Federal Communications Commission FCC 08-101
Before the
Federal Communications Commission
Washington, D.C. 20554
In the Matters of
Federal-State Joint Board on Universal 
Service
Access Charge Reform
Universal Service Contribution Methodology
Petition for Reconsideration and Clarification 
of the Fifth Circuit Remand Order of 
BellSouth Corporation
Petition for Reconsideration of the Fifth 
Circuit Remand Order of Arya 
Communications International Corporation
Joint Request for Review of Decision of 
Universal Service Administrator of Cable Plus 
L.P., and MultiTechnology Services, L.P.
Request for Review of Pan Am Wireless, Inc.
Request for Review of USA Global Link, Inc.
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CC Docket No. 96-45
CC Docket No. 96-262
WC Docket No. 06-122
ORDER ON RECONSIDERATION 
Adopted:  April 9, 2008  Released:  April 11, 2008
By the Commission:
TABLE OF CONTENTS
Heading Paragraph #
I. INTRODUCTION.....................................................................................................................1
II. BACKGROUND.......................................................................................................................2
III. DISCUSSION............................................................................................................................8
A. Recovery of Universal Service Contributions.....................................................................8
B. Retention of the Limited International Revenues Exception.............................................10
C. Retroactive Application of TOPUC and the Fifth Circuit Remand Order........................13
D. Other Matters.....................................................................................................................23
IV. ORDERING CLAUSES..........................................................................................................24
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I. INTRODUCTION
1. In this Order, we deny the petitions for reconsideration filed by BellSouth 
Corporation (“BellSouth”) and Arya International Communications Corporation (“Arya”) with 
respect to the Commission’s Fifth Circuit Remand Order, and confirm the conclusions by the 
Wireline Competition Bureau (“Bureau”) in the Fifth Circuit Clarification Order.1 Specifically, 
we:
· reconfirm that Commercial Mobile Radio Services (“CMRS”) providers may recover 
their universal service contributions through rates charged for all of their services; 
· reject the suggestion that the Commission’s eight percent Limited International 
Revenues Exception (“LIRE”) is arbitrary and capricious; and 
· deny Petitioners’ request for refund of universal service contributions remitted from 
January 1, 1998 to October 31, 1999, that were based on intrastate 
telecommunications revenues or international telecommunications revenues in excess 
of the eight percent LIRE.2  
II. BACKGROUND
2. On May 8, 1997, the Commission issued the 1997 Universal Service Order, 
implementing the universal service provisions in section 254 of the Communications Act of 
1934, as amended (“the Act”).3 In this order, the Commission required interstate carriers to 
contribute a percentage of their end user telecommunications revenues to the Fund.4  
  
1 Federal-State Joint Board on Universal Service, Sixteenth Order on Reconsideration in CC Docket No. 96-45, 
Eighth Report and Order in CC Docket No. 96-45, Sixth Report and Order in CC Docket No. 96-262, 15 FCC Rcd 
1679 (1999) (“Fifth Circuit Remand Order”); Petition for Reconsideration and Clarification of BellSouth 
Corporation, CC Docket No. 96-45 (filed Dec. 6, 1999) (“BellSouth Petition”) Petition for Reconsideration of Arya 
International Communications Corporation, CC Docket No. 96-45 (filed Dec. 6, 1999) (“Arya Petition”).  As an 
attachment to its petition, BellSouth also filed a request for refund of certain of its universal service contributions 
submitted to the Universal Service Administrative Company (USAC) from January 1, 1998 through October 31, 
1999, that is contingent on the Commission’s response to its petition.  See BellSouth Petition, Attach. (Letter from 
David G. Frolio, Counsel for BellSouth Corporation, to Cheryl Parrino, Chief Executive Officer, Universal Service 
Administrative Company, dated December 6, 1999). Federal State Joint Board on Universal Service, CC Docket 
Nos. 96-45, 96-262, Order, 20 FCC Rcd 13779 (2005) (“Fifth Circuit Clarification Order”).
2 We note, at the outset, that none of the petitioners before us, or any other universal service fund (“USF” or “Fund”) 
contributors, would be out of pocket in the event that we deny retroactive USF refunds.  Although the contributors 
do contribute directly to the USF through contributions made to the Universal Service Administrative Company 
(USAC), those contributors routinely pass those costs along to customers, usually in a line item on their bills. See 
infra Section III.C.
3 47 U.S.C. § 254; Federal-State Joint Board on Universal Service, CC Docket No. 96-45, Report and Order, 12 FCC 
Rcd 8776 (1997), as corrected by Federal-State Joint Board on Universal Service, Erratum, 12 FCC Rcd 8776 (1997), 
and Erratum, 13 FCC Rcd 24493 (1997), aff'd in part, rev’d in part, remanded in part sub nom, Texas Office of Public 
Utility Counsel v. FCC, 183 F.3d 393 (5th Cir. 1999), cert. denied, 530 U.S. 1210 (2000), cert. dismissed, 531 U.S. 975 
(2000) (“1997 Universal Service Order”).
4 1997 Universal Service Order, 12 FCC Rcd at 9173, para. 779.
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Specifically, the Commission concluded that contributions for the high-cost and low-income 
support mechanisms would be based on interstate and international revenues while the schools 
and libraries and rural health care support mechanisms would be based on intrastate, interstate, 
and international revenues.5  
3. On July 30, 1999, the United States Court of Appeals for the Fifth Circuit (“Fifth 
Circuit”) issued a decision affirming in part, remanding in part, and reversing in part the 
Commission’s 1997 Universal Service Order.6 The Fifth Circuit held that the Commission’s 
methodology for assessing contributions for the Fund on international revenues did not satisfy 
the requirement in section 254(d) of the Act that contributions be “equitable and 
nondiscriminatory” because the contributions of certain interstate carriers that predominantly 
provide international services could exceed their interstate revenues.7 Accordingly, the court 
reversed and remanded for further consideration the Commission’s decision to assess 
contributions based on the international revenues of interstate carriers.8 The Fifth Circuit also 
determined that the Commission exceeded its authority under sections 2(b) and 254(d) of the Act 
when it assessed contributions based on intrastate revenues for the schools and libraries, and 
rural health care programs.9 Accordingly, the court reversed the Commission’s decision to 
include intrastate revenues in the contribution base for the schools and libraries, and rural health 
care support mechanisms.10
4. On remand, in its Fifth Circuit Remand Order, the Commission removed 
intrastate revenues from the contribution base for the schools and libraries, and rural health care 
programs.11 The Commission also modified the assessment of contributions on international 
revenues so that contributors whose interstate revenues comprise less than eight percent of their 
combined interstate and international revenues would only contribute based on their interstate 
revenues (the “limited international revenues exemption”).12 The Commission made these 
changes effective on a prospective basis, beginning November 1, 1999.13
5. On December 6, 1999, BellSouth filed a petition for reconsideration and 
clarification of the Commission’s Fifth Circuit Remand Order.14 In its petition, BellSouth 
  
5 Id. at 9174, 9200, 9203-05, paras. 779, 831, 837-41; see also 47 C.F.R. § 54.706(c) (1999).
6 Texas Office of Public Utility Counsel v. FCC, 183 F.3d 393 (5th Cir. 1999) (“TOPUC”).
7 Id. at 434-35; 47 U.S.C. § 254(d).
8 TOPUC, 183 F.3d at 435.
9 Id. at 447-48; 47 U.S.C. §§ 152(b), 254(d).
10 TOPUC, 183 F.3d at 448.
11 Fifth Circuit Remand Order, 15 FCC Rcd at 1685, para. 15.
12 Id.; 47 C.F.R. § 54.706(c) (1999).  The Commission subsequently increased the limited international revenues 
exemption from eight to twelve percent. See Federal-State Joint Board on Universal Service, Further Notice of 
Proposed Rulemaking and Report and Order, CC Docket No. 96-45, 17 FCC Rcd 3752, 3806-07, paras. 125-28 
(2002) (“2002 Universal Service Order”).
13 Fifth Circuit Remand Order, 15 FCC Rcd at 1679, para. 1.
14 See generally, BellSouth Petition.  As an attachment to its petition, BellSouth also filed a request for refund of 
certain of its universal service contributions submitted to the USAC from January 1, 1998 through October 31, 1999, 
that is contingent on the Commission’s response to its petition.  See BellSouth Petition, Attach. (Letter from David 
G. Frolio, Counsel for BellSouth Corporation, to Cheryl Parrino, Chief Executive Officer, Universal Service 
Administrative Company, dated Dec. 6, 1999).  
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requests that the Commission clarify and reconsider its decision to implement the Fifth Circuit’s 
decision on a prospective basis and to provide retroactive refunds for contributions based on 
intrastate revenues for the period from January 1, 1998 through October 31, 1999.15 BellSouth 
also requests that the Commission clarify that CMRS providers may lawfully recover the cost of 
their federal universal service contributions through charges associated with all of their 
telecommunications services.16
6. On December 6, 1999, Arya filed a petition seeking reconsideration of that 
portion of the Fifth Circuit Remand Order in which the Commission established the Limited 
International Revenues Exception (“LIRE”).17 Arya argues that the threshold established for the 
LIRE – eight percent – was arbitrary and capricious, and should be reversed.18 Arya argues 
further that even if the LIRE is valid, any contributions collected for the Fund prior to the Fifth 
Circuit’s decision in excess of what would have been owed under the LIRE should be refunded.19
7. In 2005, the Bureau issued an order that granted in part the Petition filed by 
BellSouth seeking clarification of the Fifth Circuit Remand Order.20 Specifically, in that order 
the Bureau clarified that:  (1) CMRS providers may recover their universal service contributions 
through rates charged for all of their services; and (2) the Commission’s decision in the Fifth 
Circuit Remand Order applied the Fifth Circuit decision in TOPUC prospectively beginning 
November 1, 1999.21 In the Fifth Circuit Clarification Order, however, the Bureau specifically 
declined to address BellSouth’s request that the Commission reconsider the prospective 
application of the Fifth Circuit Remand Order, and did not address the petition filed by Arya.22
III. DISCUSSION
A. Recovery of Universal Service Contributions
8. In response to BellSouth’s petition requesting clarification of the Commission’s 
rules, we clarified previously that the TOPUC decision did not undermine the validity of the 
Commission’s decision that CMRS providers may recover their contributions from customers 
through rates charged for all services.23 The relevant portion of the Fifth Circuit’s decision in 
TOPUC related to the manner in which the Commission may require carriers to contribute to the 
USF.24 The manner in which carriers may recover their universal service contributions through 
assessments on customers was not before the court.25 Thus, the Bureau clarified that the TOPUC
  
15 BellSouth Petition at 2, 7-13, 16-17.   
16 Id. at 7-8.  
17 Arya Petition at 1; Fifth Circuit Remand Order, 15 FCC Rcd at 1690-91, paras. 27-29.
18 Id. at 2.
19 Id.
20 See generally, Fifth Circuit Clarification Order, 20 FCC Rcd 13779.
21 Id. at 13779, para. 1.
22 Id. at 13781, n. 16.
23 Id. at 13781, para. 6.  
24 See TOPUC, 183 F.3d at 446-48 (the Commission may not assess carrier contributions based on combined 
interstate and intrastate revenues).
25 Id.  
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decision did not affect the Commission’s finding in the Fourth Reconsideration Order that 
CMRS providers may “recover their contributions through rates charged for all their services.”26  
In fact, the Commission has made clear that carriers have significant flexibility in the manner in 
which they may recover universal service contribution costs.  Carriers are not required to recover 
their universal service costs from subscribers at all.  If they choose to do so, carriers may recover 
these costs through their standard service charges or through a separate line-item.27 We do not 
alter that conclusion here.
9. We reiterate that providers that choose to recover universal service costs through 
a separate line-item may express the charge as a flat amount or as a percentage.28 Because, 
however, of the inherent difficulty in defining and ascertaining which calls over a mobile 
wireless system are “interstate,” the Commission has long permitted CMRS providers to assume 
for purposes of calculating their USF contributions that a prescribed percentage of their total end 
user telecommunications revenues is interstate.29 The Commission’s rules allow “wireless 
telecommunications providers [to] continue to recover contribution costs in a manner that is 
consistent with the way in which companies report revenues to [USAC]” on their USF 
Worksheets.30 Thus, CMRS providers may include a universal service line-item on a 
subscriber’s bill that does not reflect that particular subscriber’s interstate usage.31  
B. Retention of the Limited International Revenues Exception
10. In the Fifth Circuit Remand Order, the Commission established a limited 
exception to universal service contribution requirements for entities with interstate end-user 
telecommunications revenues that constitute less than eight percent of their combined interstate 
and international end-user telecommunications revenues.32 Arya does not challenge the 
establishment of the LIRE per se, but asserts that the Commission’s Fifth Circuit Remand Order
failed to articulate a satisfactory explanation for adopting the eight percent threshold, thus 
rendering the decision arbitrary and capricious.33 Arya asserts that the Commission “offered no 
  
26 Fifth Circuit Clarification Order, 20 FCC Rcd at 13781, paras. 6-7; Federal-State Joint Board on Universal 
Service, Fourth Order on Reconsideration and Report and Order, CC Docket No. 96-45, 13 FCC Rcd 5318, 5489, 
para. 309 (1997) (“Fourth Reconsideration Order”).
27 See Federal-State Joint Board on Universal Service, Report and Order and Second Further Notice of Proposed 
Rulemaking, CC Docket No. 96-45, 17 FCC Rcd 24952, 24974, 24978-80, paras. 40, 53-55 (2002) (“Report and 
Order”).
28 Report and Order, 17 FCC Rcd at 24978-79, paras. 49-53.  Since the Fourth Reconsideration Order and the Fifth 
Circuit Clarification Order, the Commission has held that it is unreasonable for carriers, including CMRS providers, 
to include on subscriber bills line-item charges that reflect a mark up from the assessment that the provider pays.  
For example, if a telecommunications provider is assessed 10 percent of its interstate telecommunications revenues 
for purposes of universal service contributions, it may not include a line-item on a subscriber’s bill that reflects an 
amount greater than 10 percent of the interstate portion of the bill.  This requirement is codified in section 54.712 of 
the Commission’s rules.  See 47 C.F.R. § 54.712.
29 See Federal-State Joint Board on Universal Service, Memorandum Opinion and Order and Further Notice of 
Proposed Rulemaking, CC Docket No. 96-45, 13 FCC Rcd 21252, 21254-60, paras. 5-15 (1998) (“Interim Safe 
Harbor Order”); see also Fifth Circuit Clarification Order, 20 FCC Rcd at 13782, para. 8.
30 See Reconsideration Order, 18 FCC Rcd at 1426, para. 8; see also Fifth Circuit Clarification Order, 20 FCC Rcd 
at 13782, para. 9.
31 Fifth Circuit Clarification Order, 20 FCC Rcd at 13782, para. 9.
32 Fifth Circuit Remand Order, 15 FCC Rcd at 1687, para. 19; 47 C.F.R. § 54.706(c).
33 Arya Petition at 4.
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explanation” for its choice of eight percent, and accordingly its decision should be 
reconsidered.34 We disagree.
11. As explained in the Fifth Circuit Remand Order, a provider of interstate and 
international telecommunications is not required to contribute based on its international 
telecommunications end-user revenues if its interstate telecommunications end-user revenues 
constitute less than eight percent of its combined interstate and international end-user 
telecommunications revenues.35 The Commission further stated that the rule is intended to 
exclude from the contribution base the international end-user telecommunications revenues of 
any telecommunications provider whose annual contribution, based on the provider’s interstate 
and international end-user telecommunications revenues, would exceed the amount of its 
interstate end-user telecommunications revenues.36 The Commission concluded that the rule is 
consistent with the determination of the Fifth Circuit that requiring a carrier to pay more 
universal service contributions than it derives from interstate revenues violates the requirement 
in section 254(d) of the Act that universal service contributions be equitable and 
nondiscriminatory.37
12. In selecting the relevant threshold, the Commission explained that selection of 
eight percent provided sufficient margin of safety based on the contribution factors at the time, 
such that a provider’s contribution would not exceed the amount of its interstate end-user 
telecommunications revenues.38 Selecting a fixed percentage for the LIRE rather than tying it to 
the established contribution factor, which fluctuates quarterly, also ensured that the Commission 
could meet the statutory requirement that the USF contribution mechanism remain specific and 
predictable.39 Moreover, in 2002 the Commission revised the LIRE to address certain changes in 
the telecommunications marketplace, and increased the exception threshold to twelve percent.40  
Accordingly, Arya’s argument that the Commission failed to articulate its rationale for selecting 
the eight percent threshold is without merit, and we decline to reconsider the LIRE threshold.
C. Retroactive Application of TOPUC and the Fifth Circuit Remand Order
13. In the Fifth Circuit Clarification Order, the Bureau clarified that the Fifth Circuit 
Remand Order applied the Fifth Circuit decision prospectively from the effective date of the 
Fifth Circuit’s mandate.41  Upon further consideration, we confirm the conclusion of the Bureau 
and deny BellSouth’s request to apply the Fifth Circuit Remand Order on a retroactive basis.  
Further, we deny the request by Arya to retroactively apply the LIRE to contributions made prior 
to the Fifth Circuit’s mandate.
  
34 Id. at 5.
35 See 47 C.F.R. § 54.706(c); see also Fifth Circuit Remand Order, 15 FCC Rcd at 1687 para. 19.
36 Id.
37 See id., citing TOPUC, 183 F.3d at 434-35.
38 Fifth Circuit Remand Order, 15 FCC Rcd at 1687-88, paras. 19-20, n. 56.
39 47 U.S.C. § 254(b)(5); Fifth Circuit Remand Order, 15 FCC Rcd at 1687, n. 56.  
40 2002 Universal Service Order, 17 FCC Rcd at 3806-07, paras.  125-128.
41 See Fifth Circuit Clarification Order, 20 FCC Rcd at 13783, para. 11; Fifth Circuit Remand Order, 15 FCC Rcd 
at 1679, para. 1.
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14. In considering whether to give retroactive application to a new rule, the courts 
have held that when there is a “substitution of new law for old law that was reasonably clear,” 
the new rule may justifiably be given solely prospective effect in order to “protect the settled 
expectations of those who had relied on the preexisting rule.”42 By contrast, retroactive effect is 
appropriate for “new applications of [existing] law, clarifications, and additions.”43  In cases in 
which there are “new applications of existing law, clarifications, and additions,” the courts start 
with a presumption in favor of retroactivity.44 However, retroactivity may be denied “when to 
apply the new rule to past conduct or to prior events would work a ‘manifest injustice.’”45 Based 
on the equitable factors discussed below, we conclude that retroactive application would work a 
manifest injustice that defeats the presumption of retroactivity.   Accordingly, we affirm the Fifth 
Circuit Remand Order.46
15. At the outset, we recognize that this case involves conflicting equitable 
considerations that are somewhat novel.  Unlike recent Commission precedent in which the D.C. 
Circuit has applied the “manifest injustice” standard,47 this case does not involve the more 
common situation that pits one group of carriers against another.  Rather, at its essence, the 
decision of whether to give retroactive effect to the Fifth Circuit decision requires us to assess 
the equities of significantly increasing collection from current USF contributors and their 
customers in order to attempt to flow refunds to millions of customers of an earlier decade.  
Thus, this is ultimately a complicated dispute about how to handle a transaction that affects 
customer groups over different time periods.48 In evaluating whether retroactivity would produce 
a manifest injustice, we focus our analysis on the benefits and burdens to the affected parties.49  
  
42 Williams Natural Gas Co. v. FERC, 3 F.3d 1544, 1554 (D.C.Cir.1993).
43 Id.; Pub. Serv. Co. of Colo. v. FERC, 91 F.3d 1478, 1488 (D.C.Cir.1996); see also Aliceville Hydro Assocs. v. 
FERC, 800 F.2d 1147, 1152 (D.C.Cir.1986) (discussing the distinction between “new applications of law” and 
“substitutions of new law for old law”).
44 See, e.g., Health Ins. Ass'n of Am. v. Shalala, 23 F.3d 412, 424 (D.C.Cir.1994).
45 Verizon Tel. Cos. v. FCC, 269 F.3d 1098, 1011 (D.C.Cir. 2001) (“Verizon”); Clark-Cowlitz Joint Operating 
Agency v. FERC, 826 F.2d 1074, 1081 (D.C.Cir.1987) (en banc) (quoting Thorpe v. Housing Auth. of the City of 
Durham, 393 U.S. 268, 282, 89 S.Ct. 518 (1969)); see also Consol. Freightways v. NLRB, 892 F.2d 1052, 1058 
(D.C.Cir.1989); Cassell v. FCC, 154 F.3d 478, 486 (D.C.Cir.1998) (“Cassell”) (declining to “plow laboriously” 
through the Clark-Cowlitz factors, which “boil down to a question of concerns grounded in notions of equity and 
fairness”).  Similarly, the Supreme Court has held that retroactive relief may also be denied under “special 
circumstances,” but only the “most compelling,” such as “grave disruption or inequity.”  National Fuel Gas Supply 
Corp. v. FERC, 59 F.3d 1281, 1288 (D.C. Cir. 1995) (“National Fuel”) (quoting Ryder v. U.S., 515 U.S. 177, 184 
(1995)). This rule governs the effect of federal court decisions on agency proceedings as well as other court cases.
See National Fuel, 59 F.3d at 1289.
46 See Fifth Circuit Remand Order, 15 FCC Rcd 1679.   
47 See, e.g., Qwest Services Corp. v. FCC, 509 F.3d 531 (D.C. Cir. 2007) and Verizon, 269 F.3d 1098.
48 This evaluation is further complicated by arguments set out in MCI’s opposition, explaining that incumbent local 
exchange carriers (LECs) passed through the vast majority of their contribution costs to interexchange carriers 
(IXCs) in the form of increased access charges. See Opposition of MCI at 3-5.  As a result, MCI alleges that 
incumbent LECs would have to pass refunds through to IXCs to avoid windfalls. MCI argues that because the 
LECs’ future collections would have to be increased to pay for the refunds, “IXCs would themselves end up as the 
funding source of their pass-through refunds, thus completing a process that is almost entirely circular.” Id. at 3. 
49 As the D.C. Circuit has previously noted, retroactivity determinations “boil down to a question of concerns 
grounded in notions of equity and fairness.”  Cassell v. FCC, 154 F3d 478, 486 (D. C. Cir. 1998).
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To do this, we necessarily consider how the refund mechanisms would function and the potential 
effect of any refund on our statutory obligations under section 254 of the Act.
16. First, a decision to compel refunds would require USAC to refund to the 
contributing carriers more than one billion dollars in monies already disbursed to thousands of 
schools, libraries and rural health care providers.50 Because of the resulting shortfall in current 
USAC funds, USAC would, in turn, have to significantly increase collections from current USF 
contributors and their customers by raising the contribution factor applied to today’s interstate 
and international revenue.  Indeed, some estimates show that USAC would need to collect an 
additional $1.6 billion from current contributors, which likely would be passed through by the 
carriers to today’s consumers.51 The net effect of any such refund would be that 2008 consumers 
subsidize charges that should have been paid by consumers in 1998 and 1999 had the 
Commission assessed only interstate and international revenue (and excluded intrastate revenue).  
In our view, such an outcome – higher USF charges to today’s customers – would be 
fundamentally at odds with our Section 254 mandate to preserve and advance universal service.52
Today’s consumers would have to shoulder the burden of the refunds while having no 
responsibility for causing the underlying problem.  The harms to today’s end-users and to the 
universal service system itself would be undeniable should retroactive effect be given to the Fifth 
Circuit decision.
17. Ironically, despite the hardships of a refund on current consumers, those end-users 
who bore the erroneous costs in 1998-99 would not necessarily reap benefits from refunds.  As a 
practical matter, because USF contribution charges are generally passed through by the 
contributing entity to its customers,53 contributors would have to use 1998 and 1999 billing 
information to ensure that the consumers who paid the USF received the refunds.54 This effort, 
which would be difficult in even the best of times, is here further complicated because many of 
the carriers that contributed to the USF based on intrastate and international revenue no longer 
exist; they would thus be unavailable to receive the refund and disburse it to the appropriate 1998 
and 1999 consumers.  Even those carriers who still conduct business may have great difficulties 
tracking customers from this earlier period, given customer churn.
18. At the same time, those customers who could be successfully identified would not 
be assured of obtaining their money from the carriers.55 As even BellSouth concedes, attempting 
  
50 See AT&T Corporation Comments on Petitions for Reconsideration and Clarification, CC Docket Nos. 96-45 and 
96-262, at 4 (filed Apr. 24, 2000) (AT&T Comments)(estimating that refunds of amounts assessed on intrastate 
revenues alone would be approximately $1.6 billion); see also Opposition of MCI Worldcom, Inc., CC Docket Nos. 
96-45 and 96-262, at 2 (filed Apr. 24, 2000) (MCI Worldcom Comments).
51 AT&T Comments at 4.
52 See 47 U.S.C. § 254(d); see also Alenco Comm’ns, Inc. v. FCC, 201 F.3d 608, 620 (5th Cir. 2000) (“Because 
universal service is funded by a general pool subsidized by all telecommunications providers - and thus indirectly by 
customers - excess subsidization in some cases may detract from universal service by causing rates unnecessarily to 
rise, thereby pricing some consumers out of the market.”).
53 See id. at 6; see also, AT&T Comments at 5 (arguing that USF charges by BellSouth and others based on 
intrastate revenues were also passed through to IXCs, and that any refund should be passed through to the IXCs as 
well).
54 BellSouth Petition at 7.
55 See MCI Worldcom Comments at 3-5.  MCI claims that incumbent local exchange carriers (LECs) passed through 
the vast majority of their contribution costs to interexchange carriers (IXCs) in the form of increased access charges, 
thus incumbent LECs would have to pass refunds through to IXCs to avoid windfalls.  Id. at 3-4.  MCI asserts that 
(continued....)
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to facilitate refunds would be “a bit like unscrambling eggs.”56 Our rules focus on carrier 
contributions rather than cost recovery, and the rules afford carriers discretion on how to pass 
through these costs to their customers.  As a result, with costs passed along in a variety of ways, 
it would be extraordinarily difficult for the Commission to develop an effective framework for 
directing carriers’ refund efforts.57 Moreover, any individual refunds to former customers (to the 
extent these customers can be identified and located) are likely to be small amounts, which 
would be further reduced by the offset from increased universal service charges on their current 
telephone bills.58 The only realistic conclusion we can draw is that the potential benefits of 
refunds for contributors or end-user customers are extremely speculative.59
19. In contrast, the costs and burdens of a refund requirement are concrete.  Although 
the amount of any consumer refund would be minute, the number of customers potentially 
affected would run into the millions.  As a result, the carriers’ administrative burdens to disburse 
such refunds would be enormous.  Potentially carriers’ administrative costs could overwhelm the 
amounts available for distribution as refunds; just as bad, those administrative costs might be 
passed along to end-users through other increased charges. Further, the likelihood for significant 
confusion in administering any refund program has been repeatedly recognized by commenters.60  
The anticipated confusion would, in turn, impinge on the Commission’s obligation to ensure the 
“sufficiency” of the USF based on “equitable” contributions.61 In our view, imposing an 
unworkable refund obligation for only the most speculative of benefits does not serve the public 
interest or comport with our statutory obligations under section 254.
20. We conclude that considerations of fairness and equity militate strongly against 
retroactive application and defeat the presumption of retroactivity.62 Requiring refunds of this 
magnitude would compel USAC to raise the USF contribution factor.  That would cause 
manifest injustice for today’s consumers, as they shoulder higher bills while bearing no 
culpability for the refund problem.  At the same time, we strongly doubt it would be possible to 
ensure that the refunds provided by USAC be passed through appropriately to end-users.  
  
(...continued from previous page)
because future collections would have to be increased to pay for the refunds, “IXCs would themselves end up as the 
funding source of their pass-through refunds, thus completing a process that is almost entirely circular.”  Id. at 3.   
56 BellSouth Petition at 13.
57 Although the Commission has used a carrier's current customers to achieve restitution of prior period over 
earnings pursuant to regulated rates, AT&T Earnings on Interstate and Foreign Services During 1978, CC Docket 
No. 79-187, Decision, 102 FCC2d 52 (1984), such an approach here would be inconsistent with the universal service 
funding objectives because of the differing carriers, the variety of rate structures, and customer churn.
58 See MCI Worldcom Comments at 3.
59 See id. at 2-5 (arguing retroactive application would serve no useful purpose).
60 See id. at 4 (retroactive application would create tremendous confusion and administrative burdens); AT&T 
Comments at 4 (retroactive application would require massive refunds resulting in grave disruption to the 
administration of the USF program); BellSouth Reply, CC Docket Nos. 96-45 and 96-262, at 3-4 (filed May 8, 
2000) (refunding contributions retroactively would be complex and would warrant a rulemaking proceeding); but 
see Teleglobe Comments, CC Docket Nos. 96-45 and 96-262, at 4 (filed April 24, 2000) (arguing for retroactive 
application).
61 See 47 U.S.C. § 254(b); MCI Worldcom Comments at 3-5 (noting that the net effect of efforts to “true up” 
contributions for carriers would likely have no net effect, while creating confusion and significant administrative 
burdens and expenses).
62 See Exxon Co., USA v. FERC, 182 F.3d 30, 49 (D.C. Cir. 1999).
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Moreover, any customers who received a small refund check would benefit little because they, 
too, would be saddled with higher USF charges going forward.  In contrast, some carriers could 
conceivably obtain windfalls where payments are not flowed through to their former customers.  
Neither logic nor fairness supports such a result, which works a “manifest injustice” not only 
upon current end-users, but upon the Universal Service program as a whole.  Under these 
circumstances, we decline to order retroactive application of the Fifth Circuit’s decision.
21. We also disagree with BellSouth that a series of Supreme Court decisions 
culminating in Reynoldsville Casket Co. v. Hyde, 514 U.S. 749 (1995), mandates retroactive 
application of the Fifth Circuit’s decision here.63 The Fifth Circuit did not specifically mandate 
that its decision be applied to the litigants before it, Cincinnati Bell and COMSAT Corporation 
(COMSAT), and neither party sought a refund from the Commission of its universal service 
contributions.64 As the Fifth Circuit did not apply the new rule to the litigants before it, there is 
no selective retroactivity here.65 Accordingly, we affirm our decision in the Fifth Circuit
Remand Order to apply the Fifth Circuit decision prospectively.66 Thus, we deny BellSouth’s 
petition for reconsideration and request for refund of its individual assessments based on its 
intrastate contributions.
22. Further, with respect to Arya’s request, the Fifth Circuit’s determination regarding 
contributions based on international revenues was not based on lack of Commission jurisdiction.  
Rather, the Fifth Circuit found that requiring carriers to contribute on international 
telecommunications revenues without any limiting principle would result in instances in which 
predominantly international carriers would be forced to incur prohibitive costs.67 The Fifth 
Circuit accordingly found the Commission’s decision to be contrary to the Section 254’s 
“equitable and nondiscriminatory” language.68 The Fifth Circuit remanded that portion of the 
1997 Universal Service Order to the Commission for further consideration.69 In seeking refunds 
of amounts assessed on international revenues in excess of the eight percent threshold, however, 
Arya is not seeking retroactive application of the Fifth Circuit’s decision.  Rather, it is seeking 
retroactive application of the Commission’s Fifth Circuit Remand Order, in which the 
Commission established the LIRE.  Retroactive rulemaking is generally not favored.70 For that 
reason and for the same reasons that justify prospective-only effect of the Fifth Circuit’s TOPUC
decision discussed above, we decline to give the Fifth Circuit Remand Order retroactive effect as 
to contributions based on international telecommunications revenues.71
  
63 See BellSouth Petition at 8-11.
64 See, e.g., TOPUC, Brief of Cincinnati Bell Tel. Co., p. 38 (Feb. 28, 1998) (asking the court to require refunds).
65 See Reynoldsville Casket, 514 U.S. at 752 (“when (1) the Court decides a case and applies the (new) legal rule of 
that case to the parties before it, then (2) it and other courts must treat that same (new) legal rule as ‘retroactive.’ 
applying it, for example, to all pending cases, whether or not those cases involve predecision events.”).  See also 
James B. Beam Distilling Co. v. Georgia, 501 U.S. 529, 538 (1991) (selective retroactivity “breaches the principle 
that litigants in similar situations should be treated the same”).   
66 See Fifth Circuit Remand Order, 15 FCC Rcd at 1679, para. 1.
67 TOPUC, 183 F.3d at 434-35.
68 Id.
69 Id.
70 Bowen v. Georgetown University Hosp., 488 U.S. 204, 208 (1988).
71 Id.
Federal Communications Commission FCC 08-101
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D. Other Matters
23. In addition to the petitions filed by BellSouth and Arya, several carriers sought 
refunds or excuse from payment for USF contributions following the TOPUC decision by filing 
appeals with USAC or directly with the Commission.72 In the Cable Plus and Pan Am Appeals, 
the appellants, like BellSouth in its petition for reconsideration, seek refund of their universal 
service contributions based on intrastate revenues.73 In the USA Global Appeal, the appellant, 
like Arya in its petition for reconsideration, seeks refund of its universal service contribution 
based on international revenues.74 We deny these requests as well for the reasons stated above.  
IV. ORDERING CLAUSES
24. Accordingly, IT IS ORDERED, pursuant to sections 1, 2, 4(i), 4(j), 201, 202, 218-
220, 254 and 303(r)of the Communications Act of 1934, as amended, 47 U.S.C. §§ 151, 152, 
154(i)-(j), 201, 202, 21-220, 254, and 303(r) that BellSouth Corporation’s Petition for 
Reconsideration and Clarification, Arya International Communications Corporation’s Petition 
for Reconsideration of the Commission’s Fifth Circuit Remand Order, Cable Plus L.P. and 
MultiTechnology Services, L.P.’s Joint Request for Review, PanAm Wireless, Inc.’s Request for 
Review, and USA Global Link, Inc.’s Request for Review ARE DENIED.
25. IT IS FURTHER ORDERED THAT this Order SHALL BECOME EFFECTIVE thirty 
(30) days after its publication in the Federal Register.
FEDERAL COMMUNICATIONS COMMISSION
Marlene H. Dortch
Secretary
  
72 See Joint Request for Review of Decision of Universal Service Administrator filed by Cable Plus L.P. and 
MultiTechnology Services, L.P., CC Docket Nos. 96-45 and 97-121 (filed Jan. 14, 2000) (“Cable Plus Appeal”); 
Request for Refund of Pan Am Wireless, Inc., CC Docket No. 96-45 (filed Nov. 15, 1999) (‘Pan Am Appeal”); 
Request for Review of USA Global Link, CC Docket Nos. 96-45, 97-121 (filed July 23, 2001) (“USA Global 
Appeal”); see also, Fifth Circuit Remand Order, Fifth Circuit Clarification Order (applying the Fifth Circuit 
decision on a prospective basis).  
73 Cable Plus Appeal at 3 (seeking refund for the period January 1, 1997 through November 1, 1999); Pan Am 
Appeal at 1 (seeking refund for the period January 1, 1998 through October 1, 1999).
74 USA Global Link Appeal at 1 (seeking refunds for 1997, 1998 and January to June 1999).