Commission Document

PUBLIC NOTICE

Federal Communications Commission

News Media Information 202 / 418-0500

445 12th St., S.W.

Internet: http://www.fcc.gov

Washington, D.C. 20554

TTY: 1-888-835-5322

DA 11-1051

Released: June 14, 2011

Proposed Third Quarter 2011 Universal Service Contribution Factor

CC Docket No. 96-45
In this Public Notice, the Office of Managing Director (OMD) announces that the proposed
universal service contribution factor for the third quarter of 2011 will be 0.144 or 14.4 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 Federal Communications Commission (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 2011.5 Accordingly, the projected demand and expenses are as follows:


1 See 47 C.F.R. 54.709(a).
2 See id.
3 See 47 C.F.R. 54.709(a)(2).
4 See 47 C.F.R. 54.709(a)(3).
5 See Federal Universal Service Support Mechanisms Fund Size Projections for the Third Quarter 2011, available at
<http://www.universalservice.org/overview/ filings> (filed May 2, 2011) (USAC Filing for Third Quarter 2011
Projections). See also Federal Universal Service Support Mechanisms Quarterly Contribution Base for the Third
Quarter 2011, available at <http://www.universalservice.org/overview/ filings> (filed June 1, 2011) (USAC Filing
for Third Quarter 2011 Contribution Base).

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($ millions)
Program Demand
Projected
Admin.
Application
Application of
Total Program
Program
Expenses
Of Interest
True-Ups &
Collection
Support
Income
Adjustments
(Revenue
Requirement)
Schools and Libraries
543.86
18.64
(3.97)
(2.71)
555.82
Rural Health Care
23.79
3.83
(0.72)
(1.30)
25.60
High-Cost
1,102.53
4.25
(0.39)
(13.19)
1,093.20
Low Income
423.01
1.64
(0.11)
3.00
427.54
TOTAL
2,093.19
28.36
(5.19)
(14.20)
2,102.16

USAC Projections of Industry Revenues

USAC submitted projected collected end-user telecommunications revenues for July through
September 2011 based on information contained in the Third Quarter 2011 Telecommunications
Reporting Worksheet (FCC Form 499-Q).6 The amount is as follows:
Total Projected Collected Interstate and International End-User Telecommunications Revenues
for Third Quarter 2011: $16.848724 billion.

Adjusted Contribution Base

To determine the quarterly contribution base, we decrease the third quarter 2011 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 2011 is
as follows:
Adjusted Quarterly Contribution Base for Universal Service Support Mechanism
Third Quarter 2011 Revenues - Projected Revenue Requirement - 1%
($16.848724 billion $2.102160 billion) * 0.99
$14.599098 billion.


6 USAC Filing for Third Quarter 2011 Contribution Base at 6.
2

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Unadjusted Contribution Factor

Using the above-described adjusted contribution base and the total program collection (revenue
requirement) from the table above, the proposed unadjusted contribution factor for the third quarter of
2011 is as follows:
Contribution Factor for Universal Service Support Mechanisms
Total Program Collection / Adjusted Quarterly Contribution Base
$2.102160 billion / $14.599098 billion
0.143992

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 2011 is as follows:
Unadjusted Circularity Factor for Universal Service Support Mechanisms
1 - ((Third Quarter 2011 Revenues - Total Program Collection) / Third Quarter 2011 Revenues)
1 (($16.848724 billion - $2.102160 billion) / $16.848724 billion)
0.124767

Proposed Contribution Factor

The Commission has directed OMD to announce the contribution factor as a percentage rounded
up to the nearest tenth of one percent.7 Accordingly, the proposed contribution factor for the third quarter
of 2011 is as follows:
14.4


7 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, Order and
Second Order on Reconsideration, 18 FCC Rcd 4818, 4826, para. 22 (2003) (Second Order on Reconsideration).
3

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Proposed Circularity Factor

The Commission also has directed OMD to account for contribution factor rounding when
calculating the circularity discount factor.8 Accordingly, the proposed circularity factor for the third
quarter of 2011 is as follows:
0.1248139

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.10 USAC shall use the contribution factor to
calculate universal service contributions for the third quarter of 2011. USAC will reduce each provider's
contribution obligation by a circularity discount approximating the provider's contributions in the
upcoming quarter.11 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.12
We also emphasize that carriers may not mark up federal universal service line-item amounts
above the contribution factor.13 Thus, carriers may not, during the third quarter of 2011, recover through
a federal universal service line item an amount that exceeds 14.4 percent of the interstate
telecommunications charges on a customer's bill.


8 Id.
9 The proposed circularity discount factor = 1 + [(unadjusted circularity discount factor 1) * (unadjusted
contribution factor / proposed contribution factor)]. The proposed circularity discount factor is calculated in a
spreadsheet program, which means that internal calculations are made with more than 15 decimal places.
10 See 47 C.F.R. 54.709(a)(3).
11 USAC will calculate each individual contributor's contribution in the following manner: (proposed contribution
factor * contributor's projected collected revenues) (proposed circularity discount factor * proposed contribution
factor * contributor's projected collected revenues).
12 See 47 C.F.R. 54.713.
13 See 47 C.F.R. 54.712.
4

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In addition, under the limited international revenues exception (LIRE) in section 54.706(c) of the
Commission's rules, a contributor to the universal service fund 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
projected collected interstate end-user telecommunications revenues, net of projected contributions.14 The
rule is intended to exclude from the contribution base the international end-user telecommunications
revenues of any entity whose annual contribution, based on the provider's interstate and international end-
user telecommunications revenues, would exceed the amount of its interstate end-user revenues.15 The
proposed contribution factor exceeds 12 percent, which we recognize could result in a contributor being
required to contribute to the universal service fund an amount that exceeds its interstate end-user
telecommunications revenue. Should a contributor face this situation, the contributor may petition the
Commission for waiver of the LIRE threshold.16
For further information, contact Kim Yee in Financial Operations, Office of Managing Director,
at (202) 418-0805, TTY (202) 418-0484.


14 See 47 C.F.R. 54.706.
15 See Federal-State Joint Board on Universal Service, Sixteenth Order on Reconsideration, CC Docket No. 96-45,
Eighth Report and Order, CC Docket No. 96-45, Sixth Report and Order, Docket No. 96-262, 15 FCC Rcd 1679,
1687-1692, paras. 17-29 (1999) (Fifth Circuit Remand Order).
16 Generally, the Commission's rules may be waived for good cause shown. 47 C.F.R. 1.3. The Commission may
exercise its discretion to waive a rule where the particular facts make strict compliance inconsistent with the public
interest. Northeast Cellular Telephone Co. v. FCC, 897 F.2d 1164, 1166 (D.C. Cir. 1990) (Northeast Cellular). In
addition, the Commission may take into account considerations of hardship, equity, or more effective
implementation of overall policy on an individual basis. WAIT Radio v. FCC, 418 F.2d 1153, 1159 (D.C. Cir.
1969); Northeast Cellular, 897 F.2d at 1166. Waiver of the Commission's rules is therefore appropriate only if
special circumstances warrant a deviation from the general rule, and such deviation will serve the public interest.
Northeast Cellular, 897 F.2d at 1166; 47 C.F.R. 54.802(a).
5

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