Universal Service Fund Overview Cheryl L' Parrino

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Universal Service Fund OverviewCheryl L. Parrino

Train-the-Trainer Workshop Crystal City,
VA September 25, 2003
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Universal Service Fund Overview

• Universal service means providing access to
  telecommunications services for all Americans at
  reasonable rates
• Rural or high cost areas
• Libraries
• Low-income consumers
• Rural heath care facilities
• Public and private schools

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Universal Service Fund Overview

• History of Universal Service
• ATT goal
• Communications Act of 1934
• All people in the US shall have access to rapid,
  efficient, nationwidecommunications services
  with adequate facilities at reasonable charges.
• Telecommunications Act of 1996
• Congress decreed that it is federal policy to
  provide support for services essential to
  education, public health or public safety and
  established that all people regardless of
  location or income level should have affordable
  access to telecommunications and information
  services.

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Universal Service Fund Overview

• The Universal Service Administrative Company
  (USAC)
• Permanent administrator of all Universal Service
  Support Mechanisms (High Cost, Interstate Access,
  Interstate Common Line, Low Income, Rural Health
  Care, and Schools and Libraries)
• Diverse 19 member Board of Directors comprised of
  representatives of universal service stakeholders

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Universal Service Fund Overview

• USACs Role
• USACs functions and responsibilities include
• Administer each of the support mechanisms
• Bill contributors, collect contributions, and
  disburse Universal Service Funds
• Report quarterly to the Commission on
  disbursement of Universal Service Funds
• USAC may not
• Make policy
• Interpret unclear provisions of the statute or
  rules
• Interpret the intent of Congress
• Advocate policy positions before the Commission
  or its staff, but may advocate positions on
  administrative issues relating to the support
  mechanisms

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Universal Service Fund Overview

• USAC Key Milestones
• Incorporation (09/17/97)
• First support payments (01/98)
• Successful completion of attest audits for RHC
  (06/99) and SL (11/98) mechanisms which then
  allowed for commitments and disbursements
• Merger with Schools and Libraries Corporation and
  the Rural Health Care Corporation (12/31/98)
• Transition the Billing, Collection, Disbursement,
  and Accounting functions from IBM to USAC
  (01/23/03)

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Universal Service Fund Overview

• USAC Key Milestones (cont.)
• Successful implementation of significant changes
  and new initiatives ordered by the FCC under very
  tight time constraints
• Changes to the Rural Health Care mechanism
  (11/01/99)
• Revised High Cost Support per the High Cost Model
  order (01/01/00)
• New Interstate Access Support Mechanism
  (07/01/00)
• Low Income Tribal Lands initiative (10/01/00)
• Changes to the Contribution Base reduced lag
  (07/01/01)
• Revised High Cost Support per the RTF order
  (07/01/01)
• Changes to the Contribution Base circularity
  and joint billing (07/01/02)
• New Interstate Common Line Support Mechanism
  (07/01/02)

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Universal Service Fund Overview

• USAC Key Milestones (cont.)
• Successful implementation of significant changes
  and new initiatives ordered by the FCC under very
  tight time constraints (cont.)
• Implementation of CIPA requirements and
  implementing changes based on court case
  (06/28/02)
• Changes to the Contribution Base change revenue
  to projected collected and increase wireless safe
  harbor (04/01/03)
• Implementation of the Debt Collection Improvement
  Act (07/01/03)
• Implementation of CIPA changes based on court
  case (08/03)

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Universal Service Fund Overview

• Billing, Collection, and Disbursement
• Billing
• 2500 carriers involved monthly
• Approximately 500,000,000 billed monthly
• Fourth Quarter 2003 contribution factor is 9.2
• Contribution factor assessed against interstate
  and international revenues some may be exempt
  based on size
• Late payment fees are assessed

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Universal Service Fund Overview
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Universal Service Fund Overview
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Universal Service Fund Overview
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Universal Service Fund Overview

• Billing, Collection, and Disbursement
• Collections
• USAC collects 99 of all accounts in 180 days
• USAC implemented the Debt Collection Improvement
  Act
• Accounts over 90 days are transferred to the FCC
• Accounts held by the FCC over 30 days are
  transferred to treasury for collection
• These carriers are subject to government
  penalties
• These carriers may have other government payments
  held
• These carriers are not allowed to do business
  with the federal government
• USAC has been authorized to negotiate payment
  plans
• USAC applies approximately 2,500 payments of late
  fees each month to contributors accounts
• Total collections are approximately 500 million
  each month

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Universal Service Fund Overview

• Billing, Collection, and Disbursement
• Disbursements
• Monthly for High Cost and Low Income
• As invoices are submitted for Schools and
  Libraries and Rural Health Care Providers
• Mandatory netting for Rural Health Care
• Netting required for Schools and Libraries if not
  current with USAC obligations
• USAC is requesting netting for nonpayers in High
  Cost and Low Income

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Universal Service Fund Overview

• Support Mechanism Demand for 2003
• (Dollars in the Billions)

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Universal Service Fund Overview

• High Cost Support Mechanism
• Ensures that telecommunications rates paid by
  customers that live in rural or high cost areas
  are comparable to rates paid by urban customers
• Customers do not need to apply for this program
  telecommunications companies pass this benefit
  directly on to consumers through lower rates
• Total estimated 2003 support - 3.3 billion

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Universal Service Fund Overview

• High Cost Support Mechanism (cont.)
• Carriers Eligible for High Cost Support
• Must be designated as an Eligible
  Telecommunications Carrier (ETC) by state PUC
• Funding is only available in those areas where a
  carrier has ETC designation
• Must offer all universal services throughout the
  service area (pure resale does not qualify)
• Must advertise the availability of such services
  and charges
• Must meet the qualifications for each fund

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Universal Service Fund Overview

• High Cost Support Components
• High Cost Loop (HCL)
• Local Switching Support (LSS)
• Long Term Support (LTS)
• High Cost Model Support (HCM)
• Interstate Access Support (IAS)
• Interstate Common Line Support (ICLS)

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Universal Service Fund Overview

• High Cost Support Components (cont.)
• High Cost Loop Support provides intrastate
  support for the cost of the last mile of
  connection primarily for rural companies in
  service areas where the cost to provide this
  service exceeds 115 of the national average
• Local Switching Support provides interstate
  assistance which helps cover the high fixed
  switching costs for companies that serve fewer
  than 50,000 customers
• Long Term Support helps offset the interstate
  access charges for rate-of-return regulated
  carriers

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Universal Service Fund Overview

• High Cost Support Components (cont.)
• Forward-Looking Support (High Cost Model Support)
  provides intrastate support for non-rural
  carriers for the last mile of connection in
  service areas where the cost to provide this
  service in the state exceeds 135 of the national
  average
• Interstate Access Support helps offset interstate
  access charges for price cap carriers
• Interstate Common Line Support provides
  interstate support, effective July 1, 2002, for
  rate-of-return carriers, to the extent that
  subscriber line charge (SLC) caps do not permit
  them to recover their common line revenue
  requirements

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Universal Service Fund Overview

• Low Income Support Mechanism
• Provides direct support to low-income customers
  for monthly charges and connection costs
• The low-income customer must apply to receive the
  benefit
• Customer must contact the local phone company

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Universal Service Fund Overview

• Low Income Support Mechanism (cont.)
• Carriers Eligible for Low Income Support
• Must be designated as an Eligible
  Telecommunications Carrier (ETC)
• Funding is only available in those areas where a
  carrier has ETC designation
• Must offer all universal services throughout the
  service area (pure resale does not qualify)
• Must advertise the availability of such services
  and charges

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Universal Service Fund Overview

• Low Income Support Components
• Lifeline Support helps to pay the costs of
  monthly telephone service
• Link Up Support helps to defray the cost of
  telephone installation and certain other one-time
  costs
• Toll Limitation Service compensates telephone
  companies for offering no-cost toll limitation
  service

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Universal Service Fund Overview

• Low Income Support Federal Eligibility Criteria
• Individuals receiving support for any of these
  federal programs
• Medicaid, food stamps, Supplemental Security
  Income, federal public housing assistance, or the
  Low Income Home Energy Assistance Program
• Individuals living on tribal lands may also rely
  on participation in any of the following
  programs
• BIA general assistance, Temporary Assistance for
  Needy Families, Head Start (if income eligible),
  or free meals under the National School Lunch
  Program

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Universal Service Fund Overview

• Lifeline support amounts
• Maximum Lifeline support available to consumers
  not living on reservations 13.50
• 10.00 in federal support
• 3.50 in matching state support
• Maximum Lifeline support available to consumers
  living on reservations 38.50
• 35.00 in federal support
• 3.50 in matching state support

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Universal Service Fund Overview

• Link Up Support Amounts
• Half of the customary telephone connection
  charge, up to a maximum of 30.00
• A deferred schedule for payment of the charges
  assessed for initiating telephone service, for
  which the consumer does not pay interest
• Interest charges not assessed to the consumer
  must be for connection charges up to 200 that
  are deferred for a period not to exceed one year

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Universal Service Fund Overview

• Link Up Support Amounts (cont.)
• For qualifying low-income subscribers living on
  reservations, an additional reduction of up to
  70 is available
• Covers 100 of the charges from 60.00 to 130.00
  for commencing service at the subscribers
  principal place of residence
• Eligible connection charges include any charges
  the carrier customarily assesses to connect
  subscribers to the network, including
  facilities-based charges associated with line
  extensions or the construction of facilities
  needed to initiate service
• Reduction does not apply to charges for
  facilities or equipment that fall on the customer
  side of the demarcation point (for example,
  wireless handsets or inside wiring)

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Universal Service Fund Overview

• Toll Limitation Support
• ETCs are required to offer toll limitation at the
  time a consumer subscribes to Lifeline
• There are two types of toll limitation
• Toll control limits the amount of long-distance
  calls to a pre-set amount selected by the
  consumer
• Toll blocking prevents the placement of any
  long-distance calls
• If a low-income consumer voluntarily elects toll
  blocking from a carrier, the carrier may not
  collect a service deposit in order to initiate
  Lifeline service
• If toll blocking is unavailable, the carrier may
  charge a service deposit

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Universal Service Fund Overview

• Low Income Support Mechanism
• Each state program is different
• State participation varies significantly

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Universal Service Fund Overview

• Rural Health Care Support
• Support to help equalize rates between urban and
  rural areas for telecommunications services
• The Rural Health Care Provider must apply every
  year
• Urban or rural health care providers may receive
  support for up to 30 hours (180) per month of
  toll charges to reach the Internet if no local
  dial-up access is available
• No bandwidth limit
• Rural health care providers must competitively
  bid for services

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Universal Service Fund Overview

• Rural Health Care Support
• Eligible Facilities
• Post secondary educational institutions offering
  health care instruction
• Community health centers
• Local health departments or agencies
• Community mental health centers
• Not-for-profit hospitals
• Rural health care clinics
• Consortium of the above

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Universal Service Fund Overview

• Major Universal Service Policy Matters Pending at
  the FCC
• Contribution base methodology revisions
• Whether equal access is part of the definition of
  Universal Service
• High Cost Mechanism
• Requests for reconsideration of RTF and ICLS
  orders
• 5th Circuit remand
• Referral to the Joint Board on portability
• Updating line counts in the High Cost Model

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Universal Service Fund Overview

• Major Universal Service Policy Matters Pending at
  the FCC
• Low Income Mechanism
• Joint Board Recommendation
• Rural Health Care NPRM
• Schools and Libraries NPRM

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Universal Service Fund Overview

• Contact Information
• Contact USAC at [phone]
• If you have specific questions, you may also
  contact any member of our USAC leadership team
• Billing, Collections, and Disbursements Mr.
  Mark Carmichael, VP of Finance
• High Cost and Low Income Ms. Irene Flannery, VP
  of the High Cost and Low Income Division
• Rural Health Care Mr. Mel Blackwell, VP of
  External Communications and the Rural Health Care
  Division
• Schools and Libraries Mr. George McDonald, VP
  of the Schools and Libraries Division
• General questions Mr. Robert Haga, VP of
  Strategic Planning and USAC Operations
• Visit our Web Site http//www.universalservice.o
  rg/