PUBLIC NOTICE

DA 04-1613

Released: June 7, 2004

In this Public Notice, the Wireline Competition Bureau (Bureau) announces that the proposed universal service contribution factor for the third quarter of 2004 is .089 or 8.9 percent.^[1]

Rules for Calculating the Contribution Factor

Contributions to the federal universal service support mechanisms are determined using a quarterly contribution factor calculated by the Commission.[2] The Commission calculates the quarterly contribution factor based on the ratio of total projected quarterly costs of the universal service support mechanisms to contributors’ total projected collected end-user interstate and international telecommunications revenues, net of projected contributions.^[3]

USAC Projections of Demand and Administrative Expenses

Pursuant to section 54.709(a)(3) of the Commission’s rules,^[4] the Universal Service Administrative Company (USAC) submitted projections of demand and administrative expenses for the third quarter of 2004.^[5]

Pursuant to section 54.709(b) of the Commission’s rules,[6] in light of excess collections carried over from previous quarters, USAC submitted an alternative projection of demand for the schools and libraries support mechanism for the third quarter of 2004, which was $200 million lower than its original projection.[7] As we did in the last quarter and consistent with section 54.709(b), we utilize USAC’s alternative projection of demand. Accordingly, the projected demand and expenses are as follows:

($ millions)

USAC Projections of Industry Revenues

USAC submitted projected collected end-user telecommunications revenues for July through September 2004 based on information contained in the Third Quarter 2004 Telecommunications Reporting Worksheet (FCC Form 499-Q).[8] The amount is as follows:

Total Projected Collected Interstate and International End-User Telecommunications Revenues for

Third Quarter 2004: $18.707211 billion.

Adjusted Contribution Base

To determine the quarterly contribution base, we decrease the third quarter 2004 estimate of projected collected interstate and international end-user telecommunications revenues by the projected revenue requirement to account for circularity, and decrease the result by one percent to account for uncollectible contributions. Accordingly, the quarterly contribution base for the third quarter of 2004 is as follows:

Adjusted Quarterly Contribution Base for Universal Service Support Mechanism

Third Quarter 2004 Revenues - Projected Revenue Requirement - 1%

($18.707211 billion – $1.514511 billion) * 0.99

$17.020773 billion.

Unadjusted Contribution Factor

Using the above-described adjusted contribution base and the total program collection requirement from the table above, the proposed unadjusted contribution factor for the third quarter of 2004 is as follows:

Contribution Factor for Universal Service Support Mechanisms

Total Program Collection / Adjusted Quarterly Contribution Base

$1.514511 billion / $17.020773 billion

0.088980

Unadjusted Circularity Factor

USAC will reduce each provider’s contribution obligation by a circularity discount approximating the provider’s contributions in the upcoming quarter. Accordingly, the proposed unadjusted circularity factor for the third quarter of 2004 is as follows:

Unadjusted Circularity Factor for Universal Service Support Mechanisms

1 - ((Third Quarter 2004 Revenues - Total Program Collection) / Third Quarter 2004 Revenues)

1 – (($18.707211 - $1.514511) / $18.707211 billion)

.080959

Proposed Contribution Factor

The Commission has directed the Bureau to announce the contribution factor as a percentage rounded to the nearest tenth of one percent.[9] Accordingly, the proposed contribution factor for the third quarter of 2004 is as follows:

.089

The Commission also has directed the Bureau to account for contribution factor rounding when calculating the circularity discount factor.[10] Accordingly, the proposed circularity factor for the third quarter of 2004 is as follows:

.081166[11]

Conclusion

If the Commission takes no action regarding the projections of demand and administrative expenses and the proposed contribution factor within the 14-day period following release of this Public Notice, they shall be deemed approved by the Commission.[12] USAC shall use the contribution factor to calculate universal service contributions for the third quarter of 2004. USAC will reduce each provider’s contribution obligation by a circularity discount approximating the provider’s contributions in the upcoming quarter.[13] USAC includes contribution obligations less the circularity discount in invoices sent to contributors. Contribution payments are due on the dates shown on the invoice. Contributors will pay interest for each day for which the payments are late. Contributors failing to pay contributions in a timely fashion may be subject to the enforcement provisions of the Communications Act of 1934, as amended, and any other applicable law. In addition, contributors may be billed by USAC for reasonable costs of collecting overdue contributions.[14]

We also emphasize that carriers may not mark up federal universal service line-item amounts above the contribution factor.^[15] Thus, carriers may not, during the third quarter of 2004, recover through a federal universal service line item an amount that exceeds the interstate telecommunications charges on a customer’s bill times 8.9%.

For further information, contact Warren Firschein in the Telecommunications Access Policy Division, Wireline Competition Bureau, at (202) 418-7400, TTY (202) 418-0484.