Federal Communications Commission Washington, D.C. 20554 February 8, 2011 DA 11-243 WC Docket No. 05-337 Karen Majcher, Vice President, High-Cost and Low Income Division Universal Service Administrative Company 2000 L St., N.W., Suite 200 Washington, DC 20036 Dear Ms. Majcher: This letter confirms that the Universal Service Administrative Company (USAC) should adjust the interim cap on high-cost universal service support for competitive eligible telecommunications carriers (ETCs) as described below. In a letter dated August 24, 2010, I instructed USAC to adjust the interim cap to reflect true-ups, waivers, and corrections of errors that affected the amount of support that competitive ETCs were eligible to receive in March 2008.1 Consistent with that letter, the adjusted interim cap should be implemented for the entire period since August 1, 2008, the effective date of the Interim Cap Order. Subsequent to my letter, USAC discovered two errors in the specific adjustments it had submitted to the Commission. First, the actual true-ups to Interstate Common Line Support (ICLS) and Local Switching Support (LSS) varied from the estimates that were submitted by USAC. Second, three competitive ETCs were assigned negative eligibility amounts, when for the purposes of adjusting the interim cap they should not have been permitted to fall below $0. In addition, some parties have suggested that the specific adjustments made could have been more transparent, especially as they related to the ICLS and LSS true-ups (which were shown at the state level only). Finally, some parties have indicated that the true-ups necessary to implement the revised cap could be unduly burdensome. To address these issues, USAC should adjust the interim cap as reflected in the attached tables, which correct the prior errors and more clearly show the adjustments that are being made at a competitive ETC- specific level. USAC should implement the adjusted interim cap beginning with February 2011 support payments (the actual disbursement of which will occur in March 2011). Except as specifically described in this letter, USAC should implement the interim cap adjustment as described in the August 24, 2010, letter. Moreover, in response to your letter of December 28, 2010, to the extent any carrier indicates that the recovery of support for prior periods would be unduly burdensome, USAC shall offer the carrier a repayment schedule to recover disbursed amounts that were above the interim cap of high-cost universal 1 Letter from Sharon Gillett, Wireline Competition Bureau, to Karen Majcher, USAC, dated August 24, 2010. USAC has posted this letter to its website at http://www.usac.org/_res/documents/hc/pdf/2010- reminders/InterimCapAdjustmentLetter.pdf. Page 2— service support, as described in the August 24, 2010 letter.2 In situations where carriers request a payment plan to repay the amounts above the interim cap, USAC proposed an administrative offset of monthly support amounts either by applying the entire support amount each month or a percentage to permit partial support to the carrier during the recovery period. This letter approves USAC’s proposal, with the modification discussed below, to ensure it is consistent with the Commission’s rules addressing debt collection.3 Specifically, USAC must comply with the Commission’s debt collection rules which include a demand for payment, charging of interest and penalties, notice of administrative offset, and the process for collection in installments. To accomplish this, USAC shall include a demand notice to the applicable carrier that the recoverable amount is a debt owed the United States, and that it will be delinquent, if not paid in full on the due date.4 The demand notice will also include certain required information,5 e.g., the basis for the indebtedness, the applicable standards for assessing interest, penalties, and administrative costs,6 and, as is appropriate to these cases, alternative methods of payment,7 including collection in installments pursuant to a written agreement,8 and the procedures for administrative offset.9 USAC’s required demand and notice shall also be tailored to provide the carrier with alternatives to expedite the process and commence recovery within three months or less of the date of the demand letter. For example, the initial demand notice will require within 30 days the carrier to make elections and provide financial information to evaluate properly the request to pay in installments under a written agreement.10 Proposed elections from a menu of documents may include, e.g.: (a) the carrier’s acknowledgement of the debt; (b) an agreement to pay the full amount due within 30 days (and thereby avoid paying interest); (c) a promissory note requiring monthly payments and interest that may be satisfied by payment or by administrative offset. Carriers shall be permitted to seek review of the demand 2 The USAC December 28, 2010 letter also proposed procedures to recover funds from High Cost program beneficiaries requesting payment plans for large audit recoveries. USAC proposes to modify the Commission’s procedures by allowing carriers to request that USAC apply administrative offset of monthly support payments until the amount owed plus accrued interest is recovered. This letter approves this proposal subject to the modification discussed in this letter to ensure it is consistent with the Commission’s rules addressing debt collection. 3 See 47 C.F.R. § 1.1901, et seq. 4See 47 C.F.R. § 1.1911; 31 U.S.C. § 3701; 47 C.F.R. §§ 1.1901(e), (h); 1.1910. 5 See 47 C.F.R. § 1.1911(b). 6 See 31 U.S.C. § 3717; 47 C.F.R. § 1.1940. 7 See 47 C.F.R. § 1.1911(d). 8 See 47 C.F.R. § 1.1914. 9 See 31 U.S.C. § 3716; 47 C.F.R. §§ 1.1911(d); 1.1912. 10 See 47 C.F.R. § 1.1914(a). Page 3— notice consistent with section 54.719 of the Commission’s rules.11 A carrier electing a payment plan or administrative offset shall also waive the right to appeal. The Commission’s Office of Managing Director is available to assist USAC in drafting the required documents. If you have any questions regarding this letter, please do not hesitate to contact me at 202-418-1500. Sincerely, Sharon Gillett Chief Wireline Competition Bureau 11 See 47 C.F.R. § 54.719. Attachment A Interim Cap Adjustments by State Revised Original Baseline Baseline (March (March 2008, not 2008, not State annualized) annualized) Difference AK $ 6,252,774 $ 6,062,334 $ (190,440) AL $ 1,560,105 $ 1,550,031 $ (10,074) AR $ 4,932,491 $ 4,734,991 $ (197,500) AS $ 289,627 $ 224,935 $ (64,692) AZ $ 1,039,117 $ 987,210 $ (51,907) CA $ 27,906 $ 27,906 $ - CO $ 839,466 $ 840,045 $ 579 CT $ - $ - $ - DC $ - $ - $ - DE $ - $ - $ - FL $ 1,284,028 $ 1,295,630 $ 11,602 GA $ 2,375,551 $ 2,256,656 $ (118,895) GU $ 577,279 $ 750,719 $ 173,440 HI $ 2,927,668 $ 2,856,576 $ (71,092) IA $ 5,109,145 $ 5,109,265 $ 120 ID $ 636,711 $ 654,746 $ 18,035 IL $ 1,207,003 $ 1,198,657 $ (8,346) IN $ 619,725 $ 622,132 $ 2,407 KS $ 7,155,178 $ 7,280,817 $ 125,639 KY $ 2,382,117 $ 2,370,464 $ (11,653) LA $ 5,453,643 $ 5,355,614 $ (98,029) MA $ - $ - $ - MD $ 49 $ 49 $ - ME $ 1,080,032 $ 952,748 $ (127,284) MI $ 1,885,975 $ 1,832,621 $ (53,354) MN $ 4,225,519 $ 4,106,287 $ (119,232) MO $ 1,535,089 $ 1,397,898 $ (137,191) MP $ 37,580 $ 80,756 $ 43,176 MS $ 13,412,800 $ 13,359,389 $ (53,411) MT $ 1,028,751 $ 1,023,028 $ (5,723) NC $ 847,986 $ 888,830 $ 40,844 ND $ 3,762,546 $ 3,651,090 $ (111,456) NE $ 4,820,498 $ 4,944,130 $ 123,632 NH $ 18,199 $ 18,225 $ 26 NJ $ - $ - $ - NM $ 1,201,299 $ 1,332,577 $ 131,278 NV $ 595,631 $ 481,810 $ (113,821) NY $ 268,091 $ 265,889 $ (2,202) OH $ - $ - $ - OK $ 2,837,440 $ 2,723,779 $ (113,661) OR $ 1,814,666 $ 1,784,549 $ (30,117) PA $ 130,638 $ 129,027 $ (1,611) PR $ 14,107,118 $ 11,397,157 $ (2,709,961) RI $ - $ - $ - SC $ 478,962 $ 440,387 $ (38,575) SD $ 3,001,388 $ 3,006,842 $ 5,454 TN $ 102,677 $ 98,600 $ (4,077) TX $ 2,899,355 $ 2,940,253 $ 40,898 UT $ 32,838 $ 33,107 $ 269 VA $ 1,269,819 $ 1,267,322 $ (2,497) VI $ 79,034 $ 124,051 $ 45,017 VT $ 522,194 $ 516,153 $ (6,041) Revised Original Baseline Baseline (March (March 2008, not 2008, not State annualized) annualized) Difference WA $ 2,953,402 $ 2,876,740 $ (76,662) WI $ 4,825,440 $ 4,795,905 $ (29,535) WV $ 1,490,325 $ 1,813,870 $ 323,545 WY $ 1,463,344 $ 1,388,077 $ (75,267) Total $ 117,398,219 $ 113,849,874 $ (3,548,345) Attachment B Interim Cap Adjustments by Study Area Code: Original Baseline Original Baseline (March 2008 support, not annualized) CETC Study State Study Area Name Area Code HCL HCM IAS ICLS LSS SNA SVS TOTAL AK Alaska Communications Systems Holding, 619005 $ 625,552 $ - $ - $ 866,120 $ 62,818 $ - $ - $ 1,554,490 AK Alaska Digitel LLC 619002 $ 136,813 $ - $ - $ 248,261 $ - $ - $ - $ 385,074 AK ASTAC Wireless LLC 619010 $ 46,558 $ - $ - $ 28,084 $ 65,841 $ 1,526 $ - $ 142,009 AK Bristol Bay Cellular Partnership 619008 $ 41,086 $ - $ - $ 30,486 $ 21,205 $ - $ - $ 92,777 AK Copper Valley Wireless, Inc. 619006 $ 83,879 $ - $ - $ 37,320 $ 13,309 $ 2,108 $ - $ 136,616 AK Cordova Wireless Communications, Inc.