Message from the Chairman and the CEO

On behalf of the USAC Board of Directors and USAC staff, we are proud to report that USAC has played an important role in bringing people together through communications. In just four years, we have built a corporation from the ground up that has funded access to communications technology for millions of Americans. This technology has spurred commerce and increased access to information and emergency services, educational services, health care in rural areas, and other critical services.

In 2001, USAC faced many challenges, implemented a myriad of changes, and accomplished many goals. This Annual Report focuses on four themes: Utilization, Synergies, Accomplishments, and Compliance.

tilization - In the four years since USAC was created, over $15 billion in universal service support has been disbursed to nearly 8,000 service providers. In 2001 alone, USAC disbursed $4.7 billion to approximately 5,500 service providers. The number of applicants and service providers participating in the universal service support mechanisms continues to grow. Most important, these funds are being utilized. Universal service support is making a real difference in the everyday lives of consumers across this country.

One example of universal service support making a real difference occurred on the night of September 11. The staff of the New York Public Library system made the decision to open all usable branch libraries the next day, despite many business closings around them. The next morning at the Mid-Manhattan Library, over 200 people were standing in line when the librarian arrived, desperate to use the Internet to contact family and friends. The Schools and Libraries Support Mechanism helps to provide the Internet access at this library.

Universal service support is also making a difference across the country in Kobuk, Alaska, a tiny village with a population of 109. Prior to the establishment of the telehealth network, the only access to treatment from a doctor was either through medivac, which required sending a plane to Kobuk and flying the patient to Kotzebue, or more commonly, through ham radio or telephone. The Rural Health Care Support Mechanism has helped to establish the telehealth network, and with this network a doctor can now consult with a patient and provide medical attention, or in a trauma situation, walk a health practitioner through the appropriate treatment.

These are just two examples of how universal service has been utilized to make a real difference.

ynergies - USAC continually seeks ways to improve administration of the support mechanisms in order to provide better service while keeping administrative costs low. In order for us to provide better customer service, it is critically important for USAC to communicate with our stakeholders and seek synergies.

We work closely with our customers: rural health care organizations; service providers; federal, state, and local school, library, and regulatory officials; tribal leaders; and other stakeholder groups. These groups have provided suggestions that have helped to improve customer service, reduce administrative expenses and reach consumers that could benefit from the program. Our stakeholders have helped USAC leverage resources and achieve synergies.

ccomplishments - In 2001 the FCC again entrusted USAC to implement significant changes in the administration of the universal service support mechanisms. USAC has implemented those changes consistent with FCC rules in an efficient and effective manner.

In May, the FCC approved a revised High Cost support mechanism for rural carriers. This revision provides additional funding for rural carriers. USAC successfully implemented this change by July 1. Additional changes affecting rural carriers are scheduled to be implemented in 2002.