  purposes  of  this  FRFA,  we  will  use  the  term  Wired  Telecommunications  Carriers  to  connote
 wireline  carriers  and  service  providers.  237
 13  C.  F.  R.    121.201,  North  American  Industry  Classification  System  (NAICS)  code  513310.  238
 U.  S.  Census  Bureau,  1997  Economic  Census,  Subject  Series:  Information,  Employment  Size  of  Firms  Subject  to  Federal  Income  Tax:  1997,  Table  5,  NAICS  code  513310  (issued  Oct.  2000).
 239  Id.  The  census  data  do  not  provide  a  more  precise  estimate  of  the  number  of  firms  that  have  employment  of
 1,500  or  fewer  employees;  the  largest  category  provided  is  Firms  with  1,000  employees  or  more.  240
 NAICS  code  513310.  241
 13  C.  F.  R.    121.  201,  NAICS  codes  513310  and  513330.  242
 FCC,  Wireline  Competition  Bureau,  Industry  Analysis  and  Technology  Division,  Trends  in  Telephone  Service  (May  2002),  (Trends  in  Telephone  Report)  at  Table  16.  3.  The  total  for  resellers  includes  both  toll  resellers  and
 local  resellers.  The  category  for  CAPs  also  includes  competitive  local  exchange  carriers  (CLECs).  243
 See  Trends  in  Telephone  Report  at  Table  5.3.
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 We  do  not  have  data  specifying  the  number  of  these  carriers  that  are  not  independently  owned  and  operated,  and  therefore  we  are  unable  to  estimate  with  greater  precision  the  number  of  these
 carriers  that  would  qualify  as  small  business  concerns  under  SBA's  definition.  Consequently,  most  incumbent  LECs,  IXCs,  CAPs,  OSPs,  payphone  providers  and  resellers  are  small  entities
 that  may  be  affected  by  the  decisions  and  rules  adopted  in  this  Order.
 110.  Wireless  Service  Providers.  The  SBA  has  size  standards  for  wireless  small  businesses  within  the  two  separate  Economic  Census  categories  of  Paging  and  of  Cellular  and
 Other  Wireless  Telecommunications.  For  both  of  those  categories,  the  SBA  considers  a  business  to  be  small  if  it  has  1,500  or  fewer  employees.  244  According  to  the  most  recent  Trends  in
 Telephone  Report  data,  1,761  companies  reported  that  they  were  engaged  in  the  provision  of  wireless  service.  245  Of  these  1,761  companies,  an  estimated  1,175  reported  that  they  have  1,500
 or  fewer  employees  and  586  reported  that,  alone  or  in  combination  with  affiliates,  they  have  more  than  1,500  employees.  246  Consequently,  we  estimate  that  most  wireless  service  providers
 are  small  entities  that  may  be  affected  by  the  rules  adopted  herein.
 111.  Broadband  Personal  Communications  Service  (PCS).  The  broadband  PCS  spectrum  is  divided  into  six  frequency  designated  A  through  F,  and  the  Commission  has  held
 auctions  for  each  block.  The  Commission  defined  small  entity  for  Blocks  C  and  F  as  an  entity  that  has  average  gross  revenues  of  $40  million  or  less  in  the  three  previous  calendar  years.  247  For
 Block  F,  an  additional  classification  for  very  small  business  was  added  and  is  defined  as  an  entity  that,  together  with  affiliates,  has  average  gross  revenues  of  not  more  than  $15  million  for
 the  preceding  three  calendar  years.  248  These  standards  defining  small  entity  in  the  context  of  broadband  PCS  auctions  have  been  approved  by  the  SBA.  249  No  small  businesses  within  the
 SBA-  approved  definition  bid  successfully  for  licenses  in  Blocks  A  and  B.  There  were  90  winning  bidders  that  qualified  as  small  entities  in  the  Block  C  auctions.  A  total  of  93  small  and
 very  small  business  bidders  won  approximately  40  percent  of  the  1,479  licenses  for  Blocks  D,  E,  and  F.  250  On  March  23,  1999,  the  Commission  re-  auctioned  347  C,  D,  E,  and  F  Block  licenses;
 244  13  C.  F.  R.    121.201,  NAICS  codes  517211  and  517212.
 245  Trends  in  Telephone  Report  at  Table  5.  3.
 246  Id.
 247  See  Amendment  of  Parts  20  and  24  of  the  Commissions  Rules    Broadband  PCS  Competitive  Bidding  and  the
 Commercial  Mobile  Radio  Service  Spectrum  Cap,  Report  and  Order,  WT  Docket  No.  96-  59,  Report  and  Order,  11  FCC  Rcd  7824,  paras.  57-  60  (1996),  61  Fed.  Reg.  33859  (July  1,  1996);  see  also  47  C.  F.  R.    24.  720(  b).
 248  See  Amendment  of  Parts  20  and  24  of  the  Commissions  Rules    Broadband  PCS  Competitive  Bidding  and  the
 Commercial  Mobile  Radio  Service  Spectrum  Cap,  Report  and  Order,  WT  Docket  No.  96-  59,  11  FCC  Rcd  7824,  paras.  57-  60  (1996),  61  Fed.  Reg.  33859  (July  1,  1996).
 249  See,  e.  g.,  Implementation  of  Section  309(  j)  of  the  Communications  Act    Competitive  Bidding,  PP  Docket  No.
 93-  253,  Fifth  Report  and  Order,  9  FCC  Rcd  5532,  5581-  84,  paras.  115-  17  (1994).  250
 FCC  News,  Broadband  PCS,  D,  E  and  F  Block  Auction  Closes,  No.  71744  (rel.  Jan.  14,  1997);  see  also  Amendment  of  the  Commissions  Rules  Regarding  Installment  Payment  Financing  for  Personal  Communications
 (continued....)
 51
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 there  were  48  small  business  winning  bidders.  On  January  26,  2001,  the  Commission  completed  the  auction  of  422  C  and  F  Broadband  PCS  licenses  in  Auction  No.  35.  Of  the  35  winning
 bidders  in  this  auction,  29  qualified  as  small  or  very  small  businesses.  Based  on  this  information,  we  conclude  that  the  number  of  small  broadband  PCS  licensees  will  include  the  90
 winning  C  Block  bidders,  the  93  qualifying  bidders  in  the  D,  E,  and  F  blocks,  the  48  winning  bidders  in  the  1999  re-  auction,  and  the  29  winning  bidders  in  the  2001  re-  auction,  for  a  total  of
 260  small  entity  broadband  PCS  providers,  as  defined  by  the  SBA  small  business  size  standards  and  the  Commission's  auction  rules.  Consequently,  we  estimate  that  260  broadband  PCS
 providers  are  small  entities  that  may  be  affected  by  the  rules  and  policies  adopted  herein.
 112.  Narrowband  PCS.  To  date,  two  auctions  of  narrowband  PCs  licenses  have  been  conducted.  Through  these  auctions,  the  Commission  has  awarded  a  total  of  41  licenses,  out  of
 which  11  were  obtained  by  small  businesses.  For  purposes  of  the  two  auctions  that  have  already  been  held,  small  businesses  were  defined  as  entities  with  average  gross  revenues  for  the  prior
 three  calendar  years  of  $40  million  or  less.  To  ensure  meaningful  participation  of  small  business  entities  in  the  auctions,  the  Commission  adopted  a  two-  tiered  definition  of  small  businesses  in
 the  Narrowband  PCS  Second  Report  and  Order.  251  A  small  business  is  an  entity  that,  together  with  affiliates  and  controlling  interests,  has  average  gross  revenues  for  the  three  preceding  years
 of  not  more  than  $40  million.  A  very  small  business  is  an  entity  that,  together  with  affiliates  and  controlling  interests,  has  average  gross  revenues  for  the  three  preceding  years  of  not  more  than
 $15  million.  These  definitions  have  been  approved  by  the  SBA.  In  the  future,  the  Commission  will  auction  459  licenses  to  serve  MTAs  and  408  response  channel  licenses.  There  is  also  one
 megahertz  of  narrowband  PCS  spectrum  that  has  been  held  in  reserve  and  that  the  Commission  has  not  yet  decided  to  release  for  licensing.  The  Commission  cannot  predict  accurately  the
 number  of  licenses  that  will  be  awarded  to  small  entities  in  future  auctions.  However,  four  of  the  16  winning  bidders  in  the  two  previous  narrowband  PCS  auctions  were  small  businesses,  as  that
 term  was  defined  under  the  Commissions  Rules.  The  Commission  assumes,  for  purposes  of  this  FRFA,  that  a  large  portion  of  the  remaining  narrowband  PCS  licenses  will  be  awarded  to  small
 entities.  The  Commission  also  assumes  that  at  least  some  small  businesses  will  acquire  narrowband  PCS  licenses  by  means  of  the  Commissions  partitioning  and  disaggregation  rules.
 113.  Specialized  Mobile  Radio  (SMR).  The  Commission  awards  "small  entity"  and  "very  small  entity"  bidding  credits  in  auctions  for  Specialized  Mobile  Radio  (SMR)  geographic
 area  licenses  in  the  800  MHz  and  900  MHz  bands  to  firms  that  had  revenues  of  no  more  than  $15  million  in  each  of  the  three  previous  calendar  years,  or  that  had  revenues  of  no  more  than  $3
 (...  continued  from  previous  page)  Services  (PCS)  Licensees,  WT  Docket  No.  97-  82,  Second  Report  and  Order  and  Further  Notice  of  Proposed
 Rulemaking,  12  FCC  Rcd  16436  (1997),  62  Fed.  Reg.  55348  (Oct.  24,  1997).  251
 Amendment  of  the  Commissions  Rules  to  Establish  New  Personal  Communications  Services,  Narrowband  PCS,  Docket  No.  ET  92-  100,  Docket  No.  PP  93-  253,  Second  Report  and  Order  and  Second  Further  Notice  of  Proposed
 Rulemaking,  15  FCC  Rcd  10456  (2000).
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 million  in  each  of  the  three  previous  calendar  years,  respectively.  252  In  the  context  of  both  the  800  MHz  and  900  MHz  SMR  service,  the  definitions  of  "small  entity"  and  "very  small  entity"
 have  been  approved  by  the  SBA.  These  bidding  credits  apply  to  SMR  providers  in  the  800  MHz  and  900  MHz  bands  that  either  hold  geographic  area  licenses  or  have  obtained  extended
 implementation  authorizations.  We  do  not  know  how  many  firms  provide  800  MHz  or  900  MHz  geographic  area  SMR  service  pursuant  to  extended  implementation  authorizations,  nor  how
 many  of  these  providers  have  annual  revenues  of  no  more  than  $15  million.  One  firm  has  over  $15  million  in  revenues.  We  assume,  for  our  purposes  here,  that  all  of  the  remaining  existing
 extended  implementation  authorizations  are  held  by  small  entities,  as  that  term  is  defined  by  the  SBA.  The  Commission  has  held  auctions  for  geographic  area  licenses  in  the  800  MHz  and  900
 MHz  SMR  bands.  There  were  60  winning  bidders  that  qualified  as  small  and  very  small  entities  in  the  900  MHz  auctions.  Of  the  1,020  licenses  won  in  the  900  MHz  auction,  bidders  qualifying
 as  small  and  very  small  entities  won  263  licenses.  In  the  800  MHz  SMR  auction,  38  of  the  524  licenses  won  were  won  by  small  and  very  small  entities.  Consequently,  we  estimate  that  there
 are  301  or  fewer  small  entity  SMR  licensees  in  the  800  MHz  and  900  MHz  bands  that  may  be  affected  by  the  rules  and  policies  adopted  herein.
 114.  Rural  Radiotelephone  Service.  The  Commission  has  not  adopted  a  definition  of  small  entity  specific  to  the  Rural  Radiotelephone  Service.  253  A  significant  subset  of  the  Rural
 Radiotelephone  Service  is  the  Basic  Exchange  Telephone  Radio  Systems  (BETRS).  254  For  purposes  of  this  FRFA,  we  will  use  the  SBA's  size  standard  applicable  to  wireless  service
 providers,  supra  --  an  entity  employing  no  more  than  1,500  persons.  255  There  are  approximately  1,000  licensees  in  the  Rural  Radiotelephone  Service,  and  the  Commission  estimates  that  almost
 all  of  them  qualify  as  small  entities  under  the  SBA's  size  standard.  Consequently,  we  estimate  that  there  are  1,000  or  fewer  small  entity  licensees  in  the  Rural  Radiotelphone  Service  that  may
 be  affected  by  the  rules  and  policies  adopted  herein.
 115.  Air-  Ground  Radiotelephone  Service.  The  Commission  has  not  adopted  a  definition  of  small  entity  specific  to  the  Air-  Ground  Radiotelephone  Service.  256  For  purposes  of
 this  FRFA,  we  will  use  the  SBA's  size  standard  applicable  to  wireless  service  providers,  supra  --  an  entity  employing  no  more  than  1,500  persons.  257  There  are  approximately  100  licensees  in
 the  Air-  Ground  Radiotelephone  Service,  and  we  estimate  that  almost  all  of  them  qualify  as  small  under  the  SBA  definition.
 4.  Description  of  Projected  Reporting,  Recordkeeping,  and  Other
 252  47  C.  F.  R.    90.814.
 253  The  service  is  defined  in  section  22.  99  of  the  Commission's  Rules.  47  C.  F.  R.    22.  99.
 254  BETRS  is  defined  in  sections  22.  757  and  22.  759  of  the  Commission's  Rules.  47  C.  F.  R.    22.  757,  22.759.
 255  13  C.  F.  R.    121.  201,  NAICS  codes  513321,  513322.
 256  The  service  is  defined  in  section  22.  99  of  the  Commission's  Rules.  47  C.  F.  R.    22.  99.
 257  13  C.  F.  R.    121.  201,  NAICS  codes  513321,  513322.
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 Compliance  Requirements
 116.  Pursuant  to  the  Order,  contributions  to  the  Commissions  universal  service  will  be  based  on  projections  provided  by  contributors  of  their  collected  end-  user  interstate  and
 international  telecommunications  revenues  (i.  e.,  end-  user  telecommunications  revenues  less  estimated  uncollectibles).  258  As  noted  in  the  Order,  the  modified  methodology  will  result  in
 minimal  changes  to  current  reporting  requirements.  259  Because  the  projected  collection  approach  we  adopt  is  similar  to  the  existing  contribution  methodology,  it  will  be  relatively  easy  for  both
 USAC  and  contributors  to  administer  and  implement  this  modification  to  our  current  methodology  while  we  consider  other  reforms  to  the  current  system.  Consistent  with  our
 existing  policy,  contributors  will  continue  to  file  a  Form  499-  Q  on  a  quarterly  basis  and  the  Form  499-  A  on  an  annual  basis.  The  Commission  and  USAC  will  also  continue  to  set  contribution
 factors  on  a  quarterly  basis  using  the  same  timeframes  as  the  current  methodology.  Under  the  revised  methodology,  however,  in  addition  to  filing  the  Form  499-  Q  to  report  historical  gross-billed
 revenues  from  the  prior  quarter,  contributors  also  will  project  their  gross-  billed  and  collected  end-  user  interstate  and  international  telecommunications  revenues  for  the  upcoming
 quarter.  We  believe  that  this  will  not  be  burdensome  for  contributors,  as  they  need  to  develop  such  projections  for  their  own  internal  business  purposes.  Consistent  with  current  procedures,
 contributors  will  have  the  option  of  certifying  as  to  the  confidential  nature  of  such  projections  on  the  FCC  Form  499-  Q.
 117.  As  noted  in  the  Order,  we  retain  the  requirement  for  an  officer  to  certify  to  the  truthfulness  and  accuracy  of  the  FCC  Form  499-  A  submitted  to  the  Administrator.  260  We  also
 will  require  an  officer  to  certify  that  the  projections  of  revenue  and  uncollectibles  included  in  the  FCC  Form  499-  Q  represent  a  good-  faith  estimate  based  on  company  policies  and  procedures.  To
 ensure  the  contributors  report  correct  information  on  the  FCC  Form  499-  A,  we  require  all  contributors  to  maintain  records  and  documentation  to  justify  the  information  reported  in  the
 Form  499-  A  for  three  years.  We  also  will  require  filers  to  maintain  records  detailing  the  methodology  used  to  determine  projections  in  the  Form  499-  Q  for  three  years.  Filers  will  be
 required  to  provide  such  records  and  documentation  to  the  Commission  and  USAC  upon  request.  261
 5.  Steps  Taken  To  Minimize  Significant  Economic  Impact  on  Small  Entities,  and  Significant  Alternatives  Considered
 118.  The  RFA  requires  an  agency  to  describe  any  significant  alternatives  that  it  has
 258  See  supra  paras.  29-  32.
 259  Id.  at  paras.  33-  37.
 260  Id.  at  para.  34.
 261  We  also  note  that  persons  willfully  making  false  statements  in  the  Worksheets  can  be  punished  by  fine  or
 imprisonment  under  title  18  of  the  United  States  Code.  See  18  U.  S.  C.    1001.
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 considered  in  reaching  its  proposed  approach,  which  may  include  the  following  four  alternatives  (among  others):  (  1)  the  establishment  of  differing  compliance  or  reporting  requirements  or
 timetables  that  take  into  account  the  resources  available  to  small  entities;  (2)  the  clarification,  consolidation,  or  simplification  of  compliance  or  reporting  requirements  under  the  rule  for  small
 entities;  (3)  the  use  of  performance,  rather  than  design,  standards;  and  (4)  an  exemption  from  coverage  of  the  rule,  or  any  part  thereof,  for  small  entities.  262
 119.  The  Commission  has  taken  numerous  steps  to  minimize  significant  economic  impact  on  small  entities  in  adopting  modifications  to  the  revenue-  based  methodology  for
 assessing  and  recovering  contributions  to  the  federal  universal  service  mechanisms.  In  modifying  the  existing  contribution  system,  we  have  adopted  rules  related  to  contribution
 recovery  that  will  increase  billing  transparency  and  decrease  confusion  for  consumers  about  the  amount  of  universal  service  contributions  that  are  passed  through  by  carriers,  while  ensuring  that
 carriers  continue  to  have  the  flexibility  to  recover  legitimate  administrative  costs  from  consumers  through  other  means.  263  By  allowing  carriers  to  contribute  based  on  projected  collected  end-  user
 revenues,  we  eliminate  one  of  the  major  reasons  for  carriers  to  recover  amounts  in  excess  of  the  relevant  assessment  rate.  In  light  of  these  changes,  we  prohibit  carriers  from  marking  up  federal
 universal  service  line  items  above  the  contribution  factor.  These  actions  address  small  entity  concerns  regarding  recovery  practices.  We  have  also  retained  the  de  minimis  exemption  to  ensure
 that  compliance  costs  associated  with  contributing  to  universal  service  do  not  exceed  actual  contribution  amounts.  Consistent  with  the  views  expressed  by  many  commenters,  including
 small  entity  commenters,  we  find  that  the  alternatives  to  revise  or  eliminate  the  de  minimis  exemption  are  not  supported  by  the  record  developed  at  this  time.  264
 120.  As  discussed  in  the  Order,  we  have  also  considered  various  alternative  proposals  on  how  to  reform  the  universal  service  contribution  system.  265  We  conclude  that  the
 modifications  to  the  current  revenue-  based  contribution  methodology,  as  adopted  in  the  Order  will  maintain  the  viability  of  universal  service  in  the  near  term,  while  we  continue  to  examine
 reforms  that  are  more  fundamental  based  on  proposals  submitted  in  the  record  in  this  proceeding.
 6.  Report  to  Congress
 121.  The  Commission  will  send  a  copy  of  the  Order,  including  the  FRFA,  in  a  report  to  be  sent  to  Congress  pursuant  to  the  Congressional  Review  Act.  266  In  addition,  the  Commission
 will  send  a  copy  of  the  Order,  including  this  FRFA,  to  the  Chief  Counsel  for  Advocacy  of  the  Small  Business  Administration.  A  copy  of  this  Order  and  FRFA  (or  summaries  thereof)  will  also
 262  5  U.  S.  C.    603(  c)(  1)-(  4).
 263  See  supra  para.  2;  see  generally  discussion  supra  at  Part  III.  B.
 264  See,  e.  g.,  Allied  Comments  at  9;  CPC  Comments  at  14-  15;  ITA  Reply  Comments  at  6-  7;  NECA  Comments  7-  8.
 265  See  generally  discussion  supra  at  Part  III.
 266  See  5  U.  S.  C.    801(  a)(  1)(  A).
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 be  published  in  the  Federal  Register.  267
 B.  Paperwork  Reduction  Act  Analysis
 122.  The  action  contained  herein  has  been  analyzed  with  respect  to  the  Paperwork  Reduction  Act  of  1995  and  found  to  impose  new  or  modified  reporting  and  recordkeeping
 requirements  or  burdens  on  the  public.  Implementation  of  these  new  or  modified  reported  and  recordkeeping  requirements  will  be  subject  to  approval  by  the  Office  of  Management  and  Budget
 (OMB)  as  prescribed  by  the  Act,  and  will  go  into  effect  upon  announcement  in  the  Federal  Register  of  OMB  approval.
 C.  Initial  Regulatory  Flexibility  Act  Analysis
 123.  As  required  by  the  Regulatory  Flexibility  Act  (RFA),  the  Commission  has  prepared  this  Initial  Regulatory  Flexibility  Analysis  (IRFA)  on  the  possible  significant  economic
 impact  on  small  entities  of  policies  and  rules  proposed  in  this  Second  Further  Notice  of  Proposed  Rulemaking.  Written  public  comments  are  requested  on  this  IRFA.  Comments  must  be
 identified  as  responses  to  the  IRFA  and  must  be  filed  by  the  deadlines  for  comments  on  the  Second  Further  Notice  provided  below  in  section  V.  E.
 1.  Need  for  and  Objectives  of  the  Proposed  Rules
 124.  The  assessment  and  recovery  of  universal  service  contributions  are  governed  by  the  statutory  framework  established  by  Congress  in  the  Act.  268  Section  254(  b)  instructs  the
 Commission  to  establish  universal  service  support  mechanisms  with  the  goal  of  ensuring  the  delivery  of  affordable  telecommunications  services  to  all  Americans,  including  consumers  in
 high-  cost  areas,  low-  income  consumers,  eligible  schools  and  libraries,  and  rural  health  care  providers.  269  Section  254(  d)  of  the  Act  states  that  [  e]  very  telecommunications  carrier  that
 provides  interstate  telecommunications  services  shall  contribute,  on  an  equitable  and  nondiscriminatory  basis,  to  the  specific,  predictable,  and  sufficient  mechanisms  established  by
 the  Commission  to  preserve  and  advance  universal  service.  270
 125.  Consistent  with  section  254  of  the  Act  and  as  noted  in  the  Order,  today  we  take  interim  measures  to  maintain  the  viability  of  universal  service  in  the  near  term  --  a  fundamental
 267  See  5  U.  S.  C.    604(  b).
 268  See  47  U.  S.  C.    201,  202,  254.
 269  47  U.  S.  C.    254(  b).
 270  47  U.  S.  C.    254(  d).  See  also  47  U.  S.  C.    254(  b)(  4),  (5)  (providing  that  Commission  policy  on  universal  service
 shall  be  based,  in  part,  on  the  principles  that  contributions  should  be  equitable  and  nondiscriminatory,  and  support  mechanisms  should  be  specific,  predictable,  and  sufficient).  The  Commission  adopted  the  additional  principle  that
 federal  support  mechanisms  should  be  competitively  neutral,  neither  unfairly  advantaging  nor  disadvantaging  particular  service  providers  or  technologies.  See  Universal  Service  Order,  12  FCC  Rcd  at  8801-  03,  paras.  46-  51.
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 goal  of  this  Commission  --  while  we  consider  further  long-  term  reforms.  271  As  discussed  in  further  detail  in  the  Order,  although  the  interim  measures  we  adopt  today  will  improve  the
 current  contribution  methodology,  they  do  not  address  our  concerns  regarding  the  long-  term  viability  of  any  revenue-  based  system.  272  We  therefore  conclude  that  it  is  appropriate  to  further
 study  long-  term  reforms  of  the  contribution  methodology.
 126.  Therefore,  in  this  Second  Further  Notice,  we  seek  comment  on  specific  aspects  of  three  connection-  based  proposals  in  the  record.  273  First,  we  ask  for  comment  on  a  proposed
 contribution  methodology  that  would  impose  a  minimum  contribution  obligation  on  all  interstate  telecommunications  carriers  and  flat  charge  for  each  end-  user  connection  depending  on  the
 nature  or  capacity  of  the  connection.  Next,  we  seek  comment  on  a  proposal  to  assess  all  connections  based  purely  on  capacity.  Under  this  proposal,  contribution  obligations  for  each
 switched  end-  user  connection  would  be  shared  between  access  and  transport  providers.  Finally,  we  seek  comment  on  a  proposal  to  assess  providers  of  switched  connections  based  on  their
 working  telephone  numbers.
 2.  Legal  Basis
 127.  The  legal  basis  as  proposed  for  this  Second  Further  Notice  is  contained  in  sections  4(  i),  4(  j),  201-  205,  254,  and  403  of  the  Communications  Act  of  1934,  as  amended,  47
 U.  S.  C.    4(  i),  4(  j),  201-  205,  254,  403.
 3.  Description  and  Estimate  of  the  Number  of  Small  Entities  to  Which  the  Proposed  Rules  Will  Apply
 128.  The  RFA  directs  agencies  to  provide  a  description  of,  and,  where  feasible,  an  estimate  of  the  number  of  small  entities  that  may  be  affected  by  the  rules  adopted  herein.  274  The
 RFA  generally  defines  the  term  "small  entity"  as  having  the  same  meaning  as  the  terms  "small  business,"  "small  organization,"  and  "small  governmental  jurisdiction."  275  In  addition,  the  term
 "small  business"  has  the  same  meaning  as  the  term  "small  business  concern"  under  the  Small  Business  Act,  unless  the  Commission  has  developed  one  or  more  definitions  that  are  appropriate
 to  its  activities.  276  Under  the  Small  Business  Act,  a  "small  business  concern"  is  one  that:  (1)  is
 271  See  generally  discussion  supra  at  Parts  I  &  III.
 272  See  supra  paras.  3-  4.
 273  See  supra  at  Part  IV.
 274  5  U.  S.  C.    604(  a)(  3).
 275  5  U.  S.  C.    601(  6).
 276  5  U.  S.  C.    601(  3)  (incorporating  by  reference  the  definition  of  "small  business  concern"  in  5  U.  S.  C.    632).
 Pursuant  to  5  U.  S.  C.    601(  3),  the  statutory  definition  of  a  small  business  applies  "unless  an  agency  after  consultation  with  the  Office  of  Advocacy  of  the  Small  Business  Administration  and  after  opportunity  for  public
 comment,  establishes  one  or  more  definitions  of  such  term  which  are  appropriate  to  the  activities  of  the  agency  and  publishes  such  definition  in  the  Federal  Register."
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 independently  owned  and  operated;  (2)  is  not  dominant  in  its  field  of  operation;  and  (3)  meets  any  additional  criteria  established  by  the  Small  Business  Administration  (SBA).  277
 129.  We  have  described  in  detail,  supra,  in  the  Final  Regulatory  Flexibility  Analysis,  the  categories  of  entities  that  may  be  directly  affected  by  any  rules  or  proposals  adopted  in  our
 efforts  to  reform  the  universal  service  contribution  system.  278  For  this  Initial  Regulatory  Flexibility  Analysis,  we  hereby  incorporate  those  entity  descriptions  by  reference.
 4.  Description  of  Projected  Reporting,  Recordkeeping,  and  Other  Compliance  Requirements
 130.  Should  the  Commission  decide  that  fundamental  reform  of  the  existing  contribution  methodology  is  needed,  the  associated  rule  changes  potentially  could  modify  the
 reporting  and  recordkeeping  requirements  of  telecommunications  service  providers  regulated  under  the  Communications  Act.  Under  a  connection-  based  mechanism,  we  potentially  could
 require  telecommunications  service  providers  to  file  additional  and/  or  different  monthly  or  quarterly  reports.  279  Any  such  reporting  requirements  potentially  could  require  the  use  of
 professional  skills,  including  legal  and  accounting  expertise.  Without  more  data,  we  cannot  accurately  estimate  the  cost  of  compliance  by  small  telecommunications  service  providers.  In
 this  IFRA,  we  therefore  seek  comment  on  the  frequency  with  which  carriers  should  submit  reports  to  USAC,  the  types  of  burdens  carriers  will  face  in  periodically  submitting  reports  to
 USAC,  and  whether  the  costs  of  such  reporting  are  outweighed  by  the  potential  benefits  of  the  possible  reforms.  280  Entities,  especially  small  businesses  and  small  entities,  more  generally,  are
 encouraged  to  quantify  the  costs  and  benefits  of  the  reporting  requirement  proposals.
 5.  Steps  Taken  to  Minimize  Significant  Economic  Impact  on  Small  Entities,  and  Significant  Alternatives  Considered
 131.  The  RFA  requires  an  agency  to  describe  any  significant  alternatives  that  it  has  considered  in  reaching  its  proposed  approach,  which  may  include  the  following  four  alternatives
 (among  others):  (1)  the  establishment  of  differing  compliance  or  reporting  requirements  or  timetables  that  take  into  account  the  resources  available  to  small  entities;  (2)  the  clarification,
 consolidation,  or  simplification  of  compliance  or  reporting  requirements  under  the  rule  for  small  entities;  (3)  the  use  of  performance,  rather  than  design,  standards;  and  (4)  an  exemption  from
 coverage  of  the  rule,  or  any  part  thereof,  for  small  entities.  281
 277  15  U.  S.  C.    632.
 278  See  supra  paras.  108-  115.
 279  See  supra  at  paras.  77-  78.
 280  Id.
 281  5  U.  S.  C.    603(  c).
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 132.  The  Second  Further  Notice  seeks  comment  on  a  number  of  connection-  based  alternatives  to  modify  the  existing  contribution  methodology  system.  Although  the  proponents
 of  specific  connection-  based  proposals  argue  that  they  would  be  consistent  with  the  requirements  of  section  254(  d)  of  the  Act  that  every  telecommunications  carrier  that  provides  interstate
 telecommunications  services  contribute  to  the  Commissions  universal  service  mechanisms  on  a  equitable  and  nondiscriminatory  basis,  several  other  parties  have  expressed  concerns  that  the
 connection-  based  proposals  in  the  record  would  be  inconsistent  with  the  statutory  mandate.  282  We  specifically  take  note  of  those  commenters  that  argue  that  the  connection-  based  proposals  in
 the  record  would  result  in  inequitable  contributions.  283
 133.  We  therefore  believe  it  is  appropriate  to  further  develop  the  record  on  aspects  of  certain  proposals  to  assess  universal  service  contributions  at  least  in  part  on  the  number  and
 capacity  of  connections.  We  also  believe  it  is  appropriate  to  continue  refining  our  analysis  of  the  potential  impacts  on  consumers  and  contributors,  including  small  entities,  of  adopting  such  a
 methodology.  In  this  Second  Further  Notice,  we  seek  comment  on  specific  measures  the  Commission  could  take  to  ensure  that  a  connection-  based  contribution  methodology  would  be
 consistent  with  these  statutory  mandates.  The  Commission  will  also  consider  additional  significant  alternatives  developed  in  the  record.
 134.  Wherever  possible,  the  Second  Further  Notice  seeks  comment  on  how  to  reduce  the  administrative  burden  and  cost  of  compliance  for  small  telecommunications  service
 providers.  For  example,  we  seek  comment  on  the  operation  of  a  de  minimis  exemption  under  the  various  connections-  based  proposals.  We  also  seek  comment  on  the  appropriate  frequency  and
 content  of  reporting  under  a  connection-  based  methodology.  We  specifically  seek  comment  from  contributors  that  are  small  entities  under  the  Small  Business  Act.
 6.  Federal  Rules  that  May  Duplicate,  Overlap,  or  Conflict  with  the  Proposed  Rules
 135.  None.
 D.  Initial  Paperwork  Reduction  Act  of  1995  Analysis
 136.  The  Second  Further  Notice  contains  either  a  proposed  or  modified  information  collection.  As  part  of  a  continuing  effort  to  reduce  paperwork  burdens,  we  invite  the  general
 public  and  the  Office  of  Management  and  Budget  (OMB)  to  take  this  opportunity  to  comment  on  the  information  collections  contained  in  this  Further  Notice,  as  required  by  the  Paperwork
 Reduction  Act  of  1995,  Public  Law  104-  13.  Public  and  agency  comments  are  due  at  the  same  time  as  other  comments  on  the  Second  Further  Notice;  OMB  comments  are  due  60  days  from  the
 date  of  publication  of  the  Second  Further  Notice  in  the  Federal  Register.  Comments  should
 282  See  generally  discussion  supra  at  Part  I.
 283  See  generally  discussion  supra  at  Part  IV.
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 address:  (a)  whether  the  proposed  collection  of  information  is  necessary  for  the  proper  performance  of  the  functions  of  the  Commission,  including  whether  the  information  shall  have
 practical  utility;  (b)  the  accuracy  of  the  Commissions  burden  estimates;  (c)  ways  to  enhance  the  quality,  utility,  and  clarity  of  the  information  collected;  and  (d)  ways  to  minimize  the  burden  of
 the  collection  of  information  on  the  respondents,  including  the  use  of  automated  collection  techniques  or  other  forms  of  information  technology.
 E.  Comment  Filing  Procedures
 137.  Pursuant  to  sections  1.415  and  1.419  of  the  Commission's  rules,  47  C.  F.  R.    1.415,  1.419,  interested  parties  may  file  comments  30  days  or  fewer  from  publication  in  the
 Federal  Register,  and  reply  comments  60  days  or  fewer  from  publication  in  the  Federal  Register.  Comments  may  be  filed  using  the  Commission's  Electronic  Comment  Filing  System  (ECFS)  or
 by  filing  paper  copies.  284
 138.  Comments  filed  through  the  ECFS  can  be  sent  as  an  electronic  file  via  the  Internet  to  <http://  www.  fcc.  gov/  e-  file/  ecfs.  html>.  Generally,  only  one  copy  of  an  electronic  submission
 must  be  filed.  If  multiple  docket  or  rulemaking  numbers  appear  in  the  caption  of  this  proceeding,  however,  commenters  must  transmit  one  electronic  copy  of  the  comments  to  each
 docket  or  rulemaking  number  referenced  in  the  caption.  In  completing  the  transmittal  screen,  commenters  should  include  their  full  name,  U.  S.  Postal  Service  mailing  address,  and  the
 applicable  docket  or  rulemaking  number.  Parties  may  also  submit  an  electronic  comment  by  Internet  e-  mail.  To  get  filing  instructions  for  e-  mail  comments,  commenters  should  send  an  e-mail
 to  ecfs@  fcc.  gov,  and  should  include  the  following  words  in  the  body  of  the  message,  "get  form  <your  e-  mail  address>."  A  sample  form  and  directions  will  be  sent  in  reply.
 139.  Parties  who  choose  to  file  by  paper  must  file  an  original  and  four  copies  of  each  filing.  If  more  than  one  docket  or  rulemaking  number  appears  in  the  caption  of  this  proceeding,
 commenters  must  submit  two  additional  copies  for  each  additional  docket  or  rulemaking  number.  Filings  can  be  sent  by  hand  or  messenger  delivery,  by  commercial  overnight  courier,  or  by  first-class
 or  overnight  U.  S.  Postal  Service  mail  (although  we  continue  to  experience  delays  in  receiving  U.  S.  Postal  Service  mail).  The  Commission's  contractor,  Vistronix,  Inc.,  will  receive
 hand-  delivered  or  messenger-  delivered  paper  filings  for  the  Commission's  Secretary  at  236  Massachusetts  Avenue,  N.  E.,  Suite  110,  Washington,  D.  C.  20002.  The  filing  hours  at  this
 location  are  8:  00  a.  m.  to  7:  00  p.  m.  All  hand  deliveries  must  be  held  together  with  rubber  bands  or  fasteners.  Any  envelopes  must  be  disposed  of  before  entering  the  building.  Commercial
 overnight  mail  (other  than  U.  S.  Postal  Service  Express  Mail  and  Priority  Mail)  must  be  sent  to  9300  East  Hampton  Drive,  Capitol  Heights,  MD  20743.  U.  S.  Postal  Service  first-  class  mail,
 Express  Mail,  and  Priority  Mail  should  be  addressed  to  445  12th  Street,  SW,  Washington,  D.  C.  20554.  All  filings  must  be  addressed  to  the  Commission's  Secretary,  Marlene  H.  Dortch,  Office
 of  the  Secretary,  Federal  Communications  Commission.
 284  See  Electronic  Filing  of  Documents  in  Rulemaking  Proceedings,  63  Fed.  Reg.  24,  121  (1998).
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 140.  Parties  also  must  send  three  paper  copies  of  their  filing  to  Sheryl  Todd,  Telecommunications  Access  Policy  Division,  Wireline  Competition  Bureau,  Federal
 Communications  Commission,  445  12th  Street  S.  W.,  Room  5-  B540,  Washington,  D.  C.  20554.  In  addition,  commenters  must  send  diskette  copies  to  the  Commission's  copy  contractor,  Qualex
 International,  Portals  II,  445  12th  Street,  S.  W.,  Room  CY-  B402,  Washington,  D.  C.  20054.
 F.  Ex  Parte  Presentations
 141.  This  is  a  permit  but  disclose  rulemaking  proceeding.  Ex  parte  presentations  are  permitted,  except  during  the  Sunshine  Agenda  period,  provided  that  they  are  disclosed  as
 provided  in  the  Commissions  rules.  285
 VI.  ORDERING  CLAUSES
 142.  Accordingly,  IT  IS  ORDERED  THAT,  pursuant  to  the  authority  contained  in  sections  1-  4,  201-  205,  214,  218-  220,  254,  403,  and  405  of  the  Communications  Act  of  1934,  as
 amended,  47  U.  S.  C.    151-  154,  201-  205,  214,  218-  220,  254,  403,  and  405,  this  REPORT  AND  ORDER  IS  ADOPTED.
 143.  IT  IS  FURTHER  ORDERED  that  Part  54  of  the  Commissions  rules,  47  C.  F.  R.  Part  54,  IS  AMENDED  as  set  forth  in  Appendix  A  hereto,  effective  30  days  after  their
 publication  in  the  Federal  Register.  The  collections  of  information  contained  within  are  contingent  upon  approval  by  the  Office  of  Management  and  Budget.
 144.  IT  IS  FURTHER  ORDERED  that  the  Commissions  Consumer  and  Governmental  Affairs  Bureau,  Reference  Information  Center,  SHALL  SEND  a  copy  of  this
 REPORT  AND  ORDER,  including  the  Final  Regulatory  Flexibility  Analysis,  to  the  Chief  Counsel  for  Advocacy  of  the  Small  Business  Administration.
 145.  IT  IS  FURTHER  ORDERED  that,  pursuant  to  the  authority  contained  in  sections  4(  i),  4(  j),  201-  205,  254,  and  403  of  the  Communications  Act  of  1934,  as  amended,  47  U.  S.  C.  
 154(  i),  154(  j),  201-  205,  254,  and  403,  this  Second  Further  Notice  of  Proposed  Rulemaking  IS  ADOPTED.
 285  See  generally  47  C.  F.  R.    1.  1202,  1.1203,  1.1203,  and  1.1206.
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 146.  IT  IS  FURTHER  ORDERED  that  the  Commissions  Consumer  and  Governmental  Affairs  Bureau,  Reference  Information  Center,  SHALL  SEND  a  copy  of  this
 Second  Further  Notice  of  Proposed  Rulemaking,  including  the  Initial  Regulatory  Flexibility  Analysis,  to  the  Chief  Counsel  for  Advocacy  of  the  Small  Business  Administration.
 FEDERAL  COMMUNICATIONS  COMMISSION
 Marlene  H.  Dortch  Secretary
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 APPENDIX  A    FINAL  RULES
 Part  54  of  the  Code  of  Federal  Regulations  is  amended  as  follows:
 PART  54  UNIVERSAL  SERVICE
 Subpart  H  Administration
 1.  Amend  section  54.706  to  revise  paragraphs  (b)  and  (c)  as  follows:
   54.706  Contributions
 (a)  *  *  *
 (b)  Prior  to  April  1,  2003,  except  as  provided  in  paragraph  (c)  of  this  section,  every
 telecommunications  carrier  that  provides  interstate  telecommunications  services,  every  provider
 of  interstate  telecommunications  that  offers  telecommunications  for  a  fee  on  a  non-  common
 carrier  basis,  and  every  payphone  provider  that  is  an  aggregator  shall  contribute  to  the  federal
 universal  service  support  mechanisms  on  the  basis  of  its  interstate  and  international  end-  user
 telecommunications  revenues,  net  of  prior  period  actual  contributions.  Beginning  April  1,  2003,
 except  as  provided  in  paragraph  (c),  every  such  provider  shall  contribute  on  the  basis  of  its
 projected  collected  interstate  and  international  end-  user  telecommunications  revenues,  net  of
 projected  contributions.
 (c)  Prior  to  April  1,  2003,  any  entity  required  to  contribute  to  the  federal  universal  service
 support  mechanisms  whose  interstate  end-  user  telecommunications  revenues  comprise  less  than
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 12  percent  of  its  combined  interstate  and  international  end-  user  telecommunications  revenues
 shall  contribute  to  the  federal  universal  service  support  mechanisms  for  high  cost  areas,  low-income
 consumers,  schools  and  libraries,  and  rural  health  care  providers  based  only  on  such
 entity's  interstate  end-  user  telecommunications  revenues,  net  of  prior  period  actual  contributions.
 Beginning  April  1,  2003,  any  entity  required  to  contribute  to  the  federal  universal  service  support
 mechanisms  whose  projected  collected  interstate  end-  user  telecommunications  revenues
 comprise  less  than  12  percent  of  its  combined  projected  collected  interstate  and  international
 end-  user  telecommunications  revenues  shall  contribute  based  only  on  such  entity's  projected
 collected  interstate  end-  user  telecommunications  revenues,  net  of  projected  contributions.  For
 purposes  of  this  paragraph,  an  "entity"  shall  refer  to  the  entity  that  is  subject  to  the  universal
 service  reporting  requirements  in  47  CFR  54.711  and  shall  include  all  of  that  entity's  affiliated
 providers  of  telecommunications  services.
 *  *  *  *  *
 2.  Amend  section  54.709  to  revise  paragraphs  (a),  (a)(  1),  and  the  first  sentence  of  paragraph
 (a)(  2)  as  follows:
   54.709  Computations  of  required  contributions  to  universal  service  support  mechanisms.
 (a)  Prior  to  April  1,  2003,  contributions  to  the  universal  service  support  mechanisms  shall  be
 based  on  contributors  end-  user  telecommunications  revenues  and  on  a  contribution  factor
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 determined  quarterly  by  the  Commission.  Contributions  to  the  mechanisms  beginning  April  1,
 2003  shall  be  based  on  contributors  projected  collected  end-  user  telecommunications  revenues,
 and  on  a  contribution  factor  determined  quarterly  by  the  Commission.
 (1)  For  funding  the  federal  universal  service  support  mechanisms  prior  to  April  1,  2003,  the
 subject  revenues  will  be  contributors'  interstate  and  international  revenues  derived  from  domestic
 end  users  for  telecommunications  or  telecommunications  services,  net  of  prior  period  actual
 contributions.  Beginning  April  1,  2003,  the  subject  revenues  will  be  contributors'  projected
 collected  interstate  and  international  revenues  derived  from  domestic  end  users  for
 telecommunications  or  telecommunications  services,  net  of  projected  contributions.
 (2)  Prior  to  April  1,  2003,  the  quarterly  universal  service  contribution  factor  shall  be  determined
 by  the  Commission  based  on  the  ratio  of  total  projected  quarterly  expenses  of  the  universal
 service  support  mechanisms  to  the  total  end-  user  interstate  and  international  telecommunications
 revenues,  net  of  prior  period  actual  contributions.  Beginning  April  1,  2003,  the  quarterly
 universal  service  contribution  factor  shall  be  determined  by  the  Commission  based  on  the  ratio  of
 total  projected  quarterly  expenses  of  the  universal  service  support  mechanisms  to  the  total
 projected  collected  end-  user  interstate  and  international  telecommunications  revenues,  net  of
 projected  contributions.  *  *  *
 3.  Amend  section  54.711  to  revise  paragraph  (a)  as  follows:
   54.711  Contributor  reporting  requirements.
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 (a)  Contributions  shall  be  calculated  and  filed  in  accordance  with  the  Telecommunications
 Reporting  Worksheet  which  shall  be  published  in  the  Federal  Register.  The  Telecommunications
 Reporting  Worksheet  sets  forth  information  that  the  contributor  must  submit  to  the  Administrator
 on  a  quarterly  and  annual  basis.  The  Commission  shall  announce  by  Public  Notice  published  in
 the  Federal  Register  and  on  its  website  the  manner  of  payment  and  dates  by  which  payments
 must  be  made.  An  executive  officer  of  the  contributor  must  certify  to  the  truth  and  accuracy  of
 historical  data  included  in  the  Telecommunications  Reporting  Worksheet,  and  that  any
 projections  in  the  Telecommunications  Reporting  Worksheet  represent  a  good-  faith  estimate
 based  on  the  contributors  policies  and  procedures.  The  Commission  or  the  Administrator  may
 verify  any  information  contained  in  the  Telecommunications  Reporting  Worksheet.  Contributors
 shall  maintain  records  and  documentation  to  justify  information  reported  in  the
 Telecommunications  Reporting  Worksheet,  including  the  methodology  used  to  determine
 projections,  for  three  years  and  shall  provide  such  records  and  documentation  to  the  Commission
 or  the  Administrator  upon  request.  Inaccurate  or  untruthful  information  contained  in  the
 Telecommunications  Reporting  Worksheet  may  lead  to  prosecution  under  the  criminal
 provisions  of  Title  18  of  the  United  States  Code.  The  Administrator  shall  advise  the  Commission
 of  any  enforcement  issues  that  arise  and  provide  any  suggested  response.
 *  *  *  *  *
 4.  Add  section  54.712  to  subpart  H  as  follows:
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   54.712  Carrier  recovery  of  universal  service  costs  from  end-  users.
 (a)  Federal  universal  service  contribution  costs  may  be  recovered  through  interstate
 telecommunications-  related  charges  to  end  users.  If  a  telecommunications  carrier  chooses  to
 recover  its  federal  universal  service  contribution  costs  through  a  line  item  on  a  customers  bill,  as
 of  April  1,  2003,  the  amount  of  the  federal  universal  service  line-  item  charge  may  not  exceed  the
 interstate  telecommunications  portion  of  that  customers  bill  times  the  relevant  contribution
 factor.
 (b)  Eligible  telecommunications  carriers  may  not  recover  federal  universal  service  contribution
 costs  from  Lifeline  customers.
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 APPENDIX  B
 PARTIES  FILING  COMMENTS  AND  REPLY  COMMENTS  IN  CC  DOCKET  NOS.  96-  45,  98-  171,  90-  571,  92-  237,  99-  200-  95-  116,  98-  170
 Comments:
 Commenters  Abbreviation
 Ad  Hoc  Telecommunications  Users  Committee  Ad  Hoc
 Alaska  Telephone  Association  ATA  Allied  Personal  Communications  Industry
 Association  of  California  Allied  AOL  Time  Warner  Inc.  AOL
 American  Association  of  Paging  Carriers  AAPC  American  Mobile  Telecommunications  Assoc.  Inc.  AMTA
 American  Public  Communications  Council  APCC  Arch  Wireless,  Inc.  Arch
 Association  of  Communications  Enterprises  ASCENT  AT&  T  Corp.  AT&  T
 AT&  T  Wireless  Services,  Inc.  AWS  BBG  Communications,  Inc.  BBG
 Beacon  Telecommunications  Advisors,  LLC  Beacon  BellSouth  Corporation  BellSouth
 BT  North  America  Inc.  BTNA  California  Public  Utilities  Commission  and
 The  People  of  the  State  of  California  CPUC  Coalition  for  Sustainable  Universal  Service  CoSUS
 Competitive  Telecommunications  Association  CompTel  Concerned  Paging  Carriers  CPC
 Consumers  Union,  Texas  Office  of  Public  Utility  Counsel,
 Consumer  Federation  of  America  Appalachian  Peoples  Action  Coalition,
 Center  for  Digital  Democracy,  Edgemont  Neighborhood  Coalition,
 and  Migrant  Legal  Action  Program  CU  et  al.  ePHONE  Telecom,  Inc.  ePHONE
 Fred  Williamson  and  Associates,  Inc.  FW&  A  General  Services  Administration  GSA
 Home  Telephone  Company,  Inc.,  Bluffton  Telephone  Co.,  Inc.,
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 Hargray  Telephone  Co.,  Inc.,  Chesnee  Telephone  Co.,
 Chester  Telephone  Co.,  Lockhart  Telephone  Co.,  Inc.
 Ridgeway  Telephone  Co.,  Inc.  Farmers  Telephone  Co.,  Inc.
 Palmetto  Rural  Telephone  Cooperative,  Inc.  PBT  Telecom,  Inc.
 Piedmont  Rural  Telephone  Cooperative,  Inc.  Sandhill  Telephone  Cooperative,  Inc.
 Sandwich  Isles  Communications,  Inc.  Yukon  Telephone  Co.,  Inc.  Home  et  al.
 Information  Technology  Association  of  America  ITAA  National  Association  of  State  Utility  Consumer  Advocates  NASUCA
 National  Exchange  Carrier  Association,  Inc.  NECA  National  Rural  Telecom  Association  and  the  Organization
 for  Promotion  and  Advancement  of  Small  Telecom  Companies  NRTA  and  OPASTCO
 National  Telecommunications  Cooperative  Association  NTCA  Nebraska  Independent  Companies  Nebraska
 Nextel  Communications,  Inc.  Nextel  OnStar  Corporation  OnStar
 PaeTec  Communications,  Inc.  PaeTec  Rural  Cellular  Association,  The  RCA
 Rural  Independent  Competitive  Alliance,  The  RICA  SBC  Communications  Inc.  SBC
 Sprint  Corporation  Sprint  Texas,  State  of  Texas
 Teletouch  Communications,  Inc.  Teletouch  Time  Warner  Telecom,
 XO  Communications,  and  Allegiance  Telecom  Time  Warner  et  al.
 TracFone  Wireless,  Inc.  TracFone  United  States  Cellular  Corporation  USCC
 United  States  Telecom  Association  USTA  Verizon  telephone  companies  Verizon
 Verizon  Wireless  Verizon  Wireless  Vincent  J.  Stoneking  V.  Stoneking
 Virgin  Mobile  USA,  LLC  Virgin  Mobile  VoiceStream  Wireless  Corporation  VoiceStream
 Western  Wireless  Corporation  Western  Working  Assets  Funding  Service,  Inc.  Working  Assets
 WorldCom,  Inc.  WorldCom
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 Reply  Comments:
 Reply  Commenters  Abbreviation  Alaska  Communications  Systems  ACS
 AOL  Time  Warner  Inc.  AOL  American  Library  Associations  ALA
 American  Public  Communications  Council  APCC  Arch  Wireless  Arch
 Association  of  Communications  Enterprises  ASCENT  Association  for  Local  Telecommunications  Services  ALTS
 BellSouth  Corporation  BellSouth  BT  North  America  BTNA
 Cable  &  Wireless  USA,  Inc.  C&  W  Coalition  for  Sustainable  Universal  Service  CoSUS
 Concerned  Paging  Carriers  AirCall,  Inc
 The  Beeper  People,  Inc.  Business  Service  Center,  Inc.
 Com-  Nav  Inc.,  d/  b/  a  Radio  Telephone  of  Maine  Cook  telecom,  Inc.,  Lubbock  Radio  Paging  Service,  Inc.
 Mobile  Phone  of  Texas,  Inc.  Mobilpage,  Inc.
 Omnicom  Paging  Plus,  LLC  Page-  All,  LLC
 Professional  Answering  Service,  Inc.  RCC  Inc.,  d/  b/  a/  Radio  Comm.  Co.
 RediCall  Communications  Co.  Robert  F.  Ryder  d/  b/  a  Radio  Paging  Service
 Salisbury  Mobile  Telephone,  Inc.  SEMA-  PHOON,  Inc.  d/  b/  a/  R.  A.  Communications
 Starpage,  Inc.  CPC  Consumers  Union
 Texas  Office  of  Public  Utility  Counsel  Consumer  Federal  of  America
 Appalachian  Peoples  Action  Coalition  Center  for  Digital  Democracy
 Edgemont  Neighborhood  Coalition  Migrant  Legal  Action  Program  CU
 Earthlink,  Inc.  Earthlink  Industrial  Telecommunications  Association,  Inc.  ITA
 Information  Technology  Assocation  of  America  ITAA  National  ALEC  Association/  Prepaid  Communications
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 Association  NALA  National  Rural  Telecom  Association
 Organization  for  the  Promotion  and  Advancement  Of  Small  Telecommunications  Companies  NRTA  and  OPASTCO
 National  Telecommunications  Cooperative  Association  NTCA  Nextel  Communications,  Inc.  Nextel
 Public  Utilities  Commission  of  Ohio  Ohio  PUC  OnStar  Corporation  OnStar
 Qwest  Communications  International  Inc.  Qwest  SBC  Communications  Inc.  SBC
 Sprint  Corporation  Sprint  Southern  Communications  Services,  Inc.  d/  b/  a
 Southern  LINC  Southern  Texas,  State  of  Texas
 TracFone  Wireless,  Inc.  TracFone  United  States  Cellular  Corporation  USCC
 Verizon  Verizon  Verizon  Wireless  Verizon  Wireless
 Voice  on  the  Net  Coalition  VON  Voicestream  Wireless  Corporation  Voicestream
 Warriner,  Gesinger  &  Associations,  LLC  Warriner  et  al.  WebLink  Wireless,  Inc.  WebLink
 Western  Alliance  Western  Alliance  Worldcom,  Inc.  Worldcom
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 APPENDIX  C
 REVISED  FORM  499-  Q  AND  INSTRUCTIONS
 The  form  and  attached  instructions  that  follow  have  not  yet  been  approved  by  OMB  and  have  been  attached  for  informational  purposes.
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 FCC  Form  499-  Q,  February  2003  Pending  Approval  by  OMB
 Estimated  Average  Burden  Hours  Per  Response:  10  Hours
 Telecommunications  Reporting  Worksheet,  FCC  Form  499-  Q
 Instructions  for  Completing  the  Quarterly  Worksheet  for  Filing  Contributions
 to  Universal  Service  Support  Mechanisms
 *  *  *  *  *
 NOTICE  TO  INDIVIDUALS:  Sections  54.706,  54.  711,  and  54.  713  of  the  Federal  Communications  Commission's  rules  require  all  telecommunications  carriers  providing  interstate  telecommunications
 services,  providers  of  interstate  telecommunications  that  offer  interstate  telecommunications  for  a  fee  on  a  non-  common  carrier  basis,  and  payphone  providers  that  are  aggregators  to  contribute  to  universal  service
 and  file  this  Telecommunications  Reporting  Worksheet  (FCC  Form  499-  Q)  on  February  1,  May  1,  August  1,  and  November  1,  each  year.  47  C.  F.  R.    54.706,  54.711,  54.713.  This  collection  of  information  stems
 from  the  Commission's  authority  under  Section  254  of  the  Communications  Act  of  1934,  as  amended,  47  U.  S.  C.    254.  The  data  in  the  Worksheet  will  be  used  to  calculate  contributions  to  the  universal  service
 support  mechanisms.  Selected  information  provided  in  the  Worksheet  will  be  made  available  to  the  public  in  a  manner  consistent  with  the  Commission's  rules.
 We  have  estimated  that  each  response  to  this  collection  of  information  will  take,  on  average,  10.0  hours.  Our  estimate  includes  the  time  to  read  the  instructions,  look  through  existing  records,  gather  and  maintain
 the  required  data,  project  growth  or  decline  in  revenues,  and  actually  complete  and  review  the  form  or  response.  If  you  have  any  comments  on  this  estimate,  or  how  we  can  improve  the  collection  and  reduce  the
 burden  it  causes  you,  please  write  the  Federal  Communications  Commission,  AMD-  PERM,  Washington,  D.  C.  20554,  Paperwork  Reduction  Project  (3060-  0855).  We  also  will  accept  your  comments  via  the
 Internet  if  you  send  them  to  jboley@  fcc.  gov.  Please  DO  NOT  SEND  COMPLETED  WORKSHEETS  TO  THIS  ADDRESS.
 Remember  --  You  are  not  required  to  respond  to  a  collection  of  information  sponsored  by  the  Federal  government,  and  the  government  may  not  conduct  or  sponsor  this  collection,  unless  it  displays  a  currently
 valid  Office  of  Management  and  Budget  (OMB)  control  number.  This  collection  has  been  assigned  an  OMB  control  number  of  3060-  0855.
 The  Commission  is  authorized  under  the  Communications  Act  of  1934,  as  amended,  to  collect  the  information  we  request  in  this  form.  We  will  use  the  information  that  you  provide  to  determine  contribution
 amounts.  If  we  believe  there  may  be  a  violation  or  potential  violation  of  a  statute  or  a  Commission  regulation,  rule,  or  order,  your  Worksheet  may  be  referred  to  the  Federal,  state,  or  local  agency  responsible
 for  investigating,  prosecuting,  enforcing,  or  implementing  the  statute,  rule,  regulation,  or  order.  In  certain  cases,  the  information  in  your  Worksheet  may  be  disclosed  to  the  Department  of  Justice,  court,  or  other
 adjudicative  body  when  (a)  the  Commission;  or  (b)  any  employee  of  the  Commission;  or  (c)  the  United  States  government,  is  a  party  to  a  proceeding  before  the  body  or  has  an  interest  in  the  proceeding.
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 With  the  exception  of  your  employer  identification  number,  if  you  do  not  provide  the  information  we  request  on  the  Worksheet,  the  Commission  may  consider  you  in  violation  of  sections  1.47,  52.17,  52.32,
 54.713,  and  64.  604  of  the  Commission's  rules.  47  C.  F.  R.    1.47,  52.  17,  52.32,  54.  713,  and  64.604.
 The  foregoing  Notice  is  required  by  the  Privacy  Act  of  1974,  P.  L.  93-  579,  December  31,  1974,  5  U.  S.  C.    552(  a)(  e)(  3),  and  the  Paperwork  Reduction  Act  of  1995,  P.  L.  No.  104-  13,  44  U.  S.  C.    3501,  et  seq.
 *  *  *  *  *
 Table  of  Contents  I.  Introduction  3
 II.  Filing  Requirements  and  General  Instructions  3  A.  Who  Must  File  3
 1.  Universal  service  exemption  for  de  minimis  telecommunications  providers  4  2.  Exception  for  government,  broadcasters,  schools  and  libraries  6
 3.  Exception  for  systems  integrator  and  self  providers  6  B.  Filing  by  Legal  Entity  6
 C.  When  and  Where  to  File  8  D.  Rounding  of  Numbers  and  Negative  Numbers  9
 E.  Obligation  to  File  Revisions  9  F.  Compliance  9
 III.  Specific  Instructions  10  A.  Block  1:  Contributor  Identification  Information  10
 B.  Block  2:  Contact  Information  10  C.  Block  3:  Contributor  Revenue  Information  11
 1.  Separating  revenues  from  other  contributors  to  the  federal  information  (carrier's  carrier  vs  end  user)  11
 2.  Column  (a)  -  total  revenues  12  3.  Columns  (b)  and  (c)  -  percent  interstate  &  international  12
 4.  Explanation  of  historical  revenue  categories  14  5.  Projected  gross  billed  end-  user  interstate  and  international  revenues  15
 6.  Projected  collected  end-  user  interstate  and  international  revenues  16  D.  Block  4:  Certification  17
 V.  Reminders  18
 Figure  1:  Table  to  determine  if  a  contributor  meets  the  de  minimis  standard  for  purposes  of  universal  service  contribution  5
 Figure  2:  Filing  schedule  8
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 I.  Introduction
 As  required  under  the  Communications  Act  of  1934,  as  amended,  1  the  Commission  has  established  procedures  to  finance  universal  service  support  mechanisms.  To  accomplish  this  Congressionally-  directed
 objective,  contributions  are  collected  from  telecommunications  carriers  providing  interstate  telecommunications  and  certain  other  providers  of  interstate  telecommunications.  This  Worksheet  sets  forth
 information  that  the  contributor  must  submit,  so  that  the  administrator  of  the  universal  service  support  mechanisms  may  calculate  and  assess  contributions.  2
 II.  Filing  Requirements  and  General  Instructions
 A.  Who  Must  File
 All  providers  of  interstate  telecommunications  within  the  United  States,  3  with  very  limited  exceptions,  must  file  an  FCC  Form  499-  Q  Telecommunications  Reporting  Worksheet.  4
 For  purposes  of  determining  whether  an  entity  provides  telecommunications,  please  note  that  the  term  "telecommunications"  means  the  transmission,  between  or  among  points  specified  by  the  user,  of
 information  of  the  user's  choosing,  without  change  in  the  form  or  content  of  the  information  as  sent  and  received.  For  the  purpose  of  filing,  the  term  "interstate  telecommunications"  includes,  but  is  not  limited  to,
 the  following  types  of  services:  wireless  telephony,  including  cellular  and  personal  communications  services  (PCS);  paging  and  messaging  services;  dispatch  services;  mobile  radio  services;  operator  services;
 access  to  interexchange  service;  special  access;  wide  area  telecommunications  services  (WATS);  subscriber  toll-  free  services;  900  services;  message  telephone  services  (MTS);  private  line;  telex;  telegraph;  video
 services;  satellite  services;  and  resale  services.  Note,  for  example,  that  all  incumbent  and  competitive  local  exchange  carriers  provide  access  to  an  interstate  public  network  and,  therefore,  provide  interstate
 telecommunications.
 Note  also  that  entities  must  file  this  Worksheet,  and  are  subject  to  universal  service  contribution  requirements,  if  they  offer  interstate  telecommunications  for  a  fee  to  the  public  even  if  only  a  narrow  or
 limited  class  of  users  could  utilize  the  services.  Included  are  entities  that  provide  interstate
 1  47  U.  S.  C.    151  et  seq.
 2  On  March  9,  2001,  the  Commission  modified  its  rules  to  base  universal  service  contributions  on  information  reported
 on  quarterly  Telecommunications  Reporting  Worksheet  filings,  with  an  annual  true-  up  based  on  information  reported  on  annual  Telecommunications  Reporting  Worksheets.  Federal-  State  Joint  Board  on  Universal  Service;  Petition  for
 Reconsideration  filed  by  AT&  T,  CC  Docket  No.  96-  45,  FCC  01-  85  (rel.  Mar.  14,  2001).  See  also  1998  Biennial  Regulatory  Review  --  Streamlined  Contributor  Reporting  Requirements  Associated  with  Administration  of
 Telecommunications  Relay  Services,  North  American  Numbering  Plan,  Local  Number  Portability,  and  Universal  Service  Support  Mechanisms,  Report  and  Order,  FCC  99-  175,  CC  Docket  No.  98-  171  (rel.  Jul.  14,  1999)  (Contributor
 Reporting  Requirements  Order).  3
 For  this  purpose,  the  United  States  is  defined  as  the  contiguous  United  States,  Alaska,  Hawaii,  American  Samoa,  Baker  Island,  Guam,  Howland  Island,  Jarvis  Island,  Johnston  Atoll,  Kingman  Reef,  Midway  Island,  Navassa  Island,
 the  Northern  Mariana  Islands,  Palmyra,  Puerto  Rico,  the  U.  S.  Virgin  Islands,  and  Wake  Island.  4
 Section  254(  d)  applies  not  only  to  every  telecommunications  carrier  that  provides  interstate  telecommunications  services  but  also  to  certain  other  provider[  s]  of  interstate  telecommunications.  47  U.  S.  C.    254(  d)  (emphasis
 added).  Solely  for  the  purposes  of  these  Instructions,  we  use  the  terms  telecommunications  services  and  telecommunications  interchangeably,  unless  otherwise  specified.  For  more  information  on  these  terms,  see  47
 U.  S.  C.    3(  43),  (46);  Federal-  State  Joint  Board  on  Universal  Service,  CC  Docket  No.  96-  45,  Report  and  Order,  12  FCC  Rcd  8776  (1997)  (Universal  Service  Order).
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 telecommunications  to  entities  other  than  themselves  for  a  fee  on  a  private,  contractual  basis.  In  addition,  owners  of  pay  telephones,  sometimes  referred  to  as  "pay  telephone  aggregators,"  must  file  this  Worksheet  if
 they  do  not  qualify  for  the  de  minimis  exemption  under  the  Commissions  universal  service  rules.  5
 The  following  three  sections  list  types  of  telecommunications  providers  that  are  not  required  to  file  the  Form  499-  Q.  Note  that  such  entities  are  treated  as  end  users  by  their  underlying  carriers  and  therefore  may  be
 subject  to  pass-  through  charges.
 1.  Universal  service  exemption  for  de  minimis  telecommunications  providers
 Section  54.  708  of  the  Commissions  rules  states  that  telecommunications  carriers  and  telecommunications  providers  are  not  required  to  contribute  directly  to  the  universal  service  support  mechanisms  for  a  given  year
 if  their  contribution  for  that  year  is  less  than  $10,000.  6  Thus,  potential  contributors  whose  contribution  to  the  universal  service  support  mechanisms  would  be  de  minimis  under  the  universal  service  rules  are  not  required
 to  file  the  Worksheet  (FCC  Form  499-  Q)  or  contribute  directly  to  universal  service  .  Telecommunications  carriers  and  other  telecommunications  providers  should  complete  the  table  contained  in  Figure  1  to  determine
 whether  they  meet  the  de  minimis  standard.  To  complete  Figure  1,  potential  filers  and  all  affiliates  must  first  complete  block  3  of  the  Worksheet  and  enter  the  amounts  from  Line  122(  b)  and  122(  c)  in  Figure  1.
 Telecommunications  providers  that  do  not  file  this  Worksheet  because  their  contributions  would  be  de  minimis  should  retain  Figure  1  and  documentation  of  their  contribution  base  revenues  for  three  years  and
 may  be  required  to  provide  it  to  the  administrator  or  FCC  upon  request.
 5  47  C.  F.  R.    54.  708.  See  also  Figure  1.
 6  47  C.  F.  R.    54.708.
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 Figure  1:  Table  to  determine  if  a  contributor  meets  the  de  minimis  standard  for  purposes  of  universal  service  contribution
 1  Interstate  contribution  base  for  the  quarter  for  filer  (amount  reportable  on  filers  Form  499-  Q;  Line  122(  b))  $
 2  International  contribution  base  for  the  quarter  for  filer  (amount  reportable  on  filers  Form  499-  Q;  Line  122(  c))  $
 3  Interstate  contribution  base  for  the  quarter  for  all  affiliates*  (total  of  amounts  reportable  on  Form  499-  Q;  Line  1220(  b)  for  all  affiliates  of
 the  filer)
 $
 4  International  contribution  base  for  the  quarter  for  all  affiliates  (total  of  amounts  reportable  on  Form  499-  Q;  Line  122(  e)  for  all  affiliates  of  the
 filer)
 $
 5  Consolidated  interstate  contribution  base:  Line  (1)  +  Line  (3)  $
 6  Consolidated  international  contribution  base:  Line  (2)  +  Line  (4)  $
 7  Total  potential  contribution  base  for  filer  and  its  affiliates:  Line  (5)  +  Line  (6)  $
 8  Combined  interstate  contribution  base  as  a  percentage  of  total  potential  contribution  base:  Line  (5)  /  Line  (7)  %
 9  Interstate  contribution  base  for  filer  from  Line  (1)  $
 10  If  the  amount  in  Line  (8)  is  equal  to  or  greater  than  12%,  enter  into  Line  (10)  the  international  contribution  base  for  the  filer  from  Line  (2).
 If  the  amount  on  Line  (8)  is  less  than  12%,  enter  $0
 $
 11  Revenue  base  for  the  filer  for  the  quarter  for  determining  contributions  to  universal  service  support  mechanisms:  Line  (9)  +  Line  (10)  $
 12  Actual  contributions  to  federal  universal  service  support  mechanisms  made  in  the  calendar  quarter  for  which  revenues  are  being  reported.  $
 13  Contribution  base:  Line  (11)    Line  (12)  $
 14  4
 15  Annualized  contribution  base;  Line  (13)  multiplied  by  Line  (14)
 16  Estimation  factor  for  determining  whether  to  file  a  499-  Q  0.095*
 17  Estimated  annual  contribution:  amount  in  Line  (15)  multiplied  by  Line  (16)  $
 *  An  affiliate  is  a  "person  that  (directly  or  indirectly)  owns  or  controls,  is  owned  or  controlled  by,  or  is  under  common  ownership  or  control  with,  another  person."  See  47  U.  S.  C.    153(  1).
 **  The  estimation  factor  is  higher  than  the  contribution  factor  announced  for  the  first  quarter  of  2003.  See  Public  Notice,  DA  02-  3387.  Actual  contribution  factors  for  2003  may  increase  or  decrease
 depending  on  quarterly  changes  in  program  costs  and  the  contribution  base.  Filers  whose  actual  contribution  requirements  total  less  than  $10,000  for  the  calendar  year  will  be  treated  as  de  minimis
 and  will  receive  refunds,  if  necessary.  Filers  whose  actual  contribution  requirements  total  $10,000  or  more  are  required  to  contribute  to  the  universal  service  support  mechanisms  and  must  file  this
 Worksheet.
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 2.  Exception  for  government,  broadcasters,  schools,  and  libraries
 Certain  entities  are  explicitly  exempted  from  contributing  directly  to  the  universal  service  support  mechanisms  and  need  not  file  this  Worksheet.  Government  entities  that  purchase  telecommunications
 services  in  bulk  on  behalf  of  themselves,  e.  g.,  state  networks  for  schools  and  libraries,  are  not  required  to  file  or  contribute  directly  to  universal  service.  Public  safety  and  local  governmental  entities  licensed  under
 Subpart  B  of  Part  90  of  the  Commission's  rules  are  not  required  to  file  or  contribute  directly  to  universal  service.  Similarly,  if  an  entity  provides  interstate  telecommunications  exclusively  to  public  safety  or
 government  entities  and  does  not  offer  services  to  others,  that  entity  is  not  required  to  file  or  contribute  directly  to  universal  service.  In  addition,  broadcasters,  non-  profit  schools,  non-  profit  libraries,  non-  profit
 colleges,  non-  profit  universities,  and  non-  profit  health  care  providers  are  not  required  to  file  the  Worksheet  or  contribute  directly  to  universal  service.
 3.  Exception  for  systems  integrators  and  self  providers
 Systems  integrators  that  derive  less  than  five  percent  of  their  systems  integration  revenues  from  the  resale  of  telecommunications  are  not  required  to  file  or  contribute  directly  to  universal  service.  Systems
 integrators  are  providers  of  integrated  packages  of  services  and  products  that  may  include  the  provision  of  computer  capabilities,  interstate  telecommunications  services,  remote  data  processing  services,  back-office
 data  processing,  management  of  customer  relationships  with  underlying  carriers  and  vendors,  provision  of  telecommunications  and  computer  equipment,  equipment  maintenance,  help  desk  functions,
 and  other  services  and  products).  Legal  entities  that  provide  services  only  to  themselves  or  to  commonly  owned  affiliates  need  not  file.
 B.  Filing  by  Legal  Entity
 Each  legal  entity  that  provides  interstate  telecommunications  service  for  a  fee,  including  each  affiliate  or  subsidiary  of  an  entity,  must  complete  separately  and  file  a  copy  of  the  attached
 Telecommunications  Reporting  Worksheet,  except  as  provided  for  below.  Entities  that  have  distinct  articles  of  incorporation  are  separate  legal  entities.  Each  affiliate  or  subsidiary  should  identify  their  ultimate
 controlling  parent  or  entity  on  Block  1  Line  (105)  --  Holding  Company.
 Consolidated  filing  will  be  permitted  only  if  the  filing  entity  certifies  that  all  of  the  following  conditions  are  met:  7
 (1)  A  single  entity  oversees  the  management  of  the  affiliated  systems;  (2)  A  single  entity  sends  bills  to  customers  and  these  bills  identify  a  single  entity  (or  trade
 name)  as  the  service  provider,  rather  than  identifying  the  individual  legal  entities;  (3)  All  revenues  are  posted  to  a  single  general  ledger;
 7  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  (rel.  Feb.  26,  2002).
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 (4)  To  the  extent  that  separate  revenue  and  expense  accounts  exist,  they  are  derived  from  one  consolidated  set  of  books  and  the  consolidated  filing  must  cover  all  revenues  contained  in
 the  consolidated  books;  (5)  Customers  have  a  single  point  of  contact;
 (6)  The  consolidated  filer  acknowledges  that  process  served  on  the  consolidated  filer  would  represent  process  served  on  any  or  all  of  the  affiliated  legal  entities;
 (7)  The  consolidated  filer  agrees  to  document  and  resolve  all  slamming  complaints  that  might  be  served  on  either  the  filing  entity  or  any  of  the  affiliated  legal  entities;  8
 (8)  The  consolidated  filer  obtains  a  separate  FCC  Registration  Number  (FRN)  from  those  assigned  to  its  affiliated  legal  entities;
 (9)  The  consolidated  filer  acknowledges  that  its  obligations  with  regard  to  universal  service,  Telecommunications  Relay  Services,  Local  Number  Portability,  the  North  American
 Numbering  Plan,  and  regulatory  fees  will  be  based  on  the  data  provided  in  consolidated  Worksheet  filings,  that  it  bears  the  responsibility  to  satisfy  those  obligations,  and  that  all
 legal  entities  covered  by  the  filing  are  jointly  and  severally  liable  for  such  obligations;  and  (10)  The  consolidated  filer  acknowledges  that  it:  (A)  was  not  insolvent  on  the  date  it  undertook
 to  make  payments  on  a  consolidated  basis  or  on  the  date  of  actual  payments  to  universal  service,  Telecommunications  Relay  Services,  Local  Number  Portability,  the  North
 American  Numbering  Plan,  and  regulatory  fees,  and  did  not  become  insolvent  as  a  result  of  such  undertaking  or  payments;  (B)  was  not  left  with  unreasonably  small  capital  as  a  result
 of  such  undertaking  or  payments;  and  (C)  was  not  left  unable  to  pay  debts  as  they  matured  as  a  result  of  such  undertaking  or  payments.  9
 Each  year,  entities  choosing  to  file  on  a  consolidated  basis  must  file  a  statement  certifying  that  they  meet  all  of  the  above  conditions.  Such  certification  also  must  include:  (1)  a  list  of  the  legal  names  of  all  legal
 entities  that  are  covered  by  the  filing;  (2)  the  Form  499  identification  numbers  of  all  legal  entities  that  are  covered  by  the  filing;  (3)  the  consolidated  filers  FRN;  and  (4)  for  wireless  carriers,  a  list  of  all  radio
 licenses  (call  signs)  issued  to  each  legal  entity  covered  by  the  filing.  Consolidated  filers  should  file  this  certification  with  the  Commissions  Data  Collection  Agent.  Furthermore,  a  contributor  choosing  to  file
 on  a  consolidated  basis  should  recognize  that  any  penalties  associated  with  failure  to  pay  or  with  underpayment  of  any  of  its  obligations  will  be  assessed  on  the  total  revenue  reported  on  the  consolidated
 basis,  rather  than  on  a  separate  legal  entity  basis.
 8  A  CMRS  carrier  that  is  not  subject  to  certain  slamming  regulations  is  not  required  to  certify  that  it  will  document
 and  resolve  all  slamming  complaints  that  might  be  served  on  either  the  filing  entity  or  any  of  its  affiliated  legal  entities  that  also  are  not  subject  to  the  slamming  regulations.
 9  For  purposes  of  this  certification,  the  term  "insolvent"  means  either  unable  to  pay  debts  when  due  or  having
 liabilities  greater  than  assets.  See  11  U.  S.  C.    101(  32).
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 C.  When  and  Where  to  File
 Figure  2  provides  the  filing  schedule  and  relevant  filing  addresses.  If  a  filing  date  is  a  holiday  (as  defined  in  Section  1.  4(  e)(  1)  of  the  Commission's  rules),  Worksheets  are  due  the  next  business  day.
 Figure  2:  Filing  schedule
 When  to  file  What  to  file  Where  to  file  *
 February  1  of  each  year  Completed  Form  499-  Q  containing  revenue  information  for  October  1
 through  December  31  of  the  prior  calendar  year  and  projections  for
 April  1  through  June  30**
 Form  499  Data  Collection  Agent  Attn:  Cristy  Dolechal
 80  South  Jefferson  Rd.  Whippany,  NJ  07981
 April  1  of  each  year  Completed  Form  499-  A  containing  revenue  information  for  January  1
 through  December  31  of  the  prior  calendar  year
 Form  499  Data  Collection  Agent  (address  above)
 May  1  of  each  year  Completed  Form  499-  Q  containing  revenue  information  for  January  1
 through  March  31  and  projections  for  July  1  through  September  30
 Form  499  Data  Collection  Agent  (address  above)
 August  1  of  each  year  Completed  Form  499-  Q  containing  revenue  information  for  April  1
 through  June  30  and  projections  for  October  1  through  December
 31
 Form  499  Data  Collection  Agent  (address  above)
 November  1  of  each  year  Completed  Form  499-  Q  containing  revenue  information  for  July  1
 through  September  30  and  projections  for  January  1  through
 March  31  of  the  coming  year
 Form  499  Data  Collection  Agent  (address  above)
 *  Do  not  send  universal  service  contributions  with  this  Worksheet  or  to  the  above  address.  The  universal  service  administrator  will  calculate  the  amount  of  contribution  due  and  send  a  bill  to  the
 billing  contact  person  and  billing  address  identified  in  Line  (112)  of  the  Form  499-  Q.
 **  The  February  1,  2003  filing  also  includes  projections  for  the  first  calendar  quarter  of  2003.
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 D.  Rounding  of  Numbers  and  Negative  Numbers
 All  information  provided  in  the  Worksheet  should  be  neatly  printed  in  ink  or  typed.  Please  provide  an  original  officer  signature  in  ink  in  Line  (124).
 Dollar  Amounts.  Reported  revenues  in  Block  3  that  are  greater  than  a  thousand  dollars  may  be  rounded  to  the  nearest  thousand  dollars.  Regardless  of  rounding,  all  dollar  amounts  must  be  reported  in  whole
 dollars.  For  example,  $2,271,881.93  could  be  reported  as  $2,271,  882  or  as  $2,272,000,  but  could  not  be  reported  as  $2272  thousand,  $2,270,000.  00  or  $2.272  million.  Please  enter  $0  in  any  line  for  which  the
 contributor  had  no  revenues  for  the  year.
 Negative  Numbers.  Contributors  are  directed  to  provide  billed  revenues  on  Lines  (115)  through  (119)  and  (121)  without  subtracting  any  expenses,  allowances  for  uncollectibles  or  settlement  payments  and  without
 making  out-  of-  period  adjustments.  The  amount  of  projected  uncollectibles  (the  difference  between  Line  (119)  and  Line  (120)  and  the  difference  between  Line  (121)  and  Line  (122))  cannot  exceed  projected
 billings.  Therefore,  do  not  enter  negative  numbers  on  the  form.
 E.  Obligation  to  File  Revisions
 Line  (128)  provides  check  boxes  to  show  whether  the  Worksheet  is  the  original  filing  or  a  revised  filing  for  the  quarter.  A  contributor  must  file  a  revised  499-  Q  Worksheet  if  it  discovers  an  error  in  the  data  that  it
 reports  ,  i.  e.,  if  the  filer  discovers  that  it  omitted  or  misclassified  a  major  category  of  revenue.  However,  revised  filings  must  be  made  within  45  calendar  days  of  the  original  filing  date.  In  general,  the  historical
 revenues  contained  in  the  quarterly  filings  will  be  based  on  unaudited  books  from  a  point  in  time  and  the  projections  will  represent  the  filers  expectations  as  of  a  point  in  time.  Contributors  need  not  file  revisions  to
 the  Form  499  -  Q  as  a  result  of  ordinary  accounting  adjustments  such  as  out-  of-  period  adjustments  .  Revenue  information  from  the  Form  499-  A  will  be  used  to  ensure  that  contributions  for  the  whole  year  are  based  on
 all  subject  revenues  for  the  year.
 Contributors  should  not  file  a  revised  Form  499-  Q  Telecommunications  Reporting  Worksheet  to  reflect  mergers,  acquisitions,  or  sales  of  operating  units.  In  the  event  that  a  contributor  that  filed  a  Form  499-  Q  no
 longer  exists,  the  successor  company  to  the  contributor's  assets  or  operations  is  responsible  for  continuing  to  make  payments,  if  any,  for  the  funding  period  and  must  notify  the  Commissions  Data  Collection  Agent.
 F.  Compliance
 Failure  to  file  the  Telecommunications  Reporting  Worksheet  or  to  pay  contributions  in  a  timely  fashion  may  subject  entities  to  the  enforcement  provisions  of  the  Communications  Act  and  any  other  applicable  law.  In
 addition,  telecommunications  providers  may  be  billed  by  the  administrators  for  reasonable  costs,  including  interest  and  administrative  costs  that  are  caused  by  late,  inaccurate,  or  untruthful  filing  of  the  Worksheet  or
 overdue  contributions.  10
 10  See  47  C.  F.  R.    54.713.
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 III.  Specific  Instructions
 A.  Block  1:  Contributor  Identification  Information
 Block  1  of  the  Telecommunications  Reporting  Worksheet  requires  identification  information.
 Line  (101)  --  enter  the  "Filer  499  ID"  number  for  the  filing  entity.  This  code  is  assigned  by  the  Commissions  Data  Collection  Agent  after  a  company  files  its  first  FCC  Form  499-  A.  Filer  499  IDs  for
 current  filers  can  be  found  at  http://  gullfoss2.  fcc.  gov/  cib/  form499/  499a.  cfm  or  in  the  FCC  report  Telecommunications  Provider  Locator,  which  is  available  on  the  Commission's  web  site  at
 www.  fcc.  gov/  ccb/  stats.  This  code  should  be  entered  at  the  top  of  any  cover  letter  or  supporting  documentation.  New  filers  are  assigned  Filer  499  ID  numbers  after  a  completed  Form  499-  A
 Telecommunications  Reporting  Worksheet  is  received  by  the  data  collection  agent.
 Line  (102)  --  enter  the  legal  name  of  the  filer  as  it  appears  on  articles  of  incorporation  and  other  legal  documents.  Each  legal  entity  must  file  a  separate  Worksheet  unless  affiliated  entities  are  filing  on  a
 consolidated  basis.  11
 Line  (103)  --  provide  the  Internal  Revenue  Service  (IRS)  employer  identification  number  (EIN)  for  the  filer.  This  should  be  the  same  EIN  that  the  company  uses  to  file  federal  excise  taxes  or  income  taxes,  if  the  filer
 offers  services  subject  to  those  taxes.  The  EIN  is  also  known  as  the  taxpayer  identification  number  (TIN)  or  for  individuals  as  the  social  security  number  (SSN).
 Line  (104)  --  provide  the  principal  name  under  which  the  company  conducts  telecommunications  activities.  This  would  typically  be  the  name  that  appears  on  customer  bills,  or  the  name  used  when  service
 representatives  answer  customer  inquiries.
 Line  (105)  --  use  this  block  to  provide  a  common  identifier  for  all  affiliated  filers.  Typically,  this  would  be  the  name  of  the  filer's  holding  company  or  controlling  entity,  if  any.  The  common  name  used  by  all
 affiliates  need  not  be  a  common  carrier.  All  reporting  affiliates  or  commonly  controlled  entities  should  have  the  identical  name  appearing  on  line  (106).  An  affiliate  is  a  "person  that  (directly  or  indirectly)  owns  or
 controls,  is  owned  or  controlled  by,  or  is  under  common  ownership  or  control  with,  another  person."  12
 Line  (106)  --  provide  the  FCC  Registration  Number  (FRN).  The  FRN  is  a  ten  digit  number  that  includes  a  check-  digit.  The  FRN  is  used  to  identify  an  entity  within  all  Commission  Licensing/  Filing  systems  and
 RAMIS  (the  Commissions  Revenue  Accounting  Management  Information  System.)  This  number  is  assigned  by  CORES  (the  Commission  Registration  System)  and  can  be  obtained  at
 https://  gullfoss2.  fcc.  gov/  cores/  CoresHome.  html.  For  assistance,  contact  the  CORES  help  desk  at  (877)  480-3201  or  by  e-  mail  at  CORES@  fcc.  gov.
 Line  (107)  --  enter  the  complete  mailing  address  of  the  corporate  headquarters  of  the  reporting  entity.
 11  See  Section  II-  B,  page  6,  for  information  on  making  consolidated  filings.
 12  See  47  U.  S.  C.    153(  1).
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 B.  Block  2:  Contact  Information
 Lines  (108-  111)  --  enter  the  name,  telephone  number,  fax  number,  and  e-  mail  address  of  the  person  who  filled  out  the  Form  499-  Q.  This  should  be  a  person  who  can  provide  clarifications  or  additional  information,
 and,  if  necessary,  who  could  serve  as  the  first  point  of  contact  in  the  event  that  either  the  Commission  or  an  administrator  should  choose  to  verify  or  audit  information  provided  in  the  Telecommunications  Reporting
 Worksheet.
 Line  (112)  --  provide  a  billing  contact  person  name  and  address  for  administrators  to  send  billing  information  for  contributions  to  the  universal  service  fund.  Information  on  establishing  electronic  fund
 transfer  and  bills  for  universal  service  will  be  sent  to  this  address  unless  other  arrangements  are  made  via  written  request.
 C.  Block  3:  Contributor  Revenue  Information
 Line  (113)    enter  the  year  for  which  revenue  information  is  being  filed.
 Line  (114)    check  the  appropriate  box  to  indicate  the  calendar  quarters  for  which  historical  and  projected  revenue  information  are  being  reported.
 Lines  (115-  120)  contain  detailed  revenue  data.
 1.  Separating  Revenue  from  Service  Provided  to  Other  Universal  Service  Contributors  for  Resale  [Line  (115)]  from  End-  User  Telecommunications
 Revenues  [Line  (116)]  (carrier's  carrier  vs.  end  user)
 In  the  Telecommunications  Reporting  Worksheet,  filers  must  report  revenues  using  two  broad  categories:  (1)  Revenues  from  other  contributors  to  the  federal  universal  service  support  mechanisms;  and,  (2)
 Revenues  from  all  other  sources.  Taken  together,  these  revenues  should  include  all  revenues  billed  to  customers  and  should  include  all  revenues  on  the  reporting  entities  books  of  account.
 For  the  purposes  of  this  Worksheet,  Revenues  from  services  provided  for  resale  by  other  contributors  to  federal  universal  service  support  mechanisms  are  revenues  from  services  provided  by  underlying  carriers
 to  other  entities  that  currently  are  contributors  to  federal  universal  service  support  mechanisms  and  that  are  resold  in  the  form  of  telecommunications.  Such  revenues  are  referred  to  herein  as  "carrier's  carrier
 revenues"  or  "revenues  from  resellers."  Revenues  from  all  other  sources  consist  primarily  of  revenues  from  services  provided  to  end  users,  referred  to  here  as  "end-  user  revenues."  This  latter  category  includes
 non-  telecommunications  revenues
 For  the  purpose  of  completing  Line  (115),  a  reseller  is  a  telecommunications  carrier  or  telecommunications  provider  that:  1)  incorporates  purchased  telecommunications  services  into  its  own
 telecommunications  offerings;  and  2)  can  reasonably  be  expected  to  contribute  to  federal  universal  service  support  mechanisms  based  on  revenues  from  such  offerings  when  provided  to  end  users.
 Each  filer  should  have  documented  procedures  to  ensure  that  it  reports  as  revenues  from  resellers  only  revenues  from  entities  that  reasonably  would  be  expected  to  contribute  to  support  universal  service.  The
 procedures  should  include  but  not  be  limited  to  maintaining  the  following  information  on  resellers:  Filer  499  ID;  legal  name;  address;  name  of  a  contact  person;  and  phone  number  of  the  contact  person.  The  filer
 should  verify  that  each  reseller  will:  1)  resell  the  filers  services  in  the  form  of  telecommunications;  and
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 2)  contribute  directly  to  the  federal  universal  service  support  mechanisms.  If  the  filer  does  not  have  independent  reason  to  know  that  the  reseller  satisfies  these  criteria,  it  should  obtain  a  signed  statement
 certifying  that  these  criteria  are  met.  Current  contributors  to  universal  service  are  identified  at  http://  gullfoss2.  fcc.  gov/  cib/  form499/  499a.  cfm.
 Note:  For  the  purposes  of  filling  out  this  Worksheet  --  and  for  calculating  contributions  to  the  universal  service  support  mechanisms  --  certain  telecommunications  carriers  and  service  providers  may  be  exempt
 from  contribution  to  the  universal  service  support  mechanisms.  These  exempt  entities,  including  "international  only"  and  "intrastate  only"  carriers  and  carriers  that  meet  the  de  minimis  universal  service
 threshold,  should  not  be  treated  as  resellers  for  the  purpose  of  reporting  revenues  on  Line  (115).  That  is,  filers  that  are  underlying  carriers  should  report  revenues  derived  from  the  provision  of  telecommunications
 to  exempt  carriers  and  providers  (including  services  provided  to  entities  that  are  de  minimis  for  universal  service  purposes)  on  Line  (116).  Underlying  carriers  must  contribute  to  the  universal  service  support
 mechanisms  on  the  basis  of  such  revenues.
 2.  Column  (a)  -  total  revenues
 The  reporting  entity  must  report  gross  revenues  from  all  sources,  including  nonregulated  and  non-telecommunications  services  on  Lines  (115)  through  (117)  and  these  must  add  to  total  gross  revenues  as
 reported  on  Line  (118).  Gross  revenues  should  include  revenues  derived  from  the  activation  and  provision  of  interstate,  international,  and  intrastate  telecommunications  and  non-  telecommunications  services.  Gross
 revenues  consist  of  total  revenues  billed  to  customers  during  the  filing  period  with  no  allowances  for  uncollectibles,  settlements,  or  out-  of-  period  adjustments.  Gross  billed  revenues  may  be  distinct  from
 booked  revenues.  NECA  pool  companies  should  report  the  actual  gross  billed  revenues  (CABS  Revenues)  reported  to  the  NECA  pool  and  not  settlement  revenues  received  from  the  pool.
 Where  two  contributors  have  merged  prior  to  the  filing  date,  the  successor  company  should  report  total  revenues  for  the  reporting  period  for  all  predecessor  operations.  The  two  contributors,  however,  should
 continue  to  report  separately  if  each  maintains  separate  corporate  identities  and  continues  to  operate.  13  Where  an  entity  obtains,  through  purchase  or  transfer,  the  telecommunications  operations  or  customer  base
 of  a  telecommunications  provider  during  a  quarter,  it  must  report  all  telecommunications  revenues  associated  with  such  operations  or  customer  base  including  revenues  billed  in  the  quarter  prior  to  the  date  of
 acquisition.
 Gross  revenues  also  should  include  any  surcharges  on  telecommunications  services  that  are  billed  to  the  customer  and  either  retained  by  the  contributor  or  remitted  to  a  non-  government  third  party  under  contract.
 Gross  revenues  should  exclude  taxes  and  any  surcharges  that  are  not  recorded  on  the  company  books  as  revenues  but  which  instead  are  remitted  to  government  bodies.  Note  that  any  charge  included  on  the
 customer  bill  and  represented  to  recover  or  collect  contributions  to  federal  or  state  universal  service  support  mechanisms  must  be  included  in  Line  (116).  Other  surcharges  treated  as  revenue  should  be  included  in  the
 revenue  categories  on  which  the  surcharges  were  levied.
 For  international  services,  gross  revenues  consist  of  gross  revenues  billed  by  U.  S.  contributors  with  no  allowances  for  settlement  payments.  International  settlement  receipts  for  foreign  billed  service  should  not
 be  included  in  revenues.
 13  See  also  Section  II-  E,  above.
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 If  you  have  any  revenue  for  Lines  (115)  and  (116),  you  may  not  omit  the  dollar  amounts  from  column  (a)  even  if  100%  of  the  revenue  is  for  interstate  or  international  service.
 3.  Column  (b)  and  (c)  -  interstate  &  international
 Columns  (b)  and  (c)  are  provided  to  identify  the  part  of  gross  revenues  that  arise  from  interstate  and  international  service  for  Lines  (115)  and  (116).  Intrastate  telecommunications  means  communications  or
 transmission  between  points  within  the  same  State,  Territory,  or  possession  of  the  United  States,  or  the  District  of  Columbia.  Interstate  and  international  telecommunications  means  communications  or
 transmission  between  a  point  in  one  State,  Territory,  possession  of  the  United  States  or  the  District  of  Columbia  and  a  point  outside  that  State,  Territory,  possession  of  the  United  States  or  the  District  of
 Columbia.  Revenues  from  services  offered  under  interstate  tariffs,  such  as  revenues  from  federal  subscriber  line  charges  and  from  federally  tariffed  local  number  portability  surcharges,  should  be  identified  as
 interstate  revenues.
 For  example,  if  a  prepaid  calling  card  provider  collects  a  fixed  amount  of  revenue  per  minute  of  traffic,  and  65  percent  of  minutes  are  interstate,  then  interstate  revenues  would  include  65  percent  of  the  end-  user
 revenue.  Similarly,  if  a  LEC  bills  local  measured  service  charges  for  calls  that  originate  in  one  state  and  terminate  in  another,  these  billings  should  be  classified  as  interstate  even  though  the  charges  are  covered  by
 a  state  tariff  and  the  revenues  are  included  in  a  local  service  account.  Note  that  under  the  Commission's  rules,  if  over  ten  percent  of  the  traffic  carried  over  a  private  or  WATS  line  is  interstate,  then  the  revenues
 and  costs  generated  by  the  entire  line  are  classified  as  interstate.  14  In  general,  flat-  rated  unbundled  network  access  elements  should  be  classified  according  to  the  regulatory  agency  that  has  primary  jurisdiction  over
 the  contracts.  Amounts  billed  to  customers  to  recover  federal  universal  service  contribution  obligations  should  be  attributed  as  either  interstate  or  international  revenues,  as  appropriate,  but  no  portion  of  such
 amounts  may  be  reported  as  intrastate  revenues.
 In  many  cases,  interstate  and  international  revenues  cannot  be  determined  directly  from  corporate  books  of  account  or  subsidiary  records.  Filers  that  cannot  derive  interstate  and  international  revenues  or  that  cannot
 derive  the  line-  by-  line  revenue  breakdowns  may  provide  on  the  Worksheet  good  faith  estimates  of  these  figures.  Information  supporting  good  faith  estimates  must  be  made  available  to  either  the  FCC  or  to  the
 Universal  Service  Administrator  upon  request.  For  convenience,  calculated  interstate  and  international  revenue  amounts  that  are  greater  than  one  thousand  dollars  may  be  rounded  to  the  nearest  thousand  dollars.
 Please  enter  zero  dollars  in  column  (b)  or  column  (c)  if,  and  only  if,  there  were  no  interstate  or  international  revenues  for  the  line  for  the  reporting  period.
 14  See  47  C.  F.  R.    36.154(  a).
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 Pursuant  to  FCC  orders,  15  wireless  telecommunications  providers  may  utilize  the  following  safe  harbor  percentages  of  interstate  revenues  associated  with  wireless  services  normally  reported  on  Line  (309)  of  the
 Form  499-  A  and  included  on  Line  (115)  of  the  Form  499-  Q,  and  on  Line  (409)  and  Line  (410)  of  the  Form  499-  A  and  included  on  Line  (116)  of  the  Form  499-  Q:
 28.5%  of  cellular  and  broadband  PCS  telecommunications  revenues  12%  of  paging  revenues
 1%  of  analog  SMR  dispatch  revenues
 Wireless  telecommunications  providers  that  choose  to  avail  themselves  of  these  safe  harbor  percentages  for  interstate  revenue  may  assume  that  the  FCC  will  not  find  it  necessary  to  review  or  question  the  data
 underlying  their  reported  percentages.  All  affiliated  wireless  telecommunications  providers  must  make  a  single  election  whether  to  report  actual  revenues  or  to  use  the  revised  safe  harbor  within  the  same  safe
 harbor  category.  So,  for  example,  if  in  a  given  period  a  wireless  telecommunications  provider  reports  actual  interstate  revenues  for  its  cellular  and  broadband  PCS  telecommunications  services,  all  of  its
 affiliated  legal  entities  must  also  report  actual  interstate  telecommunications  revenues  for  cellular  and  broadband  PCS  offerings.  The  same  wireless  telecommunications  provider  and  all  affiliates,  however,
 could  use  the  safe  harbor  for  paging  services.
 These  safe  harbor  percentages  may  not  be  applied  to  universal  service  pass-  through  charges,  fixed  local  service  revenues,  or  toll  service  charges.  All  filers  must  report  the  actual  amount  of  interstate  and
 international  revenues  for  these  services.  For  example,  toll  charges  for  itemized  calls  appearing  on  mobile  telephone  customer  bills  should  be  reported  as  intrastate,  interstate  or  international  based  on  the
 origination  and  termination  points  of  the  calls.  Thus,  for  example,  if  a  filer  uses  the  safe  harbor  percentage  for  wireless  revenues  and  has  separate  charges  only  for  international  calls,  it  would  report  as
 interstate  28.5%  of  its  cellular  wireless  revenues  on  Line  (116)  column  (b)  and  it  would  report  as  international  100%  of  its  revenues  associated  with  international  calls  on  Line  (116)  column  (c).  As  a
 result,  the  total  of  revenues  identified  as  interstate  and  international  in  columns  (b)  and  (c)  on  FCC  Form  499-  Q  Line  (116)  would  exceed  28.5%  of  the  amount  reported  in  Line  (116)  column  (a).
 4.  Explanation  of  historical  revenue  categories
 Total  gross  revenue  reported  on  Line  (118)  should  equal  the  total  of  the  detail  amounts  reported  on  Lines  (115)  through  (117).
 Line  (115)  --  Revenues  from  services  provided  to  other  universal  service  contributors  for  resale.  This  line  should  contain  revenues  from  telecommunications  services  provided  to  resellers  (i.  e.,  telecommunications
 revenue  derived  from  other  universal  service  contributors).  This  category  comprises  what  is  commonly-referred  to  as  carriers  carrier  revenues.  Filers  may  wish  to  consult  the  instructions  for  Form  499-  A,  Lines
 (303)  through  (314),  when  calculating  this  figure.
 Line  (116)  --  Universal  service  contribution  base  revenues.  This  line  should  contain  end-  user  telecommunications  revenues  (i.  e.,  telecommunications  revenues  derived  from  entities  that  do  not  contribute
 directly  to  universal  service),  except  for  revenue  from  international  calls  that  both  originate  and  terminate  in
 15  Federal-  State  Joint  Board  on  Universal  Service,  Memorandum  Opinion  and  Order  and  Further  Notice  of
 Proposed  Rulemaking,  CC  Docket  No.  96-  45,  13  FCC  Rcd  21252,  21258-  60  (1998);  Federal-  State  Joint  Board  on  Universal  Service  1998  Biennial  Regulatory  Review  on  Streamlined  Contributor  Reporting  Requirements  Report
 and  Order  and  Second  Further  Notice  of  Proposed  Rulemaking,  FCC  02-  329  (rel.  Dec.  13,  2002)  (Contribution  Methodology  Order).
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 foreign  points.  Filers  may  wish  to  consult  the  instructions  for  Form  499-  A,  Line  (420),  when  calculating  this  figure.
 Line  (117)  --  Other  revenue  that  should  not  be  reported  in  the  universal  service  contribution  base.  This  line  should  contain  revenue  from  international  calls  that  both  originate  and  terminate  in  foreign  points  and
 revenues  that  are  reportable  on  Form  499-  A,  Line  (418).
 Line  (117)  should  include  all  non-  telecommunications  service  revenues  on  the  reporting  entity's  books  as  well  as  some  revenues  that  are  derived  from  telecommunications-  related  functions  but  that  should  not  be
 included  in  the  universal  service  or  other  fund  contribution  bases.  For  example,  information  services  offering  a  capability  for  generating,  acquiring,  storing,  transforming,  processing,  retrieving,  utilizing,  or
 making  available  information  via  telecommunications  are  not  included  in  the  universal  service  or  other  fund  contribution  bases.  Information  services  do  not  include  any  use  of  any  such  capability  for  the
 management,  control,  or  operation  of  a  telecommunications  system  or  the  management  of  a  telecommunications  service.  Information  services  also  are  called  enhanced  services  because  they  are
 offered  over  common  carrier  transmission  facilities  used  in  interstate  communications  and  employ  computer  processing  applications  that  act  on  the  format,  content,  code,  protocol,  or  similar  aspects  of  the
 subscriber's  transmitted  information;  provide  the  subscriber  additional,  different,  or  restructured  information;  or  involve  subscriber  interaction  with  stored  information.  For  example,  call  moderation  and
 call  transcription  services  are  information  services.  These  services  are  exempt  from  contribution  requirements  and  should  be  reported  on  line  (117).  Line  (117)  should  include  revenues  from  published
 directory  and  carrier  billing  and  collection  services.  Line  (117)  should  include  revenues  from  the  sale,  lease,  installation,  maintenance,  or  insurance  of  customer  premises  equipment  (CPE),  inside  wiring
 charges,  inside  wiring  maintenance  insurance.  Line  (117)  should  include  the  sale  or  lease  of  transmission  equipment,  such  as  dark  fiber,  that  is  not  provided  as  part  of  a  telecommunications  service.  Line  (117)
 should  include  revenues  from  providing  open  video  systems  (OVS),  cable  leased  access,  and  direct  broadcast  satellite  (DBS)  services.  Line  (117)  should  include  late  payment  charges  and  charges
 (penalties)  imposed  by  the  company  for  customer  checks  returned  for  non-  payment.  Line  (117)  should  include  revenues  from  telecommunications  services  provided  in  a  foreign  country  where  the  traffic  does
 not  transit  the  United  States  or  where  the  carrier  is  providing  service  as  a  foreign  carrier,  i.  e.,  a  carrier  licensed  in  that  country.
 Line  (118)  --  Gross  billed  revenues  from  all  sources.  This  line  should  equal  the  sum  of  revenues  by  type  of  service  reported  on  Lines  (115)  through  (117).
 As  noted  above,  for  further  detail  on  the  types  of  revenues  that  should  be  reported  on  Lines  (115)  through  (117),  filers  may  wish  to  consult  the  Instructions  for  the  Form  499-  A,  available  at  the  Commission's  web  site
 (www.  fcc.  gov/  formpage.  html).
 5.  Projected  gross  billed  end-  user  interstate  and  international  revenues
 The  projection  quarter  is  the  calendar  quarter  that  starts  two  months  after  the  filing  date  and  finishes  5  months  after  the  filing  date.  Line  (121)  should  contain  projected  gross-  billed  end-  user  interstate  and
 international  revenues,  including  any  pass-  through  charges  for  federal  universal  service  contributions.  These  amounts  should  be  the  amounts  that  the  filer  anticipates  reporting  on  Line  (116),  column  (b)  and
 column  (c),  in  the  Form  499-  Q  filing  due  six  months  after  the  present  filing  date.  In  order  to  estimate  these  amounts,  the  filer  could  review  the  amounts  they  are  reporting  on  Line  (116)  in  the  instant  filing  and
 amounts  reported  in  recent  filings.  In  addition,  filers  could  take  into  account  general  business  conditions,  new  contracts  covering  the  projection  period,  pricing  trends,  marketing  programs,  expansion  plans,  and
 other  relevant  information.  Filers  must  develop  good  faith  projections  based  on  company  procedures  and
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 policies.  If  the  filer  anticipates  that  revenues  are  as  likely  to  increase  as  decrease,  then  it  may  copy  the  historic  values  from  Line  (116)  to  use  as  its  projections  for  Line  (121)  or  it  could  develop  projections  by
 trending  historic  values  from  previous  quarterly  filings.  Filers  need  not  make  projections  for  Line  (121)  column  (a).
 Line  (119)  should  contain  projected  gross-  billed  end-  user  interstate  and  international  revenues,  including  any  pass-  through  charges  for  federal  universal  service  contributions  for  January  1,  2003  through  March  31,
 2003.  These  projections  should  be  made  using  the  same  procedures  as  are  used  for  making  the  projections  on  Line  (121).
 6.  Projected  collected  end-  user  interstate  and  international  revenues
 Line  (122)  should  show  the  interstate  and  international  revenues  that  the  filer  anticipates  collecting  from  customers  during  the  projection  quarter.  For  this  purpose  collected  end-  user  revenues  refers  to  gross-billed
 end-  user  interstate  and  international  telecommunications  revenues,  including  any  pass-  through  charges  for  federal  universal  service  contributions,  less  estimated  uncollectibles.  16  We  define
 uncollectibles  as  the  percentage  of  interstate  and  international  telecommunications  revenues  that  the  contributor  anticipates  will  not  be  collected  from  end-  user  customers.  This  percentage  should  be
 calculated  in  accordance  with  Generally  Accepted  Accounting  Principles.  17  Filers  that  use  the  accrual  method  of  accounting  should  use  the  percentage  of  billed  revenues  that  they  recognize  currently  as  a
 reserve  for  uncollectibles  in  their  books  of  accounts.  Carriers  that  use  the  cash  method  of  accounting  should  base  this  percentage  on  a  comparison  of  actual  collections  and  billed  revenues,  with  the  periods
 chosen  to  allow  for  the  average  delay  between  when  services  are  billed  and  when  payments  are  received.  The  amounts  shown  on  Line  (122)  should  be  the  amounts  on  Line  (121)  reduced  by  the  percentage  of
 uncollectibles.
 Line  (120)  should  show  the  interstate  and  international  revenues  that  the  filer  anticipates  collecting  from  customers  during  for  January  1,  2003  through  March  31,  2003.  These  projections  should  be  made  using  the
 same  procedures  as  are  used  for  making  the  projections  on  Line  (121).
 Filers  will  be  billed  based  on  the  amounts  reported  on  Line  (122).  Any  revisions  to  these  amounts  must  be  filed  within  45  calendar  days.  No  adjustments  to  billings  will  be  made  during  the  quarter  to  reflect
 actual  levels  of  billed  service  and  actual  collection  rates.  The  administrator  will  use  the  actual  revenue  data  provided  by  contributors  on  the  FCC  Form  499-  A  to  perform  annual  true-  ups  to  the  quarterly
 projected  revenue  data  submitted  by  contributors  during  the  prior  calendar  year.  18  As  necessary,  the  administrator  will  then  refund  or  collect  from  contributors  any  over-  payments  or  under-  payments.  If  the
 combined  quarterly  projected  revenues  reported  by  a  contributor  are  greater  than  those  reported  on  its  annual  revenue  report  (Form  499-  A),  then  a  refund  will  be  provided  to  the  contributor  based  on  an
 16  Federal-  State  Joint  Board  on  Universal  Service,  Memorandum  Opinion  and  Order  and  Further  Notice  of
 Proposed  Rulemaking,  CC  Docket  No.  96-  45,  13  FCC  Rcd  21252,  21258-  60  (1998);  Contribution  Methodology  Order,  para  32.
 17  General  Accepted  Accounting  Principles  (GAAP)  encompasses  the  conventions,  rules,  and  procedures  necessary
 to  define  accepted  practice  in  the  preparation  of  financial  statements  in  the  United  States.  The  Financial  Accounting  Standards  Board  (FASB)  is  currently  the  primary  authority  to  establish  GAAP  for  all  companies.  Carriers  subject  to
 the  Uniform  System  of  Accounts  would  derive  this  figure  from  the  amount  recorded  in  Account  5301,  Uncollectible  Revenue  -  Telecommunications.
 18  See  Telecommunications  Reporting  Worksheet,  FCC  Form  499-  A,  OMB  3060-  0855  (February  2002)  (FCC  Form
 499-  A).
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 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  annual  revenue  report  (Form  499-  A),  then
 administrator  will  collect  the  difference  from  the  contributor  using  an  average  of  the  two  highest  contribution  factors  from  that  year.
 Filers  are  required  to  maintain  records  and  documentation  to  justify  the  information  reported  on  the  Telecommunications  Reporting  Worksheet  for  three  years.  Filers  also  must  maintain  records  detailing  the
 methodology  used  to  determine  projections  reported  on  the  Telecommunications  Reporting  Worksheet.  Upon  request,  filers  may  be  required  to  provide  such  records  and  documentation  to  the  Commission  or  to
 the  administrator.
 D.  Block  4:  Certification.
 Line  (123)  --  Filers  may  use  the  box  in  Line  (123)  to  request  nondisclosure  of  the  revenue  information  contained  on  the  Telecommunications  Reporting  Worksheet.  By  checking  this  box,  the  officer  of  the
 company  signing  the  Worksheet  certifies  that  the  information  contained  on  the  Worksheet  is  privileged  or  confidential  commercial  or  financial  information  and  that  disclosure  of  such  information  would  likely  cause
 substantial  harm  to  the  competitive  position  of  the  company  filing  the  Worksheet.  This  box  may  be  checked  in  lieu  of  submitting  a  separate  request  for  confidentiality  pursuant  to  section  0.459  of  the  Commission's
 rules.  19  All  decisions  regarding  disclosure  of  company-  specific  information  will  be  made  by  the  Commission.  The  Commission  regularly  makes  publicly  available  the  names  (and  Block  1  and  2  contact
 information)  of  the  entities  that  file  the  Telecommunications  Reporting  Worksheet.
 Lines  (124)  through  (127)  --  An  officer  of  the  reporting  entity  must  examine  the  data  provided  in  the  Telecommunications  Reporting  Worksheet  and  certify  that  the  information  provided  therein  is  accurate  and
 that  projections  provided  therein  represent  good  faith  estimates  based  on  company  procedures  and  policies.  An  officer  is  a  person  who  occupies  a  position  specified  in  the  corporate  by-  laws  (or  partnership  agreement),
 and  would  typically  be  president,  vice  president  for  operations,  vice  president  for  finance,  comptroller,  treasurer,  or  a  comparable  position.  If  the  reporting  entity  is  a  sole  proprietorship,  the  owner  must  sign  the
 certification.  The  signature  on  Line  (124)  must  be  in  ink.
 A  person  who  willfully  makes  false  statements  on  the  Worksheet  can  be  punished  by  fine  or  imprisonment  under  title  18  of  the  United  States  Code.  20
 Line  (128)  --  Indicate  whether  this  filing  is  an  original  filing  or  a  revised  filing.  21
 19  47  C.  F.  R.    0.459.  See  also  Examination  of  Current  Policy  Concerning  the  Treatment  of  Confidential  Information
 Submitted  to  the  Commission,  Report  and  Order,  FCC  98-  184,  GC  Docket  No.  96-  55  (rel.  Aug.  1998)  (listing  the  showings  required  in  a  request  that  information  be  withheld  and  stating  that  the  Commission  may  defer  action  on  such
 requests  until  a  formal  request  for  public  inspection  has  been  made).  20
 See  18  U.  S.  C.    1001.  21
 See  Section  II-  E.
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 SEPARATE  STATEMENT  OF  CHAIRMAN  MICHAEL  K.  POWELL
 Re:  Federal-  State  Board  on  Universal  Service  et  al.,  CC  Docket  Nos.  96-  45  et  al.
 The  Act  demands  that  this  Commission  take  responsible  steps  to  ensure  that  our  universal  service  contribution  system  remains  equitable  and  nondiscriminatory.  This  item  meets  that  test.
 The  measures  we  adopt  today,  however,  are  interim.  Make  no  mistake,  during  this  interim  period,  the  migration  of  traditional  telecommunications  services  to  digital  platforms  will
 continue  to  occur    and  at  a  gathering  speed.  The  resulting  bundles  of  innovative  telecommunications  and  information  services  will  continue  to  stress  our  current  revenues-  based
 contribution  system  if  we  do  not  act.  For  this  reason,  among  others,  we  must  challenge  ourselves  to  reform  the  contribution  system  in  creative  ways.  I  believe  that  it  remains  our  long-term
 goal  and  is  in  the  best  interest  of  American  consumers  that  we  migrate  to  a  connection-based  contribution  system.  I  write  separately  today  to  underscore  this  point.
 Universal  service  contribution  policy  cannot  remain  static.  Guided    indeed  commanded  -  by  the  statute,  we  must  ensure  that  it  evolves  as  telecommunications  technology  and  markets
 change.  The  foundation  the  Commission  has  built  needs  to  be  refined  to  account  for  technological  substitution  and  the  realities  of  a  competitive  market.  The  actions  we  take  today
 represent  a  timely  effort  to  recalibrate  the  current  revenue-  based  system  to  reflect  better  the  growth  of  wireless  services  and  improve  competitive  neutrality  among  contributors  by  basing
 contributions  on  projections  of  collected  revenues.  At  the  same  time,  we  take  action  to  protect  consumers  from  unjust  and  unreasonable  recovery  practices  by  increasing  the  transparency  of
 universal  service  line  items  on  customer  bills.  These  are  prudent  first  steps.
 We  must  never  forget,  however,  that  the  cost  of  these  programs  ultimately  is  borne  by  American  consumers.  Failure  to  engage  in  reform  may  jeopardize  the  stability  and  sufficiency  of
 the  fund  and  impose  unfair  burdens  on  certain  classes  of  carriers  and  their  customers.  By  asking  more  questions  and  seeking  specific  comment  on  the  assumptions  that  underlie  each  proposed
 contribution  methodology,  including  connection-  based  systems,  we  will  be  able  to  refine  the  record  in  this  proceeding  and  take  further  steps  to  ensure  the  long-  term  viability  of  universal
 service.  I  also  recognize  that  some  of  my  colleagues  have  suggested  that  the  Commission  address  the  universal  service  contribution  requirements  for  broadband  platforms  in  this
 proceeding.  I  believe,  however,  that  such  a  decision  must  be  made  in  the  context  of  the  Commissions  pending  proceeding  concerning  the  appropriate  statutory  classification  for
 broadband  services.  I  wish  to  emphasize  that  adopting  a  connections-  based  approach  to  universal  service  contributions  does  not  automatically  mean  that  broadband  platforms  will  be
 assessed.  Rather,  a  connections-  based  approach  provides  a  rational,  simplified  mechanism  for  addressing  the  disparity  that  currently  exists  between  DSL  and  cable  modem  platforms.  In  the
 end,  a  functioning  broadband  market  and  principles  of  technological  neutrality  require  that  consumer  choices  for  broadband  services  should  not  be  skewed  by  artificial  regulatory
 requirements.
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 Finally,  I  look  forward  to  working  with  my  federal  and  state  colleagues  to  establish  an  equitable  and  nondiscriminatory  contribution  system  that  provides  for  specific,  predictable,  and
 sufficient  funding  to  preserve  and  advance  universal  service.
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 STATEMENT  OF  COMMISSIONER  MICHAEL  J.  COPPS
 Re:  Federal-  State  Joint  Board  on  Universal  Service
 I  am  pleased  that  the  Commission  is  taking  interim  steps  toward  ensuring  that  every  carrier  contributes  on  an  equitable  and  nondiscriminatory  basis  to  universal  service.  Without
 todays  action,  consumers  of  long-  distance  services  would  have  seen  a  significant  increase  on  their  bills  as  of  April  1.
 Notwithstanding  the  actions  we  take  today,  we  must  continue  to  look  for  long-  term  solutions  that  will  put  the  fund  on  a  solid  footing  to  preserve  and  advance  universal  service.  In
 the  abstract,  I  find  much  to  recommend  a  revenue-  based  system.  It  is  undoubtedly  equitable  and  nondiscriminatory  for  those  who  use  the  network  more  to  contribute  more  to  further  the  goals  of
 universal  service.  That  being  said,  I  am  fully  cognizant  of  the  pressures  on  our  revenue-  based  system  that  are  detailed  in  our  decision  today.  For  that  reason,  I  am  willing  to  consider  changing
 our  methodology  for  assessing  carrier  contributions  to  the  universal  service  fund.  Before  I  would  agree  to  any  paradigm  shift  in  our  methodology  and  the  attendant  administrative  costs,
 however,  I  want  to  be  certain  that  our  methodology  meets  the  statutory  requirements  and  is  administratively  workable.
 I  also  urge  the  Commission  to  address  expeditiously  the  issue  of  broadband  providers  contribution  to  universal  service.  I  am  disappointed  that  the  current  disparity  under  which  DSL
 providers  contribute  and  cable  modem  providers  do  not  will  continue  for  an  indefinite  period  of  time.  When  the  Commission  finally  addresses  this  issue,  I  hope  we  will  do  so  in  a  manner  that
 does  not  narrow  the  contribution  base  and  undermine  the  sufficiency  of  the  fund.  We  must  also  work  to  avoid  a  system  that  opens  the  door  to  regulatory  arbitrage  or  distortions  in  the  market.  I
 would  also  stress  my  belief  that  broadband  will  satisfy  the  statutory  criteria  for  inclusion  in  the  list  of  supported  services  in  the  near  future.
 As  we  move  forward  with  this  contribution  methodology  proceeding,  let  us  also  recognize  that  taking  action  on  the  contribution  side  is  only  half  of  the  equation.  The
 Commission  and  the  Federal-  State  Joint  Board  on  Universal  Service  must  also  address  distribution  issues  if  we  are  to  confront  all  of  the  pressures  on  the  fund.  That  means  we  must
 complete  such  proceedings  as  the  current  one  on  portability  of  universal  service  in  markets  with  competition.
 Finally,  I  hope  we  will  work  closely  with  our  state  colleagues  as  partners  on  these  universal  service  issues.  The  statute  makes  clear  that  Federal  and  State  governments  each  have  a
 significant  role  to  play  in  preserving  and  advancing  universal  service.  It  is  only  through  a  cooperative  effort  that  we  will  meet  our  statutory  obligation  to  ensure  that  all  Americans,  no
 matter  who  they  are  or  where  they  live,  have  access  to  reasonably  comparable  services  at  reasonably  comparable  rates.  Each  and  every  American  should  have  access  to  the  best,  most
 accessible,  and  cost-  effective  communications  system  in  the  world.  In  this  modern  era,  that  is  a  fundamental  right.
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 STATEMENT  OF  COMMISSIONER  KEVIN  J.  MARTIN
 Re:  Federal-  State  Joint  Board  on  Universal  Service,  CC  Docket  No.  96-  45;
 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,  CC  Docket  No.  98-  171;
 Telecommunications  Services  for  Individuals  with  Hearing  and  Speech  Disabilities,  and  the  Americans  with  Disabilities  Act  of  1990,  CC  Docket  No.  90-  571;
 Administration  of  the  North  American  Numbering  Plan  and  North  American  Numbering  Plan  Cost  Recovery  Contribution  Factor  and  Fund  Size  CC  Docket  No.  92-  237  NSD  File
 No.  L-  00-  72;
 Number  Resource  Optimization  CC  Docket  No.  99-  200;  Telephone  Number  Portability  CC  Docket  No.  95-  116;  Truth-  in-  Billing  and  Billing  Format  CC  Docket  No.  98-  170.
 Good  item.  1
 1  See  Appendix  A.  Separate  Statement  of  Commissioner  Kevin  J.  Martin,  Federal-  State  Joint  Board  on  Universal
 Service,  Further  Notice  of  Proposed  Rulemaking  and  Report  and  Order,  CC  Docket  96-  45,  et.  al  (rel.  February  14,  2002;  Separate  Statement  of  Commissioner  Kevin  J.  Martin,  Federal-  State  Joint  Board  on  Universal  Service,  CC
 Docket  No.  96-  45  (rel.  June  13,  2002);  Separate  Statement  of  Commissioner  Kevin  J.  Martin,  Schools  and  Libraries  Universal  Service  Support  Mechanism:  CC  Docket  No.  02-  6  (rel.  June  13,  2002).
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 Appendix  A
 SEPARATE  STATEMENT  OF  COMMISSIONER  KEVIN  J.  MARTIN
 Re:  Federal-  State  Joint  Board  on  Universal  Service,  Further  Notice  of  Proposed  Rulemaking  and  Report  and  Order,  CC  Docket  No.  96-  45  et  al.
 I  am  pleased  to  join  in  approving  this  item,  which  seeks  comment  on  proposals  to  alter  our  universal  service  contribution  methodology.  Maintaining  the  stability  of  the  universal  service
 contribution  system  is  one  of  the  Commission's  most  important  responsibilities.  Congress  codified  this  responsibility  in  section  254  of  the  Telecommunications  Act  of  1996,  which
 requires  the  Commission  to,  among  other  things,  ensure  there  are  specific,  predictable,  and  sufficient  support  mechanisms  to  preserve  and  advance  universal  service.  See  47  U.  S.  C.  
 254(  b)(  5).  I  am  firmly  committed  to  carrying  out  this  directive  and  to  fulfilling  Congress'  goals  of  ensuring  affordable  telecommunications  services  and  access  to  advanced  services  in  all
 regions  of  the  nation.  See  id.    254(  b).
 To  fulfill  this  responsibility,  the  Commission  today  issues  a  notice  reevaluating  the  contribution  methodology.  As  consumers  migrate  to  new  products  and  services,  we  may  need  new  methods
 for  assessing  universal  service  contributions.  Accordingly,  I  welcome  consideration  of  novel  and  different  proposals  of  how  to  assess  universal  service  contributions.
 While  we  consider  these  comprehensive  reforms,  however,  I  believe  it  may  be  important  to  take  some  immediate  steps.  For  example,  AT&  T  has  complained  that  assessing  contribution
 obligations  on  past  revenues,  as  the  system  currently  does,  unfairly  penalizes  carriers  with  declining  revenues  and  unfairly  benefits  those  with  increasing  revenues.  I  believe  we  should  take
 action  on  AT&  T's  waiver  request,  which  seeks  to  allow  AT&  T  to  pay  its  contributions  based  on  projected  rather  than  past  revenue.  Whether  we  make  changes  along  these  lines  or  some  other
 alterations  to  the  current  system,  I  believe  some  short  term  adjustments  may  be  warranted.  I  also  wish  to  highlight  one  issue  for  comment.  In  weighing  the  various  proposals,  we  must  make
 sure  that  "[  a]  ll  providers  of  telecommunications  services  .  .  .  make  an  equitable  and  nondiscriminatory  contribution  to  the  preservation  and  advancement  of  universal  service."  47
 U.  S.  C.    254(  b)(  4).  We  must  also  follow  the  Court  of  Appeals  for  the  Fifth  Circuit's  holding  that  the  Communications  Act  prohibits  the  Commission  from  assessing  contributions  on  intrastate
 revenue.  See  Texas  Office  of  Public  Utility  Counsel  v.  FCC,  183  F.  3d  393,  448  (5th  Cir.  1999).  I  thus  think  it  is  crucial  that  parties  comment  on  how  the  different  proposals  comply  with  both  of
 these  limitations.
 Finally,  I  wish  to  emphasize  the  importance  of  participation  by  the  states  in  this  proceeding.  We  welcome  comments  from  the  state  commissions,  and  we  have  committed  to  seeking  input  from
 the  Universal  Service  Joint  Board  before  making  any  significant  changes  to  the  contribution  methodology.  I  am  confident  that  we  could  do  so  in  a  manner  that  does  not  cause  any
 unnecessary  delay.
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 STATEMENT  OF  COMMISSIONER  KEVIN  J.  MARTIN,  APPROVING  IN  PART  AND  DISSENTING  IN  PART
 Re:  Schools  and  Libraries  Universal  Service  Support  Mechanism  -  -  CC  Docket  No.  02-  6
 At  the  outset,  I  want  to  reaffirm  my  support  for  the  universal  service  program  and  the  critical  function  it  serves  to  ensure  access  for  consumers  in  rural  and  high  cost  areas,  and  promote  access
 to  advanced  services  for  schools,  libraries,  and  health  care  service  providers  in  rural  areas.
 I  am  pleased  that  the  Commission  has  clarified  that  effective  no  later  than  second  quarter  2003  any  unused  funds  from  the  schools  and  libraries  support  mechanism  in  any  given  year  will  be
 carried  forward  for  disbursement  in  subsequent  funding  years.  The  schools  and  libraries  program  has  been  instrumental  in  facilitating  access  to  advanced  services.  Todays  action  will  help  us
 ensure  that  schools  and  libraries  will  be  able  to  use  the  funding  available  under  the  existing  $2.25  billion  annual  cap.
 I  am  also  pleased  that  the  Commission  is  moving  forward  today  to  take  action  to  stabilize  the  universal  service  contribution  factor  for  consumers.  I  agree  with  the  majoritys  decision  to  blunt
 the  impact  of  spikes  in  the  universal  service  contribution  factor.  I  have  concerns,  however,  regarding  the  methodology  used  to  achieve  this  result.  I  would  have  taken  a  different  path  to
 achieve  relief  for  consumers  while  providing  greater  market  certainty  and  ensuring  that  we  achieve  our  mutual  goal  of  protecting  the  continuing  health  and  sustainability  of  the  universal
 service  fund.
 Some  of  the  systemic  problems  of  our  universal  service  contribution  methodology  are  not  new.  Back  in  April  2001,  the  Commission  outlined  these  issues  and  sought  comment  on  various
 potential  solutions.  For  example,  the  Commission  acknowledged  the  inequities  in  the  universal  service  contribution  system  of  declining  revenues  for  certain  wireline  interexchange  carriers,  as
 well  as  the  potential  impact  that  the  growth  in  the  wireless  telecommunications  sector  may  be  having  on  the  fund.
 At  that  time,  the  Commission  adopted  a  Notice  of  Proposed  Rulemaking  that  acknowledged  the  inequities  of  the  current  system  and  sought  comment  on  specific  proposals  to  address
 comprehensive  reform  of  the  universal  service  contribution  system.  Eight  months  later,  with  no  permanent  relief  in  sight,  AT&  T  presented  this  Commission  with  a  request  to  help  level  the
 playing  field  on  contributions  to  the  universal  service  fund  made  by  its  over  50  million  long  distance  customers.  For  example,  AT&  T  customers  now  face  a  monthly  federal  universal
 service  fund  surcharge  that  stands  at  over  11%,  while  customers  of  new  entrant  long-  distance  providers  pay  at  or  below  the  FCC  contribution  rate  set  within  the  7%  range.  I  supported  taking
 action  on  their  petition  at  that  time  and  today.  1
 1  See  Separate  Statement  of  Commissioner  Kevin  J.  Martin,  Federal-  State  Joint  Board  on  Universal  Service:  CC
 Docket  No.  96-  45  (rel.  June  13,  2002).
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 I  support  the  Commissions  efforts  to  address  the  long-  term  issues  created  by  a  converging  and  competitive  marketplace.  I  look  forward  to  working  with  my  colleagues  to  establish  an  equitable
 and  nondiscriminatory  contribution  system  that  provides  for  specific,  predictable  and  sufficient  funding  to  preserve  and  advance  universal  service.
 At  its  heart,  todays  decision  takes  unused  money  from  the  schools  and  libraries  program  to  stem  the  growth  of  the  contribution  factor  while  the  Commission  grapples  with  long  term  solutions.
 I  would  have  preferred  to  put  in  place  medium  term  remedies  to  address  some  of  these  contribution  methodology  issues  (e.  g.,  declining  revenues  and  the  potential  impact  that  growth
 of  the  wireless  telecommunications  sector  has  on  the  fund).  While  we  continue  to  address  the  long  term  issues,  I  believe  we  should  address  the  various  inequities  that  require  certain  service
 providers  and  their  customers  to  bear  a  disproportionate  share  of  funding  the  universal  service  system.  Especially  since  demand  for  the  school  and  libraries  program  has  always  exceeded  the
 cap,  I  believe  we  should  have  taken  these  steps  first  before  taking  any  unused  monies.
 I  believe  it  is  incumbent  upon  us  to  have  taken  steps  immediately  available  that  could  both  minimize  the  impact  of  any  increase  on  consumers  and  address  potential  inequities  in  our  current
 system  prior  to  taking  some  of  todays  actions.
 Accordingly,  I  approve  in  part  and  dissent  in  part  from  the  order.
 STATEMENT  OF  COMMISSIONER  KEVIN  J.  MARTIN
 Re:  Federal-  State  Joint  Board  on  Universal  Service;  CC  Docket  No.  96-  45  AT&  T  Petition  For  Waiver
 I  disagree  with  todays  decision  by  the  Wireline  Competition  Bureau  to  deny  AT&  Ts  request  to  contribute  to  universal  service  based  on  its  projected,  rather  than  its  historical,  revenues.
 Under  the  FCCs  rules  that  govern  universal  service  contributions,  carrier  payments  to  the  fund  are  based  on  a  snapshot  of  interstate  revenues  during  the  previous  six  months.  Over  time,
 increased  competition,  regional  Bell  company  entry  into  the  interexchange  market,  and  changes  in  the  marketplace  have  continued  to  reduce  the  interstate  revenues  of  the  traditional
 interexchange  carriers.
 The  Commissions  rules  now  place  certain  interexchange  carriers  such  as  AT&  T  that  face  declining  revenues  at  a  distinct  competitive  disadvantage.  To  comply  with  the  Commissions
 rules,  carriers  with  declining  interstate  revenues  must  collect  a  greater  share  of  universal  service  contributions  from  a  shrinking  customer  base.  In  particular,  consumers  of  these  long  distance
 carriers  have  been  required  to  contribute  a  disproportionate  and  inequitable  share  to  ensure  the  preservation  and  advancement  of  universal  service.  AT&  Ts  long  distance  customers,  for
 example,  now  face  a  monthly  federal  universal  service  fund  surcharge  that  stands  at  over  11%,  while  the  FCCs  contribution  rate  is  set  within  the  7%  range.  While  AT&  Ts  customers  bear  this
 burden,  customers  of  new  entrant  long-  distance  providers  (e.  g.,  Bell  operating  companies)  have  the  unfair  benefit  of  supporting  the  fund  at  or  below  the  FCC  contribution  rate.
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 I  am  concerned  that  the  Commission  has  been  aware  of  the  magnitude  of  this  problem  for  quite  some  time  and  yet  has  failed  to  act.  In  April  2001,  the  Commission  adopted  a  Notice  of  Proposed
 Rulemaking  that  acknowledged  the  inequities  of  the  current  system  and  sought  comment  on  specific  proposals  to  address  comprehensive  reform  of  the  universal  service  contribution  system.
 Eight  months  later,  with  no  permanent  relief  in  sight,  AT&  T  filed  its  petition  for  waiver  for  an  immediate  interim  fix  so  that  it  could  contribute  to  universal  service  based  on  projected
 revenues.
 I  supported  granting  AT&  Ts  waiver  last  December  and  would  have  supported  granting  all  similarly  situated  carriers  similar  relief.  Granting  the  waiver  would  have,  at  a  minimum,
 provided  immediate  relief  for  at  least  50  million  long  distance  customers  nationwide  while  the  Commission  continued  to  deliberate  on  a  more  permanent  solution  to  the  contribution
 methodology  issue.  In  addition,  it  would  have  set  the  groundwork  for  creating  a  more  equitable  contribution  system  by  closing  the  gap  on  the  contribution  obligations  of  different  service
 providers  and  their  end-  user  customers.  This  measure  would  have  also  brought  us  one  step  closer  to  establishing  a  more  level  playing  field  for  contributions  amongst  carriers  providing  interstate
 services  in  the  marketplace.
 In  my  view,  by  waiting  six  months  to  address  AT&  Ts  waiver  request  the  Commission  has  created  greater  uncertainty  in  the  marketplace  and  has  exacerbated  an  already  troublesome
 situation.  With  each  passing  day,  AT&  Ts  competitive  disadvantage  resulting  from  universal  service  contributions  grows  as  the  Bell  Operating  Companies  continue  to  receive  271  long
 distance  authority  throughout  the  country  and  gain  significant  long  distance  market  share.  In  general,  I  support  Commissions  policies  that  encourage  service  providers  to  compete  for  service
 offerings  based  on  market  factors  such  as  price,  service  quality,  and  convenience  but  do  not  favor  policies  that  advantage  certain  competitors  through  distortions  and  loopholes  in  our
 regulatory  framework.
 Unfortunately,  I  am  not  as  confident  that  a  permanent  solution  is  right  around  the  corner.  I  would  have  therefore  granted  AT&  Ts  petition  for  waiver  last  December  and  would  do  so  again  now.
 Maintaining  a  specific,  predictable  and  sufficient  universal  service  funding  mechanism  is  a  vital  responsibility  of  the  Commission.  I  support  the  Commissions  efforts  to  address  the  long-  term
 issues  created  by  a  converging  and  competitive  marketplace.  I  do  not  believe,  however,  that  we  should  stop  making  on-  going  adjustments  to  the  current  mechanism  to  address  competitive
 inequities  while  we  spend  months  and/  or  years  grappling  with  the  longer  term  problems.  I  believe  we  have  a  duty  to  address  such  immediate  and  mid  term  problems  as  well  as  the  long
 term  ones.
 Accordingly,  I  disagree  with  the  result  of  the  Bureaus  Order.
101