25864 Federal Register / Vol. 65, No. 87 / Thursday, May 4, 2000 / Rules and Regulations

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[FR Doc. 00–11145 Filed 5–3–00; 8:45 am]

BILLING CODE 6560–50–F

FEDERAL COMMUNICATIONS

COMMISSION

47 CFR Part 54

[CC Docket Nos. 96–45, 97–21, and 98–171;

FCC 00–118]

Federal-State Joint Board on Universal

Service; Division Announces Release

of Revised Universal Worksheet, FCC

for 457

AGENCY: Federal Communications

Commission.

ACTION: Final rule.

SUMMARY: This document concerning

the Federal-State Joint Board on

Universal Service addresses challenges

filed by several parties of the

Commission’s decision to include in the

universal service contribution base

those charges identified by carriers on

end-user bills as recovering state or

federal universal service contributions.

The Commission denies the parties’

challenges.

DATES: Effective May 4, 2000.

FOR FURTHER INFORMATION CONTACT: Jack

Zinman, Attorney, Common Carrier

Bureau, Accounting Policy Division,

(202) 418–7400.

SUPPLEMENTARY INFORMATION: This is a

summary of the Commission’s TwentyFirst Order on Reconsideration in CC

Docket No. 96–45, and Memorandum

Opinion and Order in CC Docket Nos.

96–45, 97–21, and 98–171; FCC 00–118,

released on April 11, 2000. The full text

of this document is available for public

inspection during regular business

hours in the FCC Reference Center,

Room CY–A257, 445 Twelfth Street,

SW, Washington, DC 20554.

Introduction

1. Several parties have challenged the

Commission’s decision to include in the

universal service contribution base

those charges identified by carriers on

end-user bills as recovering state or

federal universal service contributions.

As described, these challenges are

pending before the Commission at

various procedural stages. Because all of

the challenges concern the same issue,

we address them together in this order.

For the reasons that follow, we deny the

parties’ challenges.

II. Discussion

A. Alleged Procedural Violations

2. The Commission’s rules provide

that contributions to the universal

service support mechanisms shall be

based on ‘‘revenues derived from

domestic end users for

telecommunications or

telecommunications services.’’ The

parties claim that charges assessed on

end users to recover a carrier’s

contributions to state or federal

universal service support mechanisms

do not qualify as revenues derived from

telecommunications or

telecommunications services. Thus, the

parties assert that Line 48 on the 1998

Universal Service Worksheet (FCC Form

457), which treats universal service

charges as telecommunications

revenues, constitutes a new substantive

rule. Based on the assertion that Line 48

is a new substantive rule, the parties

further allege that APD committed two

procedural violations in adding Line 48

to the 1998 Worksheet. First, the parties

claim that APD exceeded the authority

delegated to the Bureau by adopting a

new substantive rule, which is a task

reserved to the Commission in Part 1,

Subpart C, of the Commission’s rules.

Second, the parties allege that APD

violated section 553 of the

Administrative Procedure Act (APA) by

adopting a new substantive rule without

an opportunity for notice and comment.

We disagree.

3. The parties have erred in their

underlying assertion that Line 48

constitutes a new substantive rule. In

the First Report and Order, 62 FR 32862

(June 17, 1997), released on May 8,

1997, the Commission decided to assess

contributions to the universal service

support mechanisms on

telecommunications revenues that

carriers derive from end users. The

Commission permitted carriers to

recover their universal service

contributions from their customers and

‘‘to specify that fact on customers’

bills,’’ e.g., through a line-item charge.

The Commission codified the

contribution requirement at

§ 54.709(a)(1) of its rules, which states

that contributions to the universal

service support mechanisms shall be

based on ‘‘revenues derived from

domestic end users for

telecommunications or

telecommunications services.’’ The 1996

Act defines telecommunications as ‘‘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

sent and received.’’ The 1996 Act also

defines telecommunications services as

‘‘the offering of telecommunications for

a fee directly to the public * * *.’’ The

charge assessed on an end-user to

recover a carrier’s contributions to state

or federal universal service support

mechanisms is simply one part of the

carrier’s fee for the provision of

telecommunications to that end-user.

Although a carrier may choose to assess

a particular cost of providing

telecommunications or

telecommunications services separately

from other such costs, the carrier’s

choice does not change the nature of the

revenues received from the end-user.

Thus, carrier-imposed universal service

charges are, and always have been,

revenues derived from the provision of

telecommunications. As such, carrierimposed universal service charges are

part of the universal service

contributions base.

4. Moreover, we believe that the

parties misapprehend the nature of

carrier-imposed universal service

charges. Instead of forcing carriers to

recover their universal service

contributions through a mandatory

surcharge on their customers, the

Commission gave carriers the flexibility

to decide whether, how, and how much

to recover from their customers. For

example, carriers may recover their

universal service contributions by

raising their rates or by adding a

separate line-item universal service

charge to their customers’ bills. In either

event, the carrier is recovering its

contribution from its end-users. Merely

because the Commission allowed

carriers to identify a portion of their fees

as recovering the carriers’ universal

service contributions, the monies so

collected are not somehow rendered

non-telecommunications revenues.

Indeed, but for the provision of

telecommunications to its customers, a

carrier would not have a

telecommunications revenues, would

not be required to contribute to the

universal service support mechanisms,

and would not have any lawful basis to

assess a universal service charge on its

customers.

5. Because carrier-imposed universal

service charges are end-user

telecommunications revenues, the

addition of Line 48 on the 1998

Worksheet does not constitute a new

substantive rule. Rather, Line 48 is

Federal Register / Vol. 65, No. 87 / Thursday, May 4, 2000 / Rules and Regulations 25865

merely the Bureau’s implementation

and clarification of the existing

Commission rule requiring that

contributions be based on end-user

telecommunications revenues. Because

Line 48 is not a new substantive rule,

the Bureau neither exceeded its

delegated authority nor violated the

notice and comment requirements of the

APA. Accordingly, we reject the parties’

procedural claims.

B. Substantiative Arguments Regarding

the Inclusion of Carrier-Imposed

Universal Service Charges in the

Contribution Base

6. The parties argue that including

carrier-imposed universal service

charges in the contribution base creates

a circular formula that drives up the

contribution base, causing increased

contributions, which result in higher

carrier-imposed universal service

charges that further drive up the

contribution base. Thus, the parties

claim that the inclusion of carrierimposed universal service charges in the

contribution base disserves the public

interest because it results in an

upwardly spiraling ‘‘vicious cycle’’ of

perpetual increases in carrier

contributions to the universal service

support mechanisms. For example,

PCIA supplies the following

descriptions of this alleged effect:

[I]f a carrier receives $100 in revenues for

flat-rated services from an end-user over a

given period, and assuming a 10 percent

contribution rate, the carrier’s contribution

would be $10. If the carrier passes the $10

through to the customer, the revenues

received from the customer (in the next

comparable period) would increase to $110.

If the $10 pass through is considered ‘‘end

user telecommunications revenues,’’ the

contribution would increase to $11, as an

assessment would be included on the

recovery of contributions from the customer.

Metrocall and Blooston provide

similar examples. Upon closer

examination, however, the inclusion of

carrier-imposed universal service

charges in the contribution base does

not have the effect claimed by the

parties.

7. In each of their examples, the

parties assume that, all other things

being equal, the contribution factor

remains constant as the contribution

base increases. This assumption,

however, is mathematically impossible.

The contribution factor is the ratio of

total universal service program costs to

the contribution base. Stated as a

mathematical equation, the contribution

factor can be described as follows:

Contribution Factor = Total Program Costs

Contribution Base

The total program costs and the

contribution base are independent

variables in this equation. The

contribution factor, on the other hand,

is the dependent variable, i.e., the

contribution factor is dependent on the

amount of the total program costs and

the contribution base. Because the

contribution base is the denominator in

this equation, the contribution factor is

inversely proportional to the

contribution base. In other words, as the

contribution base increases, all other

things being equal,the contribution

factor must decrease.

8. As demonstrated by the exhibit, all

other things being equal, when carrierimposed universal service charges are

included in the contribution base, the

contribution base increases, the

contribution factor decreases in

proportion to the increase in the

contribution base, and the amount of

each carrier’s contribution remains

constant. Therefore, the parties’

‘‘vicious cycle’’ argument is unfounded.

Moreover, if carrier-imposed universal

service charges were not included in the

contribution base, there would be a

competitive imbalance in the

Commission’s contribution

methodology. All other things being

equal, a carrier that chose to recover its

contributions by increasing its rates

would have an increased individual

contribution base and an increased

contribution. A carrier that chose to

recover its contributions by imposing a

line-item charge would not have an

increased individual contribution base

or an increased contribution. Such a

result would put carriers choosing to

raise their rates at a disadvantage

compared to carriers choosing to impose

a line-item charge, would render

illusory the ‘‘choice’’ of recovery

methods, and would violate the

universal service principle of

competitive neutrality. Accordingly, for

all of the foregoing reasons, we reject

the parties’ claims that carrier-imposed

universal service charges should be

excluded from the contribution base.

III. Ordering Clauses

9. The authority contained in sections

1–4, 201–205, 218–220, 254, 303(r), 403,

and 405 of the Communications Act of

1934, as amended, and section 1.429 of

the Commission’s rules, Twenty-First

Order on Reconsideration in CC Docket

No. 96–45 and the Memorandum

Opinion and order in CC Docket Nos.

96–45, 97–21, and 98–171 are adopted.

10. The authority contained in

sections 4(i) and 405 of the

Communications Act of 1934, as

amended, and section 1.429 of the

Commission’s rules, the Petition for

Partial Reconsideration and

Clarification filed by the Personal

Communications Industry Association

on July 17, 1997 is denied to the extent

stated.

11. The authority contained in

sections 4(i) and 405 of the

Communications Act of 1934, as

amended, and section 1.106 of the

Commission’s rules, the Petition for

Reconsideration filed by the Personal

Communications Industry Association

on August 31, 1998 is denied.

12. The authority contained in

sections 4(i) and 405 of the

Communications Act of 1934, as

amended, and section 1.106 of the

Commission’s rules, the Petition for

Reconsideration filed by Metrocall, Inc.

on August 31, 1998 is denied.

List of Subjects in 47 CFR Part 54

Universal service.

Federal Communications Commission.

Magalie Roman Salas,

Secretary.

[FR Doc. 00–11101 Filed 5–3–00; 8:45 am]

BILLING CODE 6712–01–M

FEDERAL COMMUNICATIONS

COMMISSION

47 CFR Part 73

[FCC 00–130; MM Docket No. 98–175; RM–

9364]

Television Broadcasting Services;

Digital Television Broadcasting

Services; Buffalo, NY

AGENCY: Federal Communications

Commission.

ACTION: Final rule.

SUMMARY: In a Memorandum Opinion

and Order, the Commission denies the

Application for Review filed by

Coalition for Noncommercial Media

(‘‘CNM’’), and affirms the Mass Media

Bureau’s Report and Order 64 FR 45893

(August 23, 1999). The Bureau’s action

had granted the noncommercial

educational channel reservation swap

for Channels 17 and *23 in Buffalo, New

York and related digital channels

requested by licensee Western New

York Public Broadcasting Association.

That Report and Order also had denied

oppositions filed by Grant Television,

Inc., licensee of WNYO–TV, Buffalo,

New York, WKBW–TV Licensee, Inc.,

licensee of Station WKBW–TV, Buffalo,

New York, Kevin Smardz, President of

Southtowns Christian Center, Lakeview,

New York, and CNM.

DATES: Effective July 3, 2000.