Greenberg
Traurig
Mitchell F. Brecher
(202) 331-3152
BrecherM@gtlaw.com
June 14,2005
VIA ELECTRONIC FILING
Ms. Marlene Dortch
Secretary
Federal Communications Commission
445 li
h
Street, SW
Washington, D.C. 20554
Re: Notice of Ex Parte Presentation in CC Docket Nos. 96-45, 98-171, 90-571, 92-237,
99-200, 95-116, 98-170, and NSD File No. L-OO-72
Dear Ms. Dortch:
On June 13, 2005, F. 1. Pollak, President and Chief Executive Officer of TracFone
Wireless, Inc., and I met with Commissioner Jonathan Adelstein and his legal advisor, Scott
Bergmann.
During this meeting, we reiterated the positions that TracFone has taken in its filed
comments and prior ex partes in the Universal Service Contribution Methodology proceeding.
Specifically, we discussed the anticipated continued growth in overall interstate
telecommunications services, including wireless services, and refuted the notions that interstate
revenues will decline and are less stable than connections to the public switched network
and/proceeding. We provided Commissioner Adelstein and Mr. Bergmann with several
documents, copies of which are included with this letter. These documents included a
presentation which demonstrates that the current Universal Service contribution base is
financially secure, and that elimination ofthe wireless service "safe harbor" would add revenues
to the contribution base, as would inclusion of advanced telecommunications revenues and
revenues for Voice over the Internet Protocol services. The presentation also showed that
replacement of the current revenues-based contribution methodology with a per working
telephone number or per connection charge of $1.00 would increase TracFone's monthly
Universal Service contributions by 1233%. Also provided during the meeting and enclosed
herewith is a February 23, 2005 TracFone ex parte presentation which contains a study prepared
for TracFone by TNS Telecoms entitled "Wireless Provider Bill Analysis 3
rd
Quarter 2004."
That study, based on residential wireless customer billing data, shows that average interstate
Greenberg Traurig, LLP I Attorneys at Law I 800 Connecticut Avenue, NW I Suite 500 I Washington, D.C. 20006
Tel 202.331.3100 I Fax 202.331.3101 I www.gtlaw.com
Ms. Marlene Dortch
June 14,2005
Page 2
usage of wireless service is approximately 31.1 % -- well above the safe harbor level of 28.5%.
The final document provided is a table which shows the number ofprepaid wireless subscribers
ofmajor wireless providers.
Pursuant to Section 1.1206(b) of the Commission's Rules, this notice is being filed
electronically in the above-captioned dockets. If you have any questions regarding this matter,
please feel free to contact undersigned counsel for TracFone.
Sincerely,
fif
Mitchell F. Brecher
enclosures
cc: Hon. Jonathan Adelstein
Mr. Scott Bergmann
11229000 vI
Greenberg Traurig, LLP
Attachment 1
wireless, inc.
Universal Service Fund
***
Presentation for
Federal Communications Commission
***
June 13, 2005
I I
TRACF@NE~
wireless, inc.
USFFACTS
-The current USF contribution base is financially secure, even without
spending reforms.
-Radical changes in the contribution methodology are unnecessary.
-The rapid growth ofwireless more than offsets declines in traditional
long distance services.
-Elimination ofthe wireless "safe harbor" loophole would boost the
fund and reduce the contribution rate.
-Removing exemptions for advanced telecom and VoIP would
strengthen the fund and reduce the rate.
TRACFONE Wireless, Inc. Confidential
TRACF~NE~
wireless, inc.
USF Contribution Base *
2001 2002 2003 2004 2005 2006 2007
USF Base (1) $79.2 $77.0 $76.6 $77.3 $75.1 $78.9 $76.8
USF Base w/o Safe Harbor (2) $85.1 $83.6 $88.2 $86.8
USF Base w/o Safe Harbor including Advanced Telecom (3) $95.0 $95.7 $101.9 $102.0
USF Base w/o Safe Harbor including Advanced Telecom & VOIP (4) $95.3 $96.7 $104.5 $105.9
Total interstate telecommunications revenues are increasing.
Dollars in billions
TRACFONE Wireless, Inc. Confidential * Interstate and international telecommunications
revenues from end users.
TRACF(@)NE~
wireless, inc.
USF Contribution Base
110.0
-
105.0
~
~
100.0
---------
~
95.0
---------
?
90.0
--------
~..
85.0
--II
? ..~
--
80.0
--.=:::::=:.::::- ?
?
?..~
75.0
70.0
2001 2002 2003 2004 2005 2006 2007
-+-USF Base
---USF Base w/o Safe Harbor
---r- USF Base w/o Safe Harbor including Advanced Telecom
___ USF Base w/o Safe Harbor including Advanced Telecom & VOIP
There are sufficient interstate revenues to support USF.
Dollars in billions
TRACFONE Wireless, Inc. Confidential Source: CBO, Financing Universal Telephone
Service, March 2005 (Table 1-3)
TRACF~NE~
wireless, inc.
USF Contribution Rate Needed to
Fund USF
12.0%
1~~~t~;;:;-
----4
----
70%-~:
?
6.0%
5.0%
2004 2005 2006 2007
~USFBase
---USF Base w/o Safe Harbor
-.-USF Base w/o Safe Harbor including Advanced Telecom
...USF Base w/o Safe Harbor including Advanced Telecom &VOIP
The contribution rate will decline if everyone contributes.
2004
$6.4b
Funding Requirements: *
2005 2006
-- --
$7.1b $7.1b
2007
$7.4b
TRACFONE Wireless, Inc. Confidential
* Source: CRO, USAC, FCC Staff Projections
TRACF(@)NE
e
wireless, inc.
Wireless Revenue 2002-2004
$120.0
$100.0
$80.0
$60.0
$40.0
$20.0
$O.O~I-
2002 2003 2004
? Total Service Revenue
in billions
$76.5 $87.6 $102.1
Wireless service revenues increased by more than 33% from 2002 to 2004, which means a
growing portion of interstate revenues are coming from wireless. If the FCC eliminated or
increased the wireless "safe harbor", which artificially caps interstate revenues at 28.5%, the
USF contribution base would grow substantially.
TRACFONE Wireless, Inc. Confidential Source: Cellular Telecommunications & Internet Assn., 2005
TRACF~NE~
wireless, inc.
Total U.S. Telecom Industry Revenues are Increasing
$400
$350
$350 $353 $356
$300
$302
fA
s::::
0
-
$250
m
s::::
$200
CD
::::J
s::::
$150
CD
>
CD
$100f:t::
$50
$0
1999 2000 2001 2002 2003
Source: FCC, Telecommunications Industry Revenues, 1999,2000,2001,2002,2003 (Table 8).
Includes total reported carrier revenues from telecommunications, enhanced services,
internet, broadband & information services.
TRACFONE Wireless, Inc. Confidential
TRACF~NEe
wireless, inc.
Average Monthly USF Cost per TRACFONE Subscriber
$2.50
2567%
1900%
$2.00
$1.50
1233%
$1.00
$0.50
$0.00
Current $1.00/line $1.50/line $2.00/line
Ifthe FCC decides to adopt a flat, numbers-based or connections-based USF tax and abandons
the current system, low-volume users like those served by TRACFONE would be hit HARD.
TRACFONE Wireless, Inc. Confidential
TRACF~NE~
wireless, inc.
Annual USF Costs to TRACFONE
(Based on 5 Million Subscribers $ in OOOs)
$130,000
$120,000
$110,000
$100,000
$90,000
$80,000
$70,000
$60,000
$50,000
$40,000
$30,000
$20,000
$10,000
$0
Current $1.00Iline $1.50Iline $2.00/Iine
A $1 monthly tax would cost TracFone approximately $60 million a year!
TRACFONE Wireless, Inc. Confidential
TRACF~NE@
wireless, inc.
CONCLUSION
? A radical change to the USF funding system is not needed and
will hurt millions oflow-volume, low-income consumers.
? Elimination ofthe wireless "safe harbor", advanced telecom and
VoIP loopholes will preserve USF and lower the contribution rate
substantially.
? A flat $1 per number tax would increase the cost to TracFone and
low-volume cellular users by over 1000%.
? Keep the current revenue-based system. It is fair, reliable and
will support the fund long-term.
TRACFONE Wireless, Inc. Confidential
TRACF~NE~
wireless, inc.
Footnotes
1. Congressional Budget Office, Financing Universal Telephone Service, March 2005.
FCC, Universal Service Administrative Corporation, Rollup ofForm 499-Q Filings, First Quarter through Fourth
Quarter, 2004.
FCC, Universal Service Administrative Corporation, Rollup ofForm 499-Q Filings, First and Second Quarters,
2005.
FCC, Wireline Competition Bureau StaffStudy ofAlternative Contribution Methodologies, February 26,2003.
(Projections for 2006-2007)
2. FCC, Telecommunications Industry Revenues, Table 1, March 2005. Increases in the contribution base are
based on elimination ofthe wireless safe harbor and an increase in the interstate portion ofwireless usage from
23% to 31.1 %. Wireless revenues for 2005-2007 are projections based on past average yearly increases in
revenues.
TNS, Wireless Provider Bill Analysis 3rd Quarter, 2004, FCC, Notice ofWritten Ex Parte Presentation,
TracFone Wireless Inc., February 23, 2005. TNS data showed that 31.1 % ofwireless usage is interstate.
3. FCC" Trends in Telephone Service", Advanced Service Lines, Table 2.2, May 2004.
FCC, Federal Communications Commission Releases Data on High-Speed Internet Access Services, December
22,2004.
FCC, Availability ofAdvanced Telecommunications Capability in the US., September 9, 2004.
4. Halpern Capital, "Voice over Internet Protocol (VoIP)", March 8, 2005.
UBS Investment Research, "Telephony and HSD Update for 4Q04", March 10,2005.
TRACFONE Wireless, Inc. Confidential
Attachment 2
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able of Contents
? Objective
? Overview
? Analysis Methodology
? Analysis of Average Charge
? Analysis of Call Detail
TNS Telecoms - Copyright 2003 All Information in this document is proprietary and confidential. Unauthorized reproduction prohibited.
."
the sense of business"
? To provide TracFone with an analysis of wireless phone usage
from TNS Telecoms' syndicated tracking data that analyzes
average spending for the top wireless carriers as well as
IntraState and InterState minutes and messages.
??
TNS Telecoms - Copyright 2003 All Information in this document is proprietary and confidential. Unauthorized reproduction prohibited.
the sense of business"
c'''"'i
oms Syndicated Dat
Quest® Residential SI)
? Telecom survey mailed out to demographically balanced cross
sectional panel of US households
~Responses received from 30,000 households each quarter
? Assesses behavior, attitudes, switching propensities, price
sensitivities, customer satisfaction, usage, switching, and new
product and service perceptions regarding the use of alternative
service providers
? 80
0
Jb of survey is comprised of tracking questions that remain
constant each quarter
? 20
0
Jb of survey is comprised of "Special Studies" questions based
on client input and topical issues
? Option for over samples of areas or follow-up research
? Data available from 1997 onward
??
TNS Telecoms - Copyright 2003 All Information in this document is proprietary and confidential. Unauthorized reproduction prohibited.
the sense of business·"
oms Syndicated Data
111 Harvesting®
? ReQuest® respondents are then asked to participate in Bill Harvesting® by
sending:
? Local bills
? Wireless bills
? Long Distance bills
? Cable/Satellite TV bills
? Internet bills / Credit Card Statement
? Telecom related direct mail pieces received in month
? All bill inserts included with bill
? Minimum of 8,000 households respond each quarter
? All bill information is captured including summary, regional/calling plan
information, features/services and call detail
? Complete internal process from sorting to data capture to web delive.-
? Data available from 1997 onward _
TNS Telecoms - Copyright 2003 All Information in this document is proprietary and confidential. Unauthorized reproduction prohibited.
thB sensa ·Of business"
en
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sis Methodology
? Results are reported for the third quarter, 2004 at the national level
utilizing TNS Telecoms' ReQuest consumer survey and associated Bill
Harvesting efforts
? Segmentation is by the top wireless providers
? Metrics
? Average minutes of use
? Average bill totals
? IntraState call detail
? InterState call detail
? Averages are calculated at the line level
? Only outgoing wireless calls are included in the call detail analysis
? Analysis is based only on wireless bills with call detail information
? InterState calls are determined using the wired line originating NPA's
state and the terminating NPA's state
??
TNS Telecoms - Copyright 2003 All Information in this document is proprietary and confidential. Unauthorized reproduction prohibited.
the sense business"
nalysis Methodology
? Where the call detail was not explicitly clear using the originating
and terminating NPA methodology, the following call categories
were designated as InterState:
? 800 calls
? 900 calls
? International calls
? Where the call detail was not explicitly clear using the originating
and terminating NPA methodology, the following call categories
were designated as Unclassified:
? Directory Assistance
? Voice Mail
? The call detail analysis excludes non-voice calls, such as text
messaging and data calls
??
TNS Telecoms - Copyright 2003 All Information in this document is proprietary and confidential. Unauthorized reproduction prohibited.
the sense of bu&'iness·
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\ferage Charge
Nextel I $77.88 $66.97 $10.91 I 581.4
Sprint PCS $50.97 $41.00 $9.97 I 554.4
ALLTEL $46.96 $40.06 $6.90 I 383.9
Verizon Wireless I $46.28 $40.32 $5.96 I 455.2
Cingular $45.04 $38.24 $6.80 I 430.4
AT&T Wireless $43.63 $36.85 $6.78 I 350.1
T-Mobile I $42.84 $36.69 $6.14 I 505.9
Other I $40.01 $34.30 $5.71 I 384.2
National Average
I
$46.77 $39.93 $6.84 I 445.7
TNS Telecoms Bill Harvesting Data
*Includes both incoming and outgoing calls
??
TNS Telecoms - Copyright 2003 All Information in this document is proprietary and confidential. Unauthorized reproduction prohibited.
the sense ot business"
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«
erage Total Minu
Verizon Wireless
Sprint PCS
T-Mobile
ALLTEL
AT&T Wireless
Cingular
Nextel**
Other
National Average
** Low sample size
TNS Telecoms Bill Harvesting Data
373.8
373.0
342.7
305.8
273.2
233.9
108.5
239.6
286.4
106.0
115.2
106.1
85.7
95.8
68.9
42.3
78.2
89.5
??
TNS Telecoms - Copyright 2003 All Information in this document is proprietary and confidential. Unauthorized reproduction prohibited.
the sense af business'·
traState Call Oet
Nextel** 82.2% 86.0% Sprint PCS 278.3 95.2
ALLTEL 71.5% 77.5% T-Mobile 259.2 95.2
AT&T Wireless 68.6% 75.6% Verizon Wireless 242.5 80.6
T-Mobile 67.6% 80.3% ALLTEL 233.6 71.0
Sprint PCS 67.0% 74.2% AT&T Wireless 209.0 80.7
Cingular 65.8% 74.4% Cingular 185.4 61.7
Verizon Wireless 59.4% 69.6% Nextel** 105.1 42.9
Other 72.5% 79.3% Other 192.1 68.5
National Average 67.2% 75.6% National Average 217.0 76.3
** Low sample size ** Low sample size
TNS Telecoms Bill Harvesting Data
TNS Telecoms - Copyright 2003 All Information in this document is proprietary and confidential. Unauthorized reproduction prohibited.
the
fI-
sense of busPesS-
erState Call Detai
??
Verizon Wireless 37.1% 21.8% Verizon Wireless 180.1 30.0
Cingular 33.0% 23.9% Sprint PCS 146.4 35.1
Sprint PCS 32.8% 25.5% T-Mobile 131.5 24.4
T-Mobile 32.1% 19.2% ALLTEL 108.0 20.7
AT&T Wireless 28.6% 19.6% Cingular 104.9 22.4
ALLTEL 26.9% 18.4% AT&T Wireless 102.0 24.6
Nextel** 11.9% 8.5% Nextel** 21.8 6.0
Other 26.2% 18.1% Other 90.7 20.4
National Average 31.1% 20.9% National Average 117.2 24.7
** Low sample size ** Low sample size
TNS Telecoms Bill Harvesting Data
TNS Telecoms - Copyright 2003 All Information in this document is proprietary and confidential. Unauthorized reproduction prohibited.
the sense Of business"
classified Calls
Nextel** 5.9% 5.5% Verizon Wireless 19.8 13.7
Verizon Wireless 3.5% 8.6% AT&T Wireless 14.7 8.8
AT&T Wireless 2.8% 4.8% ALLTEL** 13.0 9.4
ALLTEL** 1.6% 4.1% Nextel** 12.4 4.5
Cingular** 1.1% 1.6% Cingular** 12.1 5.1
T-Mobile** 0.3% 0.5% T-Mobile** 3.7 2.1
Sprint PCS** 0.1% 0.3% Sprint PCS** 2.6 1.7
Other 1.2% 2.7% Other 13.2 9.4
National Average 1.7% 3.4% National Average 13.7 8.4
** Low sample size ** Low sample size
Outgoing calls that could not be classified as InterState or IntraState
TNS Telecoms Bill Harvesting Data
TNS Telecoms - Copyright 2003 All Information in this document is proprietary and confidential. Unauthorized reproduction prohibited.
the
??
sense of business"
For More Information Contact:
Charles A. White
Vice President
Marketing and Client Service
cwhite@tnstelecoms.com
267-287-0111
111
Attachment 3
Prepaid Subscribers
Number of Prepaid Subscribers
Other
Total Number of Pre aid Subscribers
Hybrid Subscribers
Number of Hybrid Subscribers