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*****************************************************                            Before the
                Federal Communications Commission
                      Washington, D.C. 20554

                                )
In the Matter of                )
                                )
Federal-State Joint Board on    )       CC Docket No. 96-45
Universal Service               )
                                )
AMSC Subsidiary Corporation     )       
Request for Waiver              )                 

                  MEMORANDUM OPINION AND ORDER
                                
   Adopted:  November 4, 1998           Released:  November 4, 1998


By the Deputy Chief, Common Carrier Bureau:

     1.   On March 17, 1998 AMSC Subsidiary Corporation (AMSC) filed a Request for
Waiver of the requirement to contribute to the universal service support mechanisms based upon
its end-user telecommunications revenues.  AMSC contends that it should be permitted, through
the year 2000, to contribute on a per-minute basis for voice service, and per-kilobyte basis for
two-way mobile data services.  For the reasons discussed below, we deny AMSC's Request.

                          I.  BACKGROUND

     2.   In the Telecommunications Act of 1996 (1996 Act), Congress amended the
Communications Act of 1934 (Act) by, among other things, adding section 254 to the Act. 
Section 254(b) states that, "[a]ll providers of telecommunications services should make an
equitable and nondiscriminatory contribution to the preservation and advancement of universal
service" through "specific, predictable and sufficient Federal and State mechanisms."  To
accomplish these goals, the Act mandates 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."   

     3.   On May 8, 1997, the Commission released the Universal Service Order
implementing section 254 of the Act, and establishing universal service support mechanisms.  The
resulting Commission 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.  Commercial mobile radio services (CMRS), and
satellite services were specifically identified by the Commission and the Joint Board as examples
of interstate telecommunications.  

     4.   Pursuant to the rules established in the Universal Service Order, contributions to
the universal service support mechanisms must be based on contributors' end-user
telecommunications revenues from the previous year, and the contribution factors determined
quarterly by the Commission.  On July 18, 1997, the Commission released rules directing
contributors to submit, inter alia, end-user revenue information on a Universal Service Worksheet
(FCC Form 457), to the Universal Service Administrator, for the purpose of determining the
contribution amount. 

     5.   AMSC is a CMRS provider that offers land, maritime, and aeronautical mobile
satellite services throughout the United States.  Through the public switched telephone network
(PSTN), AMSC provides, among other things, voice and data services to people who live, work,
or travel in rural and remote areas of the United States that AMSC asserts are unserved by
terrestrial technologies.  AMSC's system also offers the ability to meet rural public safety needs,
and provide communications to any area during emergencies.

     6.   On March 17, 1998, AMSC filed a request that the Commission "waive its rules
for the next three years to permit AMSC to contribute to universal service at a level that is
equivalent on a per-minute basis, for voice service, and a per-kilobyte basis, for two-way mobile
data services, to the contributions of terrestrial-based wireless service providers."    AMSC
explains that the development of its system required an extraordinary investment, and involved
considerable technology and market risks.  AMSC contends that high costs and slower than
anticipated development of the market for mobile satellite service (MSS) have resulted in a net
loss to AMSC of $119.2 million in 1997, and a cumulative net loss of $201.5 million in 1995 and
1996.  AMSC claims that, as a result, it must charge more and collect larger end user-revenues
for its services.  Thus, AMSC contends that compelling AMSC to contribute a percentage of
total end-user revenues will unfairly result in AMSC having to contribute substantially more for its
mobile voice telephone and two-way mobile data services than other CMRS providers. 
Consequently, AMSC claims that these Commission rules are inconsistent with the goal of
maintaining competitive neutrality between technologies.

     7.   The Commission issued a public notice seeking comments on AMSC's request,
BellSouth Corporation (BellSouth) responded with comments opposing it, and AMSC filed
comments in reply.
  
                         II.  DISCUSSION

     8.   Generally the Commission's rules may be waived for good cause shown.  But, as
noted by the Court of Appeals for the D.C. Circuit, agency rules are presumed valid, and "an
applicant for waiver faces a high hurdle even at the starting gate."  The Commission may
exercise its discretion to waive a rule, where the particular facts make strict compliance
inconsistent with the public interest.  In addition, the Commission may take into account
considerations of hardship, equity, or more effective implementation of overall policy on an
individual basis.  Waiver is, therefore, appropriate if special circumstances warrant a deviation
from the general rule, and such deviation would better serve the public interest than strict
adherence to the general rule.  As further discussed below, we conclude that AMSC has failed to
show that a waiver is appropriate. 

     9.   In an effort to prove the existence of a "special circumstance," AMSC contends
that its satellite-based communications system "has been a uniquely costly two-way wireless
system to implement and [it] charges correspondingly higher rates than ground-based CMRS
systems."  AMSC argues that, without a waiver, it would be required to contribute to the
universal service fund at a rate per-minute of voice service and per-kilobyte of data service, that is
higher than its terrestrial based competitors.  AMSC thus concludes that "[f]ew if any carriers
can present a similar combination of high-cost service focused on rural areas, unique technology,
and a disproportionately burdensome universal service contribution." 

     10.  BellSouth responds that AMSC's cost structure does not constitute special or
unique circumstances.  BellSouth notes that, "[w]ithin every segment of the telecommunications
industry, some providers will have higher cost structures than other providers."  According to
BellSouth, if the Commission were to view cost structure as a valid basis for waiving the method
for calculating a carrier's universal service contribution, "then it can well expect a continuing
stream of waiver requests from carriers who believe they, like AMSC, should have a special
calculation because they are high cost companies relative to others in their industry segment."  

     11.  We agree with BellSouth that AMSC has failed to show the existence of "special
circumstances."  The fact that the rates that AMSC charges for its services may generate greater
amounts of end-user revenues per unit of traffic, which results in greater contributions, does not
make AMSC unique, nor does it justify an exemption from the obligation to contribute to
universal service on the basis of end-user revenues.  As BellSouth noted, all carriers generate
different amounts of end-user revenues per unit of traffic, and, therefore, some will always have to
contribute more per unit of traffic than others.  This is inherent in the Commission's decision to
adopt end-user revenues as the basis for apportioning the necessary universal service
contributions among different service providers, as explained below.
  
     12.  We do not find that granting this request would be in the public interest.  AMSC
claims that granting its request is in the public interest because it would maintain competitive
neutrality between different technologies, and be consistent with the congressional mandate that
all contributions to the universal service fund be assessed in an equitable manner.  According to
BellSouth, however, granting AMSC's waiver would have a contrary effect, and result in other
carriers unfairly having to compensate for the reduction in AMSC's contribution.  We agree with
BellSouth that granting AMSC's request would have the result of favoring AMSC's choice of
technology, and, therefore, would not be competitively neutral.  Indeed, even AMSC notes that
"[a] waiver in this case also will enhance AMSC's ability to provide service." 

     13.  The Commission has already specifically rejected the general use of the method for
calculating the contribution that AMSC now requests, and AMSC has given us no reason to
conclude otherwise in this particular instance.  In the NPRM to implement section 254, the
Commission suggested three different bases for assessing contributions:  (1) gross revenues; (2)
gross revenues net payments to other carriers; and (3) per-line or per-minute charges.  The
Commission invited comment on the relative merits of these methods, and the extent to which
they do, or do not, satisfy the requirements of the Act.  The Commission also sought comment
on any alternative methodologies for calculating a carrier's, or service provider's contribution to
universal service support.  The Commission asked commenters to address which method would
be the most easily administered, and competitively neutral in its effect upon contributing carriers
and service providers.  In addition, the Commission sought comment on how these methods
could be adapted if the Commission were to require non-carrier providers of telecommunications
services to make contributions to universal service support mechanisms. 
 
     14.  Based upon all of the information considered in that proceeding, the Commission
rejected the suggestion that contributions be calculated entirely on non-revenue-based measures,
such as a per-minute or per-line basis.  The Commission concluded that basing contributions
from all telecommunications carriers on their gross end-user telecommunications revenues best
satisfies the goals of competitive neutrality and ease of administration, as well as the statutory
requirement that support be explicit. 

     15.  The Commission's requirements are intended to carry out the statutory mandate
that every telecommunications carrier that provides interstate telecommunications services
"contribute, on an equitable and nondiscriminatory basis, to the specific, predictable, and sufficient
mechanisms established by the Commission to preserve and advance universal service." 
Contrary to AMSC, we believe that the principle of competitive neutrality requires AMSC to
contribute on the same basis as all other carriers.

     16.  Finally, AMSC does not claim, and we do not perceive, any significant adverse
consequences to AMSC or the public in requiring AMSC to contribute on the basis of its end-user
revenues.  AMSC benefits from universal service from its use of the PSTN.  Moreover, we have
no reason to believe that, absent a waiver, AMSC's customers would go unserved.  

     17.  Based upon the foregoing, we conclude that AMSC does not meet the
requirements for a waiver.

                      III.  ORDERING CLAUSE

     10.  Accordingly, IT IS ORDERED that, pursuant to the authority contained in section
0.291 of the Commission's rules, 47 C.F.R.  0.291, the Request for Waiver, filed March 17,
1998, by AMSC Subsidiary Corporation, IS DENIED.



                              James D. Schlichting
                              Deputy Chief, Common Carrier Bureau