PUBLIC NOTICE FEDERAL COMMUNICATIONS COMMISSION 1919 M STREET, N.W. WASHINGTON, D.C. 20554 DA 97-2157 News media information 202/418-0500 Fax-On-Demand 202/418-2830 Internet: http://www.fcc.gov ftp.fcc.gov Released: October 6, 1997 WTB INFORMATION BULLETIN UNIVERSAL SERVICE UPDATE: FREQUENTLY ASKED QUESTIONS BY WIRELESS SERVICE PROVIDERS The following information is based on the Commission's May 8, 1997 Order in the universal service proceeding ("May 8 Universal Service Order") (CC Docket No. 96-45) and the Commission's July 18, 1997 Order and August 15, 1997 Order on Reconsideration in the Temporary Administration Governance proceeding (CC Docket Nos. 97-21 and 96-45). Copies of those items as well as the Universal Service Worksheet (FCC Form 457), which is used for filing contributions to the universal service support mechanisms, are available on the FCC's website: http://www.fcc.gov/ccb/universal_service/. Are wireless service providers eligible to receive funding from the universal service support mechanisms?  A wireless carrier will be eligible to receive funding from the high cost/low income universal service support mechanisms if: -- it is a common carrier, and -- it offers the services supported by universal service support mechanisms throughout a designated service area, through its own facilities or through a combination of its own facilities and resale of another carrier's services, and advertises the availability of those services. Services supported by universal service support mechanisms are: 1. voice grade access to the public switched telephone network, with the ability to place and receive calls; 2. Dual Tone Multi-frequency (DTMF) signaling or its functional equivalent; 3. single-party service; 4. access to emergency services, including 911 and Enhanced 911 (which identifies a caller's location); 5. access to operator services; 6. access to interexchange services; 7. access to directory assistance; and 8. Lifeline and Link Up services for qualifying low-income customers.  A wireless carrier will have to be designated an "eligible telecommunications carrier" by the State in order to receive high cost/low income support.  Some wireless providers that will be contributing to the high cost/low income support mechanisms will be unable to receive high cost/low income support. For example, most paging providers and some SMR and 220-222 MHz providers will be ineligible for high cost/low income support since they do not meet the above criteria.  The Commission found that all telecommunications providers benefit from a ubiquitous telecommunications network. For example, customers who receive pages would not be able to receive or respond to those pages absent use of the public switched telephone network. -- Other carriers will also contribute to high cost/low income universal service but not receive support -- e.g., data services, and private carriers. This is consistent with the Telecommunications Act of 1996, which states that all telecommunications carriers shall make an equitable and non-discriminatory contribution to universal service, and that other providers of interstate telecommunications may be required to contribute if doing so is in the public interest.  A wireless carrier will not have to be found to be an eligible telecommunications carrier by a State in order to receive funding under universal service programs for schools and libraries. To receive funding a wireless carrier need only provide supported services to eligible schools and libraries. Do wireless service providers have to contribute to the Federal universal service support mechanisms?  All interstate telecommunications carriers, payphone providers, and providers of interstate telecommunications to others for a fee will be required to contribute. Specifically mentioned by the Commission and the Joint Board as "examples of interstate telecommunications" (and thus required to contribute) are: "cellular telephone and paging services; mobile radio services; operator services; PCS; access to interexchange service; special access; wide area telephone service (WATS); toll- free services; 900 services; MTS; private line; telex; telegraph; video services; satellite services; and resale services."  Exceptions -- i.e., telecommunications providers that offer service for a fee but will nonetheless not have to contribute to the universal service support mechanisms: -- Purely private providers that do not lease their excess capacity (e.g., a utility company licensee that uses its frequencies strictly for its own internal communications needs) do not have to contribute. If those providers decide to lease excess capacity, they will have to contribute. -- Public safety and local governmental entities licensed under Subpart B of Part 90 will not be required to contribute due to the restrictive eligibility requirements for these services and because of the important public welfare functions for which such services are used. Similarly, if an entity exclusively provides interstate telecommunications to public safety or government entities and does not offer services to others, that entity will not be required to contribute. -- Purely international carriers are explicitly excluded by the statute from contributing. The international revenues of carriers that also provide domestic interstate service, however, will be included in the calculation of those carriers' contributions. -- Purely intrastate carriers are explicitly excluded by the statute. -- Open video systems, direct broadcast satellite service and cable leased access are explicitly exempted in the May 8 Universal Service Order. -- Providers falling under the de minimis exemption, i.e., those whose annual contribution would be less than $100, will not be required to contribute.  Other providers of telecommunications that offer service for a fee and that do not fit one of the above exceptions must contribute regardless of whether they are common carriers. Who will administer the Federal universal service support mechanisms?  Until a permanent administrator is chosen, the National Exchange Carrier Association (NECA) will create an independently functioning, not-for-profit subsidiary to be designated the Universal Service Administrative Company (USAC) to administer certain Federal universal service support mechanisms. Prior to the creation of USAC, NECA has been given authority to undertake some of the preliminary administrative functions related to implementation of the universal service support mechanisms, such as distribution, receipt, and processing of the Universal Service Worksheet.  USAC will be directly responsible for billing contributors, collecting contributions to the universal service support mechanisms, and disbursing universal service support funds.  There will also be a High Cost and Low Income Committee, a Schools and Libraries Corporation, and a Rural Health Care Corporation. Each of these entities will perform all functions relating to administering the support mechanisms for their respective areas, except those directly related to billing and collecting contributions and disbursing support, which will be done by USAC.  The USAC Board of Directors consists of 17 members that represent both contributors to and beneficiaries of universal service support mechanisms. Thomas Wheeler, President, Cellular Telecommunications Industry Association, has been selected as the USAC Director to represent commercial mobile radio service (CMRS) providers. Board members are appointed for two-year terms. The USAC held its first meeting on September 22, 1997. What are the universal service contributions based on?  Contributions will be based on a percentage of end-user telecommunications revenues.  For purposes of calculating contributions, a different revenue base will be used for each group of universal service programs: -- Rural, insular and high cost areas and low income consumers. Assessments of support obligations to benefit this group will be determined based only on interstate and international end-user telecommunications revenues. (Interstate and international revenues include all revenues received for calls that do not originate and terminate in the same state. Calls that originate and terminate in foreign countries are reportable, but are not included in the contribution base.) -- Schools, libraries and rural health care providers. Assessments of support obligations to benefit this group will be determined based on both interstate, international, and intrastate end-user telecommunications revenues. How will a carrier's end-user telecommunications revenues be determined?  The Universal Service Worksheet ("Worksheet") will be used to identify each contributing carrier's identification information and information regarding end-user telecommunications revenues. (A copy of the worksheet, and the instructions, is available on the FCC's website.) The Worksheet shall be filed on a semi-annual basis. -- The first Worksheets were due to be filed by September 2, 1997 with revenue data representing contributor operations for January 1 through June 30 of 1997. -- Subsequent filings will be due as follows: March 31, containing data for the prior calendar year. September 1, containing data for the six month period from January 1 through June 30 of the current calendar year.  Contributors failing to file the Universal Service Worksheet or contributions in a timely fashion may be subject to the enforcement provisions of the Communications Act and any other applicable laws, including Commission rules.  Each legal entity that "bills end-user telecommunications revenues" and provides interstate telecommunications service must file separately. Entities that have distinct articles of incorporation are separate legal entities. Each affiliate or subsidiary that "bills end-user telecommunications revenues" must file separately. Under the Communications Act, an "affiliate" is defined 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."  Revenues consist of total revenues billed to customers during the filing period with no allowances for uncollectibles, such as fraud, or out-of-period adjustments.  Contributors that cannot derive interstate revenues from their books of account or cannot derive line-by-line revenue breakdowns from their books of account may use good faith estimates for those figures. In the August 15 Order on Reconsideration in the Temporary Administration Governance proceeding (para. 21), the Commission stated that contributors may derive their estimates using a method that they, in good faith, believe will yield a reasonably accurate result. Contributors must document how they calculated their estimates and make such information available to the Commission or Administrator upon request.  Contributors may exclude revenues from service provided to resellers from their universal service contribution funding base. A contributor should document procedures to ensure that it excludes only revenues from resellers that reasonably may be expected to contribute to support universal service.  Enhanced services, also known as information services, billing and collection, customer premises equipment, and non-telecommunications products and service revenues are not included in the universal service contribution base. How will universal service contributions be billed and collected?  Contributions to the universal service support mechanisms shall be based on contributors' end-user telecommunications revenues and contribution factors determined quarterly by USAC. The actual contribution percentage has not yet been established.  To calculate an individual entity's quarterly contribution, USAC will multiply the entity's universal service contribution base (i.e., its interstate, intrastate, and international end-user telecommunications revenues for the schools and libraries and rural health care providers universal service mechanism, or its interstate and international end-user telecommunications revenues for the high cost and low-income universal service support mechanisms) by the relevant universal service contribution factor. USAC will then bill each contributor for the amount of its contribution. Contributors must remit all contributions to USAC by the contribution date.  The Commission will announce by Public Notice and on its website the manner of payment and dates by which payment must be made. All carriers, including wireless carriers, will begin contributions on January 1, 1998.  De minimis contributions. A contributor that provides interstate telecommunications will be exempt from universal service contribution and filing requirements if that contributor's contribution for the next four quarters is expected to be less than $100 based on calculations derived from the Worksheet. This calculation must be made every six months. Must CMRS providers contribute to State Universal Service support mechanisms?  The May 8 Universal Service Order specifically finds that CMRS providers may be required to contribute to state universal service support mechanisms.  Some parties had argued that Section 332(c)(3) prohibits states from requiring CMRS providers to contribute to state universal service support unless the CMRS provider's service is a substitute for land line in a substantial portion of the state. The Commission and the Joint Board rejected that interpretation of Section 332(c). PENDING PROCEEDINGS  On July 3, 1997, Southwestern Bell Telephone Company, Pacific Bell, and Nevada Bell filed a joint petition for stay of the May 8 Universal Service Order, or, in the alternative, the portions that (a) provide support for Internet access and internal connections for eligible schools; (b) provide federal support for toll-free access to Internet access providers for rural and non-rural health care providers; (c) provide support to non-telecommunications carriers that provide supported services to eligible schools and libraries; (d) prohibit the disconnection of Lifeline customers from local service for unpaid intrastate toll charges; and (e) prohibit requiring Lifeline customers who elect toll blocking and who have unpaid intrastate toll charges to pay service deposits to initiate local service. Comments on the petition have been filed, and the matter is pending before the Commission.  On July 17, 1997, 54 parties, including seven representing wireless service providers, filed petitions for reconsideration of the May 8 Universal Service Order. Issues raised in the petitions related to wireless service include: -- How to calculate interstate and intrastate revenues for purposes of universal service support mechanisms. -- The extent that requirements for state universal service support mechanisms may differ from the requirements for the Federal program. -- Whether the Commission was correct in deciding that CMRS providers can be required to contribute to state universal service support mechanisms. -- These petitions are still pending.  On July 17, 1997, 131 entities describing themselves as rural telephone companies filed a joint petition to stay portions of the May 8 Universal Service Order, including the portions that make universal service support portable to competing local exchange carriers. Comments on the petition have been filed, and the matter is pending.  On July 18, 1997, the Commission released a Further Notice of Proposed Rulemaking (FNPRM) concerning the development of the mechanism for non-rural telephone companies to calculate the cost of providing the supported services in high cost areas. (A copy of the FNPRM, which sets out the various comments dates, is available on the FCC's website.) Issues raised in the FNPRM related to wireless service include: -- How to estimate the cost of providing the supported service in high cost areas through wireless technologies. This issue is raised as part of the FNPRM's discussion on outside plant investment. -- The level of local usage that should be included in the definition of universal service, and thus must be provided for a carrier to receive funding from the universal service support mechanisms. -- This FNPRM has a staged comment cycle for the different components of a high cost mechanism for non-rural carriers. Comments regarding the cost of providing universal service through wireless technologies, along with the other issues concerning outside plant investment, were due on September 24, 1997, and reply comments were due on October 3, 1997. Comments regarding local usage are due on October 17, 1997, and reply comments are due on October 27, 1997.  On August 1, 1997, the Commission released a Public Notice requesting nominations for membership of the Universal Service Administrator Advisory Committee ("Advisory Committee"). The Advisory Committee will recommend a permanent, third party administrator of the universal service support mechanisms. Nominations were to be submitted by August 22, 1997.  In the May 8 Universal Service Order, the Commission stated that it would issue a Further Notice of Proposed Rulemaking examining the use of competitive bidding to define universal service funding levels for high cost areas. That FNPRM has not yet been issued.  On September 17, 1997, the Federal-State Joint Board on Universal Service announced the creation of a Rural Task Force (RTF) to study the establishment of a forward-looking economic cost mechanism for rural telephone carriers. Specifically, the RTF will consider whether a forward-looking economic cost mechanism for rural carriers should have different platform design features or input values than the mechanism adopted for non-rural carriers. The RTF will present a report to the Joint Board that makes specific recommendations on the rural forward-looking economic cost mechanism by June 15, 1998. The RTF will have 17 members representing various groups. Nominations for membership on the RTF must be submitted by October 15, 1997. For further information, contact David Krech, Commercial Wireless Division, Wireless Telecommunications Bureau at (202) 418-7240; or the Universal Service Branch, Common Carrier Bureau, at (202) 418-7400.