[Federal Register Volume 66, Number 246 (Friday, December 21, 2001)]
[Rules and Regulations]
[Pages 65856-65857]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-31460]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 54

[CC Docket No. 96-45; FCC 01-321]


Federal-State Joint Board on Universal Service; Petition for 
Reconsideration Filed by the United States Telecom Association

AGENCY: Federal Communications Commission.

ACTION: Final rule, denial.

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SUMMARY: In this document, the Commission denies the request of the 
United States Telecom Association to reconsider portions of the 
Contribution Interval Order modifying the methodology used to assess 
contributions that carriers make to the federal universal service 
support mechanisms.

FOR FURTHER INFORMATION CONTACT: Richard D. Smith, Attorney, Common 
Carrier Bureau, Accounting Policy Division, (202) 418-7400.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Order 
on Reconsideration in CC Docket No. 96-45 released on November 6, 2001. 
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, S.W., Washington, D.C., 20554.

I. Introduction

    1. In this Order on Reconsideration, we deny the request of the 
United States Telecom Association (USTA) to reconsider portions of the 
Contribution Interval Order, 66 FR 16145, March 23, 2001, modifying the 
methodology used to assess contributions that carriers make to the 
federal universal service support mechanisms. Specifically, we deny 
USTA's request to reconsider the imposition of additional filing 
requirements and the method of calculating contributions from carriers 
that either under-report or over-report quarterly revenue. In so doing, 
we affirm our prior conclusion that the provision of sufficient and 
competitively neutral funding for the universal service support 
mechanisms depends on the timely submission of accurate revenue 
information from contributors.

II. Discussion

    2. We deny the request of USTA to reconsider portions of the 
Contribution Interval Order. We find that USTA has raised no new issues 
or facts to persuade us to reconsider the decisions made in the 
Contribution Interval Order. Specifically, we conclude that the 
accurate submission of quarterly revenue data is essential to ensure 
that sufficient contributions are made to the federal universal service 
support mechanisms on a competitively neutral basis. The Commission 
carefully considered the implications of imposing additional reporting 
requirements on carriers in the Contribution Interval Order and 
concluded that such requirements were necessary. In addition, we 
conclude that the method adopted by the Commission of calculating 
contributions from carriers that under-report or over-report revenues 
provides an appropriate incentive for carriers to accurately report 
quarterly revenues to USAC.
    3. Reporting Requirements. We deny USTA's request to reconsider the 
Commission's decision to increase carriers' reporting requirements. 
USTA's petition raises no new arguments that would convince us to 
reconsider the conclusion that the benefits of substantially reducing 
the contribution interval outweigh any increased

[[Page 65857]]

administrative burden on carriers. Although the Commission acknowledged 
that the prior contribution methodology was competitively neutral and 
satisfied the requirements of the Act, as discussed, the Commission 
concluded that revisions were necessary to ensure that the contribution 
methodology remains competitively neutral in light of recent changes in 
the telecommunications marketplace, such as the entry of new carriers 
into the interexchange market and the declining revenue bases faced by 
some existing carriers. The submission of quarterly revenue data allows 
us to reduce the interval, from 12 months to six months, between the 
accrual and assessment of revenues for contribution to the universal 
service fund. The shortened interval between the accrual and assessment 
of revenues therefore reduces the possibility that certain carriers 
will be placed at a competitive disadvantage as they lose market share. 
As a result, the revised methodology furthers the Commission's goal of 
maintaining competitive neutrality.
    4. Under and Over-Reporting of Revenues. We find no basis to 
reconsider the method adopted by the Commission to calculate refunds 
from carriers that over-report revenue or the collection of additional 
contributions from carriers that under-report revenue. Contrary to 
USTA's contention, we do not find the method of calculating such 
adjustments to be punitive. A true-up mechanism merely ensures that 
carriers' contributions to the universal service mechanisms are based 
on accurate revenue data over the course of the year. Moreover, the 
Commission allows carriers up to three months after each filing to 
correct errors that appear on the Form 499-Q. Thus, we find 
unpersuasive USTA's contention that carriers will be penalized as a 
result of insufficient time to ensure the complete accuracy of the 
information submitted. Only if such errors are not corrected in a 
timely fashion will USAC apply the refund and additional collection 
rules. Based on the record before us, we have no reason to overturn the 
prior conclusion that three months should be sufficient time for 
carriers to compute, and correct if necessary, revenue information.
    5. We affirm our conclusion that the methodology adopted in the 
Contribution Interval Order encourages carriers to provide accurate 
data and discourages ``gaming.'' For example, the methodology will 
deter carriers that otherwise might be tempted to under-report revenue 
to reduce their current contributions and free up capital for other 
uses. A carrier that did so would be forced to contribute additional 
funds following the annual true-up based on the average of the two 
highest quarterly contribution factors for the year. We are convinced 
that assessment of contributions based on this higher contribution rate 
will reduce the incentive for such conduct while giving carriers ample 
time to correct honest mistakes.
    6. We are not persuaded by USTA's contention that it is sufficient 
to rely on existing federal law prohibiting willful false statements to 
protect against abuse of our rules. The methodology set forth in the 
Contribution Interval Order also provides incentives to carriers to 
avoid negligent or careless errors in reporting revenues to USAC. In 
order to maintain sufficient and competitively neutral support 
mechanisms, it is essential that carriers provide accurate revenue 
information to USAC in a timely manner. For similar reasons, we also 
decline to adopt USTA's alternative proposal to exclude from this 
calculation methodology those carriers whose reported quarterly 
revenues fall within 10 percent of their reported annual revenues. This 
proposed 10 percent margin of acceptable error may translate into 
significant contributions for some carriers, who would be able to avoid 
payment by intentionally under-reporting their revenues by 10 percent 
or less. Thus, USTA's proposal may provide carriers with a substantial 
incentive to under-report their revenues. In light of the opportunity 
provided each quarter to correct such errors, we believe that adopting 
this proposal would also be contrary to our goal of encouraging 
carriers to report accurate information.

III. Ordering Clause

    1. It is ordered, pursuant to sections 1, 4(i) and 254 of the 
Communications Act of 1934, as amended, and Sec. 1.429 of the 
Commission's rules, that the Petition for Reconsideration filed April 
23, 2001 by USTA is denied.

Federal Communications Commission.
Magalie Roman Salas,
Secretary.
[FR Doc. 01-31460 Filed 12-20-01; 8:45 am]
BILLING CODE 6712-01-P