[Federal Register Volume 62, Number 116 (Tuesday, June 17, 1997)]
[Rules and Regulations]
[Pages 32862-32962]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-15081]
[[Page 32861]]
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Part II
Federal Communications Commission
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47 CFR Parts 36, 54, and 69
Universal Service; Final Rule
Federal Register / Vol. 62, No. 116 / Tuesday, June 17, 1997 / Rules
and Regulations
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 36, 54, and 69
[CC Docket No. 96-45; FCC 97-157]
Universal Service
AGENCY: Federal Communications Commission.
ACTION: Final rule.
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SUMMARY: The Report and Order released May 8, 1997, promulgates rules
implementing the statutory requirements of the Telecommunications Act
of 1996 relating to universal service. The rules adopted in this Order
are intended to promote affordable access to telecommunications and
information services to low-income consumers and consumers residing in
high cost, rural, and insular regions of the nation. The Order
establishes the definition of services to be supported by Federal
universal service support mechanisms, carriers eligible for universal
service support, and the specific timetable for implementation. The
Order modifies existing federal universal service support in the
interstate high cost fund, the dial equipment minutes weighting
program, long term support, and the Lifeline and Link-Up program. In
addition, this Order establishes new universal service support
mechanisms for eligible schools and libraries to purchase
telecommunications services at discounted rates and eligible rural
health care providers to have access to telecommunications services at
rates comparable to those in urban areas.
EFFECTIVE DATES: July 17, 1997, except for Subpart E of Part 54 which
will become effective on January 1, 1998.
FOR FURTHER INFORMATION CONTACT: Timothy Peterson, Legal Counsel,
Common Carrier Bureau, (202) 418-1500, or Sheryl Todd, Common Carrier
Bureau, (202) 418-7400.
SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Report
and Order adopted May 7, 1997, and released May 8, 1997. The full text
of the Report and Order is available for inspection and copying during
normal business hours in the FCC Reference Center (Room 239), 1919 M
St., NW., Washington, DC. Pursuant to the Telecommunications Act of
1996, the Commission released a Notice of Proposed Rulemaking and Order
Establishing Joint Board, Federal-State Joint Board on Universal
Service, CC Docket No. 96-45 on March 8, 1996 (61 FR 10499 (March 14,
1996)), a Recommended Decision on November 8, 1996 (61 FR 63778
(December 2, 1996)), and a Public Notice on November 18, 1996 (61 FR
63778 (December 2, 1996)) seeking comment on rules to implement
sections 254 and 214(e) of the Act relating to universal service. As
required by the Regulatory Flexibility Act (RFA), the Report and Order
contains a Final Regulatory Flexibility Analysis. Pursuant to section
604 of the RFA, the Commission performed a comprehensive analysis of
the Report and Order with regard to small entities and small incumbent
LECs. The Report and Order also contains new information collection
requirements subject to the Paperwork Reduction Act (PRA). The
Commission has published a separate notice in the Federal Register
relating to these information collection requirements (62 FR 28024 (May
22, 1997)).
Summary of the Report and Order:
Principles
1. Pursuant to section 254(b)(7) and consistent with the Joint
Board's recommendation, we establish ``competitive neutrality'' as an
additional principle upon which we base policies for the preservation
and advancement of universal service. Consistent with the Joint Board's
recommendation, we define this principle, in the context of determining
universal service support, as:
Competitive Neutrality--Universal service support mechanisms and
rules should be competitively neutral. In this context, competitive
neutrality means that universal service support mechanisms and rules
neither unfairly advantage nor disadvantage one provider over
another, and neither unfairly favor nor disfavor one technology over
another.
2. We agree with the Joint Board that, as a guiding principle,
competitive neutrality is consistent with several provisions of section
254 including the explicit requirement of equitable and
nondiscriminatory contributions. We also note that section 254(h)(2)
requires the Commission to establish competitively neutral rules
relating to access to advanced telecommunications and information
services for eligible schools, health care providers, and libraries. In
addition, we agree that an explicit recognition of competitive
neutrality in the collection and distribution of funds and
determination of eligibility in universal service support mechanisms is
consistent with congressional intent and necessary to promote ``a pro-
competitive, de-regulatory national policy framework.''
3. We concur in the Joint Board's recommendation that the principle
of competitive neutrality in this context should include technological
neutrality. Technological neutrality will allow the marketplace to
direct the advancement of technology and all citizens to benefit from
such development. By following the principle of technological
neutrality, we will avoid limiting providers of universal service to
modes of delivering that service that are obsolete or not cost
effective. We also agree that the principle of competitive neutrality,
including the concept of technological neutrality, should be considered
in formulating universal service policies relating to each and every
recipient and contributor to the universal service support mechanisms,
regardless of size, status, or geographic location. We agree with the
Joint Board that promoting competition is an underlying goal of the
1996 Act and that the principle of competitive neutrality is consistent
with that goal. Accordingly, we conclude that the principle of
competitive neutrality is ``necessary and appropriate for the
protection of the public interest'' and is ``consistent with this Act''
as required by section 254(b)(7).
4. We agree with the Joint Board's recommendation that our
universal service policies should strike a fair and reasonable balance
among all of the principles identified in section 254(b) and the
additional principle of competitive neutrality to preserve and advance
universal service. Consistent with the recommendations of the Joint
Board, we find that promotion of any one goal or principle should be
tempered by a commitment to ensuring the advancement of each of the
principles enumerated above.
5. We agree with the Joint Board's conclusion that Congress
specifically addressed issues relating to individuals with disabilities
in section 255 and, therefore, do not establish, at this time,
additional principles related to individuals with disabilities for
purposes of section 254. In the Notice of Inquiry adopted pursuant to
section 255 (61 FR 50465 (September 26, 1996)), the Commission sought
comment on the implementation and enforcement of section 255. The
Commission also recently released a Notice of Inquiry seeking comment
on improving telecommunications relay service (TRS) for individuals
with hearing and speech disabilities (CC Docket No. 90-571). Although
we are mindful of the commenters' concerns regarding the affordability
of, and access to, telecommunications services by individuals with
disabilities, we find that those concerns are more appropriately
addressed in the context of the Commission's implementation of
[[Page 32863]]
section 255. Therefore, we do not adopt principles related to
telecommunications users with disabilities in this proceeding.
6. We have considered the requests to promote access to affordable
telecommunications services to other groups and organizations,
including minorities and community-oriented organizations, but we
decline to adopt these proposals as additional principles. We decline
at this time to adopt additional principles the purpose of which would
be to extend universal service support to individuals, groups, or
locations other than those identified in section 254.
Definition of Universal Service: What Services To Support
7. Designated Services
We generally adopt the Joint Board's recommendation and define the
``core'' or ``designated'' services that will be supported by universal
service support mechanisms as: Single-party service; voice grade access
to the public switched network; DTMF signaling or its functional
equivalent; access to emergency services; access to operator services;
access to interexchange service; access to directory assistance; and
toll limitation services for qualifying low-income consumers. In
arriving at this definition, we have adopted the Joint Board's analysis
and recommendation that, for purposes of section 254(c)(1), the
Commission define ``telecommunications services'' in a functional
sense, rather than on the basis of tariffed services. We find that this
definition of core universal services promotes competitive neutrality
because it is technology neutral, and provides more flexibility for
defining universal service than would a services-only approach. We also
find that all four criteria enumerated in section 254(c)(1) must be
considered, but not each necessarily met, before a service may be
included within the general definition of universal service, should it
be in the public interest. We interpret the statutory language,
particularly the word ``consider,'' as providing flexibility for the
Commission to establish a definition of services to be supported, after
it considers the criteria enumerated in section 254(c)(1) (A) through
(D). We conclude that the core services that we have designated to
receive universal service support are consistent with the statutory
criteria in section 254(c)(1).
8. Single-Party Service
We agree with and adopt the Joint Board's conclusion that single-
party service is widely available and that a majority of residential
customers subscribe to it, consistent with section 254(c)(1)(B).
Moreover, we concur with the Joint Board's conclusion that single-party
service is essential to public health and safety in that it allows
residential consumers access to emergency services without delay.
Single-party service also is generally consistent with the public
interest, convenience, and necessity because, by eliminating the
sharing required by multi-party service, single-party service
significantly increases the consumer's ability to place calls
irrespective of the actions of other network users and with greater
privacy than party line service can assure. In addition, single-party
service is being deployed in public telecommunications networks by
telecommunications carriers. We adopt the finding that the term
``single-party service'' means that only one customer will be served by
each subscriber loop or access line. Eligible carriers must offer
single-party service in order to receive support regardless of whether
consumers choose to subscribe to single-or multi-party service. In
addition, to the extent that wireless providers use spectrum shared
among users to provide service, we find that wireless providers offer
the equivalent of single-party service when they offer a dedicated
message path for the length of a user's particular transmission. We
concur with the Joint Board's recommendation not to require wireless
providers to offer a single channel dedicated to a particular user at
all times.
9. Voice Grade Access to the Public Switched Network
We conclude that voice grade access includes the ability to place
calls, and thus incorporates the ability to signal the network that the
caller wishes to place a call. Voice grade access also includes the
ability to receive calls, and thus incorporates the ability to signal
the called party that an incoming call is coming. We agree that these
components are necessary to make voice grade access fully beneficial to
the consumer. We find that, consistent with section 254(c)(1), voice
grade access to the public switched network is an essential element of
telephone service, is subscribed to by a substantial majority of
residential customers, and is being deployed in public
telecommunications networks by telecommunications carriers. In
addition, we find voice grade access to be essential to education,
public health, and public safety because it allows consumers to contact
essential services such as schools, health care providers, and public
safety providers. For this reason, it is also consistent with the
public interest, convenience, and necessity.
10. We also adopt the Joint Board's recommendation that voice grade
access should occur in the frequency range between approximately 500
Hertz and 4,000 Hertz for a bandwidth of approximately 3,500 Hertz.
Although we conclude below that certain higher bandwidth services
should be supported under section 254(c)(3) for eligible schools,
libraries, and rural health care providers, we decline to adopt,
pursuant to section 254(c)(1), a higher bandwidth than that recommended
by the Joint Board. We conclude, except as further designated with
respect to eligible schools, libraries and health care providers, that
voice grade access, and not high speed data transmission, is the
appropriate goal of universal service policies at this time because we
are concerned that supporting an overly expansive definition of core
services could adversely affect all consumers by increasing the expense
of the universal service program and, thus, increasing the basic cost
of telecommunications services for all.
11. Support for Local Usage
We agree with the Joint Board that the Commission should determine
the level of local usage to be supported by federal universal service
mechanisms and that the states are best positioned to determine the
local usage component for purposes of state universal service
mechanisms. Further, we agree that, in order for consumers in rural,
insular, and high cost areas to realize the full benefits of affordable
voice grade access, usage of, and not merely access to, the local
network should be supported.
12. We find, consistent with the Joint Board's conclusion, that we
have the authority to support a certain portion of local usage,
pursuant to the universal service principles adopted above. In
particular, section 254(b)(1) states that ``[q]uality services should
be available at just, reasonable, and affordable rates.'' As a result,
ensuring affordable ``access'' to those services is not sufficient.
Universal service must encompass the ability to use the network,
including the ability to place calls at affordable rates.
13. We are also concerned, however, that consumers might not
receive the benefits of universal service support unless we determine a
minimum amount of local usage that must be included within the
supported services. We intend to consider this issue in our Further
Notice of Proposed Rulemaking (``FNPRM'') on a forward-looking economic
cost methodology, which will
[[Page 32864]]
be issued by June 1997. We are making various changes to the existing
universal service support mechanisms--including making support portable
to competing carriers--that will become effective on January 1, 1998.
The Commission will also separately seek further information regarding,
for example, local usage, and local usage patterns, in order to
determine the appropriate amount of local usage that should be provided
by carriers receiving universal service support. We will, by the end of
1997, quantify the amount of local usage that carriers receiving
universal service support will be required to provide.
14. Defining minimum levels of usage is critical to the
construction of a competitive bidding system for providing universal
service to high cost areas. An auction for only the ``access'' portion
of providing local service would be neither competitively nor
technologically neutral, because competitors and technologies with low
``access'' costs yet high per-minute costs would be unduly favored in
such an auction. This could result in awarding universal service
support to a less efficient technology, which is the precise result
that a competitive bidding system is meant to avoid. In addition, a
carrier with low access costs could then charge high per-minute rates
to consumers, which would increase consumers' overall bills, rather
than reducing them, as is the expected result of competition. Such a
result is not consistent with the principle in section 254(b)(1) that
these ``services'' are to be ``affordable.''
15. DTMF Signaling
The Joint Board recommended including DTMF signaling or its digital
functional equivalent among the supported services, and we adopt this
recommendation. We find that the network benefit that emanates from
DTMF signaling, primarily rapid call set-up, is consistent with the
public interest, convenience, and necessity, pursuant to section
254(c)(1)(D). Although consumers do not elect to subscribe to DTMF
signaling, we find that DTMF signaling provides network benefits, such
as accelerated call set-up, that are essential to a modern
telecommunications network. In addition, we agree with NENA's
characterization of DTMF signaling as a potential life- and property-
saving mechanism because it speeds access to emergency services. Thus,
we find that supporting DTMF signaling is essential to public health
and public safety, consistent with section 254(c)(1)(A), and is being
deployed in public telecommunications networks by telecommunications
carriers, consistent with section 254(c)(1)(C). We also adopt the Joint
Board's conclusion that other methods of signaling, such as digital
signaling, can provide network benefits equivalent to those of DTMF
signaling. In particular, we note that wireless carriers use out-of-
band digital signaling mechanisms for call set-up, rather than DTMF
signaling. Consistent with the principle of competitive neutrality, we
find it is appropriate to support out-of-band digital signaling
mechanisms as an alternative to DTMF signaling. Accordingly, we include
DTMF signaling and equivalent digital signaling mechanisms among the
services supported by federal universal service mechanisms.
16. Access to Emergency Services
In addition, we concur with the Joint Board's conclusion that
access to emergency services, including access to 911 service, be
supported by universal service mechanisms. We agree with the conclusion
that access to emergency service i.e., the ability to reach a public
emergency service provider, is ``widely recognized as essential to * *
* public safety,'' consistent with section 254(c)(1)(A). Due to its
obvious public safety benefits, including access to emergency services
among the core services is also consistent with the public interest,
convenience, and necessity. Further, consistent with the Joint Board's
recommendation and NENA's comments in favor of supporting access to 911
service, we define access to emergency services to include access to
911 service. Noting that nearly 90 percent of lines today have access
to 911 service capability, the Joint Board found that access to 911
service is widely deployed and available to a majority of residential
subscribers. For these reasons, we include telecommunications network
components necessary for access to emergency services, including access
to 911, among the supported services.
17. We also include the telecommunications network components
necessary for access to E911 service among the services designated for
universal service support. Access to E911 is essential to public health
and safety because it facilitates the determination of the approximate
geographic location of the calling party. We recognize, however, that
the Commission does not currently require wireless carriers to provide
access to E911 service. As set forth in the Commission's Wireless E911
Decision (61 FR 40348 (August 2, 1996)), access to E911 includes the
ability to provide Automatic Numbering Information (``ANI''), which
permits that the PSAP have call back capability if the call is
disconnected, and Automatic Location Information (``ALI''), which
permits emergency service providers to identify the geographic location
of the calling party. We recognize that wireless carriers are currently
on a timetable, established in the Wireless E911 Decision, for
implementing both aspects of access to E911. For universal service
purposes, we define access to E911 as the capability of providing both
ANI and ALI. We note, however, that wireless carriers are not required
to provide ALI until October 1, 2001. Nevertheless, we conclude that,
because of the public health and safety benefits provided by access to
E911 services the telecommunications network components necessary for
such access will be supported by federal universal service mechanisms
for those carriers that are providing it. We recognize that wireless
providers will be providing access to E911 in the future to the extent
that the relevant locality has implemented E911 service. In addition,
because the Wireless E911 Decision establishes that wireless carriers
are required to provide access to E911 only if a mechanism for the
recovery of costs relating to the provision of such services is in
place, there is at least the possibility that wireless carriers
receiving universal service support will be compensated twice for
providing access to E911. We intend to explore whether the possibility
is in fact being realized and, if so, what steps we should take to
avoid such over-recovery in a Further Notice of Proposed Rulemaking.
18. We support the telecommunications network components necessary
for access to 911 service and access to E911 service, but not the
underlying services themselves, which combine telecommunications
service and the operation of the PSAP and, in the case of E911 service,
a centralized database containing information identifying approximate
end user locations. The telecommunications network represents only one
component of 911 and E911 services; local governments provide the PSAP
and generally support the operation of the PSAP through local tax
revenues. We conclude that both 911 service and E911 service include
information service components that cannot be supported under section
254(c)(1), which describes universal service as ``an evolving level of
telecommunications services.'' Accordingly, we include only the
telecommunications network components necessary for access to 911
[[Page 32865]]
and E911 services among the services that are supported by federal
universal service mechanisms.
19. Access to Operator Services
In addition, we adopt the Joint Board's recommendation to include
access to operator services in the general definition of universal
service. Access to operator services is widely deployed and used by a
majority of residential customers. For purposes of defining the core
section 254(c)(1) services and consistent with the Joint Board's
recommendation, we base our definition of ``operator services'' on the
definition the Commission used to define the duties imposed upon LECs
by section 251(b)(3), namely, ``any automatic or live assistance to a
consumer to arrange for billing or completion, or both, of a telephone
call.'' Contrary to the suggestion of CWA, there is no evidence on the
record to suggest that automated systems provide inadequate access to
operator services for consumers in emergency situations. We also do not
require initial contact with a live operator for purposes of operator
services because we expect that most consumers will more appropriately
rely upon their local 911 service in an emergency situation. To the
extent that access to operator services enables callers to place
collect, third-party billed, and person-to-person calls, among other
things, we find that such access may be essential to public health and
is consistent with the public interest, convenience, and necessity.
20. Access to Interexchange Service
We adopt the Joint Board's recommendation to include access to
interexchange service among the services supported by federal universal
service mechanisms. We conclude that access to interexchange service
means the use of the loop, as well as that portion of the switch that
is paid for by the end user, or the functional equivalent of these
network elements in the case of a wireless carrier, necessary to access
an interexchange carrier's network. This decision is consistent with
the principle set forth in section 254(b)(3) that ``consumers * * *
should have access to telecommunications and information services
including interexchange services.'' In addition, we agree that the
majority of residential customers currently have access to
interexchange service, thus satisfying a criterion set forth in section
254(c)(1)(B). Access to interexchange service also is widely deployed
in public telecommunications networks by telecommunications carriers.
Further, as observed by the Joint Board and commenters, access to
interexchange service is essential for education, public health, and
public safety, particularly for customers who live in rural areas and
require access to interexchange service to reach medical and emergency
services, schools, and local government offices. For these reasons,
access to interexchange service also meets the public interest,
convenience, and necessity criterion of section 254(c)(1)(D).
21. We emphasize that universal service support will be available
for access to interexchange service, but not for the interexchange or
toll service. We find that the record does not support including toll
service among the services designated for support, although, as
discussed below, we find that the extent to which rural consumers must
place toll calls to reach essential services should be considered when
assessing affordability. Nevertheless, universal service should not be
limited only to ``non-competitive'' services. One of the fundamental
purposes of universal service is to ensure that rates are affordable
regardless of whether rates are set by regulatory action or through the
competitive marketplace. We note that section 254(k), which forbids
telecommunications carriers from using services that are not
competitive to subsidize competitive services, is not inconsistent with
our conclusion that it is permissible to support competitive services.
22. We do not include equal access to interexchange service among
the services supported by universal service mechanisms. Equal access to
interexchange service permits consumers to access the long-distance
carrier to which the consumer is presubscribed by dialing a 1+ number.
As discussed below, including equal access to interexchange service
among the services supported by universal service mechanisms would
require a Commercial Mobile Radio Service (CMRS) provider to provide
equal access in order to receive universal service support. We find
that such an outcome would be contrary to the mandate of section
332(c)(8), which prohibits any requirement that CMRS providers offer
``equal access to common carriers for the provision of toll services.''
Accordingly, we decline to include equal access to interexchange
service among the services supported under section 254(c)(1).
23. We note that the Commission has not required CMRS providers to
provide dialing parity to competing providers under section 251(b)(3)
because the Commission has not yet determined that any CMRS provider is
a LEC. We seek to implement the universal service provisions of section
254 in a manner that is not ``biased toward any particular
technologies,'' consistent with the Joint Board's recommendation. In
light of the provision of section 332(c)(8) stating that non-LEC CMRS
providers are statutorily exempt from providing equal access and
because the Commission has not determined that any CMRS providers
should be considered LECs, we find that supporting equal access would
undercut local competition and reduce consumer choice and, thus, would
undermine one of Congress' overriding goals in adopting the 1996 Act.
Accordingly, we do not include equal access to interexchange carriers
in the definition of universal service at this time.
24. Access to Directory Assistance and White Pages Directories
We also adopt the Joint Board's recommendation to include access to
directory assistance, specifically, the ability to place a call to
directory assistance, among the core services pursuant to section
254(c)(1). Access to directory assistance enables customers to obtain
essential information, such as the telephone numbers of government,
business, and residential subscribers. We agree that directory
assistance is used by a substantial majority of residential customers,
is widely available, is essential for education, public health, and
safety, and is consistent with the public interest, convenience, and
necessity. Accordingly, we conclude that providing universal service
support for access to directory assistance is consistent with the
statutory criteria of section 254(c)(1).
25. We further agree with the Joint Board's recommendation not to
support white pages directories and listings. We concur with the Joint
Board's determination that white pages listings are not
``telecommunications services'' as that term is defined in the Act. As
the Joint Board recognized, unlike white pages directories and
listings, access to directory assistance is a functionality of the loop
and, therefore, is a service in the functional sense.
26. Toll Limitation Services
Additionally, we include the toll limitation services for
qualifying low-income consumers among those that will be supported
pursuant to section 254(c). We find that including these services
within the supported services is essential to the public health and
safety because, as discussed below, toll limitation services will help
prevent subscribership levels for low-income
[[Page 32866]]
consumers from declining. Thus, we find that toll limitation services
will promote access to the public switched network for low-income
consumers and, therefore, are in the public interest, consistent with
the criteria of section 254(c)(1).
27. Access to Internet Services
We agree with the Joint Board's determination that Internet access
consists of more than one component. Specifically, we recognize that
Internet access includes a network transmission component, which is the
connection over a LEC network from a subscriber to an Internet Service
Provider, in addition to the underlying information service. We also
concur with the Joint Board's observation that voice grade access to
the public switched network usually enables customers to secure access
to an Internet Service Provider, and, thus, to the Internet. We
conclude that the information service component of Internet access
cannot be supported under section 254(c)(1), which describes universal
service as ``an evolving level of telecommunications services.''
Furthermore, to the extent customers find that voice grade access to
the public switched network is inadequate to provide a sufficient
telecommunications link to an Internet service provider, we conclude
that such higher quality access links should not yet be included among
the services designated for support pursuant to section 254(c)(1). We
find that a network transmission component of Internet access beyond
voice grade access should not be supported separately from voice grade
access to the public switched network because the record does not
indicate that a substantial majority of residential customers currently
subscribe to Internet access by using access links that provide higher
quality than voice grade access. In addition, although access to
Internet services offers benefits that contribute to education and
public health, we conclude that it is not ``essential to education,
public health, or public safety'' as set forth in section 254(c)(1)(A).
Under the more expansive authority granted in section 254(h), however,
we agree that supporting Internet access under that section is
consistent with Congress' intent to support Internet access for
eligible schools, libraries, and rural health care providers.
28. Other Services
We conclude that, at this time, no other services that commenters
have proposed to include in the general definition of universal service
substantially meet the criteria set forth in section 254(c)(1). We
emphasize that this section also defines universal service as
``evolving'' and, therefore, as described below, the Commission will
review the services supported by universal service mechanisms no later
than January 1, 2001. In addition, as discussed below, we find that the
issues relating to the telecommunications needs of individuals with
disabilities, including accessibility and affordability of services,
will be addressed in the context of the Commission's implementation of
section 255.
29. We are mindful of the concern expressed by commenters that an
overly broad definition of universal service might have the unintended
effect of creating a barrier to entry for some carriers because
carriers must provide each of the core services in order to be eligible
for universal service support. We concur with the Joint Board's
conclusion that conditioning a carrier's eligibility for support upon
its provision of the core services will not impose an anti-competitive
barrier to entry. We note that other services proposed by commenters,
at a later time, may become more widely deployed than they are at
present, or otherwise satisfy the statutory criteria by which we and
the Joint Board are guided.
30. Feasibility of Providing Designated Service
We conclude that eligible carriers must provide each of the
designated services in order to receive universal service support. In
three limited instances, however, we conclude that the public interest
requires that we allow a reasonable period during which otherwise
eligible carriers may complete network upgrades required for them to
begin offering certain services that they are currently incapable of
providing. Given the Joint Board's finding that not all incumbent
carriers are currently able to offer single-party service, we find that
excluding such carriers from eligibility for universal service support
might leave some service areas without an eligible carrier, especially
in areas where there currently is no evidence of competitive entry.
Therefore, as to single-party service, we will permit state
commissions, upon a finding of ``exceptional circumstances,'' to grant
an otherwise eligible carrier's request that, for a designated period,
the carrier will receive universal service support while it completes
the specified network upgrades necessary to provide single-party
service. This is consistent with the Joint Board's recommendation that
state commissions be permitted to grant requests by otherwise eligible
carriers for a period to make necessary upgrades if they currently are
unable to provide single-party service.
31. We conclude, consistent with the Joint Board's finding that
some carriers are not currently capable of providing access to E911
service, that it may be warranted to provide universal service support
to carriers that are not required under Commission rules to provide
E911 service and to carriers that are completing the network upgrades
required for them to provide access to E911 service. Access to E911
will be supported only to the extent that the relevant locality has
implemented E911 service. If the relevant locality has not implemented
E911 service, otherwise eligible carriers that are covered by the
Commission's Wireless E911 Decision are not required to provide such
access at this time to qualify for universal service support. Even in
cases in which the locality has implemented E911 service, some wireless
carriers are not currently capable of providing access to E911 service.
Although we have directed cellular, broadband PCS, and certain SMR
carriers to provide access to E911 service, we set a five-year period
during which these carriers must make the technical upgrades necessary
to offer access to E911 service. Consequently, requiring carriers to
provide access to E911 service at this time may prevent many wireless
carriers from receiving universal service support during the period
that we have already determined to be appropriate for wireless carriers
to complete preparations for their offering E911 service. We find that
this would be contrary to the principle that universal service policies
and rules be competitively neutral. In light of these considerations,
we will make some accommodation during the period in which these
carriers are upgrading their systems.
32. The Joint Board envisioned granting a period to make upgrades
while still receiving support only if a carrier could meet a ``heavy
burden that such a * * * period is necessary and in the public
interest'' and if ``exceptional circumstances'' warranted the granting
of support during that period. We find that the Joint Board's
recommendation provides a reasoned and reasonable approach to ensuring
access to single-party service while, at the same time, recognizing
that ``exceptional circumstances'' may prevent certain carriers serving
rural areas from offering single-party service. We conclude that this
approach also makes sense in the context of toll limitation service and
access to E911 when a locality has implemented E911 service.
Accordingly,
[[Page 32867]]
we conclude that a carrier that is otherwise eligible to receive
universal service support but is currently incapable of providing
single-party service, toll limitation service, or access to E911 in the
case where the locality has implemented E911 service may, if it
provides each of the other designated services, petition its state
commission for permission to receive universal service support for the
designated period during which it is completing the network upgrades
required so that it can offer these services. A carrier that is
incapable of offering one or more of these three specific universal
services must demonstrate to the state commission that ``exceptional
circumstances'' exist with respect to each service for which the
carrier desires a grant of additional time to make network upgrades.
33. We emphasize that this relief should be granted only upon a
finding that ``exceptional circumstances'' prevent an otherwise
eligible carrier from providing single-party service, toll limitation,
or access to E911 when the locality has implemented E911 service. A
carrier can show that exceptional circumstances exist if individualized
hardship or inequity warrants a grant of additional time to comply with
the general requirement that eligible carriers must provide single-
party service, toll limitation service, and access to E911 when the
locality has implemented E911 service and that a grant of additional
time to comply with these requirements would better serve the public
interest than strict adherence to the general requirement that an
eligible telecommunications carrier must be able to provide these
services to receive universal service support. The period during which
a carrier could receive support while still completing essential
upgrades should extend only as long as the relevant state commission
finds that ``exceptional circumstances'' exist and should not extend
beyond the time that the state commission deems necessary to complete
network upgrades. We conclude that this is consistent with the intent
of section 214(e) because it will ensure that ultimately all eligible
telecommunications carriers offer all of the services designated for
universal service support.
34. We recognize that some state commissions already may have
mandated single-party service for telecommunications service providers
serving their jurisdictions. If a state commission has adopted a
timetable by which carriers must offer single-party service, a carrier
may rely upon that previously established timetable and need not
request another transition period for federal universal service
purposes. Specifically, where a state has ordered a carrier to provide
single-party service within a specified period pursuant to a state
order that precedes the release date of this Order, the carrier may
rely upon the timetable established in that order and receive universal
service support for the duration of that period.
35. Extent of Universal Service
The Joint Board recommended that support for designated services be
limited to those carried on a single connection to a subscriber's
primary residence and to businesses with only a single connection. In
light of our determination, however, to adopt a modified version of the
existing universal service support system for high cost areas, we
conclude, consistent with the proposal of the state Joint Board
members, that all residential and business connections in high cost
areas that currently receive high cost support should continue to be
supported for the periods set forth below. For rural telephone
companies this means that both multiple business connections and
multiple residential connections will continue to receive universal
service support at least until January 1, 2001. We intend, however, to
continue to evaluate the Joint Board's recommendation to limit support
for primary residential connections and businesses with a single
connection as we further develop a means of precisely calculating the
forward-looking economic cost of providing universal service in areas
currently served by non-rural telephone companies. As we determine how
to calculate forward-looking economic cost, or as states do so in
state-conducted cost studies, we necessarily will examine the forward-
looking economic cost of supporting additional residential connections
or multiple connection businesses. Depending on how we determine the
forward-looking economic cost of the primary residential connection,
for example, there may be little incremental cost to additional
residential connections. In that case, for instance, there would be no
need to support additional residential connections. We will consider
the forward-looking cost of supporting designated services provided to
multiple-connection businesses as well. We recognize the arguments
raised by the several parties that commented on this aspect of the
Joint Board's recommendation, but we do not address the merits of these
arguments at this time. We intend to examine the record on this issue
in our FNRPM on a forward-looking economic cost methodology.
36. Quality of Service
We concur with the Joint Board's recommendation against the
establishment of federal technical standards as a condition to
receiving universal service support. Further, we agree with the Joint
Board that the Commission should not adopt service quality standards
``beyond the basic capabilities that carriers receiving universal
service support must provide.'' Section 254(b)(1) establishes
availability of quality services as one of the guiding principles of
universal service, but, contrary to CWA's characterization of this
section as a statutory requirement, section 254(b)(1) does not mandate
specific measures designed to ensure service quality. Rather, section
254(b) sets forth the statutory principles that the Joint Board
considered when making its recommendations and, similarly, must guide
the Commission as it implements section 254.
37. Based on the Joint Board's recommendation that the Commission
not establish federal technical standards as a condition to receiving
universal service support, we conclude that the Commission should rely
upon existing data, rather than specific standards, to monitor service
quality at this time. Several states currently have service quality
reporting requirements in place for carriers serving their
jurisdictions. We find, consistent with the Joint Board's
recommendation, that imposing additional requirements at the federal
level would largely duplicate states' efforts. In addition, imposing
federal service quality reporting requirements could be overly
burdensome for carriers, particularly small telecommunications
providers that may lack the resources and staff needed to prepare and
submit the necessary data. For this reason, we also decline to expand,
solely for universal service purposes, the category of
telecommunications providers required to file ARMIS service quality and
infrastructure reporting data. Currently, ARMIS filing requirements
apply to carriers subject to price cap regulation that collectively
serve 95 percent of access lines. We will not extend ARMIS reporting
requirements to all carriers because we find that additional reporting
requirements would impose the greatest burdens on small
telecommunications companies.
38. We will rely upon service quality data provided by the states
in combination with those data that the Commission already gathers from
price cap carriers through existing data
[[Page 32868]]
collection mechanisms in order to monitor service quality trends. We
concur with the Joint Board's recommendation that state commissions
share with the Commission, to the extent carriers provide such data,
information regarding, for example, the number and type of service
quality complaints filed with state agencies. We encourage state
commissions to submit to the Commission the service quality data they
receive from their telecommunications carriers.
39. We conclude that states may adopt and enforce service quality
rules that are competitively neutral, pursuant to section 253(b), and
that are not otherwise inconsistent with rules adopted herein. We
concur with commenters that favor state implementation of carrier
performance standards. Relying on data compiled by the National
Association of Regulatory Utilities Commissioners, we note that 40
states and the District of Columbia have service quality standards in
place for telecommunications companies. Because most states have
established mechanisms designed to ensure service quality in their
jurisdictions, we find that additional efforts undertaken at the
federal level would be largely redundant. We conclude that state-
imposed measures to monitor and enforce service quality standards will
help ``ensure the continued quality of telecommunications services, and
safeguard the rights of consumers,'' consistent with section 253(b). In
light of the existing state mechanisms designed to promote service
quality, we conclude that state commissions are the appropriate fora
for resolving consumers' specific grievances regarding service quality.
40. We agree with the Joint Board's conclusion that, to the extent
the Joint Board recommended, and we adopt, specific definitions of the
services designated for support, these basic capabilities establish
minimum levels of service that carriers must provide in order to
receive support. For example, we conclude above that voice grade access
to the public switched network should occur in the frequency range
between approximately 500 Hertz and 4,000 Hertz for a bandwidth of
approximately 3,500 Hertz. Although not a service quality standard per
se, this requirement will ensure that all consumers served by eligible
carriers receive some minimum standard of service.
41. Reviewing the Definition of Universal Service
The Commission shall convene a Joint Board no later than January 1,
2001, to revisit the definition of universal service, as section
254(c)(2) anticipates. In addition to relying upon existing data
collection mechanisms, such as ARMIS reports, the Commission will
conduct any surveys or statistical analysis that may be necessary to
make the evaluations required by section 254(c)(1) to change the
definition of universal service.
Affordability
42. We agree with and adopt the Joint Board's finding that the
definition of affordability contains both an absolute component (``to
have enough or the means for''), which takes into account an
individual's means to subscribe to universal service, and a relative
component (``to bear the cost of without serious detriment''), which
takes into account whether consumers are spending a disproportionate
amount of their income on telephone service. We adopt the
recommendation that a determination of affordability take into
consideration both rate levels and non-rate factors, such as consumer
income levels, that can be used to assess the financial burden
subscribing to universal service places on consumers.
43. Subscribership Levels
We also concur in the Joint Board's finding that subscribership
levels provide relevant information regarding whether consumers have
the means to subscribe to universal service and, thus, represent an
important tool in evaluating the affordability of rates. Based on
recent nationwide subscribership data, the Joint Board judged that
existing local rates are generally affordable. We find that recent
subscribership data, indicating that 94.2 percent of all American
households subscribed to telephone service in 1996, and the record in
this proceeding are consistent with the Joint Board's determination. We
recognize that affordable rates are essential to inducing consumers to
subscribe to telephone service, and also that increasing the number of
people connected to the network increases the value of the
telecommunications network. Further, we note that insular areas
generally have subscribership levels that are lower than the national
average, largely as a result of income disparity, compounded by the
unique challenges these areas face by virtue of their locations.
44. We also agree with the Joint Board that subscribership levels
are not dispositive of the issue of whether rates are affordable. As
the Joint Board concluded, subscribership levels do not address the
second component of affordability, namely, whether paying the rates
charged for services imposes a hardship for those who subscribe.
Accordingly, we conclude that the Commission and states should use
subscribership levels, in conjunction with rate levels and certain
other non-rate factors, to identify those areas in which the services
designated for support may not be affordable.
45. Non-Rate Factors
The record demonstrates that various other non-rate factors affect
a consumer's ability to afford telephone service. We agree that the
size of a customer's local calling area is one factor to consider when
assessing affordability. Specifically, we concur with the Joint Board's
finding that the scope of the local calling area ``directly and
significantly impacts affordability,'' and, thus, should be a factor to
be weighed when determining the affordability of rates. We further
agree with the Joint Board that an examination that would focus solely
on the number of subscribers to which one has access for local service
in a local calling area would be insufficient. Instead, a determination
that the calling area reflects the pertinent ``community of interest,''
allowing subscribers to call hospitals, schools, and other essential
services without incurring a toll charge, is appropriate. In reaching
this conclusion, we agree with commenters that affordability is
affected by the amount of toll charges a consumer incurs to contact
essential service providers such as hospitals, schools, and government
offices that are located outside of the consumer's local calling area.
Toll charges can greatly increase a consumer's expenditure on
telecommunications services, mitigating the benefits of universal
service support. In addition, rural consumers who must place toll calls
to contact essential services that urban consumers may reach by placing
a local call cannot be said to pay ``reasonably comparable'' rates for
local telephone service when the base rates of the service are the same
in both areas. Thus, we find that a determination of rate affordability
should consider the range of a subscriber's local calling area,
particularly whether the subscriber must incur toll charges to contact
essential public service providers.
46. In addition, we agree with the Joint Board that consumer income
levels should be among the factors considered when assessing rate
affordability. We concur with the Joint Board's finding that a nexus
exists between income level and the ability to afford universal
service. A rate that is affordable to
[[Page 32869]]
affluent customers may not be affordable to lower-income customers. In
light of the significant disparity in income levels throughout the
country, per-capita income of a local or regional area, and not a
national median, should be considered in determining affordability. As
the Joint Board concluded, determining affordability based on a
percentage of the national median income would be inequitable because
of the significant disparities in income levels across the country.
Specifically, we agree that such a standard would tend to overestimate
the price at which services are affordable when applied to a service
area where income level is significantly below the national median.
Accordingly, we decline to adopt proposals to establish nationwide
standards for measuring the impact of customer income levels on
affordability.
47. We also agree with the Joint Board that cost of living and
population density affect rate affordability. Like income levels, cost
of living affects how much a consumer can afford to pay for universal
services. The size of a consumer's calling area, which tends to be
smaller in areas with low population density, affects affordability. In
addition, given that cost of living and population density, like income
levels, are factors that vary across local or regional areas, we find
that these factors should be considered by region or locality.
48. Finally, we agree with and adopt the Joint Board's finding that
legitimate local variations in rate design may affect affordability.
Such variations include the proportion of fixed costs allocated between
local services and intrastate toll services; proportions of local
service revenue derived from per-minute charges and monthly recurring
charges; and the imposition of mileage charges to recover additional
revenues from customers located a significant distance from the wire
center. We find that states, by virtue of their local rate-setting
authority, are best qualified to assess these factors in the context of
considering rate affordability.
49. Determining Rate Affordability
We agree with the Joint Board that states should exercise initial
responsibility, consistent with the standards set forth above, for
determining the affordability of rates. We further concur with the
Joint Board's conclusion that state commissions, by virtue of their
rate-setting roles, are the appropriate fora for consumers wishing to
challenge the affordability of intrastate rates for both local and toll
services. The unique characteristics of each jurisdiction render the
states better suited than the Commission to make determinations
regarding rate affordability. Each of the factors proposed by parties
and endorsed by the Joint Board with the exception of subscribership
levels--namely, local calling area size, income levels, cost of living,
and population density--represents data that state regulators, as
opposed to the Commission, are best situated to obtain and analyze.
50. As the Joint Board recommended, the Commission will work in
concert with states and U.S. territories and possessions informally to
address instances of low or declining subscribership levels. Such
informal cooperation may consist of sharing data or conducting joint
inquiries in an attempt to determine the cause of low or declining
subscribership rates in a given state, or providing other assistance
requested by a state. We will defer to the states for guidance on how
best to implement federal-state collaborative efforts to ensure
affordability. We find that this dual approach in which both the states
and the Commission play significant roles in ensuring affordability is
consistent with the statutory mandate embodied in section 254(i).
51. In addition, where ``necessary and appropriate,'' the
Commission, working with the affected state or U.S. territory or
possession, will open an inquiry to take such action as is necessary to
fulfill the requirements of section 254. We conclude that such action
is warranted with respect to insular areas. The record indicates that
subscribership levels in insular areas are particularly low.
Accordingly, we will issue a Public Notice to solicit further comment
on the factors that contribute to the low subscribership levels that
currently exist in insular areas, and to examine ways to improve
subscribership in these areas.
52. Some commenters have suggested that the Commission provide
universal service support for rates that are found to be unaffordable
or where subscribership levels decline from current levels. We agree
that, if subscribership levels begin to drop significantly from current
levels, we may need to take further action. Among the benefits
subscribership brings to individuals is access to essential services,
such as emergency service providers, and access to entities such as
schools, health care facilities and local governments. In addition,
subscribers enjoy the increased value of the telephone network, i.e.,
the large numbers of people who can be reached via the network, that
results from high subscribership levels. We agree with Puerto Rico Tel.
Co. that, because the Puerto Rico subscribership level remains
significantly below the national average, it is not appropriate to
delay action until a subscribership level that is already low declines
further. As discussed above, we find that further action is warranted
with respect to insular areas.
53. In addition, we will continue actively to monitor
subscribership across a wide variety of income levels and demographic
groups and encourage states to do likewise. The Commission currently
uses Census Bureau data to publish reports that illustrate
subscribership trends among households, including subscribership by
state, as well as nationwide subscribership rates by categories
including income level, race, and age of household members, and
household size. We find that any response to a decline in
subscribership revealed by our analysis of the relevant data should be
tailored to those who need assistance to stay connected to the network.
54. We concur with the Joint Board's recommendation to implement a
national benchmark to calculate the amount of support eligible
telecommunications carriers will receive for serving rural, insular,
and high cost areas. The Joint Board declined to establish a benchmark
based on income or subscribership and specifically did not equate the
benchmark support levels with affordability. We agree. Setting the
rural, insular and high cost support benchmark based on income and
subscribership would fail to target universal service assistance and
could therefore needlessly increase the amount of universal service
support. Recent data show that telephone subscribership was 96.2
percent in 1996 for households with annual incomes of at least $15,175
and 85.4 percent for households with annual incomes below $15,175. The
Joint Board concluded that, because telephone penetration declines
significantly for low-income households, the impact of household income
is more appropriately addressed through programs designed to help low-
income households obtain and retain telephone service, rather than as
part of the high cost support mechanism. Accordingly, we adopt the
Joint Board's recommendation to channel support designed to assist low-
income consumers through the Lifeline and Link Up programs, rather than
through the high cost support methodology.
[[Page 32870]]
Carriers Eligible for Universal Service Support
55. Adoption of Section 214(e)(1) Criteria
Consistent with the Joint Board's recommendation, we adopt the
statutory criteria contained in section 214(e)(1) as the rules for
determining whether a telecommunications carrier is eligible to receive
universal service support. Pursuant to those criteria, only a common
carrier may be designated as an eligible telecommunications carrier,
and therefore may receive universal service support. In addition, each
eligible carrier must, throughout its service area: (1) Offer the
services that are supported by federal universal service support
mechanisms under section 254(c); (2) offer such services using its own
facilities or a combination of its own facilities and resale of another
carrier's services, including the services offered by another eligible
telecommunications carrier; and (3) advertise the availability of and
charges for such services using media of general distribution.
56. Statutory Construction of Section 214(e)
We conclude that section 214(e)(2) does not permit the Commission
or the states to adopt additional criteria for designation as an
eligible telecommunications carrier. As noted by the Joint Board,
``section 214 contemplates that any telecommunications carrier that
meets the eligibility criteria of section 214(e)(1) shall be eligible
to receive universal service support.'' Section 214(e)(2) states that
``[a] state commission shall * * * designate a common carrier that
meets the requirements of paragraph (1) as an eligible
telecommunications carrier * * *.'' Section 214(e)(2) further states
that ``* * * the State commission may, in the case of an area served by
a rural telephone company, and shall, in the case of all other areas,
designate more than one common carrier as an eligible
telecommunications carrier for a service area designated by the State
commission, so long as each additional requesting carrier meets the
requirements of paragraph (1).'' Read together, we find that these
provisions dictate that a state commission must designate a common
carrier as an eligible carrier if it determines that the carrier has
met the requirements of section 214(e)(1). Consistent with the Joint
Board's finding, the discretion afforded a state commission under
section 214(e)(2) is the discretion to decline to designate more than
one eligible carrier in an area that is served by a rural telephone
company; in that context, the state commission must determine whether
the designation of an additional eligible carrier is in the public
interest. The statute does not permit this Commission or a state
commission to supplement the section 214(e)(1) criteria that govern a
carrier's eligibility to receive federal universal service support.
57. In addition, state discretion is further limited by section
253: A state's refusal to designate an additional eligible carrier on
grounds other than the criteria in section 214(e) could ``prohibit or
have the effect of prohibiting the ability of any entity to provide any
interstate or intrastate telecommunications service'' and may not be
``necessary to preserve universal service.'' Accordingly, we conclude
that the section 253 precludes states from imposing additional
prerequisites for designation as an eligible telecommunications
carrier. Although section 214(e) precludes states from imposing
additional eligibility criteria, it does not preclude states from
imposing requirements on carriers within their jurisdictions, if these
requirements are unrelated to a carrier's eligibility to receive
federal universal service support and are otherwise consistent with
federal statutory requirements. Further, section 214(e) does not
prohibit a state from establishing criteria for designation of eligible
carriers in connection with the operation of that state's universal
service mechanism, consistent with section 254(f).
58. Consistent with the findings we make above, we disagree with
GTE's assertion that the use of the phrases ``a carrier that receives
such support'' and ``any such support * * *'' instead of the phrase
``such eligible carrier'' in section 254(e) indicates that Congress
intended to require carriers to meet criteria in addition to the
eligibility criteria in section 214(e). We conclude that the quoted
language indicates only that a carrier is not entitled automatically to
receive universal service support once designated as an eligible
telecommunications carrier.
59. The terms of section 214(e) do not allow us to alter an
eligible carrier's duty to serve an entire service area. Consequently,
we cannot modify the requirements of section 214(e) for carriers whose
technology limits their ability to provide service throughout a state-
defined service area. We note, however, that any carrier may, for
example, use resale to supplement its facilities-based offerings in any
given service area.
60. Additional Obligations as a Condition of Eligibility
We reject proposals to impose additional obligations as a condition
of being designated an eligible telecommunications carrier pursuant to
section 214(e) because section 214(e) does not grant the Commission
authority to impose additional eligibility criteria.
61. We emphasize that, even if we had the legal authority to impose
additional obligations as a condition of being designated an eligible
telecommunications carrier, we agree with the Joint Board that these
additional criteria are unnecessary to protect against unreasonable
practices by other carriers. As the Joint Board explained, section
214(e) prevents eligible carriers from attracting only the most
desirable customers by limiting eligibility to common carriers and by
requiring eligible carriers to offer the supported services and
advertise the availability of these services ``throughout the service
area.''
62. We further conclude that adopting the eligibility criteria
imposed by the statute without elaboration is consistent with the Joint
Board's recommended principle of competitive neutrality because, once
the forward-looking and more precisely targeted high cost methodology
is in place, all carriers will receive comparable support for
performing comparable functions. Several ILECs assert that the Joint
Board's recommendation not to impose additional criteria is in conflict
with its recommended principle of competitive neutrality because some
carriers, such as those subject to COLR obligations or service quality
regulation, perform more burdensome and costly functions than other
carriers that are eligible for the same amount of compensation. The
statute itself, however, imposes obligations on ILECs that are greater
than those imposed on other carriers, yet section 254 does not limit
eligible telecommunications carrier designation only to those carriers
that assume the responsibilities of ILECs. We find that the imposition
of additional criteria, to the extent that they would preclude some
carriers from being designated eligible pursuant to section 214(e),
would violate the principle of competitive neutrality.
63. Treatment of Particular Classes of Carriers
We agree with the Joint Board's recommendation that any
telecommunications carrier using any technology, including wireless
technology, is eligible to receive
[[Page 32871]]
universal service support if it meets the criteria under section
214(e)(1). We agree that any wholesale exclusion of a class of carriers
by the Commission would be inconsistent with the language of the
statute and the pro-competitive goals of the 1996 Act. The treatment
granted to certain wireless carriers under section 332(c)(3)(A) does
not allow states to deny wireless carriers eligible status. We also
agree that non-ILECs and carriers subject to price cap regulation
should be eligible for support. We agree with the Joint Board that
price cap regulation is an important tool for smoothing the transition
to competition and that its use should not foreclose price cap
companies from receiving universal service support. We find that
requiring price cap carriers to cover their costs of providing
universal service through internal cross-subsidies would violate the
statutory directive that support for universal service be ``explicit.''
Consequently, in our decision here and in the Access Charge Reform
Order, we adopt a plan to eliminate implicit subsidies as we identify
and make explicit universal service support. Because we have determined
that we will not exclude price cap companies from eligibility, we agree
with the Joint Board that we need not delineate the difference between
price cap carriers and other carriers, as proposed in the Further
Comment Public Notice.
64. We note that not all carriers are subject to the jurisdiction
of a state commission. Nothing in section 214(e)(1), however, requires
that a carrier be subject to the jurisdiction of a state commission in
order to be designated an eligible telecommunications carrier. Thus
tribal telephone companies, CMRS providers, and other carriers not
subject to the full panoply of state regulation may still be designated
as eligible telecommunications carriers.
65. Advertising
We agree with the Joint Board's analysis and recommendation that we
not adopt, at this time, nationwide standards to interpret the
requirement of section 214(e)(1)(B) that eligible carriers advertise,
throughout their service areas, the availability of, and charges for,
the supported services using media of general distribution. We agree
that, in the first instance, states should establish any guidelines
needed to govern such advertising. We agree that the states, as a
corollary to their obligation to designate eligible telecommunications
carriers, are in a better position to monitor the effectiveness of
carriers' advertising throughout their service areas. We also agree
with the Joint Board that competition will help ensure that carriers
inform potential customers of the services they offer. Although we
decline to adopt nationwide standards for interpreting section
214(e)(1)(B), we encourage states, as they determine whether to
establish guidelines pursuant to that section, to consider the
suggestion that the section 214(e)(1)(B) requirement that carriers
advertise in ``media of general distribution'' is not satisfied by
placing advertisements in business publications alone, but instead
compels carriers to advertise in publications targeted to the general
residential market. We conclude that no further regulations are
necessary to define the term ``throughout.'' The dictionary definition
--``in or through all parts; everywhere''--requires no further
clarification.
66. Relinquishment of Eligible Carrier Designation
We conclude that no additional measures are needed to implement
section 214(e)(4), the provision that reserves to the states the
authority to act upon an eligible carriers's request to relinquish its
designation as an eligible carrier.
67. Facilities Requirement
Section 214(e)(1) requires that, in order to be eligible for
universal service support, a common carrier must offer the services
supported by federal universal service support mechanisms throughout a
service area ``either using its own facilities or a combination of its
own facilities and resale of another carrier's services (including the
services offered by another eligible telecommunications carrier).'' In
interpreting the facilities requirement, we first address the meaning
of the term ``facilities'' and then address the meaning of the phrase
``own facilities.''
68. Defining the Term ``Facilities'' in Section 214(e)(1)
We interpret the term ``facilities,'' for purposes of section
214(e), to mean any physical components of the telecommunications
network that are used in the transmission or routing of the services
designated for support under section 254(c)(1). We conclude that this
interpretation strikes a reasonable balance between adopting a more
expansive definition of ``facilities,'' which would undermine the Joint
Board's recommendation to exclude resellers from eligible status, and
adopting a more restrictive definition of ``facilities,'' which we fear
would thwart competitive entry into high cost areas.
69. We adopt this definition of ``facilities,'' in part, to remain
consistent with the Joint Board's recommendation that ``a carrier that
offers universal service solely through reselling another carrier's
universal service package'' should not be eligible to receive universal
service support. By encompassing only physical components of the
telecommunications network that are used to transmit or route the
supported services, this definition, in effect, excludes from
eligibility a ``pure'' reseller that claims to satisfy the facilities
requirement by providing its own billing office or some other facility
that is not a ``physical component'' of the network, as defined in this
Order. We find that our determination to define ``facilities'' in this
manner is consistent with congressional intent to require that at least
some portion of the supported services offered by an eligible carrier
be services that are not offered through ``resale of another carrier's
services.''
70. Whether the Use of Unbundled Network Elements Qualifies as a
Carrier's ``Own Facilities''
We conclude that a carrier that offers any of the services
designated for universal service support, either in whole or in part,
over facilities that are obtained as unbundled network elements
pursuant to section 251(c)(3) and that meet the definition of
facilities set forth above, satisfies the facilities requirement of
section 214(e)(1)(A).
71. In making this decision, we first look to the language of
section 214(e)(1)(A), which references two classes of carriers that are
eligible for support--carriers using their ``own facilities'' and
carriers using ``a combination of (their) own facilities and resale of
another carrier's services.'' Neither the statute nor the legislative
history defines the term ``own'' as that term appears within the phrase
``own facilities'' in section 214(e)(1)(A). In addition, neither
category in section 214(e)(1)(A) explicitly refers to unbundled network
elements. Notwithstanding the lack of an express reference to unbundled
network elements in section 214(e), however, we conclude that it is
unlikely that Congress intended to deny designation as eligible to a
carrier that relies, even in part, on unbundled network elements to
provide service, given the central role of unbundled network elements
as a means of entry into local markets. Because the statute is
ambiguous with respect to whether a carrier providing service through
the use of unbundled network elements is providing service through its
``own facilities'' or through
[[Page 32872]]
the ``resale of another carrier's services,'' we look to other sections
of the Act and to legislative intent to resolve the ambiguity.
72. In so doing, we conclude that Congress did not intend to deny
designation as eligible to a carrier that relies exclusively on
unbundled network elements to provide service in a high cost area,
given that the Act contemplates the use of unbundled network elements
as one of the three primary paths of entry into local markets. We have
consistently held that Congress did not intend to prefer one form of
local entry over another. As we recognized in the Local Competition
Order (61 FR 45476 (August 29, 1996)), ``[t]he Act contemplates three
paths of entry into the local market--the construction of new networks,
the use of unbundled elements of the incumbent's network, and resale.
The 1996 Act requires us to implement rules that eliminate statutory
and regulatory barriers and remove economic impediments to each.'' In
the Recommended Decision, the Joint Board explicitly stated that
``[c]ompetitive neutrality'' is ``embodied in'' section 214(e). Indeed,
the Joint Board recommended ``that the Commission reject arguments that
only those telecommunications carriers that offer universal service
wholly over their own facilities should be eligible for universal
service [support].''
73. We conclude that the phrase ``resale of another carrier's
services'' does not encompass the provision of service through
unbundled network elements. The term ``resale'' used in section 251
refers to an ILEC's duty to offer, at wholesale rates, ``any
telecommunications service that the carrier provides at retail'' as
well as the duty of every LEC not to prohibit ``the resale of its
telecommunications services.'' Section 251 makes it clear that an
ILEC's duty to offer retail services at wholesale rates is distinct
from an ILEC's obligation to provide ``nondiscriminatory access to
network elements on an unbundled basis.'' We find that the statute's
use, in section 214(e)(1), of the term used in sections 251(b)(1) and
251(c)(4)--``resale''--suggests that Congress contemplated that the
provision of services via unbundled network elements was different from
the ``resale of another carrier's services.'' In addition, to interpret
the phrase ``resale of another carrier's services'' to encompass the
provision of a telecommunications service through use of unbundled
network elements obtained from an ILEC would require the Commission to
find that the provision of nondiscriminatory access to an unbundled
network element by an ILEC is the provision of a ``telecommunications
service''--an interpretation that is not consistent with the Act. A
``network element'' is defined as a ``facility or equipment used in the
provision of a telecommunications service'' that also ``includes
features, functions, and capabilities that are provided by means of
such facility or equipment * * *.'' A ``network element'' is not a
``telecommunications service.''
74. We conclude that, when a requesting carrier obtains an
unbundled element, such element--if it is also a ``facility''--is the
requesting carrier's ``own facilit[y]'' for purposes of section
214(e)(1)(A) because the requesting carrier has the ``exclusive use of
that facility for a period of time.'' The courts have recognized many
times that the word ``own''--as well as its numerous derivations--is a
``generic term'' that ``varies in its significance according to its
use'' and ``designate[s] a great variety of interests in property.''
The word ``ownership'' is said to ``var(y) in its significance
according to the context and the subject matter with which it is
used.'' The word ``owner'' is a broad and flexible word, applying not
only to legal title holders, but to others enjoying the beneficial use
of property. Indeed, property may have more than one ``owner'' at the
same time, and such ``ownership'' does not merely involve title
interest to that property.
75. Additionally, we note that section 214(e)(1) uses the term
``own facilities'' and does not refer to facilities ``owned by'' a
carrier. We conclude that this distinction is salient based on our
finding that, unlike the term ``owned by,'' the term ``own facilities''
reasonably could refer to property that a carrier considers its own,
such as unbundled network elements, but to which the carrier does not
hold absolute title.
76. In the context of section 214(e)(1)(A), unbundled network
elements are the requesting carrier's ``own facilities'' in that the
carrier has obtained the ``exclusive use'' of the facility for its own
use in providing services, and has paid the full cost of the facility,
including a reasonable profit, to the ILEC. The opportunity to purchase
access to unbundled network elements, as we explained in the Local
Competition Order, provides carriers with greater control over the
physical elements of the network, thus giving them opportunities to
create service offerings that differ from services offered by an
incumbent. This contrasts with the abilities of wholesale purchasers,
which are limited to offering the same services that an incumbent
offers at retail. This greater control distinguishes carriers that
provide service over unbundled network elements from carriers that
provide service by reselling wholesale service and leads us to conclude
that, as between the two terms, carriers that provide service using
unbundled network elements are better characterized as providing
service over their ``own facilities'' as opposed to providing ``resale
of another carrier's services.''
77. Unlike a pure reseller, a carrier that provides service using
unbundled network elements bears the full cost of providing that
element, even in high cost areas. Section 252(d)(1)(A)(i) requires that
the price of an unbundled network element be based on cost; a carrier
that purchases access to an unbundled network element incurs all of the
forward-looking costs associated with that element. We conclude that
universal service support should be provided to the carrier that incurs
the costs of providing service to a customer. Because a carrier that
purchases access to an unbundled network element incurs the costs of
providing service, it is reasonable for us to find that such a carrier
should be entitled to universal service support for the elements it
obtains.
78. We conclude that interpreting the term ``own facilities'' to
include unbundled network elements is the most reasonable
interpretation of the statute, given Congress's intent that all three
forms of local entry must be treated in a competitively neutral manner.
If the term ``own facilities'' is interpreted not to include service
provided through unbundled network elements, however, a carrier
providing service using unbundled network elements would suffer a
substantial cost disadvantage compared with carriers using other entry
strategies. In effect, excluding a competitive local exchange carrier
(CLEC) that uses exclusively unbundled network elements from being
designated an eligible carrier could make it cost-prohibitive for CLECs
choosing this entry strategy to serve high cost areas because ILECs
serving those areas will receive universal service support. We cannot
reconcile these implications with the ``pro-competitive'' goals of the
1996 Act and the goals of universal service and section 254. As a
result, the most reasonable interpretation of section 214(e)(1)(A) is
that the phrase ``own facilities'' includes the provision of service
through unbundled network elements, and that a carrier that uses
[[Page 32873]]
exclusively unbundled network elements to serve customers would be
entitled to receive the support payment, subject to the cap that we
describe below, that would allow it to compete with carriers utilizing
other entry strategies.
79. To hold otherwise would threaten the central principles of the
universal service system and the 1996 Act. In the Local Competition
Order, we explicitly stated that, in enacting section 251(c)(3),
Congress did not intend to restrict the entry of CLECs that use
exclusively unbundled network elements. Indeed, entry by exclusive use
of unbundled elements might be common in high cost areas--for example,
a carrier considering providing service to a single high-volume
customer or only to a portion of a high cost area might be encouraged
to offer service using unbundled elements throughout an entire service
area if it could compete with the incumbent and other entrants that may
already be receiving a payment from the universal service fund.
80. If we interpreted the term ``own facilities'' not to include
the use of unbundled network elements, the end result would be that the
entry strategy that includes the exclusive use of unbundled network
elements would be the only form of entry that would not benefit from,
either directly or indirectly, universal service support. A carrier
that has constructed all of its facilities would certainly be eligible
for support under section 214(e)(1), as would an entrant that offers
service through a mix of facilities that it had constructed and resold
services. A pure reseller indirectly receives the benefit of the
support payment, because, as discussed above, the retail rate of the
resold service already incorporates the support paid to the underlying
incumbent carrier. Such an environment--in which some forms of entry
are eligible for support but one form of entry is not--is not
``competitively neutral.'' In addition, this outcome would create an
artificial disincentive for carriers using unbundled elements to enter
into high cost areas.
81. Several commenters urge us to adopt an interpretation of the
term ``own facilities'' that would exclude the use of unbundled network
elements. These commenters assert that, in light of the Joint Board's
recommendation that support be ``portable,'' a narrow interpretation of
the section 214(e) facilities requirement is necessary to ensure that
ILECs receive adequate funds to construct, maintain, and upgrade their
telecommunications networks. We are not persuaded by these arguments
because we find that the pricing rule in section 252(d)(1) that applies
to unbundled network elements assures that the costs associated with
the construction, maintenance, and repair of an incumbent's facilities,
including a reasonable profit, would already be recovered through the
payments made by the carrier purchasing access to unbundled network
elements. The carrier purchasing access to those elements will, in
turn, receive a universal service support payment. To the extent that
these commenters' arguments are premised on their contention that
unbundled network element prices do not compensate ILECs for their
embedded costs, and that ILECs are constitutionally entitled to
recovery of their embedded costs, we will address that issue in a later
proceeding in our Access Charge Reform docket.
82. Although the states have the ultimate responsibility under
section 214(e) for deciding whether a particular carrier should be
designated as eligible, we are fully authorized to interpret the
statutory provisions that govern that determination. This language
appears in a federal statute, establishing a federal universal service
program. It is clearly appropriate for a federal agency to interpret
the federal statute that it has been entrusted with implementing.
Moreover, we believe it is particularly important for us to set out a
federal interpretation of the ``own facilities'' language in section
214, particularly as it relates to the use of unbundled network
elements. We note that the ``own facilities'' language in section
214(e)(1)(A) is very similar to language in section 271(c)(1)(A),
governing Bell operating company (BOC) entry into interLATA services.
While we are not interpreting the language in section 271 in this
Order, given the similarity of the language in these two sections, we
would find it particularly troubling to allow the states unfettered
discretion in interpreting and applying the ``own facilities'' language
in section 214(e). In order to avoid the potential for conflicting
interpretations from different states, we believe it is important to
set forth a single, federal interpretation, so that the ``own
facilities'' language is consistently construed and applied.
83. Level of Facilities Required To Satisfy the Facilities Requirement
We adopt the Joint Board's conclusion that a carrier need not offer
universal service wholly over its own facilities in order to be
designated as eligible because the statute allows an eligible carrier
to offer the supported services through a combination of its own
facilities and resale. We find that the statute does not dictate that a
carrier use a specific level of its ``own facilities'' in providing the
services designated for universal service support given that the
statute provides only that a carrier may use a ``combination of its own
facilities and resale'' and does not qualify the term ``own
facilities'' with respect to the amount of facilities a carrier must
use. For the same reasons, we find that the statute does not require a
carrier to use its own facilities to provide each of the designated
services but, instead, permits a carrier to use its own facilities to
provide at least one of the supported services. By including carriers
relying on a combination of facilities and resale within the class of
carriers eligible to receive universal service support, and by
declining to specify the level of facilities required, we believe that
Congress sought to accommodate the various entry strategies of common
carriers seeking to compete in high cost areas. We conclude, therefore,
that, if a carrier uses its own facilities to provide at least one of
the designated services, and the carrier otherwise meets the definition
of ``facilities'' adopted above, then the facilities requirement of
section 214(e) is satisfied. For example, we conclude that a carrier
could satisfy the facilities requirement by using its own facilities to
provide access to operator services, while providing the remaining
services designated for support through resale.
84. In arriving at this conclusion, we compare Congress's use of
qualifying language in the section 271(c)(1)(A) facilities requirement
with the absence of such language in the section 214(e) requirement.
Section 271(c)(1)(A) provides that a BOC that is seeking authorization
to originate in-region, interLATA services must enter into
interconnection agreements with competitors that offer ``telephone
exchange service either exclusively over their own facilities or
predominantly over their own telephone exchange service facilities in
combination with the resale of the telecommunications services of
another carrier.'' By contrast, section 214(e) does not mandate the use
of any particular level of a carrier's own facilities.
85. Several ILECs assert that eligible carriers that furnish only a
de minimis level of facilities should not be entitled to receive
universal service support. ILECs are concerned that, unless a carrier
is required to provide a substantial level of its own facilities
throughout a service area, a CLEC may be able to receive a level of
support in excess of its actual costs, and thereby gain a competitive
advantage over
[[Page 32874]]
ILECs. For example, ILECs argue that, because the prices of unbundled
network elements may be averaged over smaller geographic areas than
universal service support, the cost that a competitive carrier will
incur for serving a customer using unbundled network elements will not
match the level of universal service support the CLEC will receive for
serving that customer.
86. This asymmetry could arise because of the procedures currently
used to calculate the cost of serving a customer. Because it is
administratively infeasible to calculate the precise cost of providing
service to each customer in a service area, and because rate averaging
and the absence of competition generally have allowed it, the cost of
providing service has been calculated over a geographic region, such as
a study area, and the total cost of providing service in that area has
been averaged over the number of customers in that area. This average
cost provides the basis for calculating universal service support in
that area. To illustrate, the average cost of providing service in a
study area might be $50.00 per customer, but the cost of providing
service might be $10.00 in urban portions of the area, $40.00 in the
suburban portions, and $100.00 in outlying regions. Although the cost
of providing the supported services will be calculated at the study
area level in 1998, the cost of unbundled network elements is
calculated by the states, possibly over geographic areas smaller than
study areas. Thus, the total support given to a carrier per customer in
a study area might be $20.00, but the price of purchasing access to
unbundled network elements to serve a customer in that study area might
be $10.00, $60.00, or $100.00, depending on where the customer is
located. Consequently, a CLEC might pay $10.00 to purchase access to an
unbundled network element in order to serve a customer in a city, but
receive $20.00 in universal service support.
87. We emphasize that the uneconomic incentives described above are
largely connected with the modified existing high cost mechanism that
will be in place until January 1, 1999. We also conclude, based on the
reasons set forth immediately below, that the situation described by
the ILECs will occur, at most, infrequently during this period. We
conclude that the ILECs' concerns should be significantly alleviated
when the forward-looking and more precisely targeted methodology to
calculate high cost support becomes effective. Specifically, in our
forthcoming proceeding on the high cost support mechanism that will
take effect January 1, 1999, we intend to address fully any potential
dissimilarities between the level of disaggregation of universal
service support and the level of disaggregation of unbundled network
element prices. Nevertheless, we agree with the ILECs that we should
limit the ability of competitors to make decisions to enter local
markets based on artificial economic incentives created under the
modified existing mechanism.
88. To this end, we take the following actions to reduce the
incentives that a CLEC may have to enter a rural or non-rural market in
an attempt to exploit the asymmetry described above. First, we conclude
that a carrier that serves customers by reselling wholesale service may
not receive universal service support for those customers that it
serves through resale alone. In addition, we conclude below that a CLEC
using exclusively unbundled network elements to provide the supported
services will receive a level of universal service support not
exceeding the price of the unbundled network elements to which it
purchases access.
89. In markets served by non-rural carriers, we conclude that the
risk of the anticompetitive behavior described above is minimal
because, as of January 1, 1999, universal service support for non-rural
high cost carriers will be determined using a forward-looking
methodology that will more precisely target support. We doubt that
carriers will incur the costs necessary to meet the eligibility
requirements of section 214(e) in order to exploit this opportunity
when the support mechanisms will soon change. Further, the incentive
for a CLEC to enter an area served by a non-rural carrier to gain an
unfair advantage is diminished because the level of universal service
support per customer in these areas is small relative to the start-up
costs of attracting customers and the cost of providing service to
those customers using unbundled network elements.
90. We also expect that state commissions, in the process of making
eligibility determinations, will play an important part in minimizing
the risk of anticompetitive behavior as described above. Under section
214(e)(3), a state commission must make a finding that designation of
more than one eligible carrier is in the public interest in a service
area that is served by a rural telephone company. Accordingly, under
section 214(e)(3), a state commission may consider whether a
competitive carrier seeking designation as an eligible carrier will be
able to exploit unjustly the asymmetry between the price of unbundled
network elements and the level of universal service support. Under
section 251(f), rural telephone companies are not required to provide
nondiscriminatory access to unbundled network elements pursuant to
section 251(c)(3) until the relevant state commission determines that a
bona fide request under section 251(c) for such access ``is not unduly
economically burdensome, is technically feasible, and is consistent
with section 254 (other than sections (b)(7) and (c)(1)(D) thereof).''
Thus, state commissions may also consider whether a CLEC's request for
nondiscriminatory access to unbundled network elements is consistent
with universal service, and will be able to take into account the
arguments of ILECs to the extent that they are not addressed by the
measures discussed herein.
91. Location of Facilities for Purposes of Section 214(e)
Although we conclude above that the term ``facilities'' includes
any physical components of the telecommunications network that are used
in the transmission or routing of the supported services, we find that
the statute does not mandate that the facilities be physically located
in that service area. We find that it is reasonable to draw a
distinction between particular facilities based on the relationship of
those facilities to the provision of specific services as opposed to
their physical location within a service area both for reasons of
promoting economic efficiency as well as competitive neutrality. We
conclude that our determination not to impose restrictions based solely
on the location of facilities used to provide the supported services is
competitively neutral in that it will accommodate the various
technologies and entry strategies that carriers may employ as they seek
to compete in high cost areas.
92. Eligibility of Resellers
We adopt the Joint Board's analysis and conclusion that section
214(e)(1) precludes a carrier that offers the supported services solely
through resale from being designated eligible in light of the statutory
requirement that a carrier provide universal service, at least in part,
over its own facilities. Under any reasonable interpretation of the
term ``facilities,'' a ``pure'' reseller uses none of its own
facilities to serve a customer. Rather, a reseller purchases service
from a facilities owner and resells that service to a customer. As
explained above, resellers should not be entitled to receive universal
service support directly from federal universal service
[[Page 32875]]
mechanisms because the universal service support payment received by
the underlying provider of resold services is reflected in the price
paid by the reseller to the underlying provider.
93. We conclude that no party has demonstrated that the statutory
criteria for forbearance have been met and therefore we agree with the
Joint Board that we cannot exercise our forbearance authority to permit
``pure'' resellers to become eligible for universal service support. In
order to exercise our authority under section 10(a) of the Act to
forbear from applying a provision of the Act, we must determine that:
(1) Enforcement of the provision ``is not necessary to ensure that the
charges, practices, classifications, or regulations by, for, or in
connection with that telecommunications carrier or telecommunications
service are just and reasonable and are not unjustly or unreasonably
discriminatory;'' (2) enforcement of such provision ``is not necessary
for the protection of consumers;'' and (3) ``forbearance from applying
such provision * * * is consistent with the public interest.'' In
addition, we must consider ``whether forbearance * * * will promote
competitive market conditions.'' If pure resellers could be designated
eligible carriers and were entitled to receive support for providing
resold services, they, in essence, would receive a double recovery of
universal service support because they would recover the support
incorporated into the wholesale price of the resold services in
addition to receiving universal service support directly from federal
universal service support mechanisms. Making no finding with respect to
the first two criteria, we conclude that it is neither in the public
interest nor would it promote competitive market conditions to allow
resellers to receive a double recovery. Indeed, allowing such a double
recovery would appear to favor resellers over other carriers, which
would not promote competitive market conditions. Allowing resellers a
double recovery also would be inconsistent with the principle of
competitive neutrality because it would provide inefficient economic
signals to resellers.
94. We adopt the Joint Board's recommendation that no additional
guidelines are necessary to interpret section 254(e)'s requirement that
a carrier that receives universal service support shall only use that
support for the facilities and services for which it is intended. We
agree with the Joint Board's conclusion that the optimal approach to
minimizing misuse of universal service support is to adopt mechanisms
that will set universal support so that it reflects the costs of
providing universal service efficiently. We conclude that we will adopt
the Joint Board's recommended approach to minimizing the misuse of
support by taking steps to implement forward-looking high cost support
mechanisms and implementing the rules set forth in our accompanying
Access Charge Reform Order. We adopt the Joint Board's recommendation
that we rely upon state monitoring of the provision of supported
services to ensure that universal service support is used as intended
until competition develops. We agree with the Joint Board that, if it
becomes evident that federal monitoring is necessary to prevent the
misuse of universal service support because states are unable to
undertake such monitoring, the Commission, in cooperation with the
Joint Board, will consider the need for additional action. In addition,
we agree with the Joint Board that no additional rules are necessary to
ensure that only eligible carriers receive universal service support
because a carrier must be designated as an eligible carrier by a state
commission in order to receive funding. Finally, as discussed below,
because the services included in the Lifeline program are supported
services, we note that only eligible carriers may receive universal
service support for these services, as required by section 254(e).
95. State Adoption of Non-Rural Service Areas
We adopt the Joint Board's finding that sections 214(e)(2) and
214(e)(5) require state commissions to designate the area throughout
which a non-rural carrier must provide universal service in order to be
eligible to receive universal service support. We agree with the Joint
Board that, although this authority is explicitly delegated to the
state commissions, states should exercise this authority in a manner
that promotes the pro-competitive goals of the 1996 Act as well as the
universal service principles of section 254. We also adopt the Joint
Board's recommendation that states designate service areas that are not
unreasonably large. Specifically, we conclude that service areas should
be sufficiently small to ensure accurate targeting of high cost support
and to encourage entry by competitors. We also agree that large service
areas increase start-up costs for new entrants, which might discourage
competitors from providing service throughout an area because start-up
costs increase with the size of a service area and potential
competitors may be discouraged from entering an area with high start-up
costs. As such, an unreasonably large service area effectively could
prevent a potential competitor from offering the supported services,
and thus would not be competitively neutral, would be inconsistent with
section 254, and would not be necessary to preserve and advance
universal service.
96. We agree with the Joint Board that, if a state commission
adopts as a service area for its state the existing study area of a
large ILEC, this action would erect significant barriers to entry
insofar as study areas usually comprise most of the geographic area of
a state, geographically varied terrain, and both urban and rural areas.
We concur in the Joint Board's finding that a state's adoption of
unreasonably large service areas might even violate several provisions
of the Act. We also agree that, if a state adopts a service area that
is simply structured to fit the contours of an incumbent's facilities,
a new entrant, especially a CMRS-based provider, might find it
difficult to conform its signal or service area to the precise contours
of the incumbent's area, giving the incumbent an advantage. We
therefore encourage state commissions not to adopt, as service areas,
the study areas of large ILECs. In order to promote competition, we
further encourage state commissions to consider designating service
areas that require ILECs to serve areas that they have not
traditionally served. We recognize that a service area cannot be
tailored to the natural facilities-based service area of each entrant,
we note that ILECs, like other carriers, may use resold wholesale
service or unbundled network elements to provide service in the
portions of a service area where they have not constructed facilities.
Specifically, section 254(f) prohibits states from adopting regulations
that are ``inconsistent with the Commission's rules to preserve and
advance universal service.'' State designation of an unreasonably large
service area could also violate section 253 if it ``prohibit[s] or
ha[s] the effect of prohibiting the ability of an entity to provide any
interstate or intrastate telecommunications service,'' and is not
``competitively neutral'' and ``necessary to preserve and advance
universal service.''
97. Authority To Alter Rural Service Areas
We find that, in contrast with non-rural service areas, section
214(e)(5) requires the Commission and the states to act in concert to
alter the service areas for areas served by rural carriers. We conclude
that the plain language of section 214(e)(5) dictates that neither
[[Page 32876]]
the Commission nor the states may act alone to alter the definition of
service areas served by rural carriers. In addition, we conclude that
the language ``taking into account'' indicates that the Commission and
the states must each give full consideration to the Joint Board's
recommendation and must each explain why they are not adopting the
recommendations included in the most recent Recommended Decision or the
recommendations of any future Joint Board convened to provide
recommendations with respect to federal universal service support
mechanisms. Furthermore, we conclude that the ``pro-competitive, de-
regulatory'' objectives of the 1996 Act would be furthered if we
minimize any procedural delay caused by the need for federal-state
coordination on this issue. Therefore, we conclude that we should
determine, at this time, the procedure by which the state commissions,
when proposing to redefine a rural service area, may obtain the
agreement of the Commission.
98. Under the procedures we adopt, after a state has concluded that
a service area definition different from a rural telephone company's
study area would better serve the universal service principles found in
section 254(b), either the state or a carrier must seek the agreement
of the Commission. Upon the receipt of the proposal, the Commission
will issue a public notice on the proposal within 14 days. If the
Commission does not act upon the proposal within 90 days of the release
date of the public notice, the proposal will be deemed approved by the
Commission and may take effect according to the state procedure. If the
Commission determines further consideration is necessary, it will
notify the state commission and the relevant carriers and initiate a
proceeding to determine whether it can agree to the proposal. A
proposal subject to further consideration by the Commission may not
take effect until both the state commission and this Commission agree
to establish a different definition of a rural service area, as
required by section 214(e)(5). Similarly, if the Commission initiates a
proceeding to consider a definition of a rural service area that is
different from the ILEC's study area, we shall seek the agreement of
the relevant state commission by submitting a petition to the relevant
state commission according to that state commission's procedure. No
definition of a rural service area proposed by the Commission will take
effect until both the state commission and this Commission agree to
establish a different definition. In keeping with our intent to use
this procedure to minimize administrative delay, we intend to complete
consideration of any proposed definition of a service area promptly.
99. Adoption of Study Areas
We find that retaining the study areas of rural telephone companies
as the rural service areas is consistent with section 214(e)(5) and the
policy objectives underlying section 254. We agree that, if
competitors, as a condition of eligibility, must provide services
throughout a rural telephone company's study area, the competitors will
not be able to target only the customers that are the least expensive
to serve and thus undercut the ILEC's ability to provide service
throughout the area. In addition, we agree with the Joint Board that
this decision is consistent with our decision to use a rural ILEC's
embedded costs to determine, at least initially, that company's costs
of providing universal service because rural telephone companies
currently average such costs at the study-area level. Some wireless
carriers have expressed concern that they might not be able to provide
service throughout a rural telephone company's study area because that
study area might be noncontiguous. In such a case, we note that this
carrier could supplement its facilities-based service with service
provided via resale. In response to the concerns expressed by wireless
carriers, however, we also encourage states, as discussed more fully
below, to consider designating rural service areas that consist of only
the contiguous portions of ILEC study areas. Further, we agree that any
change to a study area made by the Commission should result in a
corresponding change to the corresponding rural service area. Thus, we
encourage a carrier seeking to alter its study area to also request a
corresponding change in its service area, preferably as a part of the
same regulatory proceeding. If the carrier is not initiating any
proceedings with this Commission, it should seek the approval of the
relevant state commission first, and then either the state commission
or the carrier should seek Commission agreement according to the
procedures described above. We agree with the Joint Board that this
differing treatment of rural carriers sufficiently protects smaller
carriers and is consistent with the Act.
100. We also conclude that universal service policy objectives may
be best served if a state defines rural service areas to consist only
of the contiguous portion of a rural study area, rather than the entire
rural study area. We conclude that requiring a carrier to serve a non-
contiguous service area as a prerequisite to eligibility might impose a
serious barrier to entry, particularly for wireless carriers. We find
that imposing additional burdens on wireless entrants would be
particularly harmful to competition in rural areas, where wireless
carriers could potentially offer service at much lower costs than
traditional wireline service. Therefore, we encourage states to
determine whether rural service areas should consist of only the
contiguous portions of an ILEC's study area, and to submit such a
determination to the Commission according to the procedures we describe
above. We note that state commissions must make a special finding that
the designation is in the public interest in order to designate more
than one eligible carrier in a rural service area, and we anticipate
that state commissions will be able to consider the issue of contiguous
service areas as they make such special findings.
101. We agree with the Joint Board's analysis and conclusion that
it would be consistent with the Act for the Commission to base the
actual level of universal service support that carriers receive on the
cost of providing service within sub-units of a state-defined service
area, such as a wire center or a census block group (CBG). We reject
Bell Atlantic's argument that the language in section 214(e)(5) gives
the states exclusive authority to establish non-rural service areas
``for the purpose of determining universal service obligations and
support mechanisms.'' As the Joint Board concluded, the quoted language
refers to the designation of the area throughout which a carrier is
obligated to offer service and advertise the availability of that
service, and defines the overall area for which the carrier may receive
support from federal universal service support mechanisms. Bell
Atlantic is therefore incorrect when it argues that the approach
recommended by the Joint Board ignores the phrase ``and support
mechanisms.'' The universal service support a carrier will receive will
be based on the Commission's determination of the cost of providing the
supported services in the service area designated by a state
commission.
102. We conclude that, consistent with our decision to use a
modification of the existing high cost mechanisms until January 1,
1999, the Commission will continue to use study areas to calculate the
level of high cost support that carriers receive. Because we are
continuing to use study areas to calculate high cost support until
January 1, 1999, if a state commission follows our admonition to
designate a service
[[Page 32877]]
area that is not unreasonably large, that service area will likely be
smaller than the federal support areas during that period. We conclude
that the decision to continue to use study areas to calculate the level
of high cost support is nonetheless consistent with the Act for two
reasons. First, as the Joint Board found, the Act does not prohibit the
Commission from calculating support over a geographic area that is
different from a state-defined service area. Second, so long as a
carrier does not receive support for customers located outside the
service area for which a carrier has been designated eligible by a
state commission, our decision is consistent with section 214(e)(5)'s
requirement that the area for which a carrier should receive universal
service support is a state-designated service area. We agree with the
Joint Board, however, that calculating support over small geographic
areas will promote efficient targeting of support. We therefore adopt
the Joint Board's recommendation and conclude that, after January 1,
1999, we will calculate the amount of support that carriers receive
over areas no larger than wire centers. We will further define support
areas as part of our continuing effort to perfect the method by which
we calculate forward-looking economic costs.
103. Unserved Areas
We agree with the Joint Board that we should not adopt rules at
this time governing how to designate carriers for unserved areas. We
conclude that the record remains inadequate for us to fashion a
cooperative federal-state program to select carriers for unserved
areas, as proposed in the NPRM. We conclude that, if, in the future, it
appears that a cooperative federal-state program is needed, we will
then revisit this issue and work with state commissions and the Joint
Board to create a program. We seek information that will allow us to
determine whether additional measures are needed. Therefore, we
strongly encourage state commissions to file with the Common Carrier
Bureau reports detailing the status of unserved areas in their states.
In order to raise subscribership to the highest possible levels, we
seek to determine how best to provide service to currently-unserved
areas in a cost-effective manner. We seek the assistance of state
commissions with respect to this issue.
104. Implementation
The administrator of the universal service support mechanisms shall
not disburse funds to a carrier providing service to customers until
the carrier has provided, to the administrator, a true and correct copy
of the decision of a state commission designating that carrier as an
eligible telecommunications carrier. A state commission seeking to
alter a rural service area has the choice of either filing itself, or
requiring an affected eligible telecommunications carrier to file, a
petition with the Commission seeking the latter's agreement with the
newly defined rural service area. We delegate authority to the Common
Carrier Bureau to propose and act upon state proposals to redefine a
rural service area.
Rural, Insular, and High Cost
105. Use of Forward-Looking Economic Cost
We agree with the Joint Board's recommendation that the proper
measure of cost for determining the level of universal service support
is the forward-looking economic cost of constructing and operating the
network facilities and functions used to provide the supported services
as defined per section 254(c)(1). We agree that, in the long run,
forward-looking economic cost best approximates the costs that would be
incurred by an efficient carrier in the market. The use of forward-
looking economic costs as the basis for determining support will send
the correct signals for entry, investment, and innovation.
106. We agree with the Joint Board that the use of forward-looking
economic cost will lead to support mechanisms that will ensure that
universal service support corresponds to the cost of providing the
supported services, and thus, will preserve and advance universal
service and encourage efficiency because support levels will be based
on the costs of an efficient carrier. Because forward-looking economic
cost is sufficient for the provision of the supported services, setting
support levels in excess of forward-looking economic cost would enable
the carriers providing the supported services to use the excess to
offset inefficient operations or for purposes other than ``the
provision, maintenance, and upgrading of facilities and services for
which the support is intended.''
107. We also agree that a forward-looking economic cost methodology
is the best means for determining the level of universal service
support. We find that a forward-looking economic cost methodology
creates the incentive for carriers to operate efficiently and does not
give carriers any incentive to inflate their costs or to refrain from
efficient cost-cutting. Moreover, a forward-looking economic cost
methodology could be designed to target support more accurately by
calculating costs over a smaller geographical area than the cost
accounting systems that the ILECs currently use.
108. Embedded Cost
Several ILECs have asserted that only a universal service mechanism
that calculates support based on a carrier's embedded cost will provide
sufficient support. As we discussed, the use of forward-looking
economic cost will provide sufficient support for an efficient provider
to provide the supported services for a particular geographic area.
Thus, we conclude that the universal service support mechanisms should
be based on forward-looking economic cost, and we reject the arguments
for basing the support mechanisms on a carrier's embedded cost.
109. To the extent that it differs from forward-looking economic
cost, embedded cost provide the wrong signals to potential entrants and
existing carriers. The use of embedded cost would discourage prudent
investment planning because carriers could receive support for
inefficient as well as efficient investments. The Joint Board explained
that when ``embedded costs are above forward-looking costs, support of
embedded costs would direct carriers to make inefficient investments
that may not be financially viable when there is competitive entry.''
The Joint Board also explained that if embedded cost is below forward-
looking economic cost, support based on embedded costs would erect an
entry barrier to new competitors, because revenue per customer and
support, together, would be less than the forward-looking economic cost
of providing the supported services. Consequently, we agree with the
conclusion that support based on embedded cost could jeopardize the
provision of universal service. We also agree that the use of embedded
cost to calculate universal service support would lead to subsidization
of inefficient carriers at the expense of efficient carriers and could
create disincentives for carriers to operate efficiently.
110. ``Legacy'' Cost
Several commenters assert that the use of forward-looking economic
cost necessitates the establishment of a separate mechanism to
reimburse ILECs for their ``legacy cost,'' which they define to include
the under-depreciated portion of the plant and equipment.
[[Page 32878]]
Several ILECs contend that unless we explicitly provide a mechanism for
them to recover their under-depreciated costs, the use of forward-
looking economic cost to determine universal service support would
constitute a taking under the Fifth Amendment. No carrier, however, has
presented any specific evidence that the use of forward-looking
economic cost to determine support amounts will deprive it of property
without just compensation. Indeed, the mechanisms we are creating today
provide support to carriers in addition to other revenues associated
with the provision of service.
111. Construction Costs
US West proposes to establish a separate support mechanism for the
cost of constructing facilities. Under US West's proposal, the carrier
that first constructed the facility to serve an end user would receive
support for its construction costs, even if the end user switched to
another carrier. The second carrier to serve the end user would receive
support only for its operational expenses. Under the US West proposal,
only the carrier that constructed first, generally an ILEC, except in
currently unserved areas, would receive support to cover the
facilities' construction costs. We observe that allowing only the ILEC
to receive support for the construction of the facilities used to
provide universal service would, however, discourage new entrants from
constructing additional facilities in high cost areas, thereby
discouraging facilities-based competition, in contravention of
Congress's explicit goals. Further investigation is needed to determine
whether there are special circumstances, such as the need to attract
carriers to unserved areas or to upgrade facilities, in which it may or
may not be reasonable to compensate one-time costs with one-time
payments. Because we believe this issue should be examined further, we
will consider this proposal in a future proceeding.
112. Determination of Forward-Looking Economic Cost for Non-Rural
Carriers
Having adopted the Joint Board recommendation that universal
service support be based upon forward-looking economic cost, we next
consider how such cost should be determined. The Joint Board found that
cost models provide an ``efficient method of determining forward-
looking economic cost, and provide other benefits, such as the ability
to determine costs at smaller geographic levels than would be practical
using the existing cost accounting system.'' The Joint Board also found
that because they are not based on any individual company's costs, cost
models provide a competitively neutral estimate of the cost of
providing the supported services. Based on those conclusions, the Joint
Board recommended that the amount of universal service support a
carrier would receive should be calculated by subtracting a benchmark
amount from the cost of service for a particular geographic area, as
determined by the forward-looking economic cost model.
113. The Joint Board discussed the three cost models that had been
presented to it during the proceeding, but did not endorse a specific
model. The Joint Board concluded that, before a specific model could be
selected, several issues would need to be resolved, including how the
various assumptions among the models regarding basic input levels were
determined, which input levels were reasonable, what were the
relationships among the inputs, why certain functionalities included in
one model were not present in the other models, and which of the unique
set of engineering design principles for each model were most
reasonable.
114. Three different forward-looking cost models were submitted to
the Commission for consideration in response to the January 9 Public
Notice: the BCPM; the Hatfield model; and the TECM. These three models
use many different engineering assumptions and input values to
determine the cost of providing universal service. For example,
Hatfield 3.1 uses loading coils in its outside plant to permit the use
of longer copper loops, thereby reducing the amount of fiber required
for outside plant. In contrast, the BCPM relies more heavily on fiber
and avoids the use of loading coils; this assumption increases the cost
of service that BCPM predicts. Another example is that Hatfield designs
the interoffice network required to provide local service in a multiple
switch environment, while the BCPM accounts for this interoffice
service by allowing the user to input a switch investment percentage.
115. There has been significant progress in the development of the
two major models--the BCPM and Hatfield 3.1--since the Joint Board made
its recommendation. For example, the ability of both models to identify
which geographic areas are high cost for the provision of universal
service has been improved. The BCPM uses seven different density
groups, rather than the six zones used in the BCM2, to determine for a
given CBG the mixture of aerial, buried, and underground plant, feeder
fill factors, distribution fill factors, and the mix of activities in
placing plant, such as aerial placement or burying, and the cost per
foot to install plant. Hatfield also increased the number of density
zones, going from six density zones in Hatfield Version 2.2.2 to nine
in Hatfield 3.1.
116. While acknowledging remaining problems with the models in
their report to the Commission, the state members of the Joint Board
recommend that the Commission reject the TECM and select in this Order
one of the remaining models to determine the needed level of universal
service support in order to focus the efforts of industry participants
and regulators. Specifically, three of the state members recommend that
the Commission select the BCPM as the platform from which to seek
further refinement to the modeling process. The state members of the
Joint Board recommend that the non-rural carriers move to the use of a
model over a three-year period. According to the state members, such a
period will allow for continued evaluation of the model's accuracy and
permit any needed improvements to be made before non-rural carriers
receive support based solely on the model. The state members of the
Joint Board also recommend that the Commission and Joint Board members
and staff work with the administrator to monitor the use of the model.
117. We agree with the state members that the TECM should be
excluded from further consideration for use as the cost model because
the proponents have never provided nationwide estimates of universal
service support using that model. We also agree with the state members
that there are many issues that still need to be resolved before a cost
model can be used to determine support levels. In particular, the
majority state members note that the model input values should not be
accepted. Instead, they suggest specific input values for the cost of
equity, the debt-equity ratio, depreciation lives, the cost of
switches, the cost of digital loop carrier equipment and the percentage
of structures that should be shared. The majority state members are
also concerned with the models' logic for estimating building costs.
They see no justification for tying building costs to the number of
switched lines as Hatfield 3.1 does and they suggest that using BCPM's
technique of estimating building costs as a percent of switch costs is
not logical. In light of the wide divergence and frequent changes in
data provided to us, we agree with the recommendation of the dissenting
state members of the Joint Board that we cannot at this time reasonably
apply either of the models currently before us
[[Page 32879]]
to calculate forward-looking economic costs of providing universal
service.
118. The proposed cost models also use widely varying input values
to determine the cost of universal service, and in many cases the
proponents have not filed the underlying justification for the use of
those values. For example, BCPM no longer uses ARMIS expenses as the
basis for its expense estimates. Instead, BCPM bases expenses on a
survey of eight ILECs. Neither the survey instrument nor the individual
carrier responses to the survey have been filed with the Commission.
The proponents have not provided supporting information underlying
their determinations of expenses. This lack of support fails to meet
the Joint Board's criterion for evaluation that the underlying data and
computations should be available to all interested parties. We agree
with the state members of the Joint Board that this lack of support
makes it impossible to determine whether the estimated expenses are the
minimum necessary to provide service. The Hatfield 3.1 model also is
based on information that has not been fully made available to the
Commission and all interested parties. For example, the Hatfield 3.1
model adjusts the number of supported lines assigned to a CBG on the
basis of an undisclosed algorithm. This algorithm has not been filed
with the Commission. The application of this algorithm, however,
increased the number of households in one state by 34 percent.
Moreover, in regard to the fiber/copper cross-over point, the
proponents of the Hatfield 3.1 model have submitted no studies to show
that the decision concerning the cross-over point between the use of
copper and fiber that they chose represents the least-cost
configuration, as required by the Joint Board.
119. Despite significant and sustained efforts by the commenters
and the Commission, the versions of the models that we have reviewed to
date have not provided dependable cost information to calculate the
cost of providing service across the country. The majority state
members emphasize that their recommendation to use the BCPM is not an
endorsement of all aspects of the model, but rather that they regard
the model as the best platform at this time from which the Commission,
state commissions, and interested parties can make collective
revisions. Indeed, the report finds that neither the Hatfield 3.1 model
nor the BCPM meets the criteria set out by the Joint Board pertaining
to openness, verifiability, and plausibility. The report also discusses
several specific issues that the majority state members of the Joint
Board contend must be addressed before the BCPM can be considered for
use in determining support levels, including the dispersion of
population within a CBG, the plant-specific operating expenses used by
the model, and interoffice local transport investment. We agree with
the state members that there are significant unresolved problems with
each of these cost models, such as the input values for switching
costs, digital loop carrier equipment, depreciation rates, cost of
capital, and structure sharing. We also agree with them that line count
estimates should be more accurate and reflect actual ILEC counts.
120. Based on these problems with the models, we conclude that we
cannot use any of the models at this time as a means to calculate the
forward-looking economic cost of the network on which to base support
for universal service in high cost areas. Consequently, we believe that
it would be better to continue to review both the BCPM and Hatfield
models. Further review will allow the Commission and interested parties
to compare and contrast more fully the structure and the input values
used in these models. We find that continuing to examine the various
models will not delay our implementation of a forward-looking economic
cost methodology for determining support for rural, insular, and high
cost areas. As discussed above, we will issue a FNPRM on a forward-
looking cost methodology for non-rural carriers by the end of June
1997. We anticipate that by the end of the year we will choose a
specific model that we will use as the platform for developing that
methodology. We anticipate that we will seek further comment on that
selection and the refinements necessary to adopt a cost methodology by
August 1998 that will be used for non-rural carriers starting on
January 1, 1999. Consequently, as we explain below, we will continue
using mechanisms currently in place to determine universal service
support until January 1, 1999, while we resolve the issues related to
the forward-looking economic cost models.
121. We also agree with the dissenting state members of the Joint
Board that our actions are consistent with the requirements of section
254 because we have identified the services to be supported by federal
universal service support mechanisms, and we are setting forth a
specific timetable for implementation of our forward-looking cost
methodology. Moreover, our actions here are consistent with section
254's requirement that support should be explicit. Making ``implicit''
universal service subsidies ``explicit'' ``to the extent possible''
means that we have authority at our discretion to craft a phased-in
plan that relies in part on prescription and in part on competition to
eliminate subsidies in the prices for various products sold in the
market for telecommunications services. Consequently, we reject the
arguments that section 254 compels us immediately to remove all costs
associated with the provision of universal service from interstate
access charges. Under the timetable we have set forth here, we will
over the next year identify implicit interstate universal support and
make that support explicit, as further provided by section 254(e).
122. As the basis for calculating federal universal service support
in their states, we will use forward-looking economic cost studies
conducted by state commissions that choose to submit such cost studies
to determine universal service support. As discussed further below, we
today adopt criteria appropriate for determining federal universal
service support to guide the states as they conduct those studies. We
ask states to elect, by August 15, 1997, whether they will conduct
their own forward-looking economic cost studies. States that elect to
conduct such studies should file them with the Commission on or before
February 6, 1998. We will then seek comment on those studies and
determine whether they meet the criteria we set forth. The Commission
will review the studies and comments received, and only if we find that
the state has conducted a study that meets our criteria will we approve
those studies for use in calculating federal support for non-rural
eligible telecommunications carriers rural, insular, and high cost
areas to be distributed beginning January 1, 1999. We intend to work
closely with the states as they conduct these forward-looking economic
cost studies. We will also work together with the states and the Joint
Board to develop a uniform cost study review plan that would
standardize the format for presentation of cost studies in order to
facilitate review by interested parties and by the Commission.
123. If a state elects not to conduct its own forward-looking
economic cost study or that the state-conducted study fails to meet the
criteria we adopt today, the Commission will determine the forward-
looking economic cost of providing universal service in that state
according to the Commission's forward-looking cost methodology. We will
seek the Joint Board's assistance in developing our method of
calculating forward-looking economic cost, which
[[Page 32880]]
we intend to develop by building on the work already done by the Joint
Board, its staff, and industry proponents of various cost models. We
will issue a FNPRM by the end of June 1997 seeking additional
information on which to base the development of a reliable means of
determining the forward-looking economic cost of providing universal
service. We shall also separately seek information on issues such as
the actual cost of purchasing switches, the current cost of digital
loop carriers, and the location of customers in the lowest density
areas.
124. Criteria for Forward-Looking Economic Cost Determinations
Whether forward-looking economic cost is determined according to a
state-conducted cost study or a Commission-determined methodology, we
must prescribe certain criteria to ensure consistency in calculations
of federal universal service support. Consistent with the eight
criteria set out in the Joint Board recommendation, we agree that all
methodologies used to calculate the forward-looking economic cost of
providing universal service in rural, insular, and high cost areas must
meet the following criteria:
(1) The technology assumed in the cost study or model must be the
least-cost, most-efficient, and reasonable technology for providing the
supported services that is currently being deployed A model, however,
must include the ILECs' wire centers as the center of the loop network
and the outside plant should terminate at ILECs' current wire centers.
The loop design incorporated into a forward-looking economic cost study
or model should not impede the provision of advanced services. For
example, loading coils should not be used because they impede the
provision of advanced services. We note that the use of loading coils
is inconsistent with the Rural Utilities Services guidelines for
network deployment by its borrowers. Wire center line counts should
equal actual ILEC wire center line counts, and the study's or model's
average loop length should reflect the incumbent carrier's actual
average loop length.
(2) Any network function or element, such as loop, switching,
transport, or signaling, necessary to produce supported services must
have an associated cost.
(3) Only long-run forward-looking economic cost may be included.
The long-run period used must be a period long enough that all costs
may be treated as variable and avoidable. The costs must not be the
embedded cost of the facilities, functions, or elements. The study or
model, however, must be based upon an examination of the current cost
of purchasing facilities and equipment, such as switches and digital
loop carriers (rather than list prices).
(4) The rate of return must be either the authorized federal rate
of return on interstate services, currently 11.25 percent, or the
state's prescribed rate of return for intrastate services. We conclude
that the current federal rate of return is a reasonable rate of return
by which to determine forward looking costs. We realize that, with the
passage of the 1996 Act, the level of local service competition may
increase, and that this competition might increase the ILECs' cost of
capital. There are other factors, however, that may mitigate or offset
any potential increase in the cost of capital associated with
additional competition. For example, until facilities-based competition
occurs, the impact of competition on the ILEC's risks associated with
the supported services will be minimal because the ILEC's facilities
will still be used by competitors using either resale or purchasing
access to the ILEC's unbundled network elements. In addition, the cost
of debt has decreased since we last set the authorized rate of return.
The reduction in the cost of borrowing caused the Common Carrier Bureau
to institute a preliminary inquiry as to whether the currently
authorized federal rate of return is too high, given the current
marketplace cost of equity and debt. We will re-evaluate the cost of
capital as needed to ensure that it accurately reflects the market
situation for carriers.
(5) Economic lives and future net salvage percentages used in
calculating depreciation expense must be within the FCC-authorized
range. We agree with those commenters that argue that currently
authorized lives should be used because the assets used to provide
universal service in rural, insular, and high cost areas are unlikely
to face serious competitive threat in the near term. To the extent that
competition in the local exchange market changes the economic lives of
the plant required to provide universal service, we will re-evaluate
our authorized depreciation schedules. We intend shortly to issue a
notice of proposed rule making to further examine the Commission's
depreciation rules.
(6) The cost study or model must estimate the cost of providing
service for all businesses and households within a geographic region.
This includes the provision of multi-line business services, special
access, private lines, and multiple residential lines. Such inclusion
of multi-line business services and multiple residential lines will
permit the cost study or model to reflect the economies of scale
associated with the provision of these services.
(7) A reasonable allocation of joint and common costs must be
assigned to the cost of supported services. This allocation will ensure
that the forward-looking economic cost does not include an unreasonable
share of the joint and common costs for non-supported services.
(8) The cost study or model and all underlying data, formulae,
computations, and software associated with the model must be available
to all interested parties for review and comment. All underlying data
should be verifiable, engineering assumptions reasonable, and outputs
plausible.
(9) The cost study or model must include the capability to examine
and modify the critical assumptions and engineering principles. These
assumptions and principles include, but are not limited to, the cost of
capital, depreciation rates, fill factors, input costs, overhead
adjustments, retail costs, structure sharing percentages, fiber-copper
cross-over points, and terrain factors.
(10) The cost study or model must deaverage support calculations to
the wire center serving area level at least, and, if feasible, to even
smaller areas such as a Census Block Group, Census Block, or grid cell.
We agree with the Joint Board's recommendation that support areas
should be smaller than the carrier's service area in order to target
efficiently universal service support. Although we agree with the
majority of the commenters that smaller support areas better target
support, we are concerned that it becomes progressively more difficult
to determine accurately where customers are located as the support
areas grow smaller. As SBC notes, carriers currently keep records of
the number of lines served at each wire center, but do not know which
lines are associated with a particular CBG, CB, or grid cell. Carriers,
however, would be required to provide verification of customer location
when they request support funds from the administrator.
125. In order for the Commission to accept a state cost study
submitted to us for the purposes of calculating federal universal
service support, that study must be the same cost study that is used by
the state to determine intrastate universal service support levels
pursuant to section 254(f). A state need not perform a new cost study,
but may submit a cost study that has already been performed for
evaluation by the Commission. We also encourage a state, to the extent
possible and consistent
[[Page 32881]]
with the above criteria, to use its ongoing proceedings to develop
permanent unbundled network element prices as a basis for its universal
service cost study. This would reduce duplication and diminish
arbitrage opportunities that might arise from inconsistencies between
the methodologies for setting unbundled network element prices and for
determining universal service support levels. In particular, we wish to
avoid situations in which, because of different methodologies used for
pricing unbundled network elements and determining universal service
support, a carrier could receive support for the provision of universal
service that differs from the rate it pays to acquire access to the
unbundled network elements needed to provide universal service.
Consequently, to prevent differences between the pricing of unbundled
network elements and the determination of universal service support, we
urge states to coordinate the development of cost studies for the
pricing of unbundled network elements and the determination of
universal service support.
126. Development and Selection of a Suitable Forward-Looking Support
Mechanism for Rural Carriers
Consistent with our plan for non-rural carriers, we shall commence
a proceeding by October 1998 to establish forward-looking economic cost
mechanisms for rural carriers. Although a precise means of determining
forward-looking economic cost for non-rural carriers will be prescribed
by August 1998 and will take effect on January 1, 1999, rural carriers
will begin receiving support pursuant to support mechanisms
incorporating forward-looking economic cost principles only when we
have sufficient validation that forward-looking support mechanisms for
rural carriers produce results that are sufficient and predictable.
Consistent with the Joint Board's recommendation that mechanisms for
determining support for rural carriers incorporate forward-looking cost
principles, rather than embedded cost, we will work closely with the
Joint Board, state commissions, and interested parties to develop
support mechanisms that satisfy these principles.
127. To ensure that the concerns of rural carriers are thoroughly
addressed, Pacific Telecom suggests that a task force be established
specifically to study the development and impact of support mechanisms
incorporating forward-looking economic cost principles for rural
carriers. State Joint Board members and USTA have also recommended the
formation of a rural task force to study and develop a forward-looking
economic cost methodology for rural carriers. The state Joint Board
members contend that such a task force ``should provide valuable
assistance in identifying the issues unique to rural carriers and
analyzing the appropriateness of proxy cost models for rural
carriers.'' We support this suggestion. Such a task force should report
its findings to the Joint Board. We encourage the Joint Board to
establish the task force soon, so that its findings can be included in
any Joint Board report to the Commission prior to our issuance of the
FNPRM on a forward-looking economic cost methodology for rural carriers
by October 1998. Although the Joint Board has the responsibility to
appoint the members of the task force, we suggest that it include a
broad representation of industry, including rural carriers, as well as
a representative from remote and insular areas. We also suggest that
the meetings and records of the task force be open to the public.
128. Specifically, through the FNPRM, we will seek to determine
what mechanisms incorporating forward-looking economic cost principles
would be appropriate for rural carriers. We require that mechanisms
developed and selected for rural carriers reflect the higher operating
and equipment costs attributable to lower subscriber density, small
exchanges, and lack of economies of scale that characterize rural
areas, particularly in insular and very remote areas, such as Alaska.
We also require that cost inputs be selected so that the mechanisms
account for the special characteristics of rural areas in its cost
calculation outputs. We recognize the unique situation faced by
carriers serving Alaska and insular areas may make selection of cost
inputs for those carriers especially challenging. Thus, if the selected
mechanisms include a cost model, the model should use flexible inputs
to accommodate the variation in cost characteristics among rural study
areas due to each study area's unique population distribution.
Moreover, the Commission, working with the Joint Board, state
commissions, and other interested parties, will determine whether
calculating the support using geographic units other than CBGs would
more accurately reflect a rural carrier's costs. The Commission will
likewise consider whether such mechanisms should include a ``maximum
shift or change'' feature to ensure that the amount of support each
carrier receives will not fluctuate more than an established amount
from one year to the next, similar to the provision in
Sec. 36.154(f)(1) of the Commission's rules to mitigate separations and
high cost fund changes.
129. The Commission with the Joint Board's assistance will also
consider whether a competitive bidding process could be used to set
support levels for rural carriers. The record does not support adoption
of competitive bidding as a support mechanism at this time. The FNPRM
will examine the development of such a competitive bidding process that
will meet the requirements of both sections 214(e) and 254.
130. Applicable Benchmarks
The Joint Board recommended that the Commission adopt a benchmark
based on nationwide average revenue per line to calculate the support
eligible telecommunications carriers would receive for serving rural,
insular, and high cost areas. The Joint Board recommended that the
support that an eligible telecommunications carrier receives for
serving a supported line in a particular geographic area should be the
cost of providing service calculated using forward-looking economic
cost minus a benchmark amount. The benchmark is the amount subtracted
from the cost of providing service that is the basis for determining
the support provided from the federal universal service support
mechanisms.
131. The Joint Board recommended setting the benchmark at the
nationwide average revenue per line, because ``that average reflects a
reasonable expectation of the revenues that a telecommunications
carrier would be reasonably expected to use to offset its costs, as
estimated in the proxy model.'' Because it recommended that eligible
residential and single-line business be supported, with single-line
businesses receiving less support, the Joint Board recommended defining
two benchmarks, one for residential service and a second for single-
line business service. Because they found that a revenue-based
benchmark will require periodic review and more administrative
oversight than a cost-based benchmark, however, the majority state
members of the Joint Board recommended, in their second report to the
Commission the use of a benchmark based on the nationwide average cost
of service as determined by the cost model.
132. We agree with the Joint Board's recommendation, and intend to
establish a nationwide benchmark based on average revenues per line for
local, discretionary, interstatecaretA and intrastate access
services, and other telecommunications revenues that will be used with
either a cost model or a
[[Page 32882]]
cost study to determine the level of support carriers will receive for
lines in a particular geographic area. A non-rural eligible
telecommunications carrier could draw from the federal universal
service support mechanism for providing supported services to a
subscriber only if the cost of serving the subscriber, as calculated by
the forward-looking cost methodology, exceeds the benchmark. We note
that a majority of the commenters support the use of a benchmark based
on revenues per line. We also agree with the Joint Board that there
should be separate benchmarks for residential service and single-line
business service.
133. Consistent with the Joint Board's recommendation, we shall
include revenues from discretionary services in the benchmark. We agree
with Time Warner that a determination of the amount of support a
carrier needs to serve a high cost area should reflect consideration of
the revenues that the carrier receives from providing other local
services, such as discretionary services. As the Joint Board noted,
those revenues offset the costs of providing local service. Setting the
benchmark at a level below the average revenue per line, including
discretionary services, would allow a carrier to recover the costs of
discretionary services from customers purchasing these discretionary
services and from the universal service mechanisms. This unnecessary
payment would increase the size of the universal service support
mechanisms, and consequently require larger contributions from all
telecommunications carriers. We agree that competition could reduce
revenues from a particular service, we anticipate that the development
of competition in the local market will also lead to the development of
new services that will produce additional revenues per line and to
reductions in the costs of providing the services generating those
revenues. We will also review the benchmark at the same time we review
the means for calculating forward-looking economic cost. Thus, at these
periodic reviews, we can adjust both the forward-looking cost
methodology and the benchmark to reflect the positive effects of
competition.
134. We include revenues from discretionary services in the
benchmark for additional reasons. The costs of those services are
included in the cost of service estimates calculated by the forward-
looking economic cost models that we will be evaluating further in the
FNPRM. Revenues from services in addition to the supported services
should, and do, contribute to the joint and common costs they share
with the supported services. Moreover, the former services also use the
same facilities as the supported services, and it is often impractical,
if not impossible, to allocate the costs of facilities between the
supported services and other services. For example, the same switch is
used to provide both supported services and discretionary services.
Consequently, in modeling the network, the BCPM and the Hatfield 3.1
models use digital switches capable of providing both supported
services and discretionary services. Therefore, it would be difficult
for the models to extract the costs of the switch allocated to the
provision of discretionary services.
135. We also include both interstate and intrastate access revenues
in the benchmark, as recommended by the Joint Board. Access to IXCs and
to other local wire centers is provided by a part of the switch known
as the port. The methodologies filed in this proceeding include the
costs of the port as costs of providing universal service. The BCPM,
however, subtracts a portion of port costs allocated to toll calls.
Hatfield 3.1, in contrast, includes all port costs in the costs of
providing supported services. Both methodologies exclude per-minute
costs of switching that are allocated to toll calls. Therefore, the
methodologies filed in this proceeding do not include all access costs
in the costs of providing universal service. Access charges to IXCs,
however, have historically been set above costs as one implicit
mechanism supporting local service. We therefore conclude that, unless
and until both interstate and intrastate access charges have been
reduced to recover only per-minute switch and transport costs, access
revenues should be included in the benchmark. Accordingly, we reject
the proposals by some commenters to exclude revenues from discretionary
and access services in calculating the benchmark.
136. We also agree with the Joint Board that setting the benchmark
at nationwide average revenue per line is reasonable because that
average reflects a reasonable expectation of the revenues that a
telecommunications carrier could use to cover its costs, as estimated
by the forward-looking cost methodology we are adopting. A nationwide
benchmark will also be easy to administer and will make the support
levels more uniform and predictable than a benchmark set at a regional,
state, or sub-state level would make them. A nationwide benchmark, as
the Joint Board noted, will also encourage carriers to market and
introduce new services in high costs areas as well as urban areas,
because the benchmark will vary depending upon the average revenues
from carriers serving all areas. For that reason, contrary to the
contentions of some commenters, we conclude that a nationwide benchmark
will not harm carriers serving rural areas but rather encourage them to
introduce new services. We note that support levels for rural carriers
will be unaffected by the benchmark unless and until they begin to
transition to a forward-looking cost methodology, which would occur no
earlier than 2001. Further, we note that the states have discretion to
provide universal service support beyond that included in the federal
universal service support mechanism.
137. We agree the Joint Board's recommendation to adopt two
separate benchmarks, one for residential service and a second for
single-line business services. Because business service rates are
higher than residential service rates, we consider those additional
revenue derived from business services when developing the benchmark.
We note that the only parties who have opposed adopting separate
benchmarks contend that, because ILECs do not keep separate records for
residential and business revenues, separate benchmarks would be
administratively difficult. We do not believe, however, that using two
revenue benchmarks will be administratively difficult. For purposes of
universal service support, the eligible telecommunications carrier need
not determine the exact revenues per service, but only the number of
eligible residential and business connections it serves in a particular
support area. To calculate support levels, the administrator will take
the cost of service, as derived by the forward-looking cost
methodology, and subtract the applicable benchmark and multiply that
number by the number of eligible residential or business lines served
by the carrier in that support area.
138. The majority state members depart from the Joint Board
recommendation and now suggest the use of a cost-based benchmark. They
contend that it may be difficult to match the revenue used in a
benchmark with the cost of service included in the model. They also
argue that a revenue benchmark would require periodic review and more
regulatory oversight than a cost-based benchmark. Although we recognize
there may be some difficulties in using a revenue-based benchmark, we
agree with the Joint Board that a cost-based benchmark should not be
relied upon at this time. As the Joint Board noted, it is best to
compare the revenue to the cost to determine the needed support rather
[[Page 32883]]
than to examine only the cost side of the equation. A cost-based
benchmark, as Time Warner states, does not reflect the revenue already
available to a carrier for covering its costs for the supported
services. Even in some areas with above average costs, revenue can
offset high cost without resort to subsidies, resulting in maintenance
of affordable rates. We also agree with the majority state members of
the Joint Board that a cost-based benchmark will not completely satisfy
the objective of ensuring that only a reasonable allocation of joint
and common costs are assigned to the cost of the supported services.
Although the majority state members of the Joint Board now express
concern about the difficulty in matching the service revenue and the
cost of services included in a model, we remain confident that we can
do that. We also do not find that it will be administratively difficult
to establish and maintain a revenue-based benchmark, and intend to
review the benchmark when we review the forward-looking economic cost
methodology. Consequently, we will not adopt a cost-based benchmark at
this time, but will, as the majority state members of the Joint Board
suggest, address in the FNPRM the specific benchmark that should be
used.
139. As stated above, we have determined that the revenue benchmark
should be calculated using local service, access, and other
telecommunications revenues received by ILECs, including discretionary
revenue. Based on the data we have received in response to the data
request from the Federal-State Joint Board in CC Docket 80-286 (80-286
Joint Board) on universal service issues, it appears that the benchmark
for residential services should be approximately $31 and for single-
line businesses should be approximately $51. We recognize, as did the
Joint Board, that the precise calculation of the level of the benchmark
must be consistent with the means of calculating the forward-looking
economic costs of constructing and operating the network. Thus, we do
not adopt a precise calculation of the benchmark at this time, but will
do so after we have had an opportunity to review state cost studies and
the study or model that will serve as the methodology for determining
forward looking economic costs in those states that do not conduct cost
studies. We will also seek further information, particularly to clarify
the appropriate amounts of access charge revenue and intraLATA toll
revenue that should be included in the revenue benchmark.
140. We have determined to assess contributions for the universal
service support mechanisms for rural, insular, and high cost areas
solely from interstate revenues. We have adopted this approach because
the Joint Board did not recommend that we should assess intrastate as
well as interstate revenues for the high cost support mechanisms and
because we have every reason to believe that the states will
participate in the federal-state universal service partnership so that
the high cost mechanisms will be sufficient to guarantee that rates are
just, reasonable, and affordable. Support for rural, insular, and high
cost areas served by non-rural carriers distributed through forward-
looking economic cost based mechanisms need only support interstate
costs. We will monitor the high cost mechanisms to determine whether
additional federal support becomes necessary.
141. Accordingly, we must determine the federal and state shares of
the costs of providing high cost service. We have concluded that the
federal share of the difference between a carrier's forward looking
economic cost of providing supported services and the national
benchmark will be 25 percent. Twenty-five percent is the current
interstate allocation factor applied to loop costs in the Part 36
separations process, and because loop costs will be the predominant
cost that varies between high cost and non-high cost areas, this factor
best approximates the interstate portion of universal service costs.
142. Prior to the adoption of the 25 percent interstate allocation
factor for loop costs, the Commission allocated most non-traffic
sensitive (NTS) plant costs on the basis of a usage-based measure,
called the Subscriber Plant Factor (SPF). In 1984, the Commission and
the 80-286 Joint Board recognized that there was no purely economic
method of allocating NTS costs on a usage-sensitive basis. Therefore,
the Commission adopted a fixed interstate allocation factor to separate
loop costs between the interstate and intrastate jurisdictions. In
establishing a 25 percent interstate allocation factor for loop costs,
the Commission was guided by the following four principles adopted by
the 80-286 Joint Board: ``(1) Ensure the permanent protection of
universal service; (2) provide certainty to all parties; (3) be
administratively workable; and (4) be fair and equitable to all
parties.'' Because we find that the four principles adopted by the 80-
286 Joint Board are consistent with the principles set out in section
254(b) and because universal service support is largely attributable to
high NTS loop costs, we find that applying the 25 percent interstate
allocation factor historically applied to loop costs in the Part 36
separations process is appropriate here.
143. We believe that the states will fulfill their role in
providing for the high cost support mechanisms. Indeed, we note that
there is evidence that such state support is substantial, as states
have used a variety of techniques to maintain low residential basic
service rates, including geographic rate averaging, higher rates for
business customers, higher intrastate access rates, higher rates for
intrastate toll service, and higher rates for discretionary services.
The Commission does not have any authority over the local rate setting
process or the implicit intrastate universal service support reflected
in intrastate rates. We believe that it would be premature for the
Commission to substitute explicit federal universal service support for
implicit intrastate universal service support before states have
completed their own universal service reforms through which they will
identify the support implicit in existing intrastate rates and make
that support explicit. Although we are not, at the outset, providing
federal support for intrastate, as well as interstate, costs associated
with providing universal services, we will monitor the high cost
mechanisms to ensure that they are sufficient to ensure just,
reasonable, and affordable rates. We expect that the Joint Board and
the states will do the same and we hope to work with the states in
further developing a unified approach to the high cost mechanisms.
144. Non-Rural Carriers
We will continue to use the existing high cost support mechanisms
for non-rural carriers through December 31, 1998, by which time we will
have a forward-looking cost methodology in place for non-rural
carriers. We are also adopting rules that will make this support
portable, or transferable, to competing eligible telecommunications
carriers when they win customers from ILECs or serve previously
unserved customers. We also shall limit the amount of corporate
operations expenses that an ILEC can recover through high cost loop
support. We shall also extend the indexed cap on the growth of the high
cost loop fund. These modifications to the existing mechanisms shall
take effect on January 1, 1998.
145. Although the Joint Board defined universal service to include
support for single residential and business lines only, we join the
state members of the Joint Board in recognizing that an
[[Page 32884]]
abrupt withdrawal of support for multiple lines may significantly
affect the operations of carriers currently receiving support for
businesses and residential customers using multiple lines. Again,
because we will only continue to use the existing support mechanisms
for 1998, we find that non-rural carriers should continue to receive
high cost assistance and LTS for all lines. We shall continue to
evaluate whether support for second residential lines, second
residences, and multiple line businesses should be provided under the
forward-looking economic cost methodology.
146. Alternative Options
We have considered different methods for calculating support until
a forward-looking economic cost methodology for non-rural carriers
becomes effective. First, we could extend application of the Joint
Board's recommendation for rural carriers to non-rural carriers and
provide high loop cost support and LTS benefits on a per-line basis for
all high cost carriers, based on amounts received for each line that
are set at previous years' embedded costs. We decline to take that
approach, however, because we, like the state members of the Joint
Board, are concerned that a set per-line support level may not provide
carriers adequate support because such support does not take into
consideration any necessary and efficient facility upgrades by the
carrier.
147. A second alternative would be to calculate costs based on the
models before us, either by choosing a model or taking an average from
the results of the models. As we have stated, flaws in and unanswered
questions about the models that have been submitted in this proceeding
prevent us from choosing one now to determine universal service support
levels. For example, the proponents use widely divergent input values
for structure sharing and switch costs to determine the cost of
providing service. We agree with the commenters that these variations
account for a large part of the difference in results between the
models. We also agree with the state members of the Joint Board that
the current versions of the models are flawed in how they distribute
households within a CBG. The BCPM and Hatfield models also inaccurately
determine the wire centers serving many customers. These inaccuracies
can create great variance in the costs of service determined by the
models. For those reasons, we find that it would better serve the
public interest not to use the current versions of the models, but to
continue to work with the model proponents, industry, and the state
commissions to improve the models before we select one to determine
universal service support.
148. At this point we conclude that we should not select one model
over another because both models lack a compelling design algorithm
that specifies where within a CBG customers are located. The BCPM model
continues to uniformly distribute customers within the CBG, and
therefore spreads customers across empty areas and generates lot sizes
that appear to be larger than the actual lot sizes. On the other hand,
the clustering algorithm used in the Hatfield 3.1 model requires that
85 percent of the population live within two or four clusters within a
CBG. This requirement could misrepresent actual population locations
when the population is clustered differently.
149. A third alternative is the proposal made by BANX to base
universal support on prices for unbundled network elements. We reject
this alternative because the record before us indicates that the states
have yet to set prices for all of the unbundled network elements needed
to provide universal service, including loop, inter-office transport,
and switching.
150. We conclude that the public interest is best served by using
high cost mechanisms that allow carriers to continue receiving support
at current levels while we continue to work with state regulators to
select a forward-looking economic cost methodology. This approach will
ensure that carriers will not need to adjust their operations
significantly in order to maintain universal service in their service
areas pending adoption of a forward-looking economic cost methodology.
151. Indexed Cap
In order to allow an orderly conversion to the new universal
service mechanisms, the Joint Board on June 19, 1996 recommended
extending the interim cap limiting growth in the Universal Service Fund
until the effective date of the rules the Commission adopts pursuant to
section 254 and the Joint Board's recommendation. We adopted that
recommendation on June 26, 1996. Because we will continue to use the
existing universal service mechanisms, with only minor modifications,
until the forward-looking economic cost mechanisms become effective, we
clarify that the indexed cap on the Universal Service Fund will remain
in effect until all carrier receive support based on a forward-looking
economic cost mechanism. We anticipate that non-rural carriers will
begin receiving universal service support based on the forward-looking
economic cost mechanisms on January 1, 1999.
152. Continued use of this indexed cap will prevent excessive
growth in the size of the fund during the period preceding the
implementation of a forward-looking support mechanisms. We find that a
cap will encourage carriers to operate more efficiently by limiting the
amount of support they receive. From our experience with the indexed
cap on the current high cost support mechanisms, implemented pursuant
to the recommendations of the Joint Board in the 80-286 proceeding, we
find that the indexed cap effectively limits the overall growth of the
fund, while protecting individual carriers from experiencing extreme
reductions in support.
153. Corporate Operations Expense
In order to ensure that carriers use universal service support only
to offer better service to their customers through prudent facility
investment and maintenance consistent with their obligations under
section 254(k), we shall limit the amount of corporate operations
expense that may be recovered through the support mechanisms for high
loop costs. A limitation on the inclusion of such expenses was proposed
in the 80-286 NPRM. Commenters in this proceeding and the 80-286
proceeding generally support limiting the amount of corporate
operations expense that can be recovered through the high cost
mechanisms because costs not directly related to the provision of
subscriber loops are not necessary for the provision of universal
service. Most commenters suggest that there be a cap on the amount of
corporate operations expense that a carrier is allowed to recover
through the universal service mechanism, but some assert that these
expenses should not be allowed at all. We agree with the commenters
that these expenses do not appear to be costs inherent in providing
telecommunications services, but rather may result from managerial
priorities and discretionary spending. Consequently, we intend to limit
universal service support for corporate operations expense to a
reasonable per-line amount, recognizing that small study areas, based
on the number of lines, may experience greater amounts of corporate
operations expense per line than larger study areas.
154. We conclude that, for each carrier, the amount of corporate
operations expense per line that is supported through our universal
service
[[Page 32885]]
mechanisms should fall within a range of reasonableness. We shall
define this range of reasonableness for each study area as including
levels of reported corporate operations expense per line up to a
maximum of 115 percent of the projected level of corporate operations
expense per line. The projected corporate operations expense per line
for each service area will be based on the number of access lines and
calculated using a formula developed from a statistical study of data
submitted by NECA in its annual filing.
155. Furthermore, we will grant study area waivers only for
expenses that are consistent with the principle in section 254(e) that
carriers should use universal service support for the ``provision,
maintenance, and upgrading of facilities and services for which the
support is intended.'' Consistent with our limitation on corporate
operations expense discussed above, we believe that corporate
operations expense in excess of 115 percent of the projected levels are
not necessary for the provision of universal service, and therefore,
absent exceptional circumstances, we will not grant waivers to provide
additional support for such expenses. To the extent a carrier's
corporate operations expense is disallowed pursuant to these
limitations, the national average unseparated cost per loop shall be
adjusted accordingly.
156. Portability of Support
Under section 254(e), eligible telecommunications carriers are to
use universal service support for the provision, maintenance, and
upgrading of facilities and services for which the support is intended.
When a line is served by an eligible telecommunications carrier, either
an ILEC or a CLEC, through the carrier's owned and constructed
facilities, the support flows to the carrier because that carrier is
incurring the economic costs of serving that line.
157. In order not to discourage competition in high cost areas, we
adopt the Joint Board's recommendation to make carriers' support
payments portable to other eligible telecommunications carriers prior
to the effective date of the forward-looking mechanism. A competitive
carrier that has been designated as an eligible telecommunications
carrier shall receive universal service support to the extent that it
captures subscribers' lines formerly served by an ILEC receiving
support or new customer lines in that ILEC's study area. At the same
time, the ILEC will continue to receive support for the customer lines
it continues to serve. We conclude that paying the support to a CLEC
that wins the customer's lines or adds new subscriber lines would aid
the emergence of competition. Moreover, in order to avoid creating a
competitive disadvantage for a CLEC using exclusively unbundled network
elements, that carrier will receive the universal service support for
the customer's line, not to exceed the cost of the unbundled network
elements used to provide the supported services. The remainder of the
support associated with that element, if any, will go the ILEC to cover
the ILEC's economic costs of providing that element in the service area
for universal service support.
158. During the period in which the existing mechanisms are still
defining high cost support for non-rural carriers, we find that the
least burdensome way to administer the support mechanism will be to
calculate an ILEC's per-line support by dividing the ILEC's universal
service support payment under the existing mechanisms by the number of
loops served by that ILEC. That amount will be the support for all
other eligible telecommunications carriers serving customers within
that ILEC's study area.
159. As previously stated, we conclude that carriers that provide
service throughout their service area solely through resale are not
eligible for support. In addition, we clarify the Joint Board's
recommendation on eligibility and find that carriers that provide
service to some customer lines through their own facilities and to
others through resale are eligible for support only for those lines
they serve through their own facilities. The purpose of the support is
to compensate carriers for serving high cost customers at below cost
prices. When one carrier serves high cost lines by reselling a second
carrier's services, the high costs are borne by the second carrier, not
by the first, and under the resale pricing provision the second carrier
receives revenues from the first carrier equal to end-user revenues
less its avoidable costs. Therefore it is the second carrier, not the
first, that will be reluctant to serve absent the support, and
therefore it should receive the support.
160. Use of Embedded Cost to Set Support Levels for Rural Carriers
We adopt the Joint Board's recommendation that, after a reasonable
period, support for rural carriers also should be based on their
forward-looking economic cost of providing services designated for
universal service support. Although it recommended using forward-
looking economic cost calculated by using a cost model to determine
high cost support for all eligible telecommunications carriers, the
Joint Board found that the proposed models could not at this time
precisely model small, rural carriers' cost. The Joint Board expressed
concern that, if the proposed models were applied to small, rural
carriers, the models' imprecision could significantly change the
support that such carriers receive, providing carriers with funds at
levels insufficient to continue operations or, at the other extreme, a
financial windfall. The Joint Board noted that, compared to the large
ILECs, small, rural carriers generally serve fewer subscribers, serve
more sparsely populated areas, and do not generally benefit from
economies of scale and scope as much as non-rural carriers. Rural
carriers often also cannot respond to changing operating circumstances
as quickly as large carriers. We agree with the Joint Board that rural
carriers not use a cost model or other means of determining forward-
looking economic cost immediately to calculate their support for
serving rural high cost areas, but we do support an eventual shift from
the existing system.
161. Use of a Forward-Looking Economic Cost Methodology by Small Rural
Carriers
We acknowledge commenters' concerns that the proposed mechanisms
incorporating forward-looking economic cost methodologies filed in this
proceeding should not in their present form be used to calculate high
cost support for small, rural carriers. At present, we recognize that
these mechanisms cannot presently predict the cost of serving rural
areas with sufficient accuracy. Consistent with the Joint Board's
recommendation, we anticipate, however, that forward-looking support
mechanisms that could be used for rural carriers within the continental
United States will be developed within three years of release of this
Order. We conclude that a forward-looking economic cost methodology
consistent with the principles we set forth in this section should be
able to predict rural carriers' forward-looking economic cost with
sufficient accuracy that carriers serving rural areas could continue to
make infrastructure improvements and charge affordable rates. We
conclude that calculating support using such a forward-looking economic
cost methodology would comply with the Act's requirements that support
be specific, predictable, and sufficient and that rates for consumers
in rural and high cost areas be affordable and reasonably comparable to
rates charged for similar services in urban areas.
[[Page 32886]]
Moreover, such a mechanism could target support by calculating costs
over a smaller geographical area than the study areas currently used.
In addition, we find that the use of mechanisms incorporating forward-
looking economic cost principles would promote competition in rural
study areas by providing more accurate investment signals to potential
competitors. Accordingly, we find that, rather than causing rural
economies to decline, as some commenters contend, the use of such a
forward-looking economic cost methodology could bring greater economic
opportunities to rural areas by encouraging competitive entry and the
provision of new services as well as supporting the provision of
designated services. Because support will be calculated and then
distributed in predictable and consistent amounts, such a forward-
looking economic cost methodology would compel carriers to be more
disciplined in planning their investment decisions.
162. Conversion to a Forward-Looking Economic Cost Methodology
Consistent with the Joint Board, we recognize that new universal
service funding mechanisms could significantly change (but not
necessarily diminish) the amount of support rural carriers receive.
Moreover, we agree that compared to large ILECs, rural carriers
generally serve fewer subscribers, serve more sparsely populated areas,
and do not generally benefit as much from economies of scale and scope.
For many rural carriers, universal service support provides a large
share of the carriers' revenues, and thus, any sudden change in the
support mechanisms may disproportionately affect rural carriers'
operations. Accordingly, we adopt the Joint Board's recommendation to
allow rural carriers to continue to receive support based on embedded
cost for at least three years. Once a forward-looking economic cost
methodology for non-rural carriers is in place, we shall evaluate
mechanisms for rural carriers. Rural carriers will shift gradually to a
forward-looking economic cost methodology to allow them ample time to
adjust to any changes in the support calculation.
163. Treatment of Rural Carriers
We conclude that a gradual shift to a forward-looking economic cost
methodology for small, rural carriers is consistent with the Act and
our access charge reform proceeding. Section 251(f)(1) grants rural
telephone companies an exemption from section 251(c)'s interconnection
requirements, under specific circumstances, because Congress recognized
that it might be unfair to both the carriers and the subscribers they
serve to impose all of section 251's requirements upon rural companies.
Furthermore, the companion Access Charge Reform Order limits
application of the rules adopted in that proceeding to price-cap ILECs.
The Access Charge Reform Order concludes that access reform for non-
price-cap ILECs, which tend to be small, rural carriers, will occur
separately from reform for price-cap ILECs because small, rural ILECs,
which generally are under rate-of-return regulation, may not be subject
to some of the duties under section 251 (b) and (c) and will likely not
have competitive entry into their markets as quickly as price cap ILECs
will experience. Because the Commission's access reform proceeding does
not propose generally to change access charge rules for non-price-cap
ILECs, we find without merit Minnesota Coalition's argument that the
current embedded-cost support mechanisms must be maintained because
changes to part 69 may cause rural carriers' revenues to decrease.
Consistent with our approach towards non-price-cap ILECs in access
charge reform, we conclude that rural carriers' unique circumstances
warrant our implementation of separate mechanisms.
164. Supported Lines
In the process of selecting a forward-looking economic cost
methodology for calculating universal service support for carriers
serving high cost areas, we will determine whether lines other than
primary residential and single business connections should be eligible
for support. For this reason, we conclude that rural carriers should
continue to receive high cost loop assistance, DEM weighting, and LTS
support for all their working loops until they move to a forward-
looking economic cost methodology. State members of the Joint Board
concur with this determination.
165. Modifications to Existing Support Mechanisms
The Joint Board recommended that for the three years beginning
January 1, 1998, high cost support for rural ILECs be calculated based
on high cost loop support, DEM weighting, and LTS benefits for each
line based on historic support amounts. We are persuaded, however, by
the commenters and the recent State High Cost Report that, even in the
absence of new plant construction, this may not provide rural carriers
adequate support for providing universal service because support to
offset cost increases in maintenance expenses due to natural disasters
or inflation would not be available. We also find that, in order to
maintain the quality of the service they offer their customers,
carriers may not be able to avoid upgrading their facilities. We find
that, consistent with the State High Cost Report, the level of support
recommended by the Joint Board may not permit carriers to afford
prudent facility upgrades.
166. The state members recommend that the Commission adopt an
industry proposal regarding the determination of the needed amount of
support for rural carriers rather than the recommendation of the Joint
Board. Expressing concern that setting high cost support, DEM
weighting, and LTS at the current per-line amount could discourage
carriers from investing in their networks, the state members endorse a
proposal that would: (1) Use a carrier's embedded costs as compared to
the 1995 nationwide average loop cost, adjusted annually to reflect
inflation, to determine whether a carrier receives high cost support;
(2) use the 1995 interstate allocation factor for DEM weighting; and
(3) freeze the percentage of the NECA pool that is associated with LTS
at 1996 levels. The state Joint Board members further recommend that,
during the period before rural carriers begin to draw support based
solely on a forward-looking cost methodology, each carrier continue to
receive support based on all of the carrier's working lines, not just
the eligible residential and single-line business lines. The state
members of the Joint Board also depart from the Joint Board's
recommendation that rural carriers not be allowed to elect to draw
support solely based on forward-looking economic costs until January 1,
2001, when all rural carriers would begin using a forward-looking cost
study for calculating their high cost support.
167. We are persuaded by commenters stating that rural carriers
require more time to adjust to any change in universal service support
than large carriers do. While giving rural carriers ample time to plan
for changes from the current methodology, we shall retain many features
of the current support mechanisms for them until they move to a
forward-looking economic cost methodology. Because we believe that
rural carriers must begin immediately to plan their network maintenance
and development more carefully, we will use some attributes of the ILEC
Associations' proposal to limit the growth of the size of the current
high cost support mechanisms beginning in 2000. We will use those
mechanisms until they are replaced by
[[Page 32887]]
the forward-looking economic cost methodology. The ILEC Associations'
proposal would control the growth in support received by the carriers
but still leave support to cover, at least partially, costs of
essential plant investment. Because they find this proposal to offer a
better initial mechanism for rural carriers than the Joint Board's
recommendations, state Joint Board members also support the ILEC
Associations' proposal. Starting on January 1, 1998, rural carriers
shall receive high cost loop support, DEM weighting assistance, and LTS
benefits on the basis of the modification of the existing support
mechanism, described below. In addition, the other modifications to the
existing mechanisms set forth shall also take effect on January 1,
1998.
168. High Cost Loop Support
We agree with the state members of the Joint Board that rural
carriers may require a greater amount of support than fixed support
mechanisms would provide. Consequently, we decline to adopt the Joint
Board's recommendation to base support for high cost loops on costs
reported in 1995. In order to maintain existing facilities and make
prudent facility upgrades until such time as forward-looking support
mechanisms are in place, we direct that the use of the current formula
to calculate high cost loops for rural ILECs continue for two years.
Thus from January 1, 1998 through December 31, 1999, rural carriers
will calculate support using the current formulas.
169. Beginning January 1, 2000, however, rural carriers shall
receive high loop cost support for their average loop costs that exceed
115 percent of an inflation-adjusted nationwide average loop cost. The
inflation-adjusted nationwide average cost per loop shall be the 1997
nationwide average cost per loop as increased by the percentage in
change in Gross Domestic Product Chained Price Index (GDP-CPI) from
1997 to 1998. We index loop costs to inflation in order to limit the
growth in the fund because, historically, small carriers' costs have
risen faster than the national average cost per loop. As a result,
small carriers have drawn increased support from the fund. We are using
the GDP-CPI of the year for which costs are reported because the
support mechanisms reflect a two-year lag between the time when the
costs on which support is based are incurred and the distribution of
support. We are using the 1997 nationwide average loop cost per loop as
the benchmark because the 1998 nationwide average loop costs would not
be calculated until September 1999. The percentage of the above-average
loop cost that rural carriers may recover from the support mechanisms
during 2000 will remain consistent with the current provisions
concerning support for high loop costs in the Commission's rules. We
note that this modification to the existing benchmark for calculating
high cost loop support enjoys wide support among ILEC commenters and is
supported by the state Joint Board members in their report. We also
conclude that rural carriers should continue to receive this support
through the jurisdictional separations process, by allocating to the
interstate jurisdiction the amount of a recipient's universal service
support for loop costs.
170. Indexed Cap
Until rural carriers calculate their support using a forward-
looking economic cost methodology, we shall continue to prescribe a cap
on the growth of the fund to support high cost loops served by either
non-rural and rural carriers equal to the annual average growth in
lines. Because beginning January 1, 1999, non-rural carriers will no
longer receive support under the existing universal service mechanisms,
it is necessary to recalculate the cap based on the costs of the rural
carriers that will remain under the modified existing support
mechanisms. This overall cap will prevent excessive growth in the size
of the fund during the period preceding the implementation of a
forward-looking support mechanisms. We conclude that a cap will
encourage carriers to operate more efficiently by limiting the amount
of support they receive. We also conclude that excessive growth in high
loop cost support would make the change to forward-looking support
mechanisms more difficult for rural carriers if those support
mechanisms provide significantly different levels of support. From our
experience with the indexed cap on the current high cost support
mechanisms, implemented pursuant to the recommendations of the 80-286
Joint Board proceeding, we conclude that the indexed cap effectively
limits the overall growth of the fund, while protecting individual
carriers from experiencing extreme reductions in support.
171. DEM Weighting Support
We adopt the Joint Board's recommendation that a subsidy
corresponding in amount to that generated formerly by DEM weighting be
recovered from the new universal service support mechanisms.
Accordingly, the local switching costs assigned to the interstate
jurisdiction beginning in 1998 will include an amount based on the
modified DEM weighting factor. We will not, however, set DEM weighting
support on a per-line basis and calculate support for high switching
costs based on the amount by which revenues collected by each carrier
exceed what would be collected without DEM weighting for calendar year
1996. We conclude that setting support at those levels may not provide
rural carriers with sufficient resources to enable the carriers to make
prudent upgrades to their switching facilities so that they may
continue to offer quality service to their customers. As we have
discussed above, we do not believe that the fixed per-line support
recommended by the Joint Board would provide rural carriers adequate
support for providing universal service because support to offset
increases in maintenance expenses due to natural disasters or inflation
would not be available. We adopt a modified version of the ILEC
Associations' proposal to provide DEM weighting benefits prior to the
conversion to a forward-looking economic cost methodology.
172. Beginning on January 1, 1998, and continuing until a forward-
looking economic cost methodology for them becomes effective, rural
carriers will receive local switching support based on weighting of
their interstate DEM factors. Assistance for the local switching costs
of a qualifying carrier will be calculated by multiplying the carrier's
annual unseparated local switching revenue requirement by a local
switching support factor, where the local switching support factor is
the difference between the 1996 weighted and unweighted interstate DEM
factors. If the number of a carrier's lines increases during 1997 or
any successive year, either through the purchase of exchanges or
through other growth in lines, such that the current DEM weighting
factor would be reduced, the carrier must apply the lower weighting
factor to the 1996 unweighted interstate DEM factor in order to derive
the local switching support factor used to calculate universal service
support. We conclude that this mechanism will provide support for
carriers to make prudent upgrades to their switching equipment needed
to maintain, if not improve, the quality of service to their customers.
173. Long Term Support (LTS)
Consistent with the Joint Board's recommendation, beginning in
1998, rural carriers will recover from the new universal service
support mechanisms LTS at a level sufficient to protect their
[[Page 32888]]
customers from the effects of abrupt increases in the NECA CCL rates.
We agree with those commenters contending that the Joint Board's
recommendation that the mechanisms compensate each common line pool
member on the basis of its interstate common line revenue requirement
relative to the total interstate common line revenue requirement does
not consider each carrier's revenues from other sources, such as SLCs
and CCL charges. Accordingly, we decline to adopt the Joint Board's
recommendation to calculate the support for LTS on a fixed per-line
basis. Instead, we adopt a modified per-line support mechanisms for
providing LTS.
174. Beginning on January 1, 1998, we shall allow a rural carrier's
annual LTS to increase from its support for the preceding calendar year
based on the percentage of increase of the nationwide average loop
cost. LTS is a carrier's total common line revenue requirement less
revenues received from SLCs and CCL charges. This approach ties
increases in LTS to changes in common line revenue requirements.
Alternative options suggested are not sufficient because they depend on
an ability to determine a nationwide CCL charge, which will no longer
be possible if the non-pooling carriers switch to a per-line rather
than a per-minute CCL charge.
175. Corporate Operations Expense
As we described earlier, for universal service support, we will not
prescribe support for corporate operations expense for each carrier
study area, as measured on an average monthly per-line basis, in excess
of 115 percent of an amount projected for a service area of its sizes.
The projected amount will be defined by a formula based upon a
statistical study that predicts corporate operations expense based on
the number of access lines.
176. Sale of Exchanges
Until support for all carriers is based on a forward-looking
economic cost methodology, we conclude that potential universal service
support payments may influence unduly a carrier's decision to purchase
exchanges from other carriers. In order to discourage carriers from
placing unreasonable reliance upon potential universal service support
in deciding whether to purchase exchanges from other carriers, we
conclude that a carrier making a binding commitment on or after May 7,
1997 to purchase a high cost exchange should receive the same level of
support per line as the seller received prior to the sale. For example,
if a rural carrier purchases an exchange from a non-rural carrier that
receives support based on the forward-looking economic cost
methodology, the loops of the acquired exchange shall receive per-line
support based on the forward-looking economic cost methodology of the
non-rural carrier prior to the sale, regardless of the support the
rural carrier purchasing the lines may receive for any other exchanges.
Likewise, if a rural carrier acquires an exchange from another rural
carrier, the acquired lines will continue to receive per-line support
of the selling company prior to the sale. If a carrier has entered into
a binding commitment to buy exchanges prior to May 7, 1997, that
carrier will receive support for the newly acquired lines based upon an
analysis of the average cost of all its lines, both those newly
acquired and those it had prior to execution of the sales agreement.
This approach reflects the reasonable expectations of such purchasers
when they entered into the purchase and sale agreements. After support
for all carriers is based on the forward-looking economic cost
methodology, carriers shall receive support for all exchanges,
including exchanges acquired from other carriers, based on the forward-
looking economic cost methodology.
177. Early Use of Forward-Looking Economic Cost Methodology
Consistent with the recommendations in the State High Cost Report,
at this time, we find that, because of the current methodologies' high
margin of error for rural areas, we should not permit rural carriers to
begin to use the forward-looking economic cost methodology when the
non-rural ILECs do. We conclude that a forward-looking economic cost
methodology developed for non-rural carriers will require further
review before being applied to rural carriers. We conclude that a
forward-looking economic cost methodology for rural carriers should not
be implemented until there is greater certainty that the mechanisms
account reasonably for the cost differences in rural study areas.
178. Certification as a Rural Carrier
Consistent with the Joint Board's recommendation, we define ``rural
carriers'' as those carriers that meet the statutory definition of a
``rural telephone company.'' (47 U.S.C. 153(37)). In order for the
administrator to calculate support payments, a carrier must notify the
Commission and its state commission, that for purposes of universal
service support determinations, it meets the definition of a ``rural
carrier.'' Carriers should make such a notification each year prior to
the beginning of the payout period for that year. We find that a self-
certification process, coupled with random verification by the
Commission and the availability of the section 208 compliance process,
would ensure that support is distributed to a carrier without delay and
still provide adequate protection against abuse.
179. Portability of Support
We adopt the Joint Board's recommendation to make rural carriers'
support payments portable. A CLEC that qualifies as an eligible
telecommunications carrier shall receive universal service support to
the extent that it captures subscribers formerly served by carriers
receiving support based on the modified existing support mechanisms or
adds new customers in the ILEC's study area. We conclude that paying
the support to a competitive eligible telecommunications carrier that
wins the customer or adds a new subscriber would aid the entry of
competition in rural study areas.
180. We shall calculate an ILEC's per-line support by dividing the
ILEC's universal service support payment by the number of loops in the
ILEC's most recent annual loop count to calculate universal service
support for all eligible telecommunications carriers serving customers
within that ILEC's study area. Moreover, in order to avoid creating a
competitive disadvantage for an eligible CLEC using exclusively
unbundled network elements to provide service, that carrier will
receive the universal service support for the customer, not to exceed
the cost of the unbundled network elements used to provide the
supported services. If the service is provided in part through
facilities constructed and deployed by the CLEC and in part through
unbundled network elements, then support will be allocated between the
ILEC and the CLEC depending on the amount of support assigned to each
element and whether the carrier constructed the facilities used to
provide service or purchased access to an unbundled network element.
181. We conclude that determining a rural ILEC's per-line support
by dividing the ILECs' universal service support payment by the number
of loops served by that ILEC to calculate universal service support for
all eligible telecommunications carriers serving customers within that
rural ILEC's study area will be the least burdensome way to administer
the support mechanisms and will provide the competing carrier with an
incentive to operate efficiently. Besides using a forward-looking or
embedded costs system, the alternative
[[Page 32889]]
for calculating support levels for competing eligible
telecommunications carriers consists of requiring the CLECs to submit
cost studies. Compelling a CLEC to use a forward-looking economic cost
methodology without requiring the ILEC's support to be calculated in
the same manner, however, could place either the ILEC or the CLEC at a
competitive disadvantage. We thus disagree with commenters that assert
that providing support to eligible CLECs based on the incumbents'
embedded costs would violate section 254(e).
182. Alaska and Insular Areas
The Joint Board recommended that, because of the unique
circumstances faced by rural carriers providing service in Alaska and
insular areas, those carriers should not be required to shift to
support mechanisms based on the forward-looking economic cost at the
same time that other rural carriers are so required. The Joint Board
noted that carriers serving insular areas have higher shipping costs
for equipment and damage caused by tropical storms, while carriers
serving Alaska have limited construction periods and serve extremely
remote rural communities. Therefore, the Joint Board recommended that
rural carriers in Alaska and insular areas continue to receive support
based on the fixed support amounts. The Joint Board further recommended
that the Commission revisit at a future date the issue of when to move
such carriers to a forward-looking economic cost methodology. Given the
plan we adopt in this Order, we find that we do not need to resolve the
issue of rural carriers serving Alaska and insular areas at this time
because we have not set a timeframe for rural carriers to move to the
forward-looking economic cost methodology. We will revisit this
question when we decide the schedule for other rural carriers moving to
the forward-looking economic cost methodology. We agree with the Joint
Board that non-rural carriers serving Alaska and insular areas should
move to the forward-looking economic cost methodology at the same time
as other non-rural carriers. We note, however, that we retain the
ability to grant waivers of this requirement in appropriate cases.
183. We note that the forward-looking economic cost models that
have been presented to us so far do not include any information on
Alaska or the insular areas. We anticipate that information for non-
rural carriers serving Alaska and insular areas will be included in
future versions of the models. If such information is not available in
a timely manner, we recognize that we may need to adjust the schedule
for non-rural carriers serving Alaska and insular areas to move to
support based forward-looking economic cost. We will evaluate that
situation as we proceed with our determination of a forward-looking
economic cost methodology through the FNPRM. We also note that, in the
absence of such information in the models, the commissions for Alaska
and the insular areas may still submit a state cost study to the
Commission.
184. We agree with Guam Tel. Authority that, under the principle
set out in section 254(b)(3) this carrier should be eligible for
universal service support and clarify the procedures to be used for any
carriers, such as Guam Tel. Authority, that may not have historical
costs studies on which to base the set support amounts. Guam Tel.
Authority, or any other carrier serving an insular area that is not
currently included in the existing universal service mechanism, shall
receive support based on an estimate of annual amount of their embedded
costs. Such carriers must submit verifiable embedded-cost data to the
fund administrator.
185. Use of Competitive Bidding Mechanisms
In the NPRM, the Commission sought comment on whether competitive
bidding could be used to determine universal service support in rural,
insular, and high cost areas. Specifically, the Commission asked
whether relying on competitive bidding would be consistent with section
214(e), the provision of the statute that specifies the circumstances
under which telecommunications carriers are eligible to receive
universal service support. Under a competitive bidding mechanism
eligible telecommunications carriers would bid on the amount of support
per line that they would receive for serving a particular geographic
area.
186. The Joint Board identified many advantages arising from the
use of a competitive bidding system. We agree with the Joint Board and
the commenters that a compelling reason to use competitive bidding is
its potential as a market-based approach to determining universal
service support, if any, for any given area. The Joint Board and some
commenters also noted that by encouraging more efficient carriers to
submit bids reflecting their lower costs, another advantage of a
properly structured competitive bidding system would be its ability to
reduce the amount of support needed for universal service. In that
regard, the bidding process should also capture the efficiency gains
from new technologies or improved productivity, converting them into
cost savings for universal service. We find that competitive bidding
warrants further consideration.
187. We agree with the commenters that suggest we issue a notice to
examine issues related to the use of competitive bidding to set
universal service support levels for rural, insular, and high cost
areas. We find that the record in this proceeding does not contain
discussion of those issues adequate for us to define at this time a
competitive bidding mechanism that is also consistent with the
requirements of sections 214(e) and 254. Overall, there is even less
discussion in the comments on the Recommended Decision addressing the
use of competitive bidding by the Commission than in the comments filed
in response to the NPRM and the Common Carrier Bureau's Public Notice.
188. It is unlikely that there will be competition in a significant
number of rural, insular, or high cost areas in the near future.
Consequently, it is unlikely that competitive bidding mechanisms would
be useful in many areas in the near future. Given the limited utility
of a competitive bidding process in the near term, it is important that
we not rush to adopt competitive bidding procedures before we complete
a thorough and complete examination of the complex and unique issues
involved with developing bidding mechanisms for awarding of universal
service support. Furthermore, as envisioned in the proposals made to
the Commission thus far, competitive bidding will be a complement to,
not a substitute for, an alternative forward-looking economic cost
methodology. We will seek to define a role for a competitive bidding
mechanism as part of the forward-looking economic cost methodology by
which support to non-rural carriers for their provision of universal
service is defined after December 31, 1998.
189. We shall therefore issue a FNPRM examining specifically the
use of competitive bidding to define universal service support for
rural, insular, and high cost areas. Our goal will be to develop a
record on specific competitive bidding mechanisms sufficient to enable
us to adopt one, if we also find it to be in the public interest. A
separate proceeding will allow commenters to focus on the issues posed
by a decision to use competitive bidding for universal service support
in light of our actions in this Order.
[[Page 32890]]
Support for Low-Income Consumers
190. Authority to Revise Lifeline and Link Up Programs
We agree with the Joint Board that section 254(j) allows us to
adopt certain changes to the Lifeline program in order to make it
consistent with the goals of the 1996 Act. We thus concur with the
Joint Board's finding that Congress did not intend for section 254(j)
to codify every detail of the existing Lifeline program, but that it
intended to give the Joint Board and the Commission permission to leave
the Lifeline program in place without modification, despite Lifeline's
inconsistency with other portions of the 1996 Act.
191. Our authority to alter the existing low-income assistance
programs must be understood in light of our general authority to
preserve and advance universal service under section 254. We find that
section 254 clarifies the scope of the Commission's universal service
responsibilities in several fundamental respects. Most notably,
universal service as defined by section 254 is both intrastate and
interstate in nature. This feature of universal service is evident, for
example, in the case of low-income support programs. Affordability of
basic telephone service is necessary to ensure that low-income
consumers have access not only to intrastate services but to interstate
telecommunications as well.
192. Thus, we agree with the Joint Board that state and federal
governments have overlapping obligations to strengthen and advance
universal service. We further conclude that section 254 grants us
authority to ensure that states satisfy these obligations. That
authority is reflected, among other places, in Congress's directive
that the Commission ensure that support is ``sufficient'' to meet
universal service obligations. Although states also must ensure that
their support mechanisms are ``sufficient,'' they may only do so to the
extent that such mechanisms are not ``inconsistent with the
Commission's rules to preserve and advance universal service.''
193. In fulfilling our responsibility to preserve and advance
universal service, we find that the 1996 Act clarifies not only the
scope of the Commission's authority, but also the specific nature of
our obligations. With respect to the Lifeline and Link-Up programs, we
observe that the Act evinces a renewed concern for the needs of low-
income citizens. Thus, for the first time, Congress expresses the
principle that rates should be ``affordable,'' and that access should
be provided to ``low-income consumers'' in all regions of the nation.
These principles strengthen and reinforce the Commission's preexisting
interest in ensuring that telecommunications service is available ``to
all the people of the United States.'' Under these directives, all
consumers, including low-income consumers, are equally entitled to
universal service as defined by this Commission under section
254(c)(1).
194. We adopt the recommendation of the Joint Board to reject the
view offered by some commenters that section 254(j) prevents the
Commission from making any change to the Lifeline program. We find that
Congress did not intend to codify the existing Lifeline program so as
to immunize it from any future changes or improvements. We therefore
conclude that Congress intended section 254(j) to permit the Commission
to leave the Lifeline program in place, notwithstanding that the
program may conflict with the pro-competitive provisions of the 1996
Act.
195. Moreover, by its own terms, section 254(j) applies only to
changes made pursuant to section 254 itself. Our authority to restrict,
expand, or otherwise modify the Lifeline program through provisions
other than section 254 has been well established over the past decade.
In 1985, we created Lifeline under the general authority of sections 1,
4(i), 201, and 205 of the Act. Since then, we have relied on those
provisions to modify the program on several occasions. We must assume
that Congress was aware of the Commission's authority under Titles I
and II to amend Lifeline. Consequently, we agree with the Joint Board
that we retain the authority to revise the Lifeline program.
196. We also agree with the Joint Board that we are not barred from
relying on the authority of section 254 itself when modifying the
Lifeline program. Although section 254(j) provides that nothing in
section 254 ``shall affect'' the Lifeline program, nonetheless, like
the Joint Board, we do not believe that section 254(j) can reasonably
be read to prevent us from changing Lifeline to bring it into
conformity with the principles of section 254. Section 254 clearly
gives the Commission independent statutory authority to establish
federal mechanisms to provide universal service support to low-income
consumers, and section 254(j) in no way can be read to usurp the
Commission's authority under section 254 to establish such mechanisms.
Were section 254 to be interpreted to prohibit us from revising our
rules establishing the Lifeline program, we could, pursuant to section
254, establish new low-income universal service support mechanisms and
then, acting pursuant to sections 1, 4(i), and 201, simply abolish the
Lifeline program as duplicative.
197. Section 254(j) indicates that Congress did not intend to
require a change to the Lifeline program in adopting the new universal
service principles. Presumably, Congress did not want to be viewed as
mandating modifications to this worthy and popular program. Congress
did not intend, however, to prevent the Commission from making changes
to Lifeline that are sensible and clearly in the public interest. Thus,
we agree with the Joint Board that it ``has the authority to recommend,
and the Commission has authority to adopt, changes to the Lifeline
program to make it more consistent with Congress's mandates in section
254 if such changes would serve the public interest.''
198. In this section, we make changes to the Lifeline program that
we believe are necessary, are in the public interest, and advance
universal service. We emphasize that, in doing so, we are relying
principally upon our preexisting authority under Titles I and II of the
Communications Act (particularly sections 1, 4(i), 201, and 205). To
the extent that we act on the basis of the principles of section
254(b), however, we rely on the authority of that section as well.
199. We share the Joint Board's concern over the low subscribership
levels among low-income consumers and agree that changes in the current
Lifeline program are warranted. We are particularly concerned that two
factors deter subscribership among low-income consumers. First, several
states do not participate in the Lifeline program, and therefore low-
income consumers in those regions do not have access to Lifeline.
Second, some low-income consumers in states that participate in the
Lifeline program receive no assistance because not all carriers in
those areas are obligated to offer Lifeline. We find that the
unavailability of Lifeline to low-income consumers in these areas runs
counter to our duty to ``make available, so far as possible, to all the
people of the United States * * * a rapid, efficient Nationwide * * *
wire and radio communication service.'' The unavailability of Lifeline
to many low-income consumers also conflicts with the statutory
principle that access to telecommunications services should be extended
to ``(c)onsumers in all regions of the Nation, including low-income
consumers.'' For these reasons, we revise the Lifeline program pursuant
to our authority under sections 1, 4(i), 201, 205, and 254 to promote
access to
[[Page 32891]]
telecommunications service for all consumers.
200. Carriers' Obligation to Offer Lifeline
We concur with the Joint Board's conclusion that, to increase
subscribership among low-income consumers, we should modify the
Lifeline program so that qualifying low-income consumers can receive
Lifeline service from all eligible telecommunications carriers. Our
determination arises from a concern that, in certain regions of the
nation, carriers may not offer Lifeline service unless compelled to do
so. In requiring all eligible telecommunications carriers to offer
Lifeline service to qualifying low-income consumers, we make Lifeline
part of our universal service support mechanisms. We emphasize that in
imposing this obligation, we are acting under our general authority in
sections 1, 4(i), 201, and 205 of the Act, as well as our authority
under section 254.
201. Expanding Lifeline to Every State and Modifying Matching
Requirements
We also agree with the Joint Board that the Lifeline program should
be amended so that qualifying low-income consumers throughout the
nation can receive Lifeline service. Presently, only 44 states
(including the District of Columbia and the U.S. Virgin Islands)
participate in Lifeline. Because the Lifeline program currently
requires states to make a matching reduction in intrastate rates in
order to qualify for the SLC waiver, a state's decision not to
participate means that federal support will not be available in that
state. We agree with the Joint Board that a baseline amount of federal
support should be available in all states irrespective of whether the
state generates support from the intrastate jurisdiction. We agree with
the Joint Board, however, that state participation in Lifeline
historically has been an important aspect of the program. As a result,
we agree with the Joint Board that matching incentives should not be
eliminated entirely. We will provide a baseline federal support amount
to qualifying low-income consumers in all states, with a matching
component above the baseline level.
202. Lifeline Support Amount
In determining the appropriate amount of support for Lifeline, the
Joint Board indicated that it was uncertain whether a federal support
amount equal to the level of the SLC (currently a maximum of $3.50),
absent any state support, would be a sufficient baseline federal
support amount. Although the Lifeline program currently provides
federal support in the form of a SLC waiver (i.e., up to $3.50), that
support must be matched by equal or greater reductions in intrastate
rates. Thus, Lifeline customers currently receive overall reductions in
their charges of $7.00 or more, depending upon state participation. Our
revised Lifeline program will be available in all states, irrespective
of state participation. Thus, the baseline support must provide a
sufficient level of support even in states that generate no support
from the intrastate jurisdiction. The Joint Board therefore proposed a
baseline amount of $5.25 in federal support, which is half-way between
the current maximum federal support level of $3.50 and the $7.00
reduction in charges that a Lifeline customer would receive assuming
full state matching. In general, we believe that the record supports
adopting the Joint Board's proposal. We conclude that the $5.25 amount
represents a sound compromise and a pragmatic balancing of the goals of
extending Lifeline to states that currently do not participate and
maintaining incentives for states to provide matching funds.
203. Lifeline consumers will continue to receive the $3.50 in
federal support that is currently available. Further, we will provide
for additional federal support in the amount of $1.75 above the current
$3.50 level. For Lifeline consumers in a given state to receive the
additional $1.75 in federal support, that state need only approve the
reduction in the portion of the intrastate rate paid by the end user;
no state matching is required. The requirement of state consent before
we make available federal Lifeline support in excess of the federal SLC
is consistent with our overall deference to the states in areas of
traditional state expertise and authority. Because the states need not
provide matching funds to receive this amount, but only approve the
reduction of $1.75 in the portion of the intrastate rate that is paid
by the end user, we believe that the states will participate in this
aspect of the program.
204. We also adopt the Joint Board's recommendation that we
``provide for additional federal support equal to one half of any
support generated from the intrastate jurisdiction, up to a maximum of
$7.00 in federal support.'' Thus, if a state provides the minimum
amount of matching support to receive the full federal support amount,
the total reduction in end user charges would increase from $7.00 under
the current system to $10.50. We believe that this increase in total
support will affect positively the low subscribership levels among low-
income consumers that concerned the Joint Board. As with the $1.75 in
federal support above $3.50, states will have to approve this reduction
in intrastate rates provided by the additional federal support amount.
205. The Joint Board observed that many states currently generate
their matching funds through the state rate-regulation process. These
states allow incumbent LECs to recover the revenue the carriers lose
from charging Lifeline customers less by charging other subscribers
more. Florida PSC points out that this method of generating Lifeline
support from the intrastate jurisdiction could result in some carriers
(i.e., ILECs) bearing an unreasonable share of the program's costs. We
see no reason at this time to intrude in the first instance on states'
decisions about how to generate intrastate support for Lifeline. We do
not currently prescribe the methods states must use to generate
intrastate Lifeline support, nor does this Order contain any such
prescriptions. Many methods exist, including competitively neutral
surcharges on all carriers or the use of general revenues, that would
not place the burden on any single group of carriers. We note, however,
that states must meet the requirements of section 254(e) in providing
equitable and non-discriminatory support for state universal service
support mechanisms.
206. We conclude that we must seek further guidance from the Joint
Board on how to ensure the integrity of the Lifeline program in light
of changes we make today to our access charge rules. In the Access
Charge Reform Order, as part of our effort to implement the Joint
Board's suggestion that the current per-minute CCL charge be modified
to reflect the non-traffic sensitive nature of loop costs, we implement
a flat charge per primary residential line that is to be assessed
against the PIC. If the customer does not select a PIC, however, the
presubscribed interexchange carrier charge (PICC) will be assessed
against the end user.
207. We wish to ensure that these changes to our Part 69 rules,
which were not contemplated when the Joint Board made its
recommendations, will not have an adverse impact on Lifeline customers.
Specifically, we are concerned that the PICC may be assessed against
Lifeline customers who elect to receive toll blocking (for which
federal support will now be provided) because they will have no PIC
associated with their lines. Accordingly, we seek further guidance from
the Joint Board on how to maintain the integrity of the Lifeline
program and ensure
[[Page 32892]]
competitive neutrality in light of these changes to our part 69 rules.
208. Making Lifeline Competitively Neutral
In this Order, we endorse the Joint Board's recommendation that we
adopt the principle of ``competitive neutrality'' and conclude that
universal service support mechanisms and rules should not unfairly
advantage one provider, nor favor one technology. Consistent with this
principle, we agree that the funding mechanisms for Lifeline should be
made more competitively neutral. We find no statutory justification for
continuing to fund the federal Lifeline program through charges levied
only on some IXCs. As required by section 254, all carriers that
provide interstate telecommunications service now will contribute on an
equitable and nondiscriminatory basis.
209. In addition, we concur with the Joint Board's recommendation
that all eligible telecommunications carriers, not just ILECs, should
be able to receive support for serving qualifying low-income consumers.
Currently, only ILECs, which charge SLCs and waive such charges for
low-income consumers, can receive support under most circumstances. We
find, however, that eligible telecommunications carriers other than
ILECs also should have the opportunity to compete to offer Lifeline
service to low-income consumers and in turn receive support in a manner
similar to the current program. Support will be provided directly to
carriers under administrative procedures determined by the universal
service administrator in direct consultation with the Commission.
210. We acknowledge that the distribution of support to non-ILEC
carriers cannot be achieved simply by waiving the SLC. Carriers other
than ILECs do not participate in the formal separations process that
our rules mandate for ILECs and hence do not charge SLCs nor
distinguish between the interstate and intrastate portion of their
charges and costs. With respect to these carriers, we conclude that
Lifeline support must be passed through directly to the consumer in the
form of a reduction in the total amount due. Indeed, sections 254(e)
and (k) require eligible telecommunications carriers to pass through
Lifeline support directly to consumers. Furthermore, we do not believe
that requiring carriers to pass through the support amount conflicts
with our desire to establish mechanisms that are respectful of
traditional state authority. Rather, we note that a portion of every
carrier's charge can be attributed to the interstate jurisdiction,
whether or not the carrier formally participates in the separations
procedure.
211. The interstate portion of ILECs' rates to recover loop costs
is, almost without exception, greater than the amount of the SLC cap
for residential subscribers; we are therefore confident that this
amount is a reasonable proxy for the interstate portion of other
eligible telecommunications carriers' costs. Thus, we conclude that we
may require an amount equal to the SLC cap for primary residential and
single-line business connections to be deducted from carriers' end-user
charges without infringing on state ratemaking authority. Furthermore,
we find that providing the same amount of Lifeline support to all
eligible telecommunications carriers, including those that do not
charge SLCs, advances competitive neutrality. In sum, we conclude that
breaking the link between Lifeline and the Commission's part 69 rules
will promote competitive neutrality by allowing eligible carriers that
are not required to charge SLCs, such as CLECs and wireless providers,
to receive federal support for providing Lifeline.
212. The precise mechanisms for distributing and collecting
Lifeline funds will be determined by the universal service
administrator in direct consultation with the Commission. In general,
however, any carrier seeking to receive Lifeline support will be
required to demonstrate to the public utility commission of the state
in which it operates that it offers Lifeline service in compliance with
the rules we adopt today. These rules require that carriers offer
qualified low-income consumers the services that must be included
within Lifeline service, as discussed more fully below, including toll-
limitation service. ILECs providing Lifeline service will be required
to waive Lifeline customers' federal SLCs and, conditioned on state
approval, to pass through to Lifeline consumers an additional $1.75 in
federal support. ILECs will then receive a corresponding amount of
support from the new support mechanisms. Other eligible
telecommunications carriers will receive, for each qualifying low-
income consumer served, support equal to the federal SLC cap for
primary residential and single-line business connections, plus $1.75 in
additional federal support conditioned on state approval. The federal
support amount must be passed through to the consumer in its entirety.
In addition, all carriers providing Lifeline service will be reimbursed
from the new universal service support mechanisms for their incremental
cost of providing toll-limitation services to Lifeline customers who
elect to receive them. The remaining services included in Lifeline must
be provided to qualifying low-income consumers at the carrier's lowest
tariffed (or otherwise generally available) rate for those services, or
at the state's mandated Lifeline rate, if the state mandates such a
rate for low-income consumers.
213. We believe that we have the authority under sections 1, 4(i),
201, 205, and 254 to extend Lifeline to include carriers other than
eligible telecommunications carriers. We agree with the Joint Board,
however, and decline to do so at the present time. Elsewhere in this
Order, we express our intention to incorporate Lifeline into our
broader universal service mechanisms adopted in this proceeding. We
believe that a single support mechanism with a single administrator
following similar rules will have significant advantages in terms of
administrative convenience and efficiency. Furthermore, in deciding
which carriers may participate in Lifeline, we note that section 254(e)
allows universal service support to be provided only to carriers deemed
eligible pursuant to section 214(e).
214. We further observe that a large class of carriers that will
not be eligible to receive universal service support--those providing
service purely by reselling another carrier's services purchased on a
wholesale basis pursuant to section 251(c)(4)--will nevertheless be
able to offer Lifeline service. The Local Competition Order provides
that all retail services, including below-cost and residential
services, are subject to wholesale rate obligations under section
251(c)(4). Resellers therefore could obtain Lifeline service at
wholesale rates that include the Lifeline support amounts and can pass
these discounts through to qualifying low-income consumers. We are
hopeful that states will take the steps required to ensure that low-
income consumers can receive Lifeline service from resellers. Further,
we find that we can rely on the states to ensure that at least one
eligible telecommunications carrier is certified in all areas. As a
result, low-income consumers always will have access to a Lifeline
program from at least one carrier. We will reassess this approach in
the future if it appears that the revised Lifeline program is not being
made available to low-income consumers nationwide.
[[Page 32893]]
215. Consumer Qualifications for Lifeline.
We agree with the Joint Board that the Commission should maintain
this basic framework for administering Lifeline qualification in states
that provide intrastate support for the Lifeline program. State
agencies or telephone companies currently determine consumer
qualifications for Lifeline pursuant to standards set by narrowly
targeted programs approved by the Commission. We believe such criteria
leave states sufficient flexibility to target support based on that
state's particular needs and circumstances. We also concur with the
recommendation that the Commission require states that provide
intrastate matching funds to base eligibility criteria solely on income
or factors directly related to income (such as participation in a low-
income assistance program). Currently, some states only make Lifeline
assistance available to low-income individuals who, for example, are
elderly or have disabilities. We agree that the goal of increasing low-
income subscribership will best be met if the qualifications to receive
Lifeline assistance are based solely on income or factors directly
related to income.
216. We also adopt the Joint Board's recommendation that the
Commission apply a specific means-tested eligibility standard, such as
participation in a low-income assistance program, in states that choose
not to provide matching support from the intrastate jurisdiction.
Specifically, we find that the default Lifeline eligibility standard in
non-participating states will be participation in Medicaid, food
stamps, Supplementary Security Income (SSI), federal public housing
assistance or section 8, or Low Income Home Energy Assistance Program
(LIHEAP). We find that, in the interest of administrative ease and
avoiding fraud, waste, and abuse, the named subscriber to the local
telecommunications service must participate in one of these assistance
programs to qualify for Lifeline. We specifically decline to base
eligibility solely on a program, such as Aid to Families with Dependent
Children (AFDC), that will be altered significantly by the recently-
enacted welfare reform law. Because we agree that individuals who are
eligible for assistance from low-income assistance programs also should
be eligible for Lifeline, participation in at least one of the programs
mentioned above shall be the federal eligibility standard applied in
states that do not participate in Lifeline. We conclude that basing
Lifeline eligibility on participation in any of these low-income
assistance programs will achieve our goal of wide Lifeline
participation by low-income consumers, because the eligibility criteria
for several of these programs vary. Therefore, basing Lifeline
eligibility on participation in any of these programs will reach more
low-income consumers than basing Lifeline eligibility solely on one of
the programs. We further conclude that if participation in Medicaid,
food stamps, SSI, public housing assistance or section 8, or LIHEAP
becomes an unworkable standard, as evidenced, for instance, by a
disproportionately low number of Lifeline consumers in states where
such a standard is used, the Commission shall revise the standard.
217. We clarify that the Joint Board's recommendation, which we
adopt, requires states to base eligibility on income or factors
directly related to income and merely suggests using participation in a
low-income assistance program as the criterion. Thus, states may choose
their eligibility criteria as long as those criteria measure income or
factors directly related to income. We have no reason to conclude, at
this time, that states will not take the required steps to reconcile
Lifeline qualification with changes in welfare laws. We have tied the
default Lifeline qualification standards (which will apply in states
that do not provide intrastate funds) to programs that commenters
believe to be unaffected or minimally affected by the new welfare
legislation. We will, however, continue to monitor the situation and
may make further changes in the future if it appears that changes to
other programs unduly limit Lifeline eligibility.
218. We agree that states providing matching intrastate Lifeline
support should continue to have the discretion to determine the
appropriateness of verification of Lifeline customers' qualification
for the program. Because these states are generating support from the
intrastate jurisdiction, they have an incentive to control fraud,
waste, and abuse of the support mechanism. Because states that are
generating matching intrastate support have a strong interest in
controlling the size of the support mechanism, we do not find at this
time that imposing stricter federal verification requirements is
necessary to ensure that the size of the support mechanisms remains at
reasonable levels. We will revisit this conclusion, however, to ensure
the sustainability and predictability of the sizing of the support
mechanisms. In light of these conclusions, we find it no longer
necessary to reduce the level of Lifeline support in states that choose
not to require that consumer qualification be verified.
219. With respect to verification in states in which the federal
default qualification criteria apply, we will require carriers to
obtain customers' signatures on a document certifying under penalty of
perjury that the customer is receiving benefits from one of the
programs included in the default standard, identifying the program or
programs from which the customer receives benefits, and agreeing to
notify the carrier if the customer ceases to participate in such
program or programs.
220. Link Up
We agree with the Joint Board that the Link Up funding mechanisms
should be removed from the jurisdictional separations rules and that
the program should be funded through equitable and non-discriminatory
contributions from all interstate telecommunications carriers. Funding
the program through contributions from all interstate carriers will
allow for explicit and competitively neutral support mechanisms.
221. We also adopt the Joint Board's recommendation that we amend
our Link Up program so that any eligible telecommunications carrier may
draw support from the new Link Up support mechanism if that carrier
offers to qualifying low-income consumers a reduction of its service
connection charges equal to one half of the carrier's customary
connection charge or $30.00, whichever is less. Support shall be
available only for the primary residential connection. When the carrier
offers eligible customers a deferred payment plan for connection
charges, we agree with the Joint Board that we should preserve the
current rule providing support to reimburse carriers for waiving
interest on the deferred charges. In the absence of evidence that
increasing the level of Link Up support for connecting each eligible
customer would significantly promote universal service goals, we will
maintain the present level of support for Link Up, as the Joint Board
recommended. To ensure that the opportunity for carrier participation
is competitively neutral, we adopt the Joint Board's recommendation to
eliminate the requirement that the commencement-of-service charges
eligible for support be filed in a state tariff.
222. For the sake of administrative simplicity, we revise our rules
to require that the same qualification requirements that apply to
Lifeline in each state, including its verification standards, also
shall apply to Link Up in that state. This step will advance
administrative
[[Page 32894]]
simplicity while states assess their approaches to universal service
and while we seek further recommendations from the Joint Board. We
further observe that this rule will change nothing in the majority of
states, which already use the same eligibility criteria for both
programs. This change, however, will base states' ability to set Link
Up eligibility criteria on whether they participate in Lifeline.
Accordingly, we eliminate the requirement that states verify Link Up
customers' qualifications for the program and instead rely on the
states to determine whether the costs of verification outweigh the
potential for fraud, waste, and abuse. Because only those states
generating intrastate Lifeline support will make this determination,
they will have an independent incentive to control fraud, waste, and
abuse. In states that do not participate in Lifeline, the federal
default Lifeline qualifications also will apply to Link Up.
223. We also adopt the Joint Board's recommendation that states
shall be prohibited from restricting the number of service connections
per year for which low-income consumers who relocate can receive Link
Up support. Commenters observe that this rule is vital for migrant
farmworkers and low-income individuals who have difficulty maintaining
a permanent residence, and we agree that this rule will help ensure
that consumers in all regions of the nation have access to affordable
telecommunications services and that rates for such services are
reasonable.
224. Services for Low-Income Consumers
We agree with the Joint Board that we should ensure, through
universal service support mechanisms, that low-income consumers have
access to certain services. The current Lifeline program does not
require that low-income consumers receive a particular level of
telecommunications services. Thus, we amend the Lifeline program to
provide that Lifeline service must include the following services:
Single-party service; voice grade access to the public switched
telephone network; DTMF or its functional digital equivalent; access to
emergency services; access to operator services; access to
interexchange service; access to directory assistance; and toll-
limitation services. In determining the specific services to be
provided to low-income consumers, we adopt the Joint Board's reasoning
that section 254(b)(3) calls for access to services for ``[c]onsumers
in all regions of the Nation, including low-income consumers'' and that
universal service principles may not be realized if low-income support
is provided for service inferior to those supported for other
subscribers. All these services, with the exception of toll limitation,
also will be supported by universal service support mechanisms for
rural, insular, and high cost areas, and we therefore find that low-
income consumers should receive support for these services.
225. We further agree with the Joint Board's recommendation that
Lifeline consumers also should receive, without charge, toll-limitation
services. Studies demonstrate that a primary reason subscribers lose
access to telecommunications services is failure to pay long distance
bills. Because voluntary toll blocking allows customers to block toll
calls, and toll control allows customers to limit in advance their toll
usage per month or billing cycle, these services assist customers in
avoiding involuntary termination of their access to telecommunications
services. The Joint Board concluded, however, that low-income consumers
may not be able to afford voluntary toll-limitation services in a
number of jurisdictions. Therefore, we are confident that providing
voluntary toll limitation without charge to low-income consumers,
should encourage subscribership among low-income consumers.
Furthermore, we find that toll-limitation services are ``essential to
education, public health or public safety'' and ``consistent with the
public interest, convenience, and necessity'' for low-income consumers
in that they maximize the opportunity of those consumers to remain
connected to the telecommunications network.
226. We also adopt the Joint Board's recommendation that carriers
providing voluntary toll limitation should be compensated from
universal service support mechanisms for the incremental cost of
providing toll-limitation services. We find that recovery of the
incremental costs of toll-limitation services is adequate cost recovery
that does not place an unreasonable burden on the support mechanisms.
By definition, incremental costs include the costs that carriers
otherwise would not incur if they did not provide toll-limitation
service to a given customer, and carriers will be compensated for their
costs in providing such service. Because low-income consumers may
otherwise be unlikely to purchase toll-limitation services, we do not
find it is necessary to support the full retail charge for toll-
limitation services the carrier would charge other consumers. We
therefore also conclude that universal service support should not
contribute to the service's joint and common costs. We require that
Lifeline subscribers receive toll-limitation services without charge.
227. We emphasize that Lifeline consumers' acceptance of toll
blocking is voluntary, and that Lifeline consumers are free to select
toll control, which limits rather than prevents consumers' ability to
place toll calls from carriers providing such a service. Both toll
blocking and toll control are forms of toll-limitation service that
would be supported by federal universal service mechanisms.
228. We will authorize state commissions to grant carriers that are
technically incapable of providing toll-limitation services a period of
time during which they may receive universal service support for
serving Lifeline consumers while they complete upgrading their switches
so that they can offer such services. The Joint Board observed that
most carriers currently are capable of providing toll-blocking service,
and some carriers are capable of providing toll control. Eligible
telecommunications carriers with deployed switches that are incapable
of providing toll-limitation services, however, shall not be required
to provide such services to customers served by those switches until
those switches are upgraded. We adopt the Joint Board's recommendation,
however, that, when they make any switch upgrades, eligible
telecommunications carriers currently incapable of providing toll-
limitation services must add the capability to their switches to
provide at least toll blocking in any switch upgrades (but Lifeline
support in excess of the incremental cost of providing toll blocking
shall not be provided for such switch upgrades). This is not an
exception to eligible telecommunications carriers' general obligation
to provide toll-limitation services; rather, it is a transitional
mechanism to allow eligible telecommunications carriers a reasonable
time in which to replace existing equipment that technically prevents
the provision of the service.
229. We concur with the Joint Board that support should not be
provided for toll-limitation services for consumers other than low-
income consumers. Subscribership levels fall well below the national
average only among low-income consumers, and, as the Joint Board
observed, a principal reason for this disparity appears to be service
termination due to failure to pay toll charges. Therefore, to the
extent carriers are capable of providing them, toll-limitation services
should be supported only for low-income consumers at this time.
[[Page 32895]]
230. No Disconnection of Local Service for Non-Payment of Toll Charges
We also adopt the Joint Board's recommendation that we should
prohibit eligible telecommunications carriers from disconnecting
Lifeline service for non-payment of toll charges. Studies suggest that
disconnection for non-payment of toll charges is a significant cause of
low subscribership rates among low-income consumers. Furthermore, the
no-disconnect rule advances the principles of section 254 that
``quality services should be available at just, reasonable, and
affordable rates'' and that access to telecommunications services
should be provided to ``consumers in all regions of the nation,
including low-income consumers.'' We therefore believe that such a rule
is within the ambit of our authority in section 254. We further find,
consistent with these principles, that an eligible telecommunications
carrier may not deny a Lifeline consumer's request for re-establishment
of local service on the basis that the consumer was previously
disconnected for non-payment of toll charges.
231. We also find that our adoption of a no-disconnect rule will
make the market for billing and collection of toll charges more
competitively neutral. Currently, the ILEC is the only toll charge
collection agent that can offer the penalty of disconnecting a
customer's local telephone service for non-payment of other charges.
ILECs have maintained this special prerogative, although the interstate
long distance market and the local exchange markets legally have been
separated for over a decade, and interstate billing and collection
activities have been deregulated since 1986. Because the practice of
disconnecting local service for non-payment of toll charges essentially
is a vestige of the monopoly era, we find our rule prohibiting that
practice will further advance the pro-competitive, deregulatory goals
of the 1996 Act.
232. We agree with several commenters and limit the federal rule to
Lifeline subscribers at this time, because only low-income consumers
experience dramatically lower subscribership levels that can be
attributed to toll charges. If we subsequently find that subscribership
levels among non-Lifeline subscribers begin to decrease, we will
consider whether this rule should apply to all consumers. In the
interest of comity, however, we leave to the states' discretion whether
such a rule should apply to other consumers at this time.
233. We further conclude that carriers offering Lifeline service
must apply partial payments received from Lifeline consumers first to
local service charges and then to toll charges, in keeping with our
goal of maintaining low-income consumers' access to local
telecommunications services. We find that this rule furthers the
principle in section 254 that access to telecommunications services
should be provided to ``consumers in all regions of the nation,
including low-income consumers'' and is within our authority in section
1 to make communications services available to as many people as
possible. Whether a Lifeline consumer's long distance and local service
providers are the same or different entities shall not affect the
application of this rule. While a carrier providing both local and long
distance service to the same consumer must be able to distinguish
between the services' respective charges to comply with our rule, we
find that any administrative burden this initially may cause is
outweighed by the benefit of maintaining Lifeline consumers' access to
local telecommunications services.
234. We also do not condition the rule prohibiting disconnection of
local service for non-payment of toll charges on the consumer's
agreement to accept toll-limitation services. Proponents of this
condition essentially argue that without this condition carriers will
experience higher levels of uncollectible toll expenses. We are not
convinced that toll limitation is necessary, however, because toll-
service providers already have available the functional equivalent of
toll limitation. That is, we observe that our rule prohibiting
disconnection of Lifeline service will not prevent toll-service
providers from discontinuing toll service to customers, including
Lifeline customers, who fail to pay their bills. Although this may have
been impossible with the switching technology used in the past, it is
achievable now. In virtually all cases, IXCs receive calling party
information with each call routed to them and could refuse to complete
calls from subscriber connections with arrearages.
235. Despite the benefits of a no-disconnect rule for Lifeline
consumers, we agree with the Joint Board that state utilities
regulators should have the ability, in the first instance, to grant
carriers a limited waiver of the requirement under limited, special
circumstances. Accordingly, we adopt the Joint Board's recommendation
that carriers may file waiver requests with their state commissions. To
obtain a waiver, the carrier must make a three-pronged showing. First,
the carrier must show that it would incur substantial costs in
complying with such a requirement. Such costs could relate to burdens
associated with technical or administrative issues, for example. For
example, some carriers providing both local and long distance service
to the same consumer may find it particularly burdensome to distinguish
between local and long distance charges. Second, the carrier must
demonstrate that it offers toll-limitation services to its Lifeline
subscribers. We find that, if a carrier is permitted by its state
commission to disconnect local service for non-payment of toll bills,
its Lifeline consumers should at least be able to control their toll
bills through toll limitation. Third, the carrier must show that
telephone subscribership among low-income consumers in its service area
in the state from which it seeks the waiver, is at least as high as the
national subscribership level for low-income consumers. Carriers must
make this showing because, we conclude, applying a no-disconnect policy
to carriers serving areas with subscribership levels below the national
average will help to improve such particularly low subscribership
levels. This waiver standard is therefore extremely limited, and a
carrier must meet a heavy burden to obtain a waiver. Furthermore, such
waivers should be for no more than two years, but they may be renewed.
If a party believes that a state commission has made an incorrect
decision regarding a waiver request, or if a state commission does not
make a decision regarding a waiver request within 30 days of its
submission, such party may file an appeal with the Commission. The
party must file the appeal with the Commission within 30 days of either
the state commission's decision or the date on which the state
commission should have rendered its decision. Furthermore, a state
commission choosing not to act on waiver requests promptly should refer
any such requests to the Commission. We agree with the Joint Board that
carriers must offer Lifeline customers toll limitation without charge
and without time restrictions in order to meet the second prong of the
waiver requirement.
236. Prohibition on Service Deposits
Pursuant to the Joint Board's recommendation and many commenters'
urging, we adopt a rule prohibiting eligible telecommunications
carriers from requiring a Lifeline subscriber to pay service deposits
in order to initiate service if the subscriber voluntarily elects to
receive toll blocking. We find that eliminating service deposits for
Lifeline customers upon their acceptance of toll blocking is
[[Page 32896]]
consistent with section 254(b) and within our general authority under
sections 1, 4(i), 201, and 205 of the Act. Section 201 of the Act gives
the Commission authority to regulate common carriers' rates and service
offerings, and section 1 directs that the Commission's regulations
provide as many people as possible with the ability to obtain
telecommunications services at reasonable rates. We find that, because
carriers' high service deposits deter subscribership among low-income
consumers, it is within our authority to prohibit carriers from
charging service deposits for Lifeline consumers who accept toll
blocking. Research suggests that carriers often require customers to
pay high service deposits in order to initiate service, particularly
when customers have had their service disconnected previously.
Therefore, we prohibit eligible telecommunications carriers from
requiring Lifeline service subscribers to pay service deposits in order
to initiate service if the subscriber voluntarily chooses to receive
toll blocking. As we have stated, universal service support shall be
provided so that toll blocking is made available to all Lifeline
consumers at no additional charge. During the period of time when
carriers incapable of providing toll-limitation services are permitted
to upgrade their switches to become capable of providing such services,
however, Lifeline subscribers may be required to pay service deposits.
237. Carriers may protect themselves against consumers' failure to
pay local charges by requesting advance payments in the amount of one
month's charges, as most ILECs currently do. We would consider an
advance-payment requirement exceeding one month to be an improper
deposit requirement, however. That is, while carriers could charge one
month's advance payment, they may take action against consumers only
after such charges have been incurred (through disconnection or
collection efforts, for example). Assessing charges on consumers before
any overdue payments are owed could make access to telecommunications
services prohibitively expensive for low-income consumers.
238. Other Services
In response to the NPRM, some commenters suggest that low-income
consumers should receive free access to information about telephone
service and that compensation for providing such information should
come from support mechanisms. These commenters appear to be concerned
that low-income consumers will be unable to place calls to gain
telephone service information if the calls otherwise would be an in-
region toll call, or if the state's Lifeline program allows only a
limited number of free calls. Similarly, NAD suggests that universal
service support mechanisms should provide support so that TTY users can
make free relay calls to numbers providing LEC service information. We
agree with the Joint Board's recommendation that the states are able to
determine, pursuant to section 254(f), whether to require carriers to
provide Lifeline customers with free access to information about
telephone service. The states are most familiar with the number of
consumers in their respective states affected by charges for these
calls and may impose such a requirement on carriers pursuant to section
254(f) through state universal service support mechanisms.
Additionally, we find that the record on free access to telephone
service information does not adequately explain how to support access
to such information in a competitively neutral way, so that consumers
are assured access to such information from all eligible service
providers. We agree with the Joint Board that the same concerns
militate against providing federal support for low-income consumers
with disabilities making relay calls to gain access to LEC service
information.
239. We concur with the Joint Board that, given the present
structure of residential interexchange rates, the record does not
support providing universal service support for usage of interexchange
and advanced services for low-income consumers. We will, however,
continue to monitor the interexchange services market to determine
whether additional measures are necessary for low-income consumers. We
observe that Lifeline services will be provided by telecommunications
carriers that have been certified as eligible for universal service
support pursuant to section 214(e). Such carriers will be obligated to
provide certain services, including access to interexchange service, to
consumers in rural, insular, and high cost areas, and we decline to
specify a different level of service for low-income consumers.
240. Some commenters disagree with the Joint Board's recommendation
that issues relating to special-needs equipment for consumers with
disabilities should not be addressed in this proceeding because
Congress provided for disabled individuals' access to
telecommunications services separately in section 255. We agree with
the Joint Board, however, that these matters are best addressed in a
proceeding to implement section 255. We observe that we have taken a
first step toward the implementation of section 255 with the release of
a Notice of Inquiry on September 19, 1996 and January 14, 1997.
Congress specifically identified other categories of users for whom
support should be provided pursuant to section 254, such as low-income
consumers, consumers in rural, insular, and high cost areas, schools
and libraries, and rural health care providers. Similarly, Congress
clearly addressed access by disabled individuals in section 255.
241. We generally agree with commenters that argue that low-income
subscribership levels might increase if there were more information
available to low-income consumers about the existence of assistance
programs. We agree with the Joint Board, however, that the states are
in a better position than the Commission to supply such information,
particularly given the flexibility states have to target low-income
universal service programs to the particular needs of their residents.
Furthermore, while we conclude that support from federal universal
service support mechanisms will not be given to carriers distributing
such information, we note that eligible telecommunications carriers
will be required to advertise the availability of, and charges for,
Lifeline pursuant to their obligations under section 214(e)(1).
242. Implementation of Revised Lifeline and Link Up Programs
Although we find that the changes to Lifeline and Link Up we now
adopt will make both programs consistent with the Act and our objective
of increasing subscribership among low-income consumers, we find that
the public interest would not be served by disrupting the existing
Lifeline and Link Up services that ILECs currently offer in most areas
of the country. We therefore must select a date on which the current
Lifeline and Link Up programs will terminate and the new programs
begin.
243. Because the new universal service support mechanisms must be
in place in order to fund the revised Lifeline and Link Up programs, we
conclude that the new Lifeline and Link Up funding mechanisms will
commence on January 1, 1998. Additionally, support for toll limitation
for Lifeline subscribers shall begin at that same time, because support
for this service also should come from the new support mechanisms.
Issues Unique to Insular
244. In the Recommended Decision, the Joint Board recognized the
special circumstances faced by carriers and
[[Page 32897]]
consumers in the insular areas of the United States, particularly the
Pacific Island territories. The Joint Board recommended that all of the
universal service mechanisms adopted in this proceeding should be
available in those areas. Thus, low-income residents living in insular
areas, such as American Samoa and the U.S. Virgin Islands, would
benefit from the Lifeline and Link-up programs, and schools, libraries,
and rural health care providers in insular areas would benefit from the
programs the Joint Board recommended for providing services to those
institutions pursuant to section 254(h). Likewise, carriers in insular
areas would be potentially eligible for universal service support if
they serve high cost areas. We agree and adopt these recommendations of
the Joint Board and conclude, in accordance with section 254, that
insular areas shall be eligible for the universal service programs
adopted in this Order.
245. The Joint Board also recommended that the Commission work with
an affected state if subscribership levels in that state fall from the
current levels on a statewide basis. The record indicates that
subscribership levels in insular areas are particularly low.
Accordingly, we will issue a Public Notice to solicit further comment
on the factors that contribute to the low subscribership levels that
currently exist in insular areas, and to examine ways to improve
subscribership in these areas.
246. Regarding support for toll-free access and access to
information services in insular areas, the Joint Board recommended that
the Commission take no specific action at this time, but revisit this
issue at a later date. The Joint Board's recommendation reflects the
fact that Guam and CNMI will be included in the NANP by July 1, 1997,
and that the Commission will require interstate carriers serving the
Pacific Island territories to integrate their rates with the rates for
services that they provide to other states no later than August 1,
1997. The Joint Board noted that those changes will affect decisions by
the carriers' business customers and information service providers on
whether to locate in a certain area or to provide toll-free access to
that area.
247. We agree with the Joint Board's recommendation that we take no
action regarding support for toll-free access and access to information
services for the Pacific Island territories now, but revisit whether we
should provide such support after those islands are included in NANP
and interexchange carriers have integrated the islands into their rate
structures. We agree with the Joint Board that it is too early to
assess whether there should be universal service support for toll-free
access and information services in the Pacific Island territories or
whether a decision not to provide support for these services would
violate either section 202 or section 254(b)(3).
248. We anticipate that, when final rate-integration plans are
filed, on or before June 1, 1997, the Pacific Island territories will
be included in the nationwide service offerings of toll-free access
service providers. Because they will be part of the NANP by the time
that the rate integration plans become effective in August, these
islands should be included in any nationwide service offering made
after that time. Subscribers to toll-free access service will, of
course, continue to be able to offer their customers toll-free access
to the subscribers' businesses on less than a nationwide basis, such as
in regional or statewide toll-free service areas. Thus we do not find
it necessary to adopt a specific requirement that carriers providing
toll-free access service include the Pacific Island territories in
their ``nation-wide'' service area, as suggested by the Governor of
Guam.
249. We agree with the commenters that there should be some period
in which residents of CNMI and Guam can continue to have access to
toll-free numbers while the market adjusts to the inclusion of those
islands in the NANP and rate integration. We note that under the
industry plan for introducing the new numbering plan areas (NPAs) for
CNMI and Guam there is a twelve-month ``permissive dialing'' period
during which callers may use either the NANP numbers or continue to use
the international numbering plan to place calls to and from the
islands. We find it in the public interest to permit the continued use
of 880 and 881 numbers by end users in the Pacific Island territories
to place toll-free calls during that ``permissive dialing'' period--
until July 1, 1998. We believe that such a period provides ample time
for toll-free access customers to evaluate the costs and benefits of
including the Pacific Island territories in their toll-free access
service areas and to decide whether to include the islands in their
area covered by the toll-free dialing service agreements with their
service providers. We also note that the islands will be included in
the NANP a month before the rate-integration plans must become
effective. Without this transition period, there would be a month
during which consumers could not use 880 or 881 numbers and during
which toll-free access customers might not have the benefit of
integrated rates to the islands.
250. Toll-free service is currently provided in CNMI and Guam as
inbound foreign-billed service. This service allows a calling party who
is in another NANP country to pay for a call from his or her location
to the United States, where the call is linked to the toll-free
service. For customers in CNMI and Guam, it means that they pay the
portion of the 880/881 call from their location to Hawaii, where it is
linked to the toll-free service.
251. According to a resolution of the Industry Numbering Committee
(INC), however, the use of 880 and 881 numbers for inbound foreign-
billed 800-type service was to be restricted to calls placed from
foreign locations within the NANP to toll-free dialing numbers in the
United States. Thus, consumers in CNMI and Guam would be unable to make
880/881 calls once those territories are included in the NANP. We find
that the circumstances in these territories warrant exercise of our
regulatory powers over numbering pursuant to section 251(e) of the Act
to supersede this industry agreement by providing for the transition
period described above that will allow end users in CNMI and Guam the
continued use of 880/881 numbers to place toll-free calls. This action
is related to the implementation of the 1996 Act, and is extremely
limited in scope--applying only to 880 and 881 calls from CNMI and Guam
and only until July 1, 1998, which will coincide with the permissive
dialing period established by the Administrator of the NANP. We also
note that none of the parties that filed comments in this proceeding
have objected to the proposal made by the Governor of Guam and CNMI to
continue the use of the 880/881 numbers from CNMI and Guam during this
period. We also find that this action is in keeping with the Joint
Board's intent that we allow the telecommunications markets in CNMI and
Guam time to adjust to the inclusion of the islands in the NANP before
we revisit whether to provide universal service support for toll-free
access services from those areas.
252. We also find that the use of 880 and 881 numbers for a limited
transition period does not violate section 228 of our rules regarding
pay-per-call services. Calls using 880 and 881 do not fall within the
definition of ``pay-per-call'' because they are not accessed through a
900 number, and the calling party is only charged for the transmission,
or part of the transmission, of the call. Although the 880 or 881
number provides a link to a toll-free number, it is not a toll-free
number itself. Those numbers are not
[[Page 32898]]
advertised as toll-free numbers and it is understood, particularly by
consumers in the Pacific Island territories who have been using the
numbers over the past few years, that there is a charge associated with
the use of the numbers. Therefore, we conclude that the use of an 880
or 881 number does not violate the restrictions on the use of toll-free
numbers in section 228 or our rules.
253. We thus agree with CNMI that there is no legal restriction on
using 880 and 881 numbers for calls from CNMI and Guam to toll-free
access numbers within the NANP. Indeed, because we find the temporary
use of those numbers for access to toll-free services in the Pacific
Island territories to be in the public interest, at least for a short
period, we shall permit carriers originating calls from the Pacific
Island territories to toll-free access services within the NANP to
continue using 880 and 881 numbers to provide access to those services
until July 1, 1998. Consumers on those islands should thus be able to
continue to use 880/881 to access toll-free numbers during that period.
We anticipate that by July 1, 1998, the businesses subscribing to toll-
free access services will have made a business decision as to whether
to include the Pacific Island territories in their toll-free access
service plans. As recommended by the Joint Board, we will then revisit
the issue of whether universal service support is needed for toll-free
access and access to information services from the Pacific Island
territories.
Schools and Libraries
254. Telecommunications Services
We adopt the Joint Board's recommendation to provide schools and
libraries with the maximum flexibility to purchase from
telecommunications carriers whatever package of commercially available
telecommunications services they believe will meet their
telecommunications service needs most effectively and efficiently.
255. The establishment of a single set of priorities for all
schools and libraries would substitute our judgment for that of
individual school administrators throughout the nation, preventing some
schools and libraries from using the services that they find to be the
most efficient and effective means for providing the educational
applications they seek to secure. Given the varying needs and
preferences of different schools and libraries and the relative
advantages and disadvantages of different technologies, we agree that
individual schools and libraries are in the best position to evaluate
the relative costs and benefits of different services and technologies.
We also agree that our actions should not disadvantage schools and
libraries in states that have already aggressively invested in
telecommunications technologies in their state schools and libraries.
Because we will require schools and libraries to pay a portion of the
costs of the services they select, we agree with the Joint Board that
allowing schools and libraries to choose the services for which they
will receive discounts is most likely to maximize the value to them of
universal service support and to minimize inefficient uses of services.
256. Permitting schools and libraries full flexibility to choose
among telecommunications services also eliminates the potential risk
that new technologies will remain unavailable to schools and libraries
until the Commission has completed a subsequent proceeding to review
evolving technological needs. Thus, in an environment of rapidly
changing and improving technologies, empowering schools and libraries,
regardless of wealth and location, to choose the telecommunications
services they will use as tools for educating their students will
enable them to use and teach students to use state-of-the-art
telecommunications technologies as those technologies become available.
257. We limit section 254(c)(3) telecommunications services to
those that are commercially available, and we find no reason to
interpret section 254(c)(3) to require us to adopt a more narrow
definition of eligible services. We observe that a state preferring a
program that targets a narrower or broader set of services may make
state funds available to schools or libraries that purchase those
services.
258. Eligible Services
We also follow the Joint Board's recommendation that schools and
libraries receive rate discounts from telecommunications carriers for
basic ``conduit'' access to the Internet. We conclude that sections
254(c)(3) and 254(h)(1), in the context of the broad policies set forth
in section 254(h)(2), authorize us to permit schools and libraries to
receive the telecommunications and information services provided by
telecommunications carriers needed to use the Internet at discounted
rates.
259. We observe that section 254(c)(3) grants us authority to
``designate additional services for support'' and section 254(h)(1)(B)
authorizes us to fund any section 254(c)(3) services. The generic
universal service definition in section 254(c)(1) and the rate
provision regarding special services for rural health care providers in
section 254(h)(1)(A) are both explicitly limited to telecommunications
services. In the education context, however, the statutory references
are to the broad class of ``services,'' rather than the narrower class
of ``telecommunications services.'' Specifically, section 254(c)(3)
refers to ``additional services,'' while section 254(h)(1)(B) refers to
``any of its services''; neither provision refers to the narrower class
of telecommunications services. In addition, sections 254 (a)(1) and
(a)(2) mandate that the Commission define the ``services that are
supported by Federal universal service support mechanisms'' but does
not limit support to telecommunications services. The use of the
broader term ``services'' in section 254(a) provides further validation
for the inclusion of services in addition to telecommunications
services in sections 254(c)(3) and 254(h)(1)(B).
260. We reject BellSouth's argument that the fact that section
254(h) is entitled ``Telecommunications Services for Certain
Providers'' leads to the conclusion that the only services covered by
that section are telecommunications services. To the contrary, within
section 254(h) Congress specified which services must be
``telecommunications services'' in order to be eligible for support. As
noted above, the rate provision regarding special services for rural
health care providers, section 254(h)(1)(A), is explicitly limited to
``telecommunications services.'' Thus, the term used in section
254(h)(1)(B), ``any of its services that are within the definition of
universal service under section (c)(3),'' cannot be read as a generic
reference to the heading of that section. Rather, the varying use of
the terms ``telecommunications services'' and ``services'' in sections
254(h)(1)(A) and 254(h)(1)(B) suggests that the terms were used
consciously to signify different meanings. In addition, the mandate in
section 254(h)(2)(A) to enhance access to ``advanced telecommunications
and information services,'' particularly when read in conjunction with
the legislative history as discussed below, suggests that Congress did
not intend to limit the support provided under section 254(h) to
telecommunications services. We conclude, therefore, that we can
include the ``information services,'' e.g., protocol conversion and
information storage, that are needed to access the Internet, as well as
internal connections, as ``additional services'' that section
[[Page 32899]]
254(h)(1)(B), through section 254(c)(3), authorizes us to support.
261. In this regard, section 254(h)(2)(A), which directs the
Commission to establish competitively neutral rules to enhance, to the
extent technically feasible and economically reasonable, access to
advanced telecommunications and information services, informs our
interpretation of sections 254(c)(3) and 254(h)(1)(B) as allowing
schools and libraries to receive discounts on rates from
telecommunications carriers for Internet access. Given the directive of
section 254(h)(2)(A) that the Commission enhance the access that
schools and libraries have to ``information services,'' as described in
the legislative history, i.e., actual educational content, we conclude
that there should be discounts for access to these services provided by
telecommunications carriers under the broad provisions of sections
254(c)(3) and 254(h)(1)(B).
262. We conclude that we are authorized to provide discounts on the
data links and associated services necessary to provide classrooms with
access to those educational materials, even though these functions meet
the statutory definition of ``information services'' because of their
inclusion of protocol conversion and information storage. Without the
use of these ``information service'' data links, schools and libraries
would not be able to obtain access to the ``research information, (and)
statistics'' available free of charge on the Internet. We note that
these information services are essential for effective transmission
service, i.e., ``conduit'' service; they are not elements of the
content services provided by information publishers. We conclude that
our authority under sections 254(c)(3) and 254(h)(1)(B) is broad enough
to achieve these section 254(h)(2)(A) goals.
263. We find that this approach of providing discounts for basic
conduit access to the Internet should not favor Internet access when
provided as pure conduit versus Internet access bundled with minimal
content; rather, this approach should simply encourage schools and
libraries to select the most cost-effective form of transmission
access, separate of content.
264. We also offer a more precise definition of what ``information
services'' will be eligible for discounts under this program in
response to commenters who challenge the feasibility of using the
``basic, conduit'' Internet access terminology that the Joint Board
used to describe what aspects of Internet access are eligible for
support. We note that Congress described the conduit services we seek
to cover in another context in the 1996 Act. That is, in listing
exceptions to the definition of ``electronic publishing'' in section
274 of the Act, Congress described certain services that are precisely
the types of ``conduit'' services that we agree with the Joint Board
should be available to eligible schools and libraries at a discount. We
adopt the descriptions of those services here because we find that they
provide the additional clarification of conduit services that
commenters request. We conclude that eligible schools and libraries
will be permitted to apply their relevant discounts to information
services provided by entities that consist of:
(i) The transmission of information as a common carrier;
(ii) The transmission of information as part of a gateway to an
information service, where that transmission does not involve the
generation or alteration of the content of information but may include
data transmission, address translation, protocol conversion, billing
management, introductory information content, and navigational systems
that enable users to access information services that do not affect the
presentation of such information services to users; and
(iii) Electronic mail services [e-mail].
As recommended by the Joint Board, other information services, such as
voice mail, shall not be eligible for support at this time.
265. We also follow the Joint Board's recommendation to grant
schools and libraries discounts on access to the Internet but not on
separate charges for particular proprietary content or other
information services. The Joint Board recommended that we solve the
problem of bundling content and ``conduit'' (access) to the Internet by
not permitting schools and libraries to purchase a package including
content and conduit, unless the bundled package included minimal
content and provided a more cost-effective means of securing non-
content access to the Internet than other non-content alternatives. We
agree with this approach.
266. Therefore, consistent with the Joint Board's recommendation,
schools and libraries that purchase, from a telecommunications carrier,
access to the Internet including nothing more than the services listed
above will be eligible for support based on the purchase price. In
addition, if it is more cost-effective for it to purchase Internet
access provided by a telecommunications carrier that bundles a minimal
amount of content with such Internet access, a school or library may
purchase that bundled package and receive support for the portion of
the package price that represents the price for the services listed
above.
267. This approach will create three possible scenarios for schools
and libraries. First, if the telecommunications carrier bundles access
with a package of content that is otherwise available free of charge on
the Internet because the content is advertiser-supported, bundling that
content with Internet access will not permit the telecommunications
carrier to recover any additional remuneration other than the fee for
the access. Second, if the telecommunications carrier offers other
Internet users access to its proprietary content for a price, it may
treat the difference between that price and the price it charges for
its access only package as the price of non-content Internet access.
Third, if a telecommunications carrier providing Internet access offers
a bundled package of content that it does not offer on an unbundled
basis and thus, the fair price of the conduit element cannot be
ascertained readily, the school or library may receive support for such
an Internet access package only if it can affirmatively show that the
price of the carrier's Internet access package was still the most cost-
effective manner for the school or library to secure basic, conduit
access to the Internet.
268. Eligible Providers
Section 254(e) states that only an ``eligible telecommunications
carrier'' under section 214(e) may receive universal service support.
Section 254(h)(1)(B)(ii), however, states that telecommunications
carriers providing services to schools and libraries may receive
reimbursement from universal service support mechanisms,
notwithstanding the provisions of section 254(e). Consequently, we
agree in concluding that Congress intended that any telecommunications
carrier, even one that does not qualify as an ``eligible
telecommunications carrier,'' should be eligible for support for
services provided to schools and libraries.
269. Support for Internal Connections
Congress intended that telecommunications and other services be
provided directly to classrooms. Therefore, eligible schools and
libraries may, under sections 254(c)(3) and 254(h)(1), secure support
for installation and maintenance of internal connections, among other
services and
[[Page 32900]]
functionalities provided by telecommunications carriers.
270. We find that the Act permits universal service support for an
expanded range of services beyond telecommunications services.
Specifically, we conclude that the installation and maintenance of
internal connections fall within the broad scope of the universal
service support provisions of sections 254 (c)(3) and (h)(1)(B), in the
context of the broad goals of section 254(h)(2)(A). Nothing in section
254 excludes internal connections from the scope of ``additional
services'' for schools and libraries that can be designated for support
under section 254(c)(3) or the corresponding services for which schools
and libraries can receive discounts under section 254(h)(1)(B).
Consistent with our finding that a broad set of services should be
supported, we also find that we should not limit support to just those
services that are offered on a common carrier basis.
271. We agree with the Joint Board's response to those parties
arguing that the physical facilities providing intraschool and
intralibrary connections are ``goods'' or ``facilities'' rather than
section 254(c)(3) ``services.'' The Joint Board observed that not only
are the installation and maintenance of such facilities services, but
the cost of the actual facilities may be relatively small compared to
the cost of labor involved in installing and maintaining internal
connections. The Joint Board noted that the D.C. Circuit has repeatedly
referred to the installation and maintenance of inside wiring as
services. The Joint Board also noted that adopting the opposite view
would treat internal connections as a facility ineligible for support
if a school purchased it but as a service eligible for support if a
school leased the facility from a third party. Given that the provision
of internal connections is a service, we conclude that we have
authority to provide discounts on the installation and maintenance of
internal connections under sections 254(c)(3) and 254(h)(1)(B).
272. We find further that the broad purposes of section 254(h)(2)
support our authority for providing discounts for the installation and
maintenance of internal connections by telecommunications carriers
under sections 254(c)(3) and 254(h)(1)(B). As the Joint Board
explained, section 254(h)(2)(A) states that ``[t]he Commission shall
establish competitively neutral rules * * * to enhance, to the extent
technically feasible and economically reasonable, access to advanced
telecommunications and information services for all public and
nonprofit elementary and secondary school classrooms * * * and
libraries.'' The Joint Board recognized that a primary way to give
``classrooms'' access to advanced telecommunications and information
services is to connect computers in each classroom to a
telecommunications network. We interpret the scope of sections
254(c)(3) and 254(h)(1)(B) as broad enough to cover the provision of
discounts on internal connections provided by telecommunications
carriers. Telecommunications carriers might well, of course,
subcontract this business to non-telecommunications carriers.
273. We also agree with the Joint Board that the legislative
history supports our finding that the installation and maintenance of
internal connections are eligible for support. We note that, in its
Joint Explanatory Statement, Congress explicitly refers repeatedly to
``classrooms.'' Reading these references, we conclude that Congress
contemplated extending discounted service all the way to the individual
classrooms of a school, not merely to a single computer lab in each
school or merely to the schoolhouse door.
274. As the Joint Board recognized, finding internal connections
ineligible for support would skew the choices of schools and libraries
to favor technologies such as wireless, in which internal connections
are inseparable from external connection, over technologies such as
conventional wireline, in which a distinction can be (and for unrelated
reasons sometimes is) drawn, even when the latter would be the more
economically efficient choice. We conclude that schools, school
districts, and libraries are in the best position and should,
therefore, be empowered to make their own decisions regarding which
technologies would best accommodate their needs, how to deploy those
technologies, and how to best integrate these new opportunities into
their curriculum. Moreover, a situation in which certain technologies
were favored over others would violate the overall principle of
competitive neutrality adopted for purposes of section 254. Of course,
we by no means wish to discourage wireless technologies where they are
the efficient solution; data suggest that wireless connections would
already be the more efficient eligible ``telecommunications service''
for connecting schools to telephone carrier offices or Internet service
providers for more than 25 percent of public schools.
275. In addition to our direct coverage of non-telecommunications
carriers below, we expect non-telecommunications carriers to compete to
provide internal connections to schools and libraries by entering
partnerships and joint ventures with telecommunications carriers. Thus,
without regard to our decision below to provide discounts for services
to eligible schools and libraries provided by non-telecommunications
carriers, we conclude that our decision to provide discounts for
services to eligible schools and libraries provided by
telecommunications carriers is competitively neutral and will
facilitate, not impede, the development of the internal connections
market.
276. Extent of Support for Internal Connections
We agree that it is often difficult to distinguish between
``internal connections,'' which would be eligible for discounts, and
computers and other peripheral equipment, which would not be eligible.
We find that a given service is eligible for support as a component of
the institution's internal connections only if it is necessary to
transport information all the way to individual classrooms. That is, if
the service is an essential element in the transmission of information
within the school or library, we will classify it as an element of
internal connections and will permit schools and libraries to receive a
discount on its installation and maintenance for which the
telecommunications carrier may be compensated from universal service
support mechanisms.
277. Applying this standard, we find that support should be
available to fund discounts on such items as routers, hubs, network
file servers, and wireless LANs and their installation and basic
maintenance because all are needed to switch and route messages within
a school or library. Their function is solely to transmit information
over the distance from the classroom to the Internet service provider,
when multiple classrooms share the use of a single channel to the
Internet service provider. We also find that ``internal connections''
would include the software that file servers need to operate and that
we should place no specific restrictions on the size, i.e., type, of
the internal connections network covered. We conclude that support
should be available to fund discounts on basic installation and
maintenance services necessary to the operation of the internal
connections network. We expressly deny support, however, to finance the
purchase of equipment that
[[Page 32901]]
is not needed to transport information to individual classrooms. A
personal computer in the classroom, for example, does not provide such
a necessary transmission function and would not be supported,
consistent with the Joint Board's recommendation. A personal computer
is not intended to transmit information over a distance, unless it is
programmed to operate as a network switch or network file server.
278. We recognize that some providers may offer a bundled package
of services and facilities, only some of which are eligible for
support. For example, some file servers may also be built to provide
storage functions to supplement personal computers on the network. We
do not intend to provide a discount on such CPE capabilities. We could
address the issue of bundling by allowing the bundling of eligible and
ineligible services, but requiring that reimbursement not be requested
for more than the fair market value of the eligible services. Such an
approach would be similar to our handling of discounts when eligible
schools and libraries and other, ineligible entities form consortia
through which to receive their telecommunications services. In the case
of service bundling, however, neither party to the transaction would
have any incentive to ensure that the allocation of costs established
in the contract was fair and nonarbitrary. In consortia, by contrast,
the members each have an incentive to ensure that they are assigned a
fair allocation of costs.
279. We conclude that eligible schools and libraries may not
receive support for contracts that provide only a single price for a
package that bundles services eligible for support with those that are
not eligible for support. Schools and libraries may contract with the
same entity for both supported and unsupported services and still
receive support only if any purchasing agreement covering eligible
services specifically prices those services separately from ineligible
services so that it will be easy to identify the purchase amount that
is eligible for a discount. Consequently, where the service provider
indicates separately what the prices of the eligible and ineligible
offerings would be if offered on an unbundled basis, the service
provider must indicate the ``price reduction'' that would apply if the
services are purchased together. The provider would then be able to
apply the appropriate universal service support discount to the price
for the eligible services after reducing the price to reflect a
proportional amount of the ``price reduction'' the provider applied.
280. Finally, we agree with those commenters asserting that schools
and libraries should not be forced by the provider of internal
connections to select a particular provider for other services. With
respect to wireline internal connections, or inside wiring, we have
previously addressed the rights of carriers and customers to carrier-
installed inside wiring. In the Detariffing Recon. Order (51 FR 8498
(March 12, 1986)), we restricted the carriers' ability to interfere
with customer access to inside wiring. We observe that the federal
antitrust laws prohibit any provider of internal connections with
monopoly power from using that power to distort competition in related
markets. Similarly, we agree with WinStar that, if a carrier does not
currently charge for the use of internal connections, it should not be
entitled to begin charging for such use if the school or library
selects an alternate service provider, because that would distort the
competitive neutrality supported strongly by both Congress and the
Joint Board.
281. Pre-Discount Price
The pre-discount price is the price of services to schools and
libraries prior to the application of a discount. That is, the pre-
discount price is the total amount that carriers will receive for the
services they sell to schools and libraries: the sum of the discounted
price paid by a school or library and the discount amount that the
carrier can recover from universal service support mechanisms for
providing such services.
282. Competitive Environment
As the Joint Board recognized, in a competitive marketplace,
schools and libraries will have both the opportunity and the incentive
to secure the lowest price charged to similarly situated non-
residential customers for similar services, and providers of
telecommunications services, Internet access, and internal connections
will face competitive pressures to provide that price.
283. We agree with the Joint Board that we should encourage schools
and libraries to aggregate their demand with others to create a
consortium with sufficient demand to attract competitors and thereby
negotiate lower rates or at least secure efficiencies, particularly in
lower density regions. We concur with the Joint Board's finding that
aggregation into consortia can also promote more efficient shared use
of facilities to which each school or library might need access.
284. Thus, we agree with the Joint Board's objectives in
recommending that eligible schools and libraries be permitted to
aggregate their telecommunications needs with those of both eligible
and ineligible entities, including health care providers and commercial
banks, because the benefits from such aggregation outweigh the
administrative difficulties. We are concerned, however, that permitting
large private sector firms to join with eligible schools and libraries
to seek prices below tariffed rates could compromise both the federal
and state policies of non-discriminatory pricing. Thus, although we
find congressional support for permitting eligible schools and
libraries to secure prices below tariffed rates, we find no basis for
extending that exception to enable all private sector firms to secure
such prices.
285. For this reason, we adopt a slightly modified version of the
Joint Board's recommendation. We conclude that eligible schools and
libraries will generally qualify for universal service discounts and
prices below tariffed rates for interstate services, only if any
consortia they join include only other eligible schools and libraries,
rural health care providers, and public sector (governmental)
customers. Eligible schools and libraries participating in consortia
that include ineligible private sector members will not be eligible to
receive universal service discounts unless the pre-discount prices of
any interstate services that such consortia receive from ILECs are
generally tariffed rates. We conclude that this approach satisfies both
the purpose and the intent of the Joint Board's recommendation because
it should allow the consortia containing eligible schools and libraries
to aggregate sufficient demand to influence existing carriers to lower
their prices and should promote efficient use of shared facilities.
This approach also includes the large state networks upon which many
schools and libraries rely for their telecommunications needs among the
entities eligible to participate in consortia. We recognize that state
laws may differ from federal law with respect to non-discriminatory
pricing requirements.
286. We adopt the Joint Board's finding that fiscal responsibility
compels us to require that eligible schools and libraries seek
competitive bids for all services eligible for section 254(h)
discounts. Competitive bidding is the most efficient means for ensuring
that eligible schools and libraries are informed about all of the
choices available to them. Absent competitive bidding, prices charged
to schools and
[[Page 32902]]
libraries may be needlessly high, with the result that fewer eligible
schools and libraries would be able to participate in the program or
the demand on universal service support mechanisms would be needlessly
great. We discuss, in greater detail below, the procedures for
undertaking the competitive bidding process.
287. Some commenters ask us to clarify a number of points regarding
competitive bidding. First, in response to a number of commenters, we
note that the Joint Board intentionally did not recommend that the
Commission require schools and libraries to select the lowest bids
offered but rather recommended that the Commission permit schools and
libraries ``maximum flexibility'' to take service quality into account
and to choose the offering or offerings that meets their needs ``most
effectively and efficiently,'' where this is consistent with other
procurement rules under which they are obligated to operate. We concur
with this policy, noting only that price should be the primary factor
in selecting a bid. When it specifically addressed this issue in the
context of Internet access, the Joint Board only recommended that the
Commission require schools and libraries to select the most cost-
effective supplier of access. By way of example, we also note that the
federal procurement regulations (which are inapplicable here) specify
that in addition to price, federal contract administrators may take
into account factors including the following: prior experience,
including past performance; personnel qualifications, including
technical excellence; management capability, including schedule
compliance; and environmental objectives. We find that these factors
form a reasonable basis on which to evaluate whether an offering is
cost-effective.
288. Although we do not impose bidding requirements, neither do we
exempt eligible schools or libraries from compliance with any state or
local procurement rules, such as competitive bidding specifications,
with which they must otherwise comply.
289. In response to the concerns of GTE and SBC that existing
Commission rules concerning interstate service prevent them from
offering rates below their generally available tariffed rates in
competitive bidding situations to establish pre-discount rates, we make
the following clarifications. First, our policies on ILEC pricing
flexibility apply only to interstate services. The ILECs' abilities to
offer intrastate services in competitive bidding situations will be
governed by the relevant state public utility commission policies.
Second, we find that ILECs will be free under sections 201(b) and 254
to participate in certain competitive bidding opportunities with rates
other than those in their generally tariffed offerings. More
specifically, they will be free, under sections 201(b) of the Act, to
offer different rates to consortia that consist solely of governmental
entities, eligible health care providers, and schools and libraries
eligible for preferential rates under section 254. Thus, we hereby
designate communications to organizations, such as schools and
libraries and eligible health care providers, eligible for preferential
rates under section 254 as a class of communications eligible for
different rates, notwithstanding the nondiscrimination requirements of
section202(a). Congress has expressly granted an exemption to section
202(a)'s prohibition against discrimination for these classes of
communications. Thus, ILECs will be free to offer differing, including
lower, rates to consortia consisting of section 254-eligible schools
and libraries, eligible health care providers, state schools and
universities, and state and local governments. These pre-discount rates
will be generally available to all eligible members of these classes
under tariffs filed with this Commission. The schools and libraries
eligible for discounts under section 254 would then receive the
appropriate universal service discount off these rates. Third, ILECs
may obtain further freedom to participate in competitive bidding
situations as a result of decisions we make in the Access Charge Reform
Proceeding. In the Third Report and Order in the Access Charge Reform
Proceeding, we will determine whether to permit ILECs to provide
targeted offerings in response to competitive bidding situations once
certain competitive thresholds are met. We conclude that this regime,
which includes a prohibition against resale of these services, best
furthers the explicit congressional directive of providing preferential
rates to eligible schools and libraries with a minimum of public
interest harm arising from limiting the availability of prediscount
rates to these classes.
290. Lowest Price Charged to Similarly Situated Non-Residential
Customers for Similar Services
In competitive markets, we anticipate that schools and libraries
will be offered competitive, cost-based prices that will match or beat
the cost-based prices paid by similarly situated customers for similar
services. We concur, however, with the Joint Board that, to ensure that
a lack of experience in negotiating in a competitive telecommunications
service market does not prevent some schools and libraries from
receiving such offers, we should require that a carrier offer services
to eligible schools and libraries at prices no higher than the lowest
price it charges to similarly situated non-residential customers for
similar services (hereinafter ``lowest corresponding price'').
291. We also adopt the Joint Board's recommendation to use the
lowest corresponding price as an upper limit on the price that carriers
can charge schools and libraries in non-competitive markets, as well as
competitive markets, so that eligible schools and libraries can take
advantage of any cost-based rates that other customers may have
negotiated with carriers during a period when the market was subject to
actual, or even potential, competition. We conclude that requiring
providers to charge their lowest corresponding price would impose no
unreasonable burden, even on non-dominant carriers, because all
carriers would be able to receive a remunerative price for their
services. We clarify that, for the purpose of determining the lowest
corresponding price, similar services would include those provided
under contract as well as those provided under tariff.
292. Section 254(h)(1)(B) requires telecommunications carriers to
make services available to all schools and libraries in any geographic
area the carriers serve. We share the Joint Board's concern that, if
``geographic area'' were interpreted to mean the entire state, any firm
providing telecommunications services to any school or library in a
state would have to be willing to serve any other school or library in
the state. We also agree with the Joint Board that an expansive
interpretation of geographic area might discourage new firms beginning
to offer service in one portion of a state from doing so due to concern
that they would have to serve all other areas in that state.
293. We concur, therefore, with the Joint Board's recommendation
that geographic area (hereinafter referred to as geographic service
area) be defined as the area in which a telecommunications carrier is
seeking to serve customers with any of its services covered by section
254(h)(1)(B). We do not limit here the area in which a
telecommunications carrier or a subsidiary or affiliate owned or
controlled by it can choose to provide service. We also agree with the
Joint Board that telecommunications carriers be required to offer
schools and libraries services at their lowest corresponding
[[Page 32903]]
prices throughout their geographic service areas. Moreover, we agree
with the Joint Board's recommendation that, as a condition of receiving
support, carriers be required to certify that the price they offer to
schools and libraries is no greater than the lowest corresponding price
based on the prices the carrier has previously charged or is currently
charging in the market. This obligation would extend, for example, to
competitive LECs, wireless carriers, or cable companies, to the extent
that they offer telecommunications for a fee to the public. We share
the Joint Board's conclusion that Congress intended schools and
libraries to receive the services they need from the most efficient
provider of those services.
294. We clarify that a provider of telecommunications services,
Internet access, and internal connections need not offer the same
lowest corresponding price to different schools and libraries in the
same geographic service area if they are not similarly situated and
subscribing to a similar set of services. Providers may not avoid the
obligation to offer the lowest corresponding price to schools and
libraries for interstate services, however, by arguing that none of
their non-residential customers are identically situated to a school or
library or that none of their service contracts cover services
identical to those sought by a school or library. Rather, we will only
permit providers to offer schools and libraries prices above the prices
charged to other similarly situated customers when those providers can
show that they face demonstrably and significantly higher costs to
serve the school or library seeking service.
295. If the services sought by a school or library include
significantly lower traffic volumes or their provision is significantly
different from that of another customer with respect to any other
factor that the state public service commission has recognized as being
a significant cost factor, then the provider will be able to adjust its
price above the level charged to the other customer to recover the
additional cost incurred so that it is able to recover a compensatory
pre-discount price. We also recognize that costs change over time and
thus, compensatory rates would not necessarily result if a provider
were required to charge the same price it had charged many years ago.
We will establish a rebuttable presumption that rates offered within
the previous three years are still compensatory. We also would not
require a provider to match a price it offered to a customer who is
receiving a special regulatory subsidy or that appeared in a contract
negotiated under very different conditions, if that would force the
provider to offer services at a rate below Total-Service Long-Run
Incremental Cost (TSLRIC).
296. We also adopt the Joint Board's recommendation that, if they
believe that the lowest corresponding price is unfairly high or low,
schools, libraries, and carriers should be permitted to seek recourse
from the Commission, regarding interstate rates, and from state
commissions, regarding intrastate rates. Eligible schools and libraries
may request a lower rate if they believe the rate offered by the
carrier is not the lowest corresponding price. Carriers may request
higher rates if they believe that the lowest corresponding price is not
compensatory.
297. We agree with the Joint Board's analysis that using TSLRIC
would not be practical, given the limited resources of schools and
libraries to participate in lengthy negotiations, arbitration, or
litigation. We also clarify that the tariffed rate would represent a
carrier's lowest corresponding price in a geographic area in which that
carrier has not negotiated rates that differ from the tariffed rate,
and that we are not requiring carriers to file new tariffs to reflect
the discounts we adopt here for schools and libraries.
298. Discounts
The Act requires the Commission, with respect to interstate
services, and the states, with respect to intrastate services, to
establish a discount on designated services provided to eligible
schools and libraries. Pursuant to section 254(h)(1)(B), the discount
must be an amount that is ``appropriate and necessary to ensure
affordable access to and use of'' the services pursuant to section
254(c)(3). The discount must take into account the principle set forth
in section 254(b)(5) and mandated in section 254(d) that the federal
universal service support mechanisms must be ``specific, predictable,
and sufficient.'' We agree with the Joint Board's recommendation that
we adopt a percentage discount mechanism, adjusted for schools and
libraries that are defined as economically disadvantaged and those
schools and libraries located in areas facing particularly high prices
for telecommunications service. In particular, we concur with the Joint
Board's recommendation that we adopt discounts from 20 percent to 90
percent for all telecommunications services, Internet access, and
internal connections, with the range of discounts correlated to
indicators of economic disadvantage and high prices for schools and
libraries.
299. We agree with the Joint Board's recommendation that we adopt
rules that provide support to eligible schools and libraries through a
percentage discount mechanism rather than providing a package of free
services or block grants to states because we find that discounts would
better assure efficiency and accountability. Requiring schools and
libraries to pay a share of the cost should encourage them to avoid
unnecessary and wasteful expenditures because they will be unlikely to
commit their own funds for purchases that they cannot use effectively.
A percentage discount also encourages schools and libraries to seek the
best pre-discount price and to make informed, knowledgeable choices
among their options, thereby building in effective fiscal constraints
on the discount fund.
300. Discounts in High Cost Areas
We also adopt the Joint Board's recommendation that, to make
service more affordable to schools and libraries, we offer greater
support to those located in high cost areas than to those in low cost
areas. Although the discount matrix we adopt do not make the prices
schools and libraries pay for telecommunications services in high and
low cost areas identical, we find that the matrix distribute
substantially more funds, particularly on a per-capita basis, to reduce
prices paid by schools and libraries in areas with higher
telecommunications prices than they do to reduce prices in areas in
which such prices are already relatively low. The greater price
reduction in terms of total dollar amounts for schools and libraries in
high cost areas results primarily because the discount rates are based
on percentages that lead proportionally to more funds flowing to those
schools and libraries facing proportionally higher prices.
301. Although the discount mechanism we adopt does not equalize
prices in all areas nationwide, it makes telecommunications service in
the areas with relatively high prices substantially more affordable to
the schools and libraries in those areas. We find that a mechanism that
may provide as much as 23 times more support per capita to a school or
library in a high cost area than it does to one in a low cost area is
providing substantially more of a discount to the former. We also note
that some eligible schools and libraries in high cost areas will
benefit, at least temporarily, from the high cost assistance that
eligible telecommunications carriers serving them will receive.
Although high cost support will only be targeted to a limited number of
services, none of
[[Page 32904]]
which are advanced telecommunications and information services, many
schools and libraries will connect to the Internet via voice-grade
access to the PSTN. Furthermore, whereas the Joint Board presumed that
such support would only be targeted to residential and single-line
businesses, in the short term, our decision diverges from that result
and permits support for multiline businesses. We agree with the Joint
Board that this position on support for schools and libraries in high
cost areas is consistent with our other goal of providing adequate
support to disadvantaged schools while keeping the size of the total
support fund no larger than necessary to achieve this goal. We agree
that the nominal percentage discount levels should be more sensitive to
how disadvantaged a school or library is than whether it is located in
a high cost service area. We conclude, therefore, that the additional
support for schools and libraries in high cost areas provided in the
matrix we adopt is ``appropriate and necessary to ensure affordable
access'' to schools and libraries as directed by section 254(h)(1)(B).
302. Discounts for Economically Disadvantaged Schools and Libraries
We adopt the Joint Board's recommendation that we establish
substantially greater discounts for the most economically disadvantaged
schools and libraries. We recognize that such discounts are essential
if we are to make advanced technologies equally accessible to all
schools and libraries. We agree, however, with the Joint Board and
several commenters that not even the most disadvantaged schools or
libraries should receive a 100 percent discount. We recognize that even
a 90 percent discount--and thus a 10 percent co-payment requirement--
might create an impossible hurdle for disadvantaged schools and
libraries that are unable to allocate any of their own funds toward the
purchase of eligible discounted services, and thus could increase the
resource disparity among schools. We conclude, however, that even if we
were to exempt the poorest schools from any co-payment requirement for
telecommunications services, a 100 percent discount would not have a
dramatically greater impact on access than would a 90 percent discount,
because we are not providing discounts on the costs of the additional
resources, including computers, software, training, and maintenance,
which constitute more than 80 percent of the cost of connecting schools
to the information superhighway. We share the Joint Board's belief that
the discount program must be structured to maximize the opportunity for
its cost-effective operation, and that, for the reasons noted above,
requiring a minimal co-payment by all schools and libraries will help
realize that goal.
303. Discount Matrix
The Joint Board considered the approximate size of the fund
resulting from a matrix assigning discounts to a school or library
based upon its level of economic disadvantage and its location. After
substantial deliberation, the Joint Board recommended the following
matrix of percentage discounts:
----------------------------------------------------------------------------------------------------------------
Discount matrix Cost of service (estimated % in category)
----------------------------------------------------------------------------------------------------------------
How disadvantaged?
-----------------------------------------------------------------
(Estimated % Low cost Mid-cost Highest cost
Based on % of students in the national school of U.S. (67%) (27%) (5%)
lunch program schools in
category)
----------------------------------------------------------------------------------------------------------------
< 1.............................................="" (3)="" 20="" 20="" 25="" 1-19............................................="" (31)="" 40="" 45="" 50="" 20-34...........................................="" (19)="" 50="" 55="" 60="" 35-49...........................................="" (15)="" 60="" 65="" 70="" 50-74...........................................="" (16)="" 80="" 80="" 80="" 75-100..........................................="" (16)="" 90="" 90="" 90="" ----------------------------------------------------------------------------------------------------------------="" 304.="" in="" fashioning="" a="" discount="" matrix,="" the="" joint="" board="" sought="" to="" ensure="" that="" the="" greatest="" discounts="" would="" go="" to="" the="" most="" economically="" disadvantaged="" schools="" and="" libraries,="" with="" an="" equitable="" progression="" of="" discounts="" being="" applied="" to="" the="" other="" categories="" within="" the="" parameters="" of="" 20="" percent="" to="" 90="" percent="" discounts.="" 305.="" identifying="" high="" price="" areas="" recognizing="" that="" schools="" and="" libraries="" in="" high="" cost="" areas="" will="" confront="" relatively="" higher="" barriers="" to="" connecting="" to="" the="" internet="" and="" maintaining="" other="" communications="" links,="" the="" joint="" board="" proposed="" a="" discount="" matrix="" that="" granted="" schools="" and="" libraries="" located="" in="" higher="" cost="" areas="" greater="" percentage="" discounts.="" although="" its="" discount="" matrix="" used="" low,="" mid,="" and="" high="" cost="" categories="" based="" on="" embedded="" cost="" armis="" data="" of="" carriers,="" the="" joint="" board="" did="" not="" recommend="" a="" way="" to="" identify="" those="" schools="" and="" libraries="" facing="" higher="" costs,="" except="" to="" suggest="" that="" we="" might="" consider="" the="" unseparated="" loop="" costs="" collected="" under="" armis.="" the="" joint="" board="" understood="" that,="" because="" such="" embedded="" cost="" data="" were="" already="" maintained="" by="" the="" commission,="" it="" would="" be="" relatively="" easy="" to="" set="" thresholds="" that="" would="" divide="" areas="" into="" high="" and="" low="" cost="" based="" on="" the="" cost="" data="" of="" the="" ilec="" serving="" the="" area.="" the="" joint="" board="" also="" recognized="" that="" unseparated="" loop="" costs="" were="" a="" good="" proxy="" for="" local="" service="" prices.="" 306.="" the="" joint="" board="" suggested="" that="" other="" methods="" for="" determining="" high="" cost="" might="" be="" appropriate="" and="" encouraged="" the="" commission="" to="" seek="" additional="" comment="" on="" the="" issue,="" which="" we="" did="" in="" the="" recommended="" decision="" public="" notice.="" as="" a="" result,="" we="" have="" considered="" several="" alternative="" methods,="" which="" were="" not="" before="" the="" joint="" board="" at="" the="" time="" of="" its="" deliberations.="" these="" methods="" include="" the="" use="" of="" cost="" data="" generated="" by="" the="" forward-looking="" cost="" methodologies="" that="" proponents="" have="" filed="" for="" use="" in="" determining="" support="" for="" high="" cost="" areas;="" density="" pricing="" zones;="" availability="" of="" advanced="" services;="" tariffed="" t-1="" prices="" for="" connections="" to="" an="" internet="" service="" provider;="" and="" whether="" schools="" and="" libraries="" are="" located="" in="" rural="" or="" urban="" areas.="" for="" the="" reasons="" discussed="" below,="" we="" conclude="" that="" we="" will="" classify="" eligible="" schools="" and="" libraries="" as="" high="" or="" low="" cost="" depending="" on="" whether="" they="" are="" located="" in="" a="" rural="" or="" an="" urban="" area,="" respectively.="" 307.="" given="" this="" set="" of="" reasonable="" but="" imperfect="" approaches="" to="" determining="" high="" cost="" for="" schools="" and="" libraries,="" we="" conclude="" that="" we="" should="" select="" the="" classification="" system="" that="" is="" least="" burdensome="" to="" schools,="" libraries,="" and="" carriers.="" we="" will="" therefore="" identify="" high="" [[page="" 32905]]="" cost="" schools="" and="" libraries="" as="" those="" located="" in="" rural,="" as="" opposed="" to="" urban,="" areas.="" after="" careful="" consideration,="" we="" conclude="" that="" identifying="" whether="" a="" school="" or="" library="" is="" located="" in="" a="" rural="" or="" urban="" area="" is="" a="" relatively="" easy="" method="" for="" schools="" and="" libraries="" to="" use,="" reasonably="" matches="" institutions="" facing="" the="" highest="" prices="" for="" telecommunications="" services="" with="" the="" highest="" discounts,="" and="" imposes="" no="" burden="" on="" carriers.="" adoption="" of="" this="" approach="" is="" also="" consistent="" with="" the="" joint="" board's="" intention="" that="" the="" method="" selected="" for="" determining="" high="" cost="" should="" calibrate="" the="" cost="" of="" service="" in="" a="" ``reasonable,="" practical,="" and="" minimally="" burdensome="" manner.''="" we="" also="" conclude="" that,="" for="" purposes="" of="" the="" schools="" and="" libraries="" discount="" program,="" rural="" areas="" should="" be="" defined="" in="" accordance="" with="" the="" definition="" adopted="" by="" the="" department="" of="" health="" and="" human="" services'="" office="" of="" rural="" health="" policy="" (orhp/hhs).="" orhp/hhs="" uses="" the="" office="" of="" management="" and="" budget's="" (omb)="" metropolitan="" statistical="" area="" (msa)="" designation="" of="" metropolitan="" and="" non-metropolitan="" counties="" (or="" county="" equivalents),="" adjusted="" by="" the="" most="" currently="" available="" goldsmith="" modification,="" which="" identifies="" rural="" areas="" within="" large="" metropolitan="" counties.="" 308.="" adoption="" of="" this="" definition="" of="" rural="" areas="" is="" consistent="" with="" the="" approach="" adopted="" in="" the="" health="" care="" section="" of="" this="" order="" and="" represents="" a="" simple="" approach="" for="" schools="" and="" libraries="" to="" determine="" eligibility="" for="" an="" incremental="" high="" cost="" discount.="" omb's="" list="" of="" metropolitan="" counties="" and="" the="" list="" of="" additional="" rural="" areas="" within="" those="" counties="" identified="" by="" the="" goldsmith="" modification="" are="" readily="" available="" to="" the="" public.="" eligible="" schools="" and="" libraries="" will="" need="" only="" to="" consult="" those="" lists="" to="" determine="" whether="" they="" are="" located="" in="" rural="" areas="" for="" purposes="" of="" the="" universal="" service="" discount="" program.="" in="" addition="" to="" being="" simple="" to="" administer,="" basing="" the="" high="" cost="" discount="" on="" a="" school's="" or="" library's="" location="" in="" a="" rural="" area="" is="" a="" reasonable="" approach="" for="" determining="" which="" entities="" should="" receive="" the="" high="" cost="" discount.="" the="" distance="" between="" customers="" and="" central="" offices,="" and="" the="" lower="" volumes="" of="" traffic="" served="" by="" central="" offices="" in="" rural="" areas,="" combine="" to="" create="" less="" affordable="" telecommunications="" rates.="" 309.="" because="" we="" adopt="" the="" use="" of="" categories="" of="" rural="" and="" urban="" to="" determine="" a="" school's="" or="" library's="" eligibility="" for="" a="" high="" cost="" discount,="" we="" conclude="" that="" there="" should="" be="" only="" two="" categories="" of="" schools="" and="" libraries.="" because="" schools="" and="" libraries="" will="" be="" categorized="" as="" either="" rural="" (high="" cost)="" or="" urban="" (low="" cost),="" the="" ``mid-cost''="" category="" recommended="" by="" the="" joint="" board="" is="" no="" longer="" relevant.="" we="" find="" that="" a="" matrix="" of="" two="" columns="" is="" also="" somewhat="" simpler="" to="" use="" and="" thus,="" we="" modify="" the="" discount="" matrix="" recommended="" by="" the="" joint="" board="" to="" have="" two="" columns="" (i.e.,="" ``urban''="" and="" ``rural'')="" as="" opposed="" to="" three.="" 310.="" identifying="" economically="" disadvantaged="" schools="" we="" agree="" with="" the="" joint="" board's="" recommendation="" that="" we="" measure="" a="" school's="" level="" of="" poverty="" in="" a="" manner="" that="" is="" minimally="" burdensome,="" ideally="" using="" data="" that="" most="" schools="" already="" collect.="" although="" the="" joint="" board="" concluded="" that="" the="" national="" school="" lunch="" program="" meets="" this="" standard,="" it="" suggested="" that="" the="" commission="" also="" consider="" other="" approaches="" that="" would="" be="" both="" minimally="" burdensome="" for="" schools="" and="" accurate="" measures="" of="" poverty.="" 311.="" based="" on="" our="" review="" of="" the="" comments="" filed="" in="" response="" to="" the="" recommended="" decision="" public="" notice,="" we="" agree="" with="" the="" joint="" board="" that="" using="" eligibility="" for="" the="" national="" school="" lunch="" program="" to="" determine="" eligibility="" for="" a="" greater="" discount="" accurately="" fulfills="" the="" statutory="" requirement="" to="" ensure="" affordable="" access="" to="" and="" use="" of="" telecommunications="" and="" other="" supported="" services="" for="" schools.="" as="" noted="" by="" commenters,="" the="" national="" school="" lunch="" program="" determines="" students'="" eligibility="" for="" free="" or="" reduced-price="" lunches="" based="" on="" family="" income,="" which="" is="" a="" more="" accurate="" measure="" of="" a="" school's="" level="" of="" need="" than="" a="" model="" that="" considers="" general="" community="" income.="" in="" addition,="" the="" national="" school="" lunch="" program="" has="" a="" well-defined="" set="" of="" eligibility="" criteria,="" is="" in="" place="" nationwide,="" and="" has="" data-gathering="" requirements="" that="" are="" familiar="" to="" most="" schools.="" we="" agree="" that="" use="" of="" an="" existing="" and="" readily="" available="" model,="" such="" as="" the="" national="" school="" lunch="" program,="" will="" be="" both="" relatively="" simple="" and="" inexpensive="" to="" administer.="" 312.="" we="" conclude="" that="" a="" school="" may="" use="" either="" an="" actual="" count="" of="" students="" eligible="" for="" the="" national="" school="" lunch="" program="" or="" federally-="" approved="" alternative="" mechanisms="" to="" determine="" the="" level="" of="" poverty="" for="" purposes="" of="" the="" universal="" service="" discount="" program.="" alternative="" mechanisms="" may="" prove="" useful="" for="" schools="" that="" do="" not="" participate="" in="" the="" national="" school="" lunch="" program="" or="" schools="" that="" participate="" in="" the="" lunch="" program="" but="" experience="" a="" problem="" with="" undercounting="" eligible="" students="" (e.g.,="" high="" schools,="" rural="" schools,="" and="" urban="" schools="" with="" highly="" transient="" populations).="" schools="" that="" choose="" not="" to="" use="" an="" actual="" count="" of="" students="" eligible="" for="" the="" national="" school="" lunch="" program="" may="" use="" only="" the="" federally-approved="" alternative="" mechanisms="" contained="" in="" title="" i="" of="" the="" improving="" america's="" schools="" act,="" which="" equate="" one="" measure="" of="" poverty="" with="" another.="" these="" alternative="" mechanisms="" permit="" schools="" to="" choose="" from="" among="" existing="" sources="" of="" poverty="" data="" a="" surrogate="" for="" determining="" the="" number="" of="" students="" who="" would="" be="" eligible="" for="" the="" national="" school="" lunch="" program.="" a="" school="" relying="" upon="" one="" of="" these="" alternative="" mechanisms="" could,="" for="" example,="" conduct="" a="" survey="" of="" the="" income="" levels="" of="" its="" students'="" families.="" we="" conclude="" that="" only="" federally-approved="" alternative="" mechanisms,="" which="" rely="" upon="" actual="" counts="" of="" low-income="" children,="" provide="" more="" accurate="" measures="" of="" poverty="" and="" less="" risk="" of="" overcounting,="" than="" other="" methods="" suggested="" by="" some="" commenters="" that="" merely="" approximate="" the="" percentage="" of="" low-income="" children="" in="" a="" particular="" area.="" 313.="" identifying="" economically="" disadvantaged="" libraries="" the="" joint="" board="" recommended="" that,="" in="" the="" absence="" of="" a="" better="" proposal,="" a="" library's="" degree="" of="" poverty="" should="" be="" measured="" based="" on="" how="" disadvantaged="" the="" schools="" are="" in="" the="" school="" district="" in="" which="" the="" library="" is="" located.="" under="" this="" plan,="" a="" library="" would="" receive="" a="" level="" of="" discount="" representing="" the="" average="" discount,="" based="" on="" both="" public="" and="" non-public="" schools,="" offered="" to="" the="" schools="" in="" the="" school="" district="" in="" which="" it="" is="" located.="" finding="" that="" this="" was="" ``a="" reasonable="" method="" of="" calculation="" because="" libraries="" are="" likely="" to="" draw="" patrons="" from="" an="" entire="" school="" district="" and="" this="" method="" does="" not="" impose="" an="" unnecessary="" administrative="" burden="" on="" libraries,''="" the="" joint="" board="" recommended="" that="" the="" commission="" seek="" additional="" comment="" on="" this="" and="" other="" measures="" of="" poverty="" that="" would="" be="" minimally="" burdensome="" for="" libraries.="" 314.="" we="" adopt="" the="" joint="" board's="" recommendation="" and="" conclude="" that="" a="" library's="" level="" of="" poverty="" be="" calculated="" on="" the="" basis="" of="" school="" lunch="" eligibility="" in="" the="" school="" district="" in="" which="" the="" library="" is="" located,="" with="" one="" modification.="" we="" conclude="" that="" it="" would="" be="" less="" administratively="" burdensome="" and,="" therefore,="" would="" impose="" lower="" administrative="" costs,="" to="" base="" a="" library's="" level="" of="" poverty="" on="" the="" percentage="" of="" students="" eligible="" for="" the="" national="" school="" lunch="" program="" only="" in="" the="" public="" school="" district="" in="" which="" the="" library="" is="" located.="" to="" require="" the="" administrator="" to="" average="" the="" discounts="" applicable="" to="" both="" public="" and="" non-public="" schools="" would="" impose="" an="" unnecessary="" administrative="" burden="" without="" an="" offsetting="" benefit="" to="" libraries.="" [[page="" 32906]]="" 315.="" we="" agree="" with="" commenters="" that="" library="" service="" areas="" and="" school="" districts="" often="" are="" not="" identical,="" and="" that="" libraries="" may="" not="" have="" ready="" access="" to="" information="" that="" would="" allow="" them="" to="" coordinate="" their="" service="" areas="" with="" the="" applicable="" school="" district="" lunch="" data.="" we="" are="" not,="" however,="" requiring="" libraries="" to="" coordinate="" their="" service="" areas="" with="" school="" districts.="" the="" procurement="" officer="" responsible="" for="" ordering="" telecommunications="" and="" other="" supported="" services="" for="" a="" library="" or="" library="" system="" need="" only="" obtain="" from="" the="" school="" district's="" administrative="" office="" the="" percentage="" of="" students="" eligible="" for="" the="" national="" school="" lunch="" program="" in="" the="" district="" in="" which="" the="" library="" is="" located.="" we="" conclude,="" therefore,="" that="" adopting="" this="" approach="" will="" not="" impose="" an="" unnecessary="" administrative="" burden="" on="" libraries.="" 316.="" ala="" notes="" that="" residents="" of="" towns="" that="" do="" not="" have="" schools="" generally="" must="" send="" their="" children="" to="" other="" towns="" to="" attend="" school.="" we="" find="" that="" the="" discount="" for="" a="" library="" in="" such="" a="" circumstance="" would="" be="" based="" on="" an="" average="" of="" the="" percentage="" of="" students="" eligible="" for="" the="" school="" lunch="" program="" in="" each="" of="" the="" school="" districts="" in="" which="" the="" town's="" children="" attend="" school.="" 317.="" we="" conclude="" that="" using="" school="" lunch="" eligibility="" to="" calculate="" the="" poverty="" level="" of="" both="" schools="" and="" libraries="" addresses="" the="" concern="" that="" equity="" exist="" between="" schools="" and="" libraries.="" that="" is,="" because="" school="" lunch="" eligibility="" data="" measures="" the="" percentage="" of="" students="" within="" 185="" percent="" of="" the="" poverty="" line,="" the="" program="" that="" we="" adopt="" herein="" will="" ensure="" that="" both="" schools="" and="" libraries="" are="" afforded="" discounts="" based="" on="" the="" same="" measure="" of="" poverty.="" under="" ala's="" proposal,="" however,="" libraries="" would="" have="" received="" discounts="" based="" on="" the="" percentage="" of="" families="" at="" or="" below="" the="" poverty="" line,="" while="" schools="" would="" have="" received="" discounts="" based="" on="" the="" percentage="" of="" students="" within="" 185="" percent="" of="" the="" poverty="" line.="" we="" conclude,="" therefore,="" that="" libraries="" will="" not="" be="" disadvantaged="" by="" adoption="" of="" the="" joint="" board's="" recommendation="" to="" use="" school="" lunch="" eligibility="" to="" determine="" the="" level="" of="" poverty="" for="" both="" schools="" and="" libraries.="" we="" also="" conclude="" that="" using="" the="" same="" measure="" of="" poverty="" for="" both="" schools="" and="" libraries="" will="" lower="" the="" administrative="" costs="" associated="" with="" the="" discount="" program="" described="" herein.="" 318.="" levels="" of="" poverty="" we="" agree="" with="" the="" joint="" board's="" recommendation="" that="" we="" adopt="" a="" step="" function="" to="" define="" the="" level="" of="" discount="" available="" to="" schools="" and="" libraries,="" based="" on="" the="" level="" of="" poverty="" in="" the="" areas="" they="" serve.="" a="" step="" function="" will="" define="" multiple="" levels="" of="" discount="" based="" on="" the="" percentage="" of="" students="" eligible="" for="" the="" national="" school="" lunch="" program.="" we="" also="" agree="" with="" the="" joint="" board's="" recommendation="" that="" the="" number="" of="" steps="" for="" determining="" discounts="" applied="" to="" telecommunications="" and="" other="" supported="" services="" should="" be="" based="" principally="" on="" the="" existing="" department="" of="" education="" categorization="" of="" schools="" eligible="" for="" the="" national="" school="" lunch="" program.="" we="" conclude="" that="" this="" approach="" is="" reasonable="" because="" the="" national="" school="" lunch="" program="" is="" based="" on="" family="" income="" levels.="" 319.="" for="" purposes="" of="" administering="" the="" school="" lunch="" program,="" the="" department="" of="" education="" places="" schools="" in="" five="" categories,="" based="" on="" the="" percentage="" of="" students="" eligible="" for="" free="" or="" reduced-price="" lunches:="" 0-19="" percent;="" 20-34="" percent;="" 35-49="" percent;="" 50-74="" percent;="" and="" 75-100="" percent.="" consistent="" with="" the="" joint="" board's="" recommendation,="" we="" adopt="" the="" percentage="" categories="" used="" by="" the="" department="" of="" education="" for="" schools="" and="" libraries,="" and="" we="" also="" establish="" a="" separate="" category="" for="" the="" least="" economically="" disadvantaged="" schools="" and="" libraries,="" i.e.,="" those="" with="" less="" than="" one="" percent="" of="" their="" students="" eligible="" for="" the="" national="" school="" lunch="" program.="" schools="" and="" libraries="" in="" the="" ``less="" than="" one="" percent''="" category="" should="" have="" comparatively="" greater="" resources="" within="" their="" existing="" budgets="" to="" secure="" affordable="" access="" to="" services="" even="" with="" lower="" discounted="" rates.="" we,="" therefore,="" adopt="" the="" following="" matrix="" for="" schools="" and="" libraries:="" ----------------------------------------------------------------------------------------------------------------="" schools="" and="" libraries="" discount="" matrix="" discount="" level="" ----------------------------------------------------------------------------------------------------------------="" how="" disadvantaged?="" -----------------------------------------------------------------------------="" (estimated="" %="" of="" urban="" discount="" rural="" discount="" %="" of="" students="" eligible="" for="" national="" school="" lunch="" program="" u.s.="" schools="" in="" (%)="" (%)="" category)="" ----------------------------------------------------------------------------------------------------------------=""><1........................................................ 3="" 20="" 25="" 1-19......................................................="" 31="" 40="" 50="" 20-34.....................................................="" 19="" 50="" 60="" 35-49.....................................................="" 15="" 60="" 70="" 50-74.....................................................="" 16="" 80="" 80="" 75-100....................................................="" 16="" 90="" 90="" ----------------------------------------------------------------------------------------------------------------="" 320.="" self-certification="" requirements="" we="" agree="" with="" the="" joint="" board's="" recommendation="" that,="" when="" ordering="" telecommunications="" and="" other="" supported="" services,="" the="" procurement="" officer="" responsible="" for="" ordering="" such="" services="" for="" a="" school="" or="" library="" must="" certify="" its="" degree="" of="" poverty="" to="" the="" universal="" service="" administrator.="" for="" eligible="" schools="" ordering="" telecommunications="" and="" other="" supported="" services="" at="" the="" individual="" school="" level,="" which="" we="" anticipate="" will="" be="" primarily="" non-public="" schools,="" the="" procurement="" officer="" ordering="" such="" services="" must="" certify="" to="" the="" universal="" service="" administrator="" the="" percentage="" of="" students="" eligible="" in="" that="" school="" for="" the="" national="" school="" lunch="" program.="" for="" eligible="" libraries="" ordering="" telecommunications="" and="" other="" supported="" services="" at="" the="" individual="" library="" level,="" which="" we="" anticipate="" will="" be="" primarily="" single-branch="" libraries,="" the="" procurement="" officer="" ordering="" such="" services="" must="" certify="" to="" the="" universal="" service="" administrator="" the="" percentage="" of="" students="" eligible="" for="" the="" national="" school="" lunch="" program="" in="" the="" school="" district="" in="" which="" the="" library="" is="" located.="" 321.="" for="" eligible="" schools="" ordering="" telecommunications="" and="" other="" supported="" services="" at="" the="" school="" district="" or="" state="" level,="" we="" agree="" with="" the="" joint="" board's="" recommendation="" that="" we="" minimize="" the="" administrative="" burden="" on="" schools="" while="" at="" the="" same="" time="" ensuring="" that="" the="" individual="" schools="" with="" the="" highest="" percentages="" of="" economically="" disadvantaged="" students="" receive="" the="" deepest="" discounts="" for="" which="" they="" are="" eligible.="" we,="" therefore,="" adopt="" the="" joint="" board's="" recommendation="" to="" require="" the="" procurement="" officer="" for="" each="" school="" district="" or="" state="" applicant="" to="" certify="" to="" the="" universal="" service="" administrator="" the="" percentage="" of="" students="" in="" each="" of="" its="" schools="" that="" is="" eligible="" for="" the="" national="" [[page="" 32907]]="" school="" lunch="" program,="" calculated="" either="" through="" an="" actual="" count="" of="" eligible="" students="" or="" through="" the="" use="" of="" a="" federally-approved="" alternative="" mechanism,="" as="" discussed="" above.="" if="" the="" level="" of="" discount="" were="" instead="" calculated="" for="" the="" entire="" school="" district,="" a="" school="" serving="" a="" large="" percentage="" of="" students="" eligible="" for="" the="" national="" school="" lunch="" program="" that="" was="" located="" in="" a="" school="" district="" comprised="" primarily="" of="" more="" affluent="" schools="" would="" not="" benefit="" from="" the="" level="" of="" discount="" to="" which="" it="" would="" be="" entitled="" if="" discounts="" had="" been="" calculated="" on="" an="" individual="" school="" basis.="" the="" school="" district="" or="" state="" may="" decide="" to="" compute="" the="" discounts="" on="" an="" individual="" school="" basis="" or="" it="" may="" decide="" to="" compute="" an="" average="" discount;="" in="" either="" case,="" the="" state="" or="" the="" district="" shall="" strive="" to="" ensure="" that="" each="" school="" receives="" the="" full="" benefit="" of="" the="" discount="" to="" which="" it="" is="" entitled.="" 322.="" for="" libraries="" ordering="" telecommunications="" and="" other="" supported="" services="" at="" the="" library="" system="" level,="" we="" agree="" with="" commenters="" asserting="" that="" library="" systems="" should="" be="" able="" to="" compute="" discounts="" on="" either="" an="" individual="" branch="" basis="" or="" based="" on="" an="" average="" of="" all="" branches="" within="" the="" system.="" specifically,="" if="" individual="" branches="" within="" a="" library="" system="" are="" located="" in="" different="" school="" districts,="" we="" conclude="" that="" the="" procurement="" officer="" responsible="" for="" ordering="" telecommunications="" and="" other="" supported="" services="" for="" the="" library="" system="" must="" certify="" to="" the="" administrator="" the="" percentage="" of="" students="" eligible="" for="" the="" national="" school="" lunch="" program="" in="" each="" of="" the="" school="" districts="" in="" which="" its="" branches="" are="" located.="" the="" library="" system="" may="" decide="" to="" compute="" the="" discounts="" on="" an="" individual="" branch="" library="" basis="" or="" it="" may="" decide="" to="" compute="" an="" average="" discount;="" in="" either="" case,="" the="" library="" system="" shall="" strive="" to="" ensure="" that="" each="" library="" receives="" the="" full="" benefit="" of="" the="" discount="" to="" which="" it="" is="" entitled.="" 323.="" similarly,="" for="" library="" consortia="" ordering="" telecommunications="" and="" other="" supported="" services,="" we="" conclude="" that="" each="" consortium's="" procurement="" officer="" must="" certify="" to="" the="" administrator="" the="" percentage="" of="" students="" eligible="" for="" the="" national="" school="" lunch="" program="" for="" the="" school="" district="" in="" which="" each="" of="" its="" members="" is="" located.="" each="" library="" consortium="" may="" compute="" the="" discounts="" on="" the="" basis="" of="" the="" school="" district="" in="" which="" each="" consortium="" member="" is="" located="" or="" it="" may="" compute="" an="" average="" discount;="" in="" either="" case,="" each="" library="" consortium="" shall="" strive="" to="" ensure="" that="" each="" of="" its="" members="" receives="" the="" full="" benefit="" of="" the="" discount="" to="" which="" it="" is="" independently="" entitled.="" 324.="" additional="" considerations="" we="" agree="" that="" our="" priority="" must="" be="" to="" establish="" the="" basic="" schools="" and="" libraries="" discount="" program.="" whether="" a="" hardship="" appeals="" process="" is="" necessary="" can="" be="" addressed="" when="" the="" joint="" board="" reviews="" the="" discount="" program="" in="" 2001="" or="" sooner,="" if="" necessary.="" in="" the="" interim,="" we="" are="" satisfied="" that="" the="" discount="" program="" that="" we="" adopt,="" reaching="" as="" high="" as="" 90="" percent="" for="" the="" most="" disadvantaged="" schools="" and="" libraries,="" will="" provide="" sufficient="" support.="" 325.="" finally,="" we="" adopt="" ameritech's="" suggestion="" that="" information="" about="" the="" universal="" service="" discounts="" for="" which="" individual="" schools="" and="" libraries="" are="" eligible,="" based="" on="" their="" level="" of="" poverty="" and="" rural="" status,="" be="" posted="" on="" the="" same="" website="" as="" that="" on="" which="" schools'="" and="" libraries'="" rfps="" will="" be="" posted,="" as="" discussed="" below.="" we="" conclude="" that="" posting="" this="" information="" on="" the="" website="" created="" by="" the="" universal="" service="" administrator="" for="" the="" schools="" and="" libraries="" discount="" program="" may="" assist="" providers="" seeking="" to="" provide="" eligible="" services="" to="" a="" school="" or="" library="" by="" providing="" potentially="" useful="" information="" about="" a="" prospective="" customer.="" if="" a="" school="" district="" submits="" school="" lunch="" eligibility="" information="" for="" each="" school,="" or="" a="" library="" system="" submits="" school="" lunch="" eligibility="" information="" for="" each="" branch,="" then="" the="" universal="" service="" administrator="" is="" instructed="" to="" post="" that="" information.="" if="" a="" school="" district="" chooses="" to="" submit="" only="" district-wide="" poverty="" information="" or="" a="" library="" system="" chooses="" to="" provide="" only="" system-wide="" poverty="" information,="" then="" that="" is="" the="" information="" that="" will="" be="" posted="" by="" the="" universal="" service="" administrator.="" we="" also="" adopt="" ameritech's="" suggestion="" that="" the="" actual="" discounts="" be="" calculated="" and="" posted="" on="" the="" website,="" as="" discussed="" below.="" 326.="" cap="" level="" we="" adopt="" the="" joint="" board's="" recommendation="" that="" there="" be="" an="" annual="" cap="" of="" $2.25="" billion="" on="" universal="" service="" support="" for="" schools="" and="" libraries="" at="" this="" time.="" we="" also="" adopt="" the="" joint="" board's="" determination="" that,="" if="" the="" annual="" cap="" is="" not="" reached="" due="" to="" limited="" demand="" from="" eligible="" schools="" and="" libraries,="" the="" unspent="" funds="" will="" be="" available="" to="" support="" discounts="" for="" schools="" and="" libraries="" in="" subsequent="" years.="" we="" modify="" the="" joint="" board's="" recommendation="" slightly,="" however,="" to="" limit="" collection="" and="" spending="" for="" the="" period="" through="" june="" 1998,="" in="" light="" of="" both="" the="" need="" to="" implement="" the="" necessary="" administrative="" processes="" and="" the="" need="" to="" make="" the="" fund="" sufficiently="" flexible="" to="" respond="" to="" demand.="" thus,="" for="" the="" funding="" period="" beginning="" january="" 1,="" 1998="" and="" ending="" june="" 1998,="" the="" administrator="" will="" only="" collect="" as="" much="" as="" required="" by="" demand,="" but="" in="" no="" case="" more="" than="" $1="" billion.="" furthermore,="" if="" less="" than="" $2.25="" billion="" is="" spent="" in="" calendar="" year="" 1998,="" then="" no="" more="" than="" half="" of="" the="" unused="" portion="" of="" the="" funding="" authority="" for="" calendar="" year="" 1998="" shall="" be="" spent="" in="" calendar="" year="" 1999.="" similarly,="" if="" the="" amount="" allocated="" in="" calendar="" years="" 1998="" and="" 1999="" is="" not="" spent,="" no="" more="" than="" half="" of="" the="" unused="" portion="" of="" the="" funding="" authority="" for="" these="" two="" years="" shall="" be="" spent="" in="" calendar="" year="" 2000.="" 327.="" we="" lack="" sufficient="" historical="" data="" to="" estimate="" accurately="" demand="" for="" the="" first="" year="" of="" this="" program.="" in="" the="" past="" when="" the="" commission="" has="" established="" similar="" funding="" mechanisms,="" the="" commission="" or="" the="" administrator="" has="" had="" access="" to="" information="" upon="" which="" to="" base="" an="" estimate="" of="" necessary="" first-year="" contribution="" levels.="" we="" direct="" the="" administrator="" to="" report="" to="" the="" commission="" on="" a="" quarterly="" basis,="" on="" both="" the="" total="" amount="" of="" payments="" made="" to="" entities="" providing="" services="" and="" facilities="" to="" schools="" and="" libraries="" to="" finance="" universal="" service="" support="" discounts,="" and="" its="" determination="" regarding="" contribution="" assessments="" for="" the="" next="" quarter.="" 328.="" timing="" of="" funding="" requests="" as="" discussed="" above,="" we="" adopt="" the="" joint="" board's="" recommendation="" that="" universal="" service="" spending="" for="" eligible="" schools="" and="" libraries="" be="" capped="" at="" $2.25="" billion="" annually.="" we="" also="" adopt="" the="" joint="" board's="" recommendation="" that="" such="" support="" be="" committed="" on="" a="" first-come-first-="" served="" basis.="" we="" further="" conclude="" that="" the="" funding="" year="" will="" be="" the="" calendar="" year="" and="" that="" requests="" for="" support="" will="" be="" accepted="" beginning="" on="" the="" first="" of="" july="" for="" the="" following="" year.="" for="" the="" first="" year="" only,="" requests="" for="" support="" will="" be="" accepted="" as="" soon="" as="" the="" schools="" and="" libraries="" website="" is="" open="" and="" applications="" are="" available.="" eligible="" schools="" and="" libraries="" will="" be="" permitted="" to="" submit="" funding="" requests="" once="" they="" have="" made="" agreements="" for="" specific="" eligible="" services,="" and,="" as="" the="" joint="" board="" recommended,="" the="" administrator="" will="" commit="" funds="" based="" on="" those="" agreements="" until="" total="" payments="" committed="" during="" a="" funding="" year="" have="" exhausted="" any="" funds="" carried="" over="" from="" previous="" years="" and="" there="" are="" only="" $250="" million="" in="" funds="" available="" for="" the="" funding="" year.="" thereafter,="" the="" joint="" board's="" proposed="" system="" of="" priorities="" will="" govern="" the="" distribution="" of="" the="" remaining="" $250="" million.="" 329.="" the="" administrator="" shall="" measure="" commitments="" against="" the="" funding="" caps="" and="" trigger="" points="" based="" on="" the="" [[page="" 32908]]="" contractually-specified="" non-recurring="" expenditures,="" such="" as="" for="" internal="" connection="" services,="" and="" recurring="" flat-rate="" charges="" for="" telecommunications="" services="" and="" other="" supported="" services="" that="" a="" school="" or="" library="" has="" agreed="" to="" pay="" and="" the="" commitment="" of="" an="" estimated="" variable="" usage="" charge,="" based="" on="" documentation="" from="" the="" school="" or="" library="" of="" the="" estimated="" expenditures="" that="" it="" has="" budgeted="" to="" pay="" for="" its="" share="" of="" usage="" charges.="" schools="" and="" libraries="" must="" file="" their="" contracts="" either="" electronically="" or="" by="" paper="" copy.="" moreover,="" schools="" and="" libraries="" must="" file="" new="" funding="" requests="" for="" each="" funding="" year.="" such="" requests="" will="" be="" placed="" in="" the="" funding="" queue="" based="" on="" the="" date="" and="" time="" they="" are="" received="" by="" the="" administrator.="" 330.="" we="" conclude="" that="" these="" rules="" will="" give="" schools="" the="" certainty="" they="" need="" for="" budgeting,="" while="" avoiding="" the="" need="" for="" the="" administrator="" to="" accumulate,="" prioritize,="" and="" allocate="" all="" discounts="" at="" the="" beginning="" of="" each="" funding="" year,="" as="" some="" commenters="" suggest.="" some="" uncertainty="" may="" remain="" about="" whether="" an="" institution="" will="" receive="" the="" same="" level="" of="" discount="" from="" one="" year="" to="" the="" next="" because="" demand="" for="" funds="" may="" exceed="" the="" funds="" available.="" if="" that="" does="" occur,="" we="" cannot="" guarantee="" discounts="" in="" the="" subsequent="" year="" without="" placing="" institutions="" that="" have="" not="" formulated="" their="" telecommunications="" plans="" in="" the="" previous="" year="" at="" a="" disadvantage,="" possibly="" preventing="" such="" entities="" from="" receiving="" any="" universal="" service="" support--a="" concern="" raised="" by="" some="" commenters.="" we="" acknowledge="" that="" requiring="" annual="" refiling="" for="" recurring="" charges="" places="" an="" additional="" administrative="" burden="" on="" eligible="" institutions.="" we="" find,="" however,="" that="" allowing="" funding="" for="" recurring="" charges="" to="" carry="" forward="" from="" one="" funding="" year="" to="" the="" next="" would="" favor="" those="" who="" are="" already="" receiving="" funds="" and="" might="" deny="" any="" funding="" to="" those="" who="" had="" never="" received="" funding="" before.="" 331.="" therefore,="" we="" find="" that,="" if="" the="" administrator="" estimates="" that="" the="" $2.25="" billion="" cap="" will="" be="" reached="" for="" the="" current="" funding="" year,="" it="" shall="" recommend="" to="" the="" commission="" a="" reduction="" in="" the="" guaranteed="" percentage="" discounts="" necessary="" to="" permit="" all="" expected="" requests="" in="" the="" next="" funding="" year="" to="" be="" fully="" funded="" as="" discussed="" in="" more="" detail,="" below.="" because="" educational="" institutions'="" funding="" needs="" will="" vary="" greatly,="" we="" find="" that="" a="" per-institution="" cap,="" as="" proposed="" by="" at&t,="" is="" likely="" to="" lead="" to="" arbitrary="" results="" and="" be="" difficult="" to="" administer.="" for="" example,="" if="" the="" per-institution="" cap="" were="" tied="" to="" factors="" such="" as="" number="" of="" students="" and="" the="" level="" of="" discount="" for="" which="" the="" institution="" is="" eligible,="" as="" at&t="" suggests,="" this="" would="" limit="" eligible="" high="" schools="" to="" the="" same="" level="" of="" support="" as="" eligible="" elementary="" schools="" of="" equal="" size,="" even="" if="" the="" former="" had="" substantially="" greater="" needs="" for="" support.="" we="" are="" not="" aware="" of="" any="" practical="" way="" to="" make="" fair="" and="" equitable="" adjustments="" for="" such="" varying="" needs.="" we="" also="" agree="" with="" the="" joint="" board's="" decision="" and="" rationale="" for="" rejecting="" the="" concept="" of="" setting="" fund="" levels="" for="" each="" state,="" and="" thus="" reject="" banx's="" proposal="" for="" establishing="" a="" cap="" on="" funds="" flowing="" to="" each="" state.="" 332.="" effect="" of="" the="" trigger="" we="" adopt="" the="" joint="" board's="" recommendation="" that,="" once="" there="" is="" only="" $250="" million="" in="" funds="" available="" to="" be="" committed="" in="" a="" given="" funding="" year,="" ``only="" those="" schools="" and="" libraries="" that="" are="" most="" economically="" disadvantaged="" and="" ha[ve]="" not="" yet="" received="" discounts="" from="" the="" universal="" service="" mechanism="" in="" the="" previous="" year="" would="" be="" granted="" guaranteed="" funds,="" until="" the="" cap="" [is]="" reached.''="" the="" joint="" board="" recommended="" that="" ``[o]ther="" economically="" disadvantaged="" schools="" and="" libraries''="" should="" have="" second="" priority,="" followed="" by="" ``all="" other="" eligible="" schools="" and="" libraries.''="" although,="" as="" the="" joint="" board="" recommended,="" the="" priority="" system="" should="" give="" first="" priority="" to="" the="" most="" economically="" disadvantaged="" institutions="" that="" have="" received="" no="" discounts="" in="" the="" previous="" funding="" year,="" we="" are="" also="" concerned="" that="" the="" prioritization="" process="" not="" disrupt="" institutions'="" ongoing="" programs="" that="" depend="" upon="" the="" discounts.="" 333.="" to="" achieve="" the="" joint="" board's="" goals,="" we="" establish="" a="" priority="" system="" that="" will="" operate="" as="" follows.="" the="" administrator="" shall="" ensure,="" as="" explained="" below,="" that="" the="" total="" level="" of="" the="" administrator's="" commitments,="" as="" well="" as="" the="" day="" that="" only="" $250="" million="" remains="" available="" under="" the="" cap="" in="" a="" funding="" year,="" are="" made="" publicly="" available="" on="" the="" administrator's="" website="" on="" at="" least="" a="" weekly="" basis.="" if="" the="" trigger="" is="" reached,="" the="" administrator="" will="" ensure="" that="" a="" message="" is="" posted="" on="" the="" website,="" notify="" the="" commission,="" and="" take="" reasonable="" steps="" to="" notify="" the="" educational="" and="" library="" communities="" that="" commitments="" for="" allocating="" the="" remaining="" $250="" million="" of="" support="" will="" be="" made="" only="" to="" the="" most="" disadvantaged="" eligible="" schools="" and="" libraries="" for="" the="" next="" 30="" days="" (or="" the="" remainder="" of="" the="" funding="" year,="" whichever="" is="" shorter).="" that="" is,="" during="" the="" 30-day="" period,="" applications="" from="" schools="" and="" libraries="" will="" continue="" to="" be="" accepted="" and="" processed,="" but="" the="" administrator="" will="" only="" commit="" funds="" to="" support="" discount="" requests="" from="" schools="" and="" libraries="" that="" are="" in="" the="" two="" most-disadvantaged="" categories="" on="" the="" discount="" matrix="" and="" that="" did="" not="" receive="" universal="" service="" supported="" discounts="" in="" the="" previous="" or="" current="" funding="" years.="" we="" provide,="" however,="" that="" schools="" and="" libraries="" that="" received="" discounts="" only="" for="" basic="" telephone="" service="" in="" the="" current="" or="" prior="" year="" shall="" not="" be="" deemed="" to="" have="" received="" discounts="" for="" purposes="" of="" the="" trigger="" mechanism.="" for="" this="" purpose,="" we="" will="" ignore="" support="" for="" basic="" telephone="" service,="" because="" we="" do="" not="" want="" to="" discourage="" disadvantaged="" schools="" and="" libraries="" from="" seeking="" support="" for="" this="" service="" to="" avoid="" forfeiting="" their="" priority="" status="" for="" securing="" support="" for="" more="" advanced="" services.="" after="" the="" initial="" 30-day="" period,="" if="" uncommitted="" funds="" remain,="" the="" administrator="" will="" process="" any="" requests="" it="" received="" during="" that="" period="" from="" eligible="" institutions="" in="" the="" two="" most="" disadvantaged="" categories="" that="" had="" previously="" received="" funds.="" if="" funds="" still="" remain,="" the="" administrator="" will="" allocate="" the="" remaining="" available="" funds="" to="" schools="" and="" libraries="" in="" the="" order="" that="" their="" requests="" were="" received="" until="" the="" $250="" million="" is="" exhausted="" or="" the="" funding="" year="" ends.="" 334.="" adjustments="" to="" discount="" matrix="" we="" have="" established="" the="" discount="" levels="" in="" this="" order="" based="" on="" the="" joint="" board's="" estimate="" of="" the="" level="" of="" expenditures="" that="" schools="" and="" libraries="" are="" likely="" to="" have.="" we="" do="" not="" anticipate="" that="" the="" cost="" of="" funding="" discount="" requests="" will="" exceed="" the="" cap,="" and="" we="" do="" not="" want="" to="" create="" incentives="" for="" schools="" and="" libraries="" to="" file="" discount="" requests="" prematurely="" to="" ensure="" full="" funding.="" furthermore,="" we="" will="" consider="" the="" need="" to="" revise="" the="" cap="" in="" our="" three-year="" review="" proceeding,="" but="" if="" estimated="" funding="" requests="" for="" the="" following="" funding="" year="" demonstrate="" that="" the="" funding="" cap="" will="" be="" exceeded,="" we="" will="" consider="" lowering="" the="" guaranteed="" percentage="" discounts="" available="" to="" all="" schools="" and="" libraries,="" except="" those="" in="" the="" two="" most="" disadvantaged="" categories,="" by="" the="" uniform="" percentage="" necessary="" to="" permit="" all="" requests="" in="" the="" next="" funding="" year="" to="" be="" fully="" funded.="" we="" will="" direct="" the="" administrator="" to="" determine="" the="" appropriate="" adjustments="" to="" the="" matrix="" based="" on="" the="" estimates="" schools="" and="" libraries="" make="" of="" the="" funding="" they="" will="" request="" in="" the="" following="" funding="" year.="" the="" administrator="" must="" then="" request="" the="" commission's="" approval="" of="" the="" recommended="" adjustments.="" after="" seeking="" public="" comment="" on="" the="" administrator's="" recommendation,="" the="" commission="" will="" then="" approve="" any="" reduction="" in="" such="" guaranteed="" percentage="" discounts="" that="" it="" finds="" to="" be="" in="" the="" public="" interest.="" if="" funds="" remain="" under="" the="" cap="" at="" the="" end="" of="" a="" funding="" year="" in="" [[page="" 32909]]="" which="" discounts="" have="" been="" reduced="" below="" those="" set="" in="" the="" matrix,="" the="" administrator="" shall="" consult="" with="" the="" commission="" to="" establish="" the="" best="" way="" to="" distribute="" those="" funds.="" 335.="" advance="" payment="" for="" multi-year="" contracts="" we="" conclude="" that="" providing="" funding="" in="" advance="" for="" multiple="" years="" of="" recurring="" charges="" could="" enable="" a="" wealthy="" school="" to="" guarantee="" that="" its="" full="" needs="" over="" a="" multi-year="" period="" were="" met,="" even="" if="" other="" schools="" and="" libraries="" that="" could="" not="" afford="" to="" prepay="" multi-year="" contracts="" were="" faced="" with="" reduced="" percentage="" discounts="" if="" the="" administrator="" estimated="" that="" the="" funding="" cap="" would="" be="" exceeded="" in="" a="" subsequent="" year.="" we="" are="" also="" concerned="" that="" funds="" would="" be="" wasted="" if="" a="" prepaid="" service="" provider's="" business="" failed="" before="" it="" had="" provided="" all="" of="" the="" prepaid="" services.="" at="" the="" same="" time,="" we="" recognize="" that="" educators="" often="" will="" be="" able="" to="" negotiate="" better="" rates="" for="" pre-paid/multi-year="" contracts,="" reducing="" the="" costs="" that="" both="" they="" and="" the="" universal="" service="" support="" mechanisms="" incur.="" therefore,="" we="" conclude="" that="" while="" eligible="" schools="" and="" libraries="" should="" be="" able="" to="" enter="" into="" pre-paid/multi-year="" contracts="" for="" supported="" services,="" the="" administrator="" will="" only="" commit="" funds="" to="" cover="" the="" portion="" of="" a="" long-term="" contract="" that="" is="" scheduled="" to="" be="" delivered="" and="" installed="" during="" the="" funding="" year.="" eligible="" schools="" and="" libraries="" may="" structure="" their="" contracts="" so="" that="" payment="" is="" required="" on="" at="" least="" a="" yearly="" basis,="" or="" they="" may="" enter="" into="" contracts="" requiring="" advance="" payment="" for="" multiple="" years="" of="" service.="" if="" they="" choose="" the="" advance="" payment="" method,="" eligible="" schools="" and="" libraries="" may="" use="" their="" own="" funds="" to="" pay="" full="" price="" for="" the="" portion="" of="" the="" contract="" exceeding="" one="" year="" (pro="" rata),="" and="" may="" request="" that="" the="" service="" provider="" seek="" universal="" service="" support="" for="" the="" pro="" rata="" annual="" share="" of="" the="" pre-="" payment.="" the="" eligible="" school="" or="" library="" may="" also="" request="" that="" the="" service="" provider="" rebate="" the="" payments="" from="" the="" support="" mechanisms="" that="" it="" receives="" in="" subsequent="" years="" to="" the="" school="" or="" library,="" to="" the="" extent="" that="" the="" school="" or="" library="" secures="" approval="" of="" discounts="" in="" subsequent="" years="" from="" the="" administrator.="" 336.="" existing="" contracts="" we="" agree="" with="" the="" recommendation="" of="" the="" joint="" board="" and="" a="" number="" of="" commenters="" that="" we="" should="" permit="" schools="" and="" libraries="" to="" apply="" the="" relevant="" discounts="" we="" adopt="" in="" this="" order="" to="" contracts="" that="" they="" negotiated="" prior="" to="" the="" joint="" board's="" recommended="" decision="" for="" services="" that="" will="" be="" delivered="" and="" used="" after="" the="" effective="" date="" of="" our="" rules,="" provided="" the="" expenditures="" are="" approved="" by="" the="" administrator="" according="" to="" the="" procedures="" set="" forth="" above.="" no="" discount="" would="" apply,="" however,="" to="" charges="" for="" any="" usage="" of="" telecommunications="" or="" information="" services="" or="" installation="" or="" maintenance="" of="" internal="" connections="" prior="" to="" the="" effective="" date="" of="" the="" rules="" promulgated="" pursuant="" to="" this="" order.="" while="" we="" will="" not="" require="" schools="" or="" libraries="" to="" breach="" existing="" contracts="" to="" become="" eligible="" for="" discounts,="" this="" exemption="" from="" our="" competitive="" bidding="" requirements="" shall="" not="" apply="" to="" voluntary="" extensions="" of="" existing="" contracts.="" 337.="" we="" conclude="" that="" allowing="" discounts="" to="" be="" applied="" to="" existing="" contract="" rates="" for="" future="" covered="" services="" is="" appropriate="" and="" necessary="" to="" ensure="" schools="" and="" libraries="" affordable="" access="" to="" and="" use="" of="" the="" services="" supported="" by="" the="" universal="" service="" program.="" as="" discussed="" above="" and="" in="" the="" recommended="" decision,="" the="" concept="" of="" affordability="" contains="" not="" only="" an="" absolute="" component,="" which="" takes="" into="" account,="" in="" this="" case,="" a="" school="" or="" library's="" means="" to="" subscribe="" to="" certain="" services,="" but="" also="" a="" relative="" component,="" which="" takes="" into="" account="" whether="" the="" school="" or="" library="" is="" spending="" a="" disproportionate="" amount="" of="" its="" funds="" on="" those="" services.="" thus,="" although="" a="" school="" or="" library="" might="" have="" chosen="" to="" devote="" funds="" to,="" for="" example,="" certain="" telecommunications="" services,="" it="" might="" have="" done="" so="" at="" considerable="" hardship="" and="" thus="" at="" a="" rate="" that="" is="" not="" truly="" affordable.="" moreover,="" some="" schools="" and="" libraries="" might="" be="" bound="" by="" contracts="" negotiated="" by="" the="" state,="" even="" though="" an="" individual="" school="" or="" library="" in="" the="" state="" might="" not="" be="" able="" to="" afford="" to="" purchase="" any="" services="" under="" the="" contract="" unless="" it="" is="" able="" to="" apply="" universal="" service="" support="" discounts="" to="" the="" negotiated="" rate.="" furthermore,="" allowing="" discounts="" to="" be="" applied="" to="" existing="" contract="" rates="" will="" ensure="" affordable="" access="" to="" and="" use="" of="" all="" the="" services="" congress="" intended,="" not="" just="" whatever="" services,="" however="" minimal,="" an="" individual="" school="" or="" library="" might="" have="" contracted="" for="" before="" the="" discounts="" adopted="" herein="" were="" available="" at="" a="" cost="" that="" might="" preclude="" it="" from="" being="" able="" to="" afford="" to="" purchase="" other="" services="" now="" available="" at="" a="" discount.="" 338.="" we="" will="" not="" adopt,="" however,="" release="" schools="" and="" libraries="" from="" their="" current="" negotiated="" contracts,="" or="" adopt="" a="" ``fresh="" look''="" requirement="" that="" would="" obligate="" carriers="" with="" existing="" service="" contracts="" with="" schools="" and="" libraries="" to="" participate="" in="" a="" competitive="" bidding="" process,="" or="" that="" we="" create="" a="" ``rebuttable="" presumption''="" that="" existing="" rates="" for="" telecommunications="" services="" are="" reasonable,="" allowing="" interested="" parties="" to="" submit="" objections="" to="" existing="" contracts="" based="" on="" assertions="" of="" unreasonable="" prices,="" improper="" cross-subsidization,="" or="" anti-competitive="" conduct="" by="" parties.="" we="" find="" that="" these="" proposals="" would="" be="" administratively="" burdensome,="" would="" create="" uncertainty="" for="" those="" service="" providers="" that="" had="" previously="" entered="" into="" contracts,="" and="" would="" delay="" delivery="" of="" services="" to="" those="" schools="" and="" libraries="" that="" took="" the="" initiative="" to="" enter="" into="" such="" contracts.="" in="" addition,="" we="" have="" no="" reason="" to="" believe="" that="" the="" terms="" of="" these="" contracts="" are="" unreasonable.="" indeed,="" abrogating="" these="" contracts="" or="" adopting="" these="" other="" proposals="" would="" not="" necessarily="" lead="" to="" lower="" pre-discount="" prices,="" due="" to="" the="" incentives="" the="" states,="" schools,="" and="" libraries="" had="" when="" negotiating="" the="" contracts="" to="" minimize="" costs.="" finally,="" we="" note="" that="" there="" is="" no="" suggestion="" in="" the="" statute="" or="" the="" legislative="" history="" that="" congress="" anticipated="" abrogation="" of="" existing="" contracts="" in="" this="" context.="" we="" find="" equally="" unpersuasive="" the="" argument="" that="" we="" should="" deny="" schools="" and="" libraries="" the="" opportunity="" to="" apply="" the="" discounts="" we="" adopt="" herein="" to="" previously="" negotiated="" contract="" rates.="" because="" schools="" and="" libraries="" are="" already="" bound="" to="" those="" contracts="" regardless="" of="" whether="" discounts="" are="" provided,="" we="" see="" no="" way="" in="" which="" ilecs="" will="" be="" unfairly="" advantaged.="" 339.="" we="" agree="" with="" the="" joint="" board="" that="" schools="" and="" libraries,="" constrained="" by="" budgetary="" limitations="" and="" the="" obligation="" to="" pay="" 100="" percent="" of="" the="" contract="" price,="" had="" strong="" incentives="" to="" secure="" the="" lowest="" rates="" possible="" when="" they="" negotiated="" the="" contracts.="" thus,="" we="" find="" it="" appropriate="" to="" apply="" discounts="" to="" these="" presumptively="" low="" rates="" rather="" than="" requiring="" negotiation="" of="" new="" rates.="" furthermore,="" we="" conclude="" that="" it="" would="" not="" be="" in="" the="" public="" interest="" to="" penalize="" schools="" and="" libraries="" in="" states="" that="" have="" aggressively="" embraced="" educational="" technologies="" and="" have="" signed="" long-term="" contracts="" for="" service="" by="" refusing="" to="" allow="" them="" to="" apply="" discounts="" to="" their="" pre-="" existing="" contract="" rates.="" 340.="" interstate="" and="" intrastate="" discounts="" we="" concur="" with="" the="" joint="" board's="" recommendation="" that="" we="" exercise="" our="" authority="" to="" provide="" federal="" universal="" service="" support="" to="" fund="" intrastate="" discounts.="" we="" also="" agree="" with="" the="" joint="" board's="" recommendation="" that="" we="" adopt="" rules="" providing="" federal="" funding="" for="" discounts="" for="" eligible="" schools="" and="" libraries="" on="" both="" interstate="" and="" intrastate="" services="" to="" the="" levels="" discussed="" above="" and="" that="" we="" require="" states="" to="" establish="" intrastate="" discounts="" at="" least="" equal="" to="" the="" [[page="" 32910]]="" discounts="" on="" interstate="" services="" as="" a="" condition="" of="" federal="" universal="" service="" support="" for="" schools="" and="" libraries="" in="" that="" state.="" while="" section="" 254(h)(1)(b)="" permits="" the="" states="" to="" determine="" the="" level="" of="" discount="" available="" to="" eligible="" schools="" and="" libraries="" with="" respect="" to="" intrastate="" services,="" the="" act="" does="" nothing="" to="" prohibit="" the="" commission="" from="" offering="" to="" fund="" intrastate="" discounts="" or="" conditioning="" that="" funding="" on="" action="" the="" commission="" finds="" to="" be="" necessary="" to="" achieve="" the="" goal="" that="" the="" snowe-="" rockefeller-exon-kerrey="" amendment="" sought="" to="" accomplish="" under="" this="" section.="" 341.="" we="" agree="" that="" section="" 254(h)(1)(b)="" creates="" a="" partnership,="" insofar="" as="" that="" section="" permits="" a="" state="" that="" wants="" to="" provide="" greater="" discounts="" or="" discounts="" for="" additional="" services="" for="" schools="" to="" do="" so.="" we="" note="" that="" states="" retain="" full="" discretion="" to="" require="" providers="" to="" set="" pre-discount="" prices="" for="" intrastate="" services="" even="" lower="" than="" the="" market="" might="" produce="" and="" to="" provide="" the="" support="" required,="" if="" any,="" from="" intrastate="" support="" obligations.="" we="" would="" find="" such="" an="" arrangement="" consistent="" with="" section="" 254(f)'s="" directive="" that="" ``[a]="" state="" may="" adopt="" regulations="" not="" inconsistent="" with="" the="" commission's="" rules="" to="" preserve="" and="" advance="" universal="" service.''="" furthermore,="" we="" concur="" with="" the="" joint="" board="" that="" it="" would="" also="" be="" permissible="" for="" states="" to="" choose="" not="" to="" supplement="" the="" federal="" program="" and="" thus="" prohibit="" their="" schools="" and="" libraries="" from="" purchasing="" services="" at="" special="" state-supported="" rates="" if="" the="" schools="" and="" libraries="" intend="" to="" secure="" federal-supported="" discounts.="" finally,="" we="" note="" that,="" if="" a="" state="" wishes="" to="" provide="" an="" intrastate="" discount="" mechanism="" that="" is="" less="" than="" the="" federal="" discount,="" it="" may="" seek="" a="" waiver="" of="" the="" requirement="" that="" it="" match="" the="" federal="" discount="" levels,="" although="" we="" would="" only="" expect="" to="" grant="" such="" waivers="" on="" a="" temporary="" basis="" and="" only="" for="" states="" with="" unusually="" compelling="" cases.="" 342.="" eligibility="" the="" joint="" board="" concluded="" that,="" to="" be="" eligible="" for="" universal="" service="" support,="" a="" school="" must="" meet="" the="" statutory="" definition="" of="" an="" elementary="" or="" secondary="" school="" found="" in="" the="" elementary="" and="" secondary="" education="" act="" of="" 1965,="" must="" not="" operate="" as="" a="" for-profit="" business,="" and="" must="" not="" have="" an="" endowment="" exceeding="" $50="" million.="" we="" agree="" and="" conclude="" that="" all="" schools="" that="" fall="" within="" the="" definition="" contained="" in="" the="" elementary="" and="" secondary="" education="" act="" of="" 1965="" and="" meet="" the="" criteria="" of="" section="" 254(h),="" whether="" public="" or="" private,="" will="" be="" eligible="" for="" universal="" service="" support.="" illinois="" board="" of="" education="" and="" community="" colleges="" ask="" that="" we="" expand="" the="" definition="" of="" schools="" to="" include="" entities="" that="" educate="" elementary="" and="" secondary="" school="" aged="" students,="" and="" apts="" asks="" that="" we="" permit="" discounts="" for="" educational="" television="" station="" licensees="" as="" a="" way="" to="" support="" distance="" learning.="" we="" find,="" however,="" consistent="" with="" the="" joint="" board="" and="" with="" sbc's="" observation,="" that="" section="" 254(h)(5)(a)="" does="" not="" grant="" us="" discretion="" to="" expand="" the="" statutory="" definition="" of="" schools.="" 343.="" section="" 254(h)(5)="" does="" not="" include="" an="" explicit="" definition="" of="" libraries="" eligible="" for="" support.="" rather,="" in="" section="" 254(h)(4)'s="" eligibility="" criteria,="" congress="" cited="" lsca.="" the="" joint="" board,="" therefore,="" used="" the="" definition="" of="" library="" found="" in="" title="" iii="" of="" the="" lsca.="" in="" late="" 1996,="" however,="" congress="" amended="" section="" 254(h)(4)="" to="" replace="" citation="" to="" the="" lsca="" with="" a="" citation="" to="" the="" newly="" enacted="" lsta.="" in="" light="" of="" this="" amendment="" to="" section="" 254(h)(4),="" we="" find="" it="" necessary="" to="" look="" anew="" at="" the="" definitions="" of="" library="" and="" library="" consortium="" and="" adopt="" definitions="" that="" are="" consistent="" with="" the="" directives="" of="" section="" 254(h).="" 344.="" lsta="" defines="" a="" library="" more="" broadly="" than="" did="" the="" former="" lsca="" and="" includes,="" for="" example,="" academic="" libraries="" and="" libraries="" of="" primary="" and="" secondary="" schools.="" if,="" for="" purposes="" of="" determining="" entities="" eligible="" for="" universal="" service="" support,="" we="" were="" to="" adopt="" a="" definition="" that="" includes="" academic="" libraries,="" we="" are="" concerned="" that="" the="" congressional="" intent="" to="" limit="" the="" availability="" of="" discounts="" under="" section="" 254(h)="" could="" be="" frustrated.="" specifically,="" in="" section="" 254(h)(5),="" congress="" limited="" eligibility="" for="" support="" to="" elementary="" and="" secondary="" schools="" that="" meet="" certain="" criteria,="" choosing="" to="" target="" support="" to="" k-12="" schools="" rather="" than="" attempting="" to="" cover="" the="" broader="" set="" of="" institutions="" of="" higher="" learning.="" if="" we="" were="" to="" adopt="" the="" new="" expansive="" definition="" of="" library,="" institutions="" of="" higher="" learning="" could="" assert="" that="" their="" libraries,="" and="" thus="" effectively="" their="" entire="" institutions,="" were="" eligible="" for="" support.="" 345.="" we,="" therefore,="" adopt="" the="" lsta="" definition="" of="" library="" for="" purposes="" of="" section="" 254(h),="" but="" we="" conclude="" that="" a="" library's="" eligibility="" for="" universal="" service="" funding="" will="" depend="" on="" its="" funding="" as="" an="" independent="" entity.="" that="" is,="" because="" institutions="" of="" higher="" education="" are="" not="" eligible="" for="" universal="" service="" support,="" an="" academic="" library="" will="" be="" eligible="" only="" if="" its="" funding="" is="" independent="" of="" the="" funding="" of="" any="" institution="" of="" higher="" education.="" by="" ``independent,''="" we="" mean="" that="" the="" budget="" of="" the="" library="" is="" completely="" separate="" from="" any="" institution="" of="" learning.="" this="" independence="" requirement="" is="" consistent="" with="" both="" congressional="" intent="" and="" the="" expectation="" of="" the="" joint="" board="" that="" universal="" service="" support="" would="" flow="" to="" an="" institution="" of="" learning="" only="" if="" it="" is="" an="" elementary="" or="" secondary="" school.="" similarly,="" because="" elementary="" and="" secondary="" schools="" with="" endowments="" exceeding="" $50="" million="" are="" not="" eligible="" for="" universal="" service="" support,="" a="" library="" connected="" to="" such="" a="" school="" will="" be="" eligible="" only="" if="" it="" is="" funded="" independently="" from="" the="" school.="" 346.="" we="" adopt="" the="" independent="" library="" requirement="" because="" we="" are="" also="" concerned="" that,="" in="" some="" instances="" where="" a="" library="" is="" attached,="" for="" funding="" purposes,="" to="" an="" otherwise="" eligible="" school,="" the="" library="" could="" attempt="" to="" receive="" support="" twice,="" first="" as="" part="" of="" the="" school="" and="" second="" as="" an="" independent="" entity.="" we="" find="" that="" the="" independence="" requirement="" will="" ensure="" that="" an="" elementary="" or="" secondary="" school="" library="" cannot="" collect="" universal="" service="" support="" twice="" for="" the="" same="" services.="" 347.="" when="" congress="" amended="" section="" 254(h)(4)="" in="" late="" 1996,="" it="" added="" the="" term="" ``library="" consortium''="" to="" the="" entities="" potentially="" eligible="" for="" universal="" service="" support.="" we="" adopt="" the="" definition="" of="" library="" consortium="" as="" it="" is="" defined="" in="" lsta,="" with="" one="" modification.="" we="" eliminate="" ``international="" cooperative="" association="" of="" library="" entities''="" from="" our="" definition="" of="" library="" consortia="" eligible="" for="" universal="" service="" support="" because="" we="" conclude="" that="" this="" modified="" definition="" is="" consistent="" with="" the="" directives="" of="" section="" 254(h).="" 348.="" we="" conclude="" that="" community="" college="" libraries="" are="" eligible="" for="" support="" only="" if="" they="" meet="" the="" definition="" above="" and="" other="" requirements="" of="" section="" 254(h).="" we="" agree="" that="" all="" eligible="" schools="" and="" libraries="" should="" be="" permitted="" to="" enter="" into="" consortia="" with="" other="" schools="" and="" libraries.="" 349.="" the="" joint="" board="" concluded="" that="" entities="" not="" explicitly="" eligible="" for="" support="" should="" not="" be="" permitted="" to="" gain="" eligibility="" for="" discounts="" by="" participating="" in="" consortia="" with="" those="" who="" are="" eligible,="" even="" if="" the="" former="" seek="" to="" further="" educational="" objectives="" for="" students="" who="" attend="" eligible="" schools.="" we="" agree="" with,="" and="" therefore="" adopt,="" this="" joint="" board="" recommendation.="" nevertheless,="" we="" look="" to="" ineligible="" schools="" and="" libraries="" to="" assume="" leadership="" roles="" in="" network="" planning="" and="" implementation="" for="" educational="" purposes.="" although="" we="" conclude="" that="" congress="" did="" not="" intend="" that="" we="" finance="" the="" costs="" of="" network="" planning="" by="" ineligible="" schools="" and="" libraries="" through="" universal="" service="" support="" mechanisms,="" we="" encourage="" universities="" and="" other="" repositories="" of="" information="" to="" make="" their="" online="" facilities="" available="" to="" other="" schools="" and="" libraries.="" we="" note="" that="" eligible="" schools="" and="" libraries="" will="" be="" eligible="" for="" [[page="" 32911]]="" discounts="" on="" any="" dedicated="" lines="" they="" purchase="" to="" connect="" themselves="" to="" card="" catalogues="" or="" databases="" of="" scientific="" or="" other="" educational="" data="" maintained="" by="" colleges="" or="" universities,="" databases="" of="" research="" materials="" maintained="" by="" religious="" institutions,="" and="" any="" art="" or="" related="" materials="" maintained="" by="" private="" museum="" archives.="" connections="" between="" eligible="" and="" ineligible="" institutions="" can="" be="" purchased="" by="" an="" eligible="" institution="" subject="" to="" the="" discount="" as="" long="" as="" the="" connection="" is="" used="" for="" the="" educational="" purposes="" of="" the="" eligible="" institution.="" 350.="" while="" those="" consortium="" participants="" ineligible="" for="" support="" would="" pay="" the="" lower="" pre-discount="" prices="" negotiated="" by="" the="" consortium,="" only="" eligible="" schools="" and="" libraries="" would="" receive="" the="" added="" benefit="" of="" universal="" service="" discount="" mechanisms.="" those="" portions="" of="" the="" bill="" representing="" charges="" for="" services="" purchased="" by="" or="" on="" behalf="" of="" and="" used="" by="" an="" eligible="" school,="" school="" district,="" library,="" or="" library="" consortia="" for="" educational="" purposes="" would="" be="" reduced="" further="" by="" the="" discount="" percentage="" to="" which="" the="" school="" or="" library="" using="" the="" services="" was="" entitled="" under="" section="" 254(h).="" the="" service="" provider="" would="" collect="" that="" discount="" amount="" from="" universal="" service="" support="" mechanisms.="" the="" prices="" for="" services="" that="" were="" not="" actually="" used="" by="" eligible="" entities="" for="" educational="" purposes="" would="" not="" be="" reduced="" below="" the="" contract="" price.="" 351.="" finally,="" several="" commenters="" ask="" that="" universal="" service="" support="" be="" targeted="" to="" schools="" and="" libraries="" serving="" individuals="" with="" disabilities.="" we="" acknowledge="" the="" barriers="" faced="" by="" individuals="" with="" disabilities="" in="" accessing="" telecommunications,="" and="" we="" note="" that="" individuals="" with="" disabilities="" attending="" eligible="" schools="" and="" using="" the="" resources="" of="" eligible="" libraries="" will="" benefit="" from="" universal="" service="" support="" mechanisms="" to="" the="" extent="" that="" those="" institutions="" qualify="" for="" universal="" service="" support.="" we="" agree="" with="" the="" joint="" board,="" however,="" that="" the="" specific="" barriers="" faced="" by="" individuals="" with="" disabilities="" in="" accessing="" telecommunications="" are="" best="" addressed="" in="" the="" proceeding="" to="" implement="" section="" 255="" of="" the="" act.="" 352.="" resale="" section="" 254(h)(3)="" bars="" entities="" that="" obtain="" discounts="" from="" reselling="" the="" discounted="" services.="" we="" concur="" with="" the="" joint="" board's="" recommendation="" that="" we="" not="" interpret="" the="" section="" 254(h)(3)="" bar="" to="" apply="" only="" to="" resale="" for="" profit.="" we="" agree="" with="" the="" joint="" board's="" recommendation="" that="" we="" interpret="" section="" 254(h)(3)="" to="" restrict="" any="" resale="" whatsoever="" of="" services="" purchased="" pursuant="" to="" a="" section="" 254="" discount="" to="" entities="" that="" are="" not="" eligible="" for="" support.="" 353.="" we="" agree,="" however,="" that="" the="" section="" 254(h)(3)="" prohibition="" on="" resale="" does="" not="" prohibit="" an="" eligible="" entity="" from="" charging="" fees="" for="" any="" services="" that="" schools="" or="" libraries="" purchase="" that="" are="" not="" subject="" to="" a="" universal="" service="" discount.="" thus,="" an="" eligible="" school="" or="" library="" may="" assess="" computer="" lab="" fees="" to="" help="" defray="" the="" cost="" of="" computers="" or="" training="" fees="" to="" help="" cover="" the="" cost="" of="" training="" because="" these="" purchases="" are="" not="" subsidized="" by="" the="" universal="" service="" support="" mechanisms.="" we="" also="" observe="" that,="" if="" eligible="" schools,="" libraries,="" or="" consortia="" amend="" their="" approved="" service="" contracts="" to="" permit="" another="" eligible="" school="" or="" library="" to="" share="" the="" services="" for="" which="" they="" have="" already="" contracted,="" it="" would="" not="" constitute="" prohibited="" resale,="" as="" long="" as="" the="" services="" used="" are="" only="" discounted="" by="" the="" amount="" to="" which="" the="" eligible="" entity="" actually="" using="" the="" services="" is="" entitled.="" 354.="" we="" concur="" with="" the="" joint="" board's="" conclusion="" that,="" despite="" the="" difficulties="" of="" allocating="" costs="" and="" preventing="" abuses,="" the="" benefits="" of="" permitting="" schools="" and="" libraries="" to="" join="" in="" consortia="" with="" other="" customers,="" as="" discussed="" above,="" outweigh="" the="" danger="" that="" such="" aggregations="" will="" lead="" to="" significant="" abuse="" of="" the="" prohibition="" against="" resale.="" the="" joint="" board="" reached="" this="" conclusion="" based="" on="" three="" findings,="" and="" we="" concur="" with="" each="" of="" them.="" first,="" the="" joint="" board="" found="" that="" the="" only="" way="" to="" avoid="" any="" possible="" misallocations="" by="" eligible="" schools="" and="" libraries="" would="" be="" to="" limit="" severely="" all="" consortia,="" even="" among="" eligible="" schools="" and="" libraries,="" because="" it="" is="" possible="" that="" consortia="" including="" schools="" and="" libraries="" eligible="" for="" varying="" discounts="" could="" allocate="" costs="" in="" a="" way="" that="" does="" not="" precisely="" reflect="" each="" school's="" or="" library's="" designated="" discount="" level.="" we="" agree="" with="" the="" joint="" board's="" conclusion="" that="" severely="" limiting="" consortia="" would="" not="" be="" in="" the="" public="" interest="" because="" it="" would="" serve="" to="" impede="" schools="" and="" libraries="" from="" becoming="" attractive="" customers="" or="" from="" benefiting="" from="" efficiencies,="" such="" as="" those="" secured="" by="" state="" networks.="" second,="" illegal="" resale,="" whereby="" eligible="" schools="" and="" libraries="" use="" their="" discounts="" to="" reduce="" the="" prices="" paid="" by="" ineligible="" entities,="" can="" be="" substantially="" deterred="" by="" a="" rule="" requiring="" providers="" to="" keep="" and="" retain="" careful="" records="" of="" how="" they="" have="" allocated="" the="" costs="" of="" shared="" facilities="" in="" order="" to="" charge="" eligible="" schools="" and="" libraries="" the="" appropriate="" amounts.="" these="" records="" should="" be="" maintained="" on="" some="" reasonable="" basis,="" either="" established="" by="" the="" commission="" or="" the="" administrator,="" and="" should="" be="" available="" for="" public="" inspection.="" we="" concur="" with="" the="" joint="" board's="" conclusion="" that="" reasonable="" approximations="" of="" cost="" allocations="" should="" be="" sufficient="" to="" deter="" significant="" abuse.="" third,="" we="" share="" the="" joint="" board's="" expectation="" that="" the="" growing="" bandwidth="" requirements="" of="" schools="" and="" libraries="" will="" make="" it="" unlikely="" that="" other="" consortia="" members="" will="" be="" able="" to="" rely="" on="" using="" more="" than="" their="" paid="" share="" of="" the="" use="" of="" a="" facility.="" this="" will="" make="" fraudulent="" use="" of="" services="" less="" likely="" to="" occur.="" we="" also="" agree="" with="" the="" joint="" board's="" recommendation="" that="" state="" commissions="" should="" undertake="" measures="" to="" enable="" consortia="" of="" eligible="" and="" ineligible="" public="" sector="" entities="" to="" aggregate="" their="" purchases="" of="" telecommunications="" services="" and="" other="" services="" being="" supported="" through="" the="" discount="" mechanism,="" in="" accordance="" with="" the="" requirements="" set="" forth="" in="" section="" 254(h).="" 355.="" bona="" fide="" request="" for="" educational="" purposes="" section="" 254(h)(1)(b)="" limits="" discounts="" to="" services="" provided="" in="" response="" to="" bona="" fide="" requests="" made="" for="" services="" to="" be="" used="" for="" educational="" purposes.="" we="" concur="" with="" the="" joint="" board's="" finding="" that="" congress="" intended="" to="" require="" accountability="" on="" the="" part="" of="" schools="" and="" libraries="" and,="" therefore,="" we="" concur="" with="" the="" joint="" board's="" recommendation="" and="" the="" position="" of="" most="" commenters="" that="" eligible="" schools="" and="" libraries="" be="" required="" to:="" (1)="" conduct="" internal="" assessments="" of="" the="" components="" necessary="" to="" use="" effectively="" the="" discounted="" services="" they="" order;="" (2)="" submit="" a="" complete="" description="" of="" services="" they="" seek="" so="" that="" it="" may="" be="" posted="" for="" competing="" providers="" to="" evaluate;="" and="" (3)="" certify="" to="" certain="" criteria="" under="" penalty="" of="" perjury.="" 356.="" because="" we="" find="" that="" the="" needs="" of="" educational="" institutions="" are="" complex="" and="" substantially="" different="" from="" the="" needs="" of="" other="" entities="" eligible="" for="" universal="" service="" support="" pursuant="" to="" this="" order,="" we="" will="" require="" the="" administrator,="" after="" receiving="" recommendations="" submitted="" by="" the="" department="" of="" education,="" to="" select="" a="" subcontractor="" to="" manage="" exclusively="" the="" application="" process="" for="" eligible="" schools="" and="" libraries,="" including="" dissemination="" and="" review="" of="" applications="" for="" service="" and="" maintenance="" of="" the="" website="" on="" which="" applications="" for="" service="" will="" be="" posted="" for="" competitive="" bidding="" by="" carriers.="" the="" important="" criteria="" in="" recommending="" eligible="" subcontractors="" are:="" familiarity="" with="" the="" telecommunications="" and="" technology="" needs="" of="" educational="" institutions="" and="" libraries;="" low="" administrative="" costs;="" and="" familiarity="" with="" the="" procurement="" processes="" of="" the="" states="" and="" school="" districts.="" moreover,="" we="" will="" consult="" [[page="" 32912]]="" with="" the="" department="" of="" education="" in="" designing="" the="" applications="" for="" this="" process.="" we="" will="" require="" those="" applications="" to="" include,="" at="" a="" minimum,="" certain="" information="" and="" certifications.="" 357.="" first,="" we="" will="" require="" applications="" to="" include="" a="" technology="" inventory/assessment.="" we="" expect="" that,="" before="" placing="" an="" order="" for="" telecommunications="" or="" information="" services,="" the="" person="" authorized="" to="" make="" the="" purchase="" for="" a="" school="" or="" library="" would="" need="" to="" review="" what="" telecommunications-related="" facilities="" the="" school="" or="" library="" already="" has="" or="" plans="" to="" acquire.="" in="" this="" regard,="" applicants="" must="" at="" a="" minimum="" provide="" the="" following="" information,="" to="" the="" extent="" applicable="" to="" the="" services="" requested:="" (1)="" the="" computer="" equipment="" currently="" available="" or="" budgeted="" for="" purchase="" for="" the="" current,="" next,="" or="" other="" future="" academic="" years,="" as="" well="" as="" whether="" the="" computers="" have="" modems="" and,="" if="" so,="" what="" speed="" modems;="" (2)="" the="" internal="" connections,="" if="" any,="" that="" the="" school="" or="" library="" already="" has="" in="" place="" or="" has="" budgeted="" to="" install="" in="" the="" current,="" next,="" or="" future="" academic="" years,="" or="" any="" specific="" plans="" relating="" to="" voluntary="" installation="" of="" internal="" connections;="" (3)="" the="" computer="" software="" necessary="" to="" communicate="" with="" other="" computers="" over="" an="" internal="" network="" and="" over="" the="" public="" telecommunications="" network="" currently="" available="" or="" budgeted="" for="" purchase="" for="" the="" current,="" next,="" or="" future="" academic="" years;="" (4)="" the="" experience="" of="" and="" training="" received="" by="" the="" relevant="" staff="" in="" the="" use="" of="" the="" equipment="" to="" be="" connected="" to="" the="" telecommunications="" network="" and="" training="" programs="" for="" which="" funds="" are="" committed="" for="" the="" current,="" next,="" or="" future="" academic="" years;="" (5)="" existing="" or="" budgeted="" maintenance="" contracts="" to="" maintain="" computers;="" and="" (6)="" the="" capacity="" of="" the="" school's="" or="" library's="" electrical="" system="" to="" handle="" simultaneous="" uses.="" 358.="" in="" addition,="" schools="" and="" libraries="" must="" prepare="" specific="" plans="" for="" using="" these="" technologies,="" both="" over="" the="" near="" term="" and="" into="" the="" future,="" and="" how="" they="" plan="" to="" integrate="" the="" use="" of="" these="" technologies="" into="" their="" curriculum.="" therefore,="" we="" concur="" with="" the="" joint="" board's="" finding="" that="" it="" would="" not="" be="" unduly="" burdensome="" to="" require="" eligible="" schools="" and="" libraries="" to="" ``do="" their="" homework''="" in="" terms="" of="" preparing="" these="" plans.="" 359.="" to="" ensure="" that="" these="" technology="" plans="" are="" based="" on="" the="" reasonable="" needs="" and="" resources="" of="" the="" applicant="" and="" are="" consistent="" with="" the="" goals="" of="" the="" program,="" we="" will="" also="" require="" independent="" approval="" of="" an="" applicant's="" technology="" plan,="" ideally="" by="" a="" state="" agency="" that="" regulates="" schools="" or="" libraries.="" we="" understand="" that="" many="" states="" have="" already="" undertaken="" state="" technology="" initiatives,="" and="" we="" expect="" that="" more="" will="" do="" so="" and="" will="" be="" able="" to="" certify="" the="" technology="" plans="" of="" schools="" and="" libraries="" in="" their="" states.="" furthermore,="" plans="" that="" have="" been="" approved="" for="" other="" purposes,="" e.g.,="" for="" participation="" in="" federal="" or="" state="" programs="" such="" as="" ``goals="" 2000''="" and="" the="" technology="" literacy="" challenge,="" will="" be="" accepted="" without="" need="" for="" further="" independent="" approval.="" with="" regard="" to="" schools="" and="" libraries="" with="" new="" or="" otherwise="" approved="" plans,="" we="" will="" receive="" guidance="" from="" the="" department="" of="" education="" and="" the="" institute="" for="" museum="" and="" library="" services="" as="" to="" alternative="" approval="" measures.="" as="" noted="" below,="" we="" will="" also="" require="" schools="" and="" libraries="" to="" certify="" that="" they="" have="" funds="" committed="" for="" the="" current="" funding="" year="" to="" meet="" their="" financial="" obligations="" set="" out="" in="" their="" technology="" plans.="" 360.="" second,="" we="" will="" require="" the="" application="" to="" describe="" the="" services="" that="" the="" schools="" and="" libraries="" seek="" to="" purchase="" in="" sufficient="" detail="" to="" enable="" potential="" providers="" to="" formulate="" bids.="" since="" we="" agree="" with="" the="" joint="" board's="" conclusion="" that="" congress="" intended="" schools="" and="" libraries="" to="" avail="" themselves="" of="" the="" growing="" competitive="" marketplace="" for="" telecommunications="" and="" information="" services,="" as="" discussed="" above,="" we="" concur="" with="" the="" joint="" board's="" recommendation="" that="" schools="" and="" libraries="" be="" required="" to="" obtain="" services="" through="" the="" use="" of="" competitive="" bidding.="" once="" the="" subcontractor="" selected="" by="" the="" administrator="" receives="" an="" application="" and="" finds="" it="" complete,="" the="" subcontractor="" will="" post="" the="" application,="" including="" the="" description="" of="" the="" services="" sought="" on="" a="" website="" for="" all="" potential="" competing="" service="" providers="" to="" review="" and="" submit="" bids="" in="" response,="" as="" if="" they="" were="" requests="" for="" proposals="" (rfps).="" moreover,="" while="" schools="" and="" libraries="" may="" submit="" formal="" and="" detailed="" rfps="" to="" be="" posted,="" particularly="" if="" that="" is="" required="" or="" most="" consistent="" with="" their="" own="" state="" or="" local="" acquisition="" requirements,="" we="" will="" also="" permit="" them="" to="" submit="" less="" formal="" descriptions="" of="" services,="" provided="" sufficient="" detail="" is="" included="" to="" allow="" providers="" to="" reasonably="" evaluate="" the="" requests="" and="" submit="" bids.="" as="" the="" joint="" board="" recognized,="" many="" schools="" and="" libraries="" are="" already="" required="" by="" their="" local="" government="" or="" governing="" body="" to="" prepare="" detailed="" descriptions="" of="" any="" purchase="" they="" make="" above="" a="" specified="" dollar="" amount,="" and="" they="" may="" be="" able="" to="" use="" those="" descriptions="" for="" this="" purpose="" as="" well.="" we="" emphasize,="" however,="" that="" the="" submission="" of="" a="" request="" for="" posting="" is="" in="" no="" way="" intended="" as="" a="" substitute="" for="" state,="" local,="" or="" other="" procurement="" processes.="" 361.="" we="" will="" also="" require="" that="" applications="" posted="" on="" the="" website="" by="" the="" administrator's="" subcontractor="" present="" schools'="" and="" libraries'="" descriptions="" of="" services="" in="" a="" way="" that="" will="" enable="" providers="" to="" search="" among="" potential="" customers="" by="" zip="" code,="" number="" of="" students="" (schools)="" or="" patrons="" (libraries),="" number="" of="" buildings,="" and="" other="" data="" that="" the="" administrator="" will="" receive="" in="" the="" applications.="" we="" believe="" that="" this="" procedure="" should="" enable="" even="" potential="" service="" providers="" without="" direct="" access="" to="" the="" website="" to="" rely="" on="" others="" to="" conduct="" searches="" for="" them.="" we="" also="" note="" that="" schools="" will="" submit="" the="" percentage="" of="" their="" students="" eligible="" for="" the="" national="" school="" lunch="" program="" and="" libraries="" will="" submit="" the="" percentage="" of="" students="" eligible="" for="" the="" national="" school="" lunch="" program="" in="" the="" school="" districts="" in="" which="" they="" are="" located="" to="" the="" administrator's="" subcontractor,="" in="" order="" to="" enable="" the="" administrator="" to="" calculate="" the="" amount="" of="" the="" applicable="" discount.="" this="" information="" will="" also="" be="" posted="" by="" the="" administrator="" on="" the="" website="" to="" help="" providers="" bidding="" on="" services="" to="" calculate="" the="" applicable="" discounts.="" 362.="" third,="" we="" concur="" with="" the="" joint="" board's="" recommendation="" that="" the="" request="" for="" services="" submitted="" to="" the="" administrator's="" subcontractor="" shall="" be="" signed="" by="" the="" person="" authorized="" to="" order="" telecommunications="" and="" other="" supported="" services="" for="" the="" school="" or="" library,="" who="" will="" certify="" the="" following="" under="" oath:="" (1)="" the="" school="" or="" library="" is="" an="" eligible="" entity="" under="" sections="" 254(h)(4)="" and="" 254(h)(5)="" and="" the="" rules="" adopted="" herein;="" (2)="" the="" services="" requested="" will="" be="" used="" solely="" for="" educational="" purposes;="" (3)="" the="" services="" will="" not="" be="" sold,="" resold,="" or="" transferred="" in="" consideration="" for="" money="" or="" any="" other="" thing="" of="" value;="" (4)="" if="" the="" services="" are="" being="" purchased="" as="" part="" of="" an="" aggregated="" purchase="" with="" other="" entities,="" the="" identities="" of="" all="" co-purchasers="" and="" the="" services="" or="" portion="" of="" the="" services="" being="" purchased="" by="" the="" school="" or="" library;="" (5)="" all="" of="" the="" necessary="" funding="" in="" the="" current="" funding="" year="" has="" been="" budgeted="" and="" will="" have="" been="" approved="" to="" pay="" for="" the="" ``non-="" discount''="" portion="" of="" requested="" connections="" and="" services="" as="" well="" as="" any="" necessary="" hardware,="" software,="" and="" to="" undertake="" the="" necessary="" staff="" training="" required="" in="" time="" to="" use="" the="" services="" effectively;="" and="" (6)="" they="" have="" complied,="" and="" will="" continue="" to="" comply,="" with="" all="" applicable="" state="" and="" local="" procurement="" processes.="" [[page="" 32913]]="" 363.="" we="" conclude="" that,="" to="" permit="" all="" interested="" parties="" to="" respond="" to="" those="" posted="" requests,="" schools,="" libraries,="" and="" consortia="" including="" such="" entities="" should="" be="" required="" to="" wait="" four="" weeks="" after="" a="" description="" of="" the="" services="" they="" seek="" has="" been="" posted="" on="" the="" school="" and="" library="" website,="" before="" they="" sign="" any="" binding="" contracts="" for="" discounted="" services.="" once="" they="" have="" signed="" a="" contract="" for="" discounted="" services,="" the="" school,="" library,="" or="" consortium="" including="" such="" entities="" shall="" send="" a="" copy="" of="" that="" contract="" to="" the="" administrator's="" subcontractor="" with="" an="" estimate="" of="" the="" funds="" that="" it="" expects="" to="" need="" for="" the="" current="" funding="" year="" as="" well="" what="" it="" estimates="" it="" will="" request="" for="" the="" following="" funding="" year.="" assuming="" that="" there="" are="" sufficient="" funds="" remaining="" to="" be="" committed,="" the="" subcontractor="" shall="" commit="" the="" necessary="" funds="" for="" the="" future="" use="" of="" the="" particular="" requestor="" and="" notify="" the="" requestor="" that="" its="" funding="" has="" been="" approved.="" 364.="" once="" the="" school,="" library,="" or="" consortium="" including="" such="" entities="" has="" received="" approval="" of="" its="" purchase="" order,="" it="" may="" notify="" the="" provider="" to="" begin="" service,="" and="" once="" the="" former="" has="" received="" service="" from="" the="" provider="" it="" must="" notify="" the="" administrator="" to="" approve="" the="" flow="" of="" universal="" service="" support="" funds="" to="" the="" provider.="" 365.="" auditing="" we="" agree="" with="" the="" joint="" board="" recommendation="" that="" schools="" and="" libraries,="" as="" well="" as="" carriers,="" be="" required="" to="" maintain="" appropriate="" records="" necessary="" to="" assist="" in="" future="" audits.="" we="" share="" the="" joint="" board's="" expectation="" that="" schools="" and="" libraries="" will="" be="" able="" to="" produce="" such="" records="" at="" the="" request="" of="" any="" auditor="" appointed="" by="" a="" state="" education="" department,="" the="" fund="" administrator,="" or="" any="" other="" state="" or="" federal="" agency="" with="" jurisdiction="" that="" might,="" for="" example,="" suspect="" fraud="" or="" other="" illegal="" conduct,="" or="" merely="" be="" conducting="" a="" routine,="" random="" audit.="" we="" also="" agree="" with="" the="" joint="" board's="" recommendation="" and="" vanguard's="" comments="" that="" eligibility="" for="" support="" be="" conditioned="" on="" schools'="" and="" libraries'="" consent="" to="" cooperate="" in="" future="" random="" compliance="" audits="" to="" ensure="" that="" the="" services="" are="" being="" used="" appropriately.="" the="" commission,="" in="" consultation="" with="" the="" department="" of="" education,="" will="" engage="" and="" direct="" an="" independent="" auditor="" to="" conduct="" such="" random="" audits="" of="" schools="" and="" libraries="" as="" may="" be="" necessary.="" such="" information="" will="" permit="" the="" commission="" to="" determine="" whether="" universal="" service="" support="" policies="" require="" adjustment.="" 366.="" annual="" carrier="" notification="" requirement="" we="" agree="" with="" the="" joint="" board's="" recommendation="" and="" decline="" to="" impose="" a="" requirement="" that="" carriers="" annually="" notify="" schools="" and="" libraries="" about="" the="" availability="" of="" discounted="" services.="" as="" the="" joint="" board="" noted,="" many="" national="" representatives="" of="" school="" and="" library="" groups="" are="" participating="" in="" this="" proceeding,="" and="" we="" believe="" that="" these="" associations="" will="" inform="" their="" members="" of="" the="" opportunity="" to="" secure="" discounted="" telecommunications="" and="" other="" covered="" services="" under="" this="" program.="" we="" encourage="" these="" groups="" to="" notify="" their="" members="" of="" the="" universal="" service="" programs="" through="" trade="" publications,="" websites,="" and="" conventions.="" while="" we="" concur="" with="" the="" joint="" board="" and="" decline="" to="" require="" provider="" notification="" to="" schools="" and="" libraries,="" we="" encourage="" service="" providers="" to="" notify="" each="" school="" and="" library="" association="" and="" state="" department="" of="" education="" in="" the="" states="" they="" serve="" of="" the="" availability="" of="" discounted="" services="" annually.="" 367.="" separate="" funding="" mechanisms="" we="" concur="" with="" the="" joint="" board's="" recommendation="" that="" the="" universal="" service="" administrator="" distribute="" support="" for="" schools="" and="" libraries="" from="" the="" same="" source="" of="" revenues="" used="" to="" support="" other="" universal="" service="" purposes="" under="" section="" 254="" because="" we="" agree="" with="" the="" joint="" board's="" conclusion="" that="" establishing="" separate="" funds="" would="" yield="" minimal,="" if="" any,="" improvement="" in="" accountability,="" while="" imposing="" unnecessary="" administrative="" costs.="" we="" share="" the="" concern="" that="" we="" must="" ensure="" proper="" accountability="" for="" and="" targeting="" of="" the="" funds="" for="" schools="" and="" libraries.="" we="" agree="" that="" this="" goal="" is="" achievable="" if="" the="" fund="" administrator="" maintains="" separate="" accounting="" categories.="" 368.="" offset="" versus="" reimbursement="" section="" 254(h)(1)(b)="" requires="" that="" a="" telecommunications="" carrier="" providing="" services="" to="" schools="" and="" libraries="" shall="" either="" apply="" the="" amount="" of="" the="" discount="" afforded="" to="" schools="" and="" libraries="" as="" an="" offset="" to="" its="" universal="" service="" contribution="" obligations="" or="" shall="" be="" reimbursed="" for="" that="" amount="" from="" universal="" service="" support="" mechanisms.="" we="" agree="" that="" section="" 254(h)(1)(b)="" requires="" that="" service="" providers="" be="" permitted="" to="" choose="" either="" reimbursement="" or="" offset.="" for="" purposes="" of="" administrative="" ease,="" we="" conclude="" that="" service="" providers,="" rather="" than="" schools="" and="" libraries,="" should="" seek="" compensation="" from="" the="" universal="" service="" administrator.="" many="" telecommunications="" carriers="" will="" already="" be="" receiving="" funds="" from="" the="" administrator="" for="" existing="" high="" cost="" and="" low-="" income="" support,="" and="" the="" administrator="" would="" often="" be="" dealing="" with="" the="" same="" entities="" for="" the="" schools="" and="" libraries="" program.="" to="" require="" schools="" and="" libraries="" to="" seek="" direct="" reimbursement="" would="" also="" burden="" the="" administrator="" because="" of="" the="" large="" number="" of="" new="" entities="" that="" would="" be="" receiving="" funds.="" 369.="" access="" to="" advanced="" telecommunications="" and="" information="" services="" as="" discussed="" above,="" we="" concur="" with="" the="" joint="" board's="" recommendation="" that="" we="" provide="" universal="" service="" support="" to="" eligible="" schools="" and="" libraries="" for="" telecommunications="" services,="" internet="" access,="" and="" internal="" connections.="" we="" have,="" however,="" relied="" on="" sections="" 254(c)(3)="" and="" 254(h)(1)(b),="" rather="" than="" section="" 254(h)(2)(a)="" as="" proposed="" by="" the="" joint="" board,="" because="" we="" believe="" the="" former="" are="" the="" more="" pertinent="" section.="" in="" addition="" to="" the="" support="" for="" such="" services="" provided="" by="" telecommunications="" carriers="" under="" sections="" 254="" (c)(3)="" and="" (h)(1)(b),="" discussed="" in="" section="" x.b.2.b.="" and="" x.b.2.c.="" of="" the="" order,="" we="" also="" agree="" with="" the="" joint="" board's="" recommendation="" to="" provide="" discounts="" for="" internet="" access="" and="" internal="" connections="" provided="" by="" non-telecommunications="" carriers,="" which="" we="" do="" under="" the="" authority="" of="" sections="" 254(h)(2)(a)="" and="" 4(i).="" 370.="" many="" companies="" that="" are="" not="" themselves="" telecommunications="" carriers="" will="" be="" eligible="" to="" provide="" supported="" non-telecommunications="" services="" to="" eligible="" schools="" and="" libraries="" at="" a="" discount="" pursuant="" to="" section="" 254(h)(1)="" because="" they="" have="" subsidiaries="" or="" affiliates="" owned="" or="" controlled="" by="" them="" that="" are="" telecommunications="" carriers.="" in="" addition,="" to="" take="" advantage="" of="" the="" discounts="" provided="" by="" section="" 254(h)(1),="" non-="" telecommunications="" carriers="" can="" bid="" with="" telecommunications="" carriers="" through="" joint="" ventures,="" partnerships,="" or="" other="" business="" arrangements.="" they="" also="" have="" the="" option="" of="" establishing="" subsidiaries="" or="" affiliates="" owned="" or="" controlled="" by="" them="" that="" are="" telecommunications="" carriers,="" even="" if="" the="" scope="" of="" their="" telecommunications="" service="" activities="" is="" fairly="" limited.="" given="" the="" ways="" in="" which="" non-telecommunications="" carriers="" can="" be="" reimbursed="" for="" providing="" discounts="" to="" eligible="" schools="" and="" libraries="" under="" section="" 254(h)(1),="" we="" conclude="" that="" it="" would="" create="" an="" artificial="" distinction="" to="" exclude="" those="" non-telecommunications="" carriers="" that="" do="" not="" have="" telecommunications="" carrier="" subsidiaries="" or="" affiliates="" owned="" or="" controlled="" by="" them,="" that="" choose="" not="" to="" create="" them,="" or="" [[page="" 32914]]="" that="" do="" not="" bid="" together="" with="" telecommunications="" carriers.="" accordingly,="" pursuant="" to="" authority="" in="" sections="" 254(h)(2)(a)="" and="" 4(i)="" of="" the="" act,="" non-telecommunications="" carriers="" will="" be="" eligible="" to="" provide="" the="" supported="" non-telecommunications="" services="" to="" schools="" and="" libraries="" at="" a="" discount.="" 371.="" section="" 254(h)(2),="" in="" conjunction="" with="" section="" 4(i),="" authorizes="" the="" commission="" to="" establish="" discounts="" and="" funding="" mechanisms="" for="" advanced="" services="" provided="" by="" non-telecommunications="" carriers,="" in="" addition="" to="" the="" funding="" mechanisms="" for="" telecommunications="" carriers="" created="" pursuant="" to="" sections="" 254(c)(3)="" and="" 254(h)(1)(b).="" the="" language="" of="" section="" 254(h)(2)="" grants="" the="" commission="" broad="" authority="" to="" enhance="" access="" to="" advanced="" telecommunications="" and="" information="" services,="" constrained="" only="" by="" the="" concepts="" of="" competitive="" neutrality,="" technical="" feasibility,="" and="" economical="" reasonableness.="" thus,="" discounts="" and="" funding="" mechanisms="" that="" are="" competitively="" neutral,="" technically="" feasible,="" and="" economically="" reasonable="" that="" enhance="" access="" to="" advanced="" telecommunications="" and="" information="" services="" fall="" within="" the="" broad="" authority="" of="" section="" 254(h)(2).="" 372.="" furthermore,="" unlike="" sections="" 254(h)(1)="" (a)="" and="" (b),="" section="" 254(h)(2)(a)="" does="" not="" limit="" support="" to="" telecommunications="" carriers.="" rather,="" section="" 254(h)(2)(a)="" supplements="" the="" discounts="" to="" telecommunications="" carriers="" established="" by="" section="" 254(h)(1)="" by="" expressly="" granting="" the="" commission="" the="" authority="" and="" directing="" the="" commission="" to="" ``establish="" competitively="" neutral="" rules="" *="" *="" *="" to="" enhance,="" to="" the="" extent="" technically="" feasible="" and="" economically="" reasonable,="" access="" to="" advanced="" telecommunications="" and="" information="" services="" for="" all="" public="" and="" non-profit="" elementary="" and="" secondary="" school="" classrooms="" *="" *="" *="" and="" libraries.''="" this="" language="" is="" notably="" broader="" than="" the="" other="" provisions="" of="" section="" 254,="" including="" section="" 254(h)="" (1)(a)="" and="" (1)(b)="" and,="" unlike="" these="" other="" sections,="" does="" not="" include="" the="" phrase="" ``telecommunications="" carriers.''="" thus,="" contrary="" to="" arguments="" raised="" by="" many="" ilecs,="" we="" conclude="" that="" section="" 254(e),="" which="" provides="" that="" ``only="" an="" eligible="" telecommunications="" carrier="" designated="" under="" section="" 214(e)="" shall="" be="" eligible="" to="" receive="" specific="" [f]ederal="" universal="" service="" support,''="" is="" inapplicable="" to="" section="" 254(h)(2).="" 373.="" in="" this="" regard,="" section="" 254(e)="" limits="" the="" provision="" of="" federal="" universal="" service="" support="" to="" eligible="" telecommunications="" carriers="" designated="" under="" section="" 214(e).="" section="" 214(e)="" requires="" ``eligible="" telecommunications="" carriers''="" to="" ``offer="" the="" services="" that="" are="" supported="" by="" [f]ederal="" universal="" service="" support="" mechanisms="" under="" section="" 254(c).''="" with="" respect="" to="" schools="" and="" libraries,="" the="" discount="" mechanism="" for="" those="" services="" designated="" for="" support="" under="" section="" 254(c)="" (specifically="" (c)(3)),="" is="" established="" by="" section="" 254(h)(1)(b).="" this="" statutory="" interrelationship="" demonstrates="" that="" the="" limitation="" set="" forth="" in="" section="" 254(e)="" pertains="" only="" to="" section="" 254(c)="" services,="" which,="" with="" respect="" to="" schools="" and="" libraries,="" is="" only="" relevant="" to="" section="" 254(h)(1)(b).="" this="" interpretation="" is="" further="" bolstered="" by="" the="" specific="" language="" set="" forth="" in="" section="" 254(h)(1)(b)(ii),="" which="" is="" an="" express="" exemption="" from="" the="" section="" 254(e)="" requirement="" for="" certain="" telecommunications="" carriers="" (i.e.,="" those="" that="" are="" not="" ``eligible''="" under="" section="" 214(e)).="" no="" such="" exemption="" language="" was="" required="" for="" section="" 254(h)(2)(a)="" because="" section="" 254(e)="" does="" not="" apply="" to="" that="" section.="" 374.="" we="" thus="" find="" that="" section="" 254(h)(2),="" in="" conjunction="" with="" section="" 4(i),="" permits="" us="" to="" empower="" schools="" and="" libraries="" to="" take="" the="" fullest="" advantage="" of="" competition="" to="" select="" the="" most="" cost-effective="" provider="" of="" internet="" access="" and="" internal="" connections,="" in="" addition="" to="" telecommunications="" services,="" and="" allows="" us="" not="" to="" require="" schools="" and="" libraries="" to="" procure="" these="" supported="" services="" only="" as="" a="" bundled="" package="" with="" telecommunications="" services.="" this="" approach="" is="" consistent="" with="" the="" requirement="" in="" section="" 254(h)(2)="" that="" the="" rules="" established="" under="" it="" be="" ``competitively="" neutral,''="" as="" well="" as="" by="" the="" principle="" of="" competitive="" neutrality="" that="" we="" have="" concluded="" should="" be="" among="" those="" overarching="" principles="" shaping="" our="" universal="" service="" policies.="" the="" goal="" of="" competitive="" neutrality="" would="" not="" be="" fully="" achieved="" if="" the="" commission="" only="" provided="" support="" for="" non-telecommunications="" services="" such="" as="" internet="" access="" and="" internal="" connections="" when="" provided="" by="" telecommunications="" carriers.="" in="" that="" situation,="" service="" providers="" not="" eligible="" for="" support="" because="" they="" are="" not="" telecommunications="" carriers="" would="" be="" at="" a="" disadvantage="" in="" competing="" to="" provide="" these="" services="" to="" schools="" and="" libraries,="" even="" if="" their="" services="" would="" be="" more="" cost-="" efficient.="" 375.="" we="" thus="" conclude="" that="" the="" same="" non-telecommunications="" services="" eligible="" for="" discounts="" if="" provided="" by="" telecommunications="" carriers="" under="" section="" 254(h)(1)(b)="" are="" eligible="" for="" discounts="" if="" provided="" by="" non-="" telecommunications="" carriers="" under="" section="" 254(h)(2)(a).="" furthermore,="" though="" the="" rules="" called="" for="" by="" section="" 254(h)(2)(a)="" are="" not="" required="" to="" mirror="" the="" discount="" schedule="" in="" section="" 254(h)(1)(b),="" we="" have="" authority="" to="" ``enhance="" access''="" in="" this="" manner.="" thus,="" the="" requirements="" that="" apply="" to="" the="" discount="" program="" for="" services="" provided="" by="" telecommunications="" carriers,="" discussed="" throughout="" this="" section,="" will="" apply="" to="" the="" discount="" program="" for="" services="" provided="" by="" non-telecommunications="" carriers,="" with="" one="" exception.="" non-telecommunications="" carriers="" that="" are="" not="" required="" to="" contribute="" to="" universal="" service="" support="" mechanisms="" will="" be="" entitled="" only="" to="" reimbursement="" for="" the="" amount="" of="" the="" discount="" afforded="" to="" eligible="" schools="" and="" libraries="" under="" section="" 254(h)(1)(b),="" whereas="" telecommunications="" carriers="" will="" be="" entitled="" to="" either="" reimbursement="" or="" an="" offset="" to="" their="" obligation="" to="" contribute="" to="" universal="" service="" support="" mechanisms.="" finally,="" we="" conclude="" that="" although="" sections="" 254(c)(3)="" and="" 254(h)(1)(b)="" on="" the="" one="" hand="" and="" sections="" 254(h)(2)(a)="" and="" 4(i)="" on="" the="" other="" hand="" authorize="" funding="" mechanisms="" under="" separate="" statutory="" authority,="" these="" funds="" can="" and="" should="" be="" combined="" into="" a="" single="" fund="" as="" a="" matter="" of="" administrative="" convenience.="" 376.="" we="" recognize="" that="" sections="" 706="" and="" 708="" include="" requirements="" that="" would="" complement="" the="" goal="" of="" widespread="" availability="" of="" advanced="" telecommunications="" services.="" we="" concur="" with="" the="" joint="" board's="" conclusion,="" however,="" that="" congress="" contemplated="" that="" section="" 706="" would="" be="" the="" subject="" of="" a="" separate="" rulemaking="" proceeding.="" we="" agree="" with="" the="" joint="" board="" and="" decline="" to="" consider="" section="" 706="" in="" the="" context="" of="" this="" proceeding.="" we="" agree="" with="" the="" joint="" board's="" recommendation="" that="" we="" not="" rely="" on="" section="" 708="" to="" provide="" advanced="" services="" to="" schools="" and="" libraries="" within="" the="" context="" of="" this="" proceeding.="" we="" also="" agree="" with="" the="" joint="" board="" and="" conclude="" that="" section="" 708="" should="" be="" considered="" further="" after="" implementation="" of="" section="" 254.="" 377.="" we="" concur="" with="" the="" joint="" board's="" recommendation="" and="" conclude="" that="" we="" adopt="" rules="" implementing="" the="" schools="" and="" libraries="" discount="" program="" at="" the="" start="" of="" the="" 1997-1998="" school="" year.="" as="" discussed="" above,="" we="" also="" conclude="" that="" the="" funding="" year="" will="" be="" the="" calendar="" year="" and="" that="" support="" will="" begin="" to="" flow="" on="" january="" 1,="" 1998.="" health="" care="" providers="" 378.="" medical="" applications="" eligible="" for="" support="" we="" agree="" with="" those="" commenters="" suggesting="" that="" health="" care="" providers="" themselves="" are="" best="" able="" to="" determine="" those="" medical="" applications="" that="" should="" [[page="" 32915]]="" be="" provided="" by="" means="" of="" supported="" telecommunications="" services.="" we="" find="" that="" ``public="" health="" services''="" are="" ``health="" care="" services''="" for="" purposes="" of="" section="" 254(h),="" and="" as="" such,="" the="" associated="" telecommunications="" services="" necessary="" to="" provide="" such="" services="" may="" be="" supported="" by="" universal="" service="" support="" mechanisms,="" consistent="" with="" the="" requirements="" of="" section="" 254(h).="" for="" purposes="" of="" section="" 254,="" we="" define="" ``public="" health="" services''="" to="" mean="" health-related="" services,="" including="" non-clinical,="" informational,="" and="" educational="" public="" health="" services,="" that="" local="" public="" health="" departments="" or="" agencies="" are="" charged="" with="" performing="" under="" federal="" and="" state="" laws.="" 379.="" we="" find="" that="" the="" phrase="" ``necessary="" for="" the="" provision="" of="" health="" care="" services="" *="" *="" *="" including="" instruction="" relating="" to="" such="" services''="" means="" reasonably="" related="" to="" the="" provision="" of="" health="" care="" services="" or="" instruction="" because="" we="" find="" that="" a="" broad="" reading="" of="" the="" phrase="" is="" consistent="" with="" the="" purpose="" of="" section="" 254(h)="" which,="" as="" congress="" has="" stated,="" is,="" in="" part,="" ``to="" ensure="" that="" health="" care="" providers="" for="" rural="" areas="" *="" *="" *="" have="" affordable="" access="" to="" modern="" telecommunications="" services="" that="" will="" enable="" them="" to="" provide="" medical="" *="" *="" *="" services="" to="" all="" parts="" of="" the="" nation.''="" we="" emphasize="" that="" the="" determination="" of="" what="" ``additional="" services''="" should="" be="" eligible="" for="" support="" is="" not="" expressly="" limited="" by="" the="" considerations="" listed="" in="" section="" 254(c)(1).="" those="" considerations="" are="" relevant="" to="" the="" establishment="" of="" core="" universal="" services="" and="" are="" not="" determinative="" of="" which="" ``additional''="" services="" should="" receive="" support="" for="" health="" care="" providers="" under="" the="" language="" of="" section="" 254(c)(3).="" 380.="" bandwidth="" limitations="" we="" conclude="" that,="" within="" the="" limitations="" described="" below,="" universal="" service="" support="" mechanisms="" for="" health="" care="" providers="" should="" support="" commercially="" available="" services="" of="" bandwidths="" up="" to="" and="" including="" 1.544="" mbps,="" or="" the="" equivalent="" transmission="" speed,="" but="" not="" higher="" speeds.="" we="" find="" that="" the="" weight="" of="" the="" record="" evidence="" demonstrates="" that="" higher="" bandwidth="" services="" are="" not="" presently="" necessary="" for="" the="" ``provision="" of="" health="" care="" services="" in="" a="" state.''="" we="" also="" find="" that="" the="" record="" indicates="" vastly="" higher="" costs="" implicated="" in="" supporting="" services="" that="" employ="" bandwidths="" higher="" than="" 1.544="" mbps.="" 381.="" services="" operating="" within="" the="" bandwidth="" limitation="" may="" be="" carried="" over="" facilities="" capable="" of="" carrying="" services="" at="" higher="" bandwidths,="" so="" long="" as="" the="" provisions="" for="" calculating="" support="" set="" forth="" herein="" are="" followed.="" accordingly,="" using="" for="" purposes="" of="" example="" some="" of="" the="" services="" described="" by="" commenters,="" frame="" relay="" service,="" private="" line="" transport="" service,="" isdn,="" satellite="" communications,="" unlicensed="" spread="" spectrum,="" non-consumer,="" point-to-point="" services,="" and="" similar="" services,="" when="" provided="" by="" a="" telecommunications="" carrier="" at="" speeds="" not="" exceeding="" 1.544="" mbps,="" and="" requested="" and="" certified="" as="" necessary="" by="" an="" eligible="" health="" care="" provider,="" will="" be="" eligible="" for="" support.="" 382.="" scope="" of="" services="" eligible="" for="" support="" we="" agree="" with="" and="" adopt="" the="" recommendation="" of="" the="" joint="" board,="" unchallenged="" by="" any="" commenter,="" that="" terminating="" services="" should="" be="" supported="" when="" they="" are="" billed="" to="" the="" eligible="" health="" care="" provider,="" as="" in="" the="" case="" of="" wireless="" telephone="" air="" time="" charges,="" and="" should="" not="" be="" supported="" otherwise.="" we="" adopt="" the="" recommendation="" of="" the="" joint="" board="" that="" we="" not="" support="" health="" care="" providers'="" acquisition="" of="" customer="" premises="" equipment="" such="" as="" computers="" and="" modems.="" 383.="" like="" the="" joint="" board,="" we="" conclude="" that="" only="" telecommunications="" services="" should="" be="" designated="" for="" support="" under="" section="" 254(h)(1)(a).="" section="" 254(e)="" states="" that="" only="" an="" ``eligible="" telecommunications="" carrier''="" under="" section="" 214(e)="" may="" receive="" universal="" service="" support.="" unlike="" section="" 254(h)(1)(b),="" section="" 254(h)(1)(a)="" does="" not="" contain="" an="" exception="" to="" the="" eligibility="" requirements="" of="" section="" 254(e).="" therefore,="" we="" conclude="" that="" only="" eligible="" telecommunications="" carriers,="" as="" defined="" in="" section="" 254(e),="" shall="" be="" eligible="" to="" receive="" support="" for="" providing="" eligible="" services="" to="" health="" care="" providers="" under="" section="" 254(h)(1)(a).="" we="" conclude="" that="" both="" eligible="" telecommunications="" carriers="" and="" telecommunications="" carriers="" that="" do="" not="" qualify="" as="" eligible="" telecommunications="" carriers="" under="" section="" 254(e)="" may="" receive="" support="" for="" services="" provided="" to="" eligible="" health="" care="" providers="" under="" section="" 254(h)(2).="" we="" find="" that="" there="" is="" no="" need="" to="" extend="" eligibility="" beyond="" telecommunications="" carriers="" because="" we="" are="" supporting="" only="" telecommunications="" services.="" 384.="" internet="" access="" the="" joint="" board="" concluded="" that="" the="" record="" contained="" insufficient="" information="" about="" the="" costs="" of="" providing="" internet="" access="" to="" health="" care="" providers="" to="" justify="" a="" recommendation="" that="" such="" access="" be="" supported.="" consistent="" with="" the="" joint="" board="" recommendation,="" the="" common="" carrier="" bureau="" sought="" comment="" on="" the="" need="" for="" supporting="" internet="" access="" for="" rural="" health="" care="" providers.="" as="" discussed="" in="" the="" schools="" and="" libraries="" section,="" sections="" 254(c)(3)="" and="" 254(h)(1)(b)="" of="" the="" act="" authorize="" us="" to="" permit="" schools="" and="" libraries="" to="" receive="" the="" telecommunications="" and="" information="" services="" needed="" to="" use="" the="" internet="" at="" discounted="" rates.="" in="" contrast,="" section="" 254(h)(1)(a)="" explicitly="" limits="" supported="" services="" for="" health="" care="" providers="" to="" telecommunications="" services.="" accordingly,="" data="" links="" and="" associated="" services="" that="" meet="" the="" statutory="" definition="" of="" information="" services,="" because="" of="" their="" inclusion="" of="" protocol="" conversion="" and="" information="" storage,="" are="" not="" eligible="" for="" support="" under="" section="" 254(h)(1)(a),="" as="" they="" are="" under="" section="" 254(h)(2)(a).="" the="" telecommunications="" component="" of="" access="" to="" an="" internet="" service="" provider,="" however,="" provided="" by="" an="" eligible="" telecommunications="" carrier,="" is="" a="" telecommunications="" service="" eligible="" for="" universal="" service="" support="" for="" health="" care="" providers="" under="" section="" 254(h)(1)(a).="" that="" is,="" any="" telecommunications="" service="" within="" the="" prescribed="" bandwidth="" limitations="" used="" to="" obtain="" access="" to="" an="" internet="" service="" provider="" is="" eligible="" for="" support="" under="" section="" 254(h)(1)(a).="" 385.="" infrastructure="" development="" and="" upgrade="" as="" a="" preliminary="" matter,="" we="" note="" that="" several="" commenters="" characterize="" infrastructure="" development="" as="" ``network="" buildout.''="" as="" other="" commenters="" note,="" however,="" providing="" additional="" support="" for="" network="" buildout="" or="" other="" infrastructure="" building="" technologies="" may="" not="" comport="" with="" the="" principle="" of="" competitive="" neutrality.="" we="" recognize="" that="" non-wireline="" technologies="" may="" provide="" the="" most="" cost-effective="" manner="" of="" providing="" services="" to="" areas="" currently="" underserved="" by,="" or="" receiving="" unsatisfactory="" service="" from="" the="" use="" of,="" wireline="" technologies.="" for="" this="" reason="" we="" will="" use="" the="" term="" ``infrastructure="" development''="" instead="" of="" ``network="" buildout''="" and="" will="" explore="" the="" use="" of="" non-wireline="" technologies="" as="" part="" of="" the="" program="" described="" below.="" 386.="" we="" agree="" that="" infrastructure="" development="" is="" not="" a="" ``telecommunications="" service''="" within="" the="" scope="" of="" section="" 254(h)(1)(a).="" we="" conclude="" that="" we="" have="" the="" authority="" to="" establish="" rules="" to="" implement="" a="" program="" of="" universal="" service="" support="" for="" infrastructure="" development="" as="" a="" method="" to="" enhance="" access="" to="" advanced="" telecommunications="" and="" information="" services="" under="" section="" 254(h)(2)(a),="" as="" long="" as="" such="" a="" program="" is="" competitively="" neutral,="" technically="" feasible,="" and="" economically="" reasonable.="" section="" [[page="" 32916]]="" 254(h)(2)(a)="" directs="" the="" commission="" to="" establish="" competitively="" neutral="" rules="" ``to="" enhance,="" to="" the="" extent="" technically="" feasible="" and="" economically="" reasonable,="" access="" to="" advanced="" telecommunications="" and="" information="" services="" for="" all="" *="" *="" *="" health="" care="" providers.''="" extending="" or="" upgrading="" existing="" telecommunications="" infrastructure="" enhances="" access="" to="" the="" advanced="" services="" that="" may="" be="" offered="" over="" that="" infrastructure.="" we="" will="" issue="" a="" public="" notice="" regarding="" whether="" and="" how="" to="" support="" infrastructure="" development="" needed="" to="" enhance="" public="" and="" not-for-profit="" health="" care="" providers'="" access="" to="" advanced="" telecommunications="" and="" information="" services.="" 387.="" periodic="" review="" we="" have="" considered="" carefully="" the="" issue="" of="" how="" soon="" to="" review="" and="" revise="" the="" description="" of="" supported="" services="" and="" adopt="" the="" joint="" board's="" recommendation="" to="" revisit="" the="" list="" of="" supported="" services="" in="" 2001.="" we="" note="" that="" there="" are="" several="" advantages="" to="" the="" joint="" board="" approach.="" the="" joint="" board's="" recommended="" review="" date="" is="" also="" the="" time="" we="" have="" set="" to="" re-convene="" a="" new="" joint="" board="" on="" universal="" service,="" which="" the="" statute="" contemplates="" will="" make="" recommendations="" to="" the="" commission="" on="" modifications="" to="" the="" definition="" of="" supported="" services.="" 388.="" eligibility="" pursuant="" to="" section="" 254(h)(1)(a),="" ``any="" public="" or="" nonprofit="" health="" care="" provider="" that="" serves="" persons="" who="" reside="" in="" rural="" areas="" in="" that="" state''="" is="" eligible="" for="" universal="" service="" support.="" as="" the="" joint="" board="" acknowledged,="" because="" nearly="" all="" health="" care="" providers="" serve="" some="" rural="" residents,="" the="" statute="" could="" be="" read="" to="" include="" nearly="" every="" health="" care="" provider="" in="" the="" country.="" the="" intent="" of="" congress="" to="" limit="" eligibility="" under="" section="" 254(h)(1)(a)="" to="" health="" care="" providers="" located="" in="" rural="" areas="" is="" demonstrated="" by="" the="" statutory="" directive="" that="" calculation="" of="" the="" amount="" of="" support="" due="" a="" carrier="" for="" providing="" services="" to="" a="" health="" care="" provider="" is="" to="" be="" based="" on="" the="" difference="" between="" the="" ``rates="" for="" services="" provided="" to="" health="" care="" providers="" for="" rural="" areas="" and="" the="" rates="" for="" similar="" services="" provided="" to="" other="" customers="" in="" comparable="" rural="" areas.''="" it="" would="" not="" be="" logical="" to="" compare="" the="" rates="" paid="" by="" health="" care="" providers="" with="" those="" paid="" by="" other="" customers="" in="" comparable="" rural="" areas="" if="" the="" health="" care="" provider="" were="" not="" also="" located="" in="" a="" rural="" area.="" thus,="" congress="" contemplated="" that="" an="" eligible="" health="" care="" provider="" would="" otherwise="" be="" paying="" the="" rates="" of="" any="" other="" nonresidential="" customer="" located="" in="" a="" rural="" area.="" 389.="" we="" agree="" with="" the="" joint="" board="" that="" we="" should="" adopt="" ``a="" mechanism="" that="" includes="" the="" largest="" reasonably="" practicable="" number="" of="" health="" care="" providers="" that="" primarily="" serve="" rural="" residents="" and="" that,="" because="" of="" their="" location,="" are="" prevented="" from="" obtaining="" telecommunications="" services="" at="" rates="" available="" to="" urban="" customers.''="" we="" also="" agree,="" therefore,="" that="" eligibility="" to="" obtain="" telecommunications="" services="" at="" urban="" rates="" should="" be="" limited="" to="" health="" care="" providers="" located="" in="" rural="" areas.="" accordingly,="" we="" conclude="" that="" all="" public="" and="" nonprofit="" health="" care="" providers="" that="" are="" located="" in="" rural="" areas="" are="" eligible="" to="" receive="" supported="" services="" pursuant="" to="" the="" mechanisms="" established="" in="" this="" section.="" 390.="" defining="" rural="" areas="" as="" the="" joint="" board="" recognized,="" section="" 254(h)(1)(a)="" requires="" us="" to="" adopt="" a="" definition="" of="" ``rural="" area''="" both="" to="" determine="" the="" location="" of="" health="" care="" providers="" and="" to="" determine="" the="" ``comparable="" rural="" areas''="" needed="" for="" use="" in="" calculating="" the="" credit="" or="" reimbursement="" to="" a="" carrier="" that="" provides="" services="" to="" those="" health="" care="" providers="" at="" reduced="" rates.="" for="" both="" purposes,="" we="" adopt="" the="" recommendation="" of="" the="" joint="" board="" and="" define="" ``rural="" area''="" to="" mean="" a="" nonmetropolitan="" county="" or="" county="" equivalent,="" as="" defined="" by="" omb="" and="" identifiable="" from="" the="" most="" recent="" msa="" list="" released="" by="" omb,="" or="" any="" census="" tract="" or="" block="" numbered="" area,="" or="" contiguous="" group="" of="" such="" tracts="" or="" areas,="" within="" an="" msa-listed="" metropolitan="" county="" identified="" in="" the="" most="" recent="" goldsmith="" modification="" published="" by="" orhp/hhs.="" we="" agree="" that="" counties="" are="" units="" of="" identification="" more="" easily="" used="" and="" administered="" than="" the="" bureau="" of="" the="" census's="" density-based="" definition="" of="" rural="" and="" urban="" areas.="" we="" find="" that="" it="" is="" consistent="" with="" the="" joint="" board's="" recommendation="" and="" congressional="" intent="" to="" adopt="" ``a="" mechanism="" that="" includes="" the="" largest="" reasonably="" practicable="" number="" of="" rural="" health="" care="" providers="" that,="" because="" of="" their="" location,="" are="" prevented="" from="" obtaining="" telecommunications="" services="" at="" rates="" available="" to="" urban="" customers.''="" as="" discussed="" above,="" because="" lists="" of="" msa="" counties="" and="" goldsmith-identified="" census="" tracts="" and="" blocks="" already="" exist,="" updated="" to="" 1996,="" such="" an="" approach="" is="" easily="" administered.="" we="" direct="" the="" administrator="" to="" post="" on="" a="" website="" the="" most="" recent="" versions="" of="" the="" msa="" list,="" the="" goldsmith="" modification="" list,="" and="" appropriate="" instructions="" for="" identifying="" the="" msa="" census="" tract="" or="" block="" numbered="" area="" in="" which="" a="" rural="" health="" care="" provider's="" site="" is="" located.="" in="" addition,="" we="" direct="" the="" administrator="" to="" make="" that="" information="" available="" in="" hard="" copy="" to="" interested="" parties="" upon="" request.="" 391.="" definition="" of="" health="" care="" provider="" we="" adopt="" the="" joint="" board's="" recommendation="" that="" the="" commission="" attempt="" no="" further="" clarification="" of="" the="" term="" ``health="" care="" provider,''="" because="" section="" 254(h)(5)(b)="" adequately="" describes="" those="" entities="" congress="" intended="" to="" be="" eligible="" for="" universal="" service="" support.="" commenters="" present="" no="" convincing="" justification="" for="" expanding="" the="" categories="" of="" eligible="" providers="" beyond="" those="" delineated="" by="" congress,="" which="" are="" unambiguously="" described="" in="" section="" 254(h)(5)(b).="" 392.="" implementing="" support="" mechanisms="" for="" rural="" health="" care="" providers="" we="" adopt="" the="" recommendation="" of="" the="" joint="" board="" and="" conclude="" that="" the="" rural="" rate="" shall="" be="" the="" average="" of="" the="" rates="" actually="" being="" charged="" to="" commercial="" customers,="" other="" than="" rates="" reduced="" by="" universal="" service="" programs,="" for="" identical="" or="" technically="" similar="" services="" provided="" by="" the="" carrier="" providing="" the="" service="" in="" the="" rural="" area="" in="" which="" the="" health="" care="" provider="" is="" located.="" in="" making="" this="" decision,="" we="" agree="" with="" the="" joint="" board's="" conclusion="" that="" the="" approach="" is="" ``[m]indful="" of="" the="" commission's="" obligation="" to="" craft="" a="" mechanism="" that="" is="" `specific,="" predictable="" and="" sufficient.'="" ''="" we="" define="" ``rural="" area''="" to="" mean="" a="" nonmetropolitan="" county="" or="" county="" equivalent,="" as="" defined="" by="" omb="" and="" identifiable="" from="" the="" most="" recent="" msa="" list="" as="" released="" by="" omb,="" or="" any="" census="" tract="" or="" block="" numbered="" area,="" or="" contiguous="" group="" of="" such="" tracts="" or="" areas,="" within="" an="" msa-listed="" metropolitan="" county="" as="" identified="" in="" the="" most="" recent="" goldsmith="" modification="" published="" by="" orhp/hhs.="" we="" conclude="" that="" including="" the="" discounted="" rates="" charged="" rural="" schools="" and="" libraries="" for="" similar="" services="" among="" the="" rates="" averaged="" would="" deny="" the="" telecommunications="" carrier="" full="" compensation="" for="" its="" services="" to="" a="" rural="" health="" care="" provider.="" for="" this="" reason,="" like="" the="" joint="" board,="" we="" conclude="" that="" the="" rates="" averaged="" to="" calculate="" the="" rural="" rate="" should="" exclude="" any="" rates="" reduced="" by="" universal="" service="" programs.="" excluding="" such="" rates="" should="" help="" ensure="" that="" the="" rural="" rate="" more="" accurately="" reflects="" the="" costs="" of="" providing="" similar="" services="" to="" other="" customers="" in="" rural="" areas,="" so="" that="" the="" carrier="" providing="" services="" receives="" ``sufficient''="" support,="" as="" contemplated="" by="" the="" act.="" 393.="" because="" we="" find="" it="" to="" be="" a="" reasonable="" procedure="" that="" minimizes="" administrative="" burdens="" on="" health="" care="" providers="" and="" carriers,="" we="" also="" adopt="" the="" joint="" board's="" recommendation="" on="" how="" to="" determine="" the="" rural="" rate="" when="" [[page="" 32917]]="" the="" providing="" carrier="" is="" providing="" no="" identical="" or="" technically="" similar="" services="" to="" other="" commercial="" customers="" in="" the="" relevant="" rural="" area.="" the="" rural="" rate="" must="" be="" determined="" by="" taking="" the="" average="" of="" the="" tariffed="" and="" other="" publicly="" available="" rates,="" not="" including="" any="" rates="" reduced="" by="" universal="" service="" programs,="" charged="" for="" the="" same="" or="" similar="" services="" in="" that="" rural="" area="" by="" other="" carriers.="" as="" the="" joint="" board="" recommended,="" if="" there="" are="" no="" such="" tariffed="" or="" publicly="" available="" rates="" for="" such="" services="" in="" that="" rural="" area,="" or="" if="" the="" carrier="" considers="" the="" method="" described="" here,="" as="" applied="" to="" the="" carrier,="" to="" be="" unfair="" for="" any="" reason,="" the="" carrier="" may="" submit,="" for="" the="" state="" commission's="" approval,="" regarding="" intrastate="" rates,="" or="" the="" commission's="" approval,="" regarding="" interstate="" rates,="" a="" cost-based="" rate="" for="" the="" provision="" of="" the="" service="" in="" the="" most="" economically="" efficient,="" reasonably="" available="" manner.="" we="" also="" agree="" that="" the="" rate="" determined="" under="" this="" procedure="" should="" be="" supported="" and="" justified="" periodically,="" taking="" into="" account="" anticipated="" and="" actual="" demand="" for="" telecommunications="" services="" by="" all="" customers="" who="" will="" make="" use="" of="" the="" facilities="" over="" which="" services="" are="" being="" provided="" to="" eligible="" health="" care="" providers.="" 394.="" identifying="" the="" applicable="" urban="" rate:="" definition="" we="" adopt="" the="" recommendation="" of="" the="" joint="" board="" with="" modifications="" and="" designate="" as="" the="" rate="" ``reasonably="" comparable="" to="" rates="" charged="" for="" similar="" services="" in="" urban="" areas="" in="" that="" state''="" (the="" ``urban="" rate''),="" a="" rate="" no="" higher="" than="" the="" highest="" tariffed="" or="" publicly="" available="" rate="" actually="" being="" charged="" to="" a="" commercial="" customer="" within="" the="" jurisdictional="" boundary="" of="" the="" nearest="" large="" city="" in="" the="" state,="" calculated="" as="" described="" below.="" accordingly,="" we="" adopt="" the="" joint="" board's="" recommended="" definition="" of="" ``urban="" areas''="" to="" be="" used="" to="" calculate="" the="" rate="" ``reasonably="" comparable="" to="" rates="" charged="" *="" *="" *="" in="" urban="" areas.''="" so="" that="" the="" urban="" rate="" would="" ``reflect="" to="" the="" greatest="" extent="" possible="" reductions="" in="" rates="" based="" on="" large-volume,="" high-density="" factors="" that="" affect="" telecommunications="" rates,''="" the="" joint="" board="" recommended="" that="" the="" commission="" use="" the="" jurisdictional="" boundaries="" of="" the="" nearest="" ``large="" city''="" to="" define="" the="" relevant="" ``urban="" area.''="" consistent="" with="" the="" joint="" board's="" recommendation="" that="" the="" commission="" ``designate="" by="" regulation="" the="" exact="" city="" population="" size="" to="" define="" the="" term="" `large="" city,'="" ''="" and="" for="" the="" reasons="" described="" in="" the="" next="" paragraph,="" we="" define="" the="" phrase="" ``nearest="" large="" city''="" to="" mean="" the="" city="" in="" the="" state="" with="" a="" population="" of="" at="" least="" 50,000,="" nearest="" to="" the="" rural="" health="" care="" provider's="" site,="" measured="" point-to-point,="" from="" the="" health="" care="" provider's="" location="" to="" the="" closest="" point="" on="" that="" city's="" jurisdictional="" boundary.="" we="" agree="" with="" the="" joint="" board's="" conclusion="" that="" in="" this="" context,="" ``="" `comparable'="" is="" most="" reasonably="" defined="" to="" mean="" `no="" higher="" than="" the="" highest'="" rate="" charged="" in="" the="" nearest="" large="" city="" (excluding="" distance-based="" charges).''="" subject="" to="" the="" limitations="" described="" below,="" a="" telecommunications="" carrier="" may="" not="" charge="" a="" rural="" health="" care="" provider="" a="" rate="" higher="" than="" the="" urban="" rate,="" as="" defined="" herein,="" for="" a="" requested="" service.="" 395.="" like="" the="" joint="" board,="" we="" conclude="" that="" telecommunications="" rates="" in="" the="" nearest="" large="" city="" are="" a="" reasonable="" proxy="" for="" the="" ``rates="" *="" *="" *="" in="" urban="" areas="" in="" a="" state.''="" we="" believe="" that="" cities="" with="" populations="" of="" at="" least="" 50,000="" are="" large="" enough="" that="" telecommunications="" rates="" based="" on="" costs="" would="" likely="" reflect="" the="" economies="" of="" scale="" and="" scope="" that="" can="" reduce="" such="" rates="" in="" densely="" populated="" urban="" areas.="" we="" also="" choose="" the="" 50,000="" city="" size="" because="" an="" msa,="" as="" defined="" by="" omb,="" is="" based="" in="" part="" on="" counties="" with="" cities="" having="" a="" population="" of="" 50,000="" or="" more,="" and="" every="" state="" has="" at="" least="" one="" msa="" with="" a="" city="" that="" size.="" if="" we="" chose="" a="" city="" size="" larger="" than="" 50,000,="" we="" would="" be="" unable="" to="" apply="" this="" standard="" to="" states="" with="" no="" cities="" of="" that="" size.="" in="" addition,="" because="" the="" telecommunications="" services="" a="" rural="" health="" care="" provider="" uses="" in="" connection="" with="" its="" provision="" of="" the="" health="" care="" services="" covered="" by="" section="" 254(h)="" are="" likely="" to="" involve="" transmission="" facilities="" linking="" that="" health="" care="" provider's="" premises="" to="" a="" point="" in="" that="" nearest="" large="" city,="" using="" that="" location="" should="" provide="" more="" accurate="" and="" more="" realistic="" comparable="" rates="" for="" specific="" services="" than="" using="" rates,="" or="" average="" rates,="" from="" more="" distant="" urban="" areas.="" we="" agree="" with="" the="" joint="" board="" that="" using="" the="" highest="" tariffed="" or="" publicly="" available="" rate="" actually="" being="" charged="" to="" customers="" in="" the="" nearest="" city="" of="" 50,000="" in="" the="" state="" avoids="" any="" unfairness="" that="" would="" arise="" from="" using="" average="" rates.="" the="" joint="" board="" stated="" that="" use="" of="" an="" average="" rate="" ``would="" entitle="" some="" rural="" customers="" to="" rates="" below="" those="" paid="" by="" some="" urban="" customers,="" creating="" fairness="" problems="" for="" those="" urban="" customers="" and="" arguably="" going="" farther="" with="" this="" mechanism="" than="" congress="" intended.''="" the="" use="" of="" average="" rates="" could="" result="" in="" pricing="" telecommunications="" services="" to="" rural="" health="" care="" providers="" at="" rates="" lower="" than="" those="" paid="" by="" many="" nearby="" urban="" customers.="" 396.="" rates="" and="" distance-based="" charges="" we="" agree="" with="" the="" advisory="" committee="" that="" support="" for="" some="" distance-based="" charges="" is="" necessary="" to="" ensure="" that="" rates="" charged="" to="" rural="" health="" care="" providers="" are="" ``reasonably="" comparable''="" to="" urban="" rates.="" we="" define="" distance-based="" charges="" as="" charges="" based="" on="" a="" unit="" of="" distance,="" such="" as="" mileage-based="" charges.="" we="" note="" that="" the="" term="" ``rate''="" is="" not="" defined="" in="" section="" 254(h)(1)(a)="" or="" elsewhere="" in="" the="" 1996="" act.="" although="" several="" incumbent="" lecs="" and="" usta="" contend="" that="" the="" term="" ``rate''="" refers="" to="" the="" cost="" of="" each="" element="" or="" sub-element="" of="" a="" telecommunications="" service,="" we="" conclude="" that,="" as="" used="" in="" section="" 254(h)(1)(a),="" the="" term="" ``rate''="" refers="" to="" the="" entire="" cost="" or="" charge="" of="" a="" service,="" end-to-end,="" to="" the="" customer.="" 397.="" such="" an="" interpretation="" is="" consistent="" with="" the="" language="" and="" purpose="" of="" section="" 254(h)(1)(a).="" as="" discussed="" above,="" section="" 254(h)(1)(a)="" refers="" to="" ``rates="" for="" services="" provided="" to="" health="" care="" providers''="" and="" ``rates="" for="" similar="" services="" provided="" to="" other="" customers,''="" not="" rates="" for="" particular="" facilities="" or="" elements="" of="" a="" service.="" as="" the="" record="" indicates,="" many,="" if="" not="" most,="" base="" rates="" for="" telecommunications="" services="" are="" averaged="" across="" a="" state="" or="" study="" area.="" it="" is="" often="" distance-based="" charges,="" not="" differences="" between="" base="" rates="" for="" service="" elements,="" that="" create="" great="" disparities="" in="" the="" overall="" cost="" of="" telecommunications="" services="" between="" urban="" and="" rural="" areas.="" indeed,="" distance-based="" charges="" are="" often="" a="" serious="" impediment="" to="" rural="" health="" care="" providers'="" use="" of="" telemedicine.="" if,="" as="" several="" lecs="" contend,="" a="" rural="" rate="" is="" ``reasonably="" comparable''="" to="" an="" urban="" rate="" provided="" that="" per-mile="" charges="" are="" the="" same="" for="" rural="" and="" urban="" areas,="" section="" 254(h)(1)(a)="" could="" do="" little="" to="" reduce="" the="" disparity="" between="" rural="" and="" urban="" rates.="" given="" that="" congress="" emphasized="" the="" importance="" of="" making="" telecommunications="" services="" affordable="" for="" rural="" health="" care="" providers,="" it="" seems="" unlikely="" that="" congress="" intended="" to="" adopt="" such="" a="" restrictive="" definition="" of="" ``rate.''="" accordingly,="" we="" will="" support="" distance-based="" charges="" incurred="" by="" rural="" health="" care="" providers,="" consistent="" with="" the="" limitations="" described="" herein.="" 398.="" support="" mechanisms="" we="" conclude="" that="" the="" universal="" service="" support="" mechanisms="" shall="" support="" eligible="" telecommunications="" services="" for="" a="" distance="" not="" to="" exceed="" the="" distance="" between="" the="" health="" care="" provider="" and="" the="" point="" on="" the="" jurisdictional="" boundary="" of="" the="" city="" used="" to="" calculate="" the="" urban="" rate="" that="" is="" most="" distant="" from="" the="" health="" care="" provider's="" location.="" because="" rural="" health="" care="" providers="" may="" select="" any="" commercially="" available="" telecommunications="" service="" with="" bandwidths="" up="" to="" and="" including="" [[page="" 32918]]="" 1.544="" mbps,="" such="" an="" approach="" is="" competitively="" neutral.="" moreover,="" this="" plan="" should="" suffice="" to="" connect="" a="" rural="" health="" care="" provider="" with="" a="" health="" care="" provider="" in="" the="" nearest="" large="" city="" in="" the="" state="" or="" an="" internet="" service="" provider.="" we="" agree="" with="" those="" ilecs="" that="" contend="" that="" establishing="" a="" maximum="" distance="" for="" which="" a="" rural="" health="" care="" provider="" can="" receive="" support="" should="" ``protect="" against="" an="" otherwise="" natural="" tendency="" for="" a="" subsidized="" rural="" provider="" to="" request="" telemedicine="" connections="" to="" far="" flung="" areas="" in="" search="" of="" the="" real="" or="" imagined="" `expert'="" in="" the="" field.''="" moreover,="" we="" agree="" with="" the="" group="" of="" ilecs="" that="" limiting="" support="" to="" connections="" to="" the="" nearest="" large="" city="" in="" the="" state="" is="" consistent="" with="" congress's="" intent="" to="" make="" rural="" and="" urban="" rates="" comparable,="" rather="" than="" making="" rural="" health="" care="" providers="" better="" off="" than="" their="" urban="" counterparts.="" 399.="" as="" the="" group="" of="" ilecs="" indicate,="" urban="" health="" care="" providers="" are="" not="" exempted="" from="" distance="" charges="" in="" connection="" with="" the="" purchase="" of="" telecommunications="" services.="" to="" the="" extent="" that="" they="" connect="" with="" other="" health="" care="" providers="" and="" internet="" service="" providers="" within="" that="" city,="" however,="" these="" urban="" health="" care="" providers="" would="" appear="" to="" be="" less="" likely="" than="" their="" rural="" counterparts="" to="" incur="" distance-based="" charges="" over="" a="" distance="" greater="" than="" the="" longest="" diameter="" of="" the="" city="" in="" which="" they="" are="" located.="" accordingly,="" we="" agree="" with="" the="" group="" of="" ilecs="" that="" blanket="" subsidization="" of="" distance-based="" charges="" for="" rural="" health="" care="" providers="" could="" result="" in="" inequalities="" between="" rural="" and="" urban="" health="" care="" providers.="" therefore,="" we="" adopt="" the="" ilecs'="" proposal="" to="" adopt="" a="" standard="" urban="" distance="" on="" a="" state-wide="" basis="" that="" takes="" into="" account="" the="" potential="" distance="" charges="" paid="" by="" urban="" health="" care="" providers.="" to="" calculate="" that="" distance,="" however,="" we="" adopt="" a="" city="" size="" consistent="" with="" our="" definition="" of="" ``nearest="" large="" city.''="" accordingly,="" we="" conclude="" that="" the="" longest="" diameters="" of="" all="" cities="" with="" a="" population="" of="" 50,000="" or="" more="" within="" a="" state="" should="" be="" averaged="" to="" arrive="" at="" that="" state's="" standard="" urban="" distance.="" we="" conclude="" that="" using="" a="" state-wide="" distance="" figure="" should="" minimize="" the="" administrative="" burden="" on="" the="" administrator="" and="" carriers="" while="" establishing="" a="" reasonable="" estimation="" of="" the="" distance="" charges="" that="" an="" urban="" health="" care="" provider="" might="" incur.="" 400.="" consistent="" with="" that="" approach,="" if="" a="" rural="" health="" care="" provider="" requests="" a="" service="" to="" be="" provided="" over="" a="" distance="" that="" is="" less="" than="" or="" equal="" to="" the="" standard="" urban="" distance="" for="" the="" state="" in="" which="" it="" is="" located,="" the="" urban="" rate="" for="" that="" service="" shall="" be="" no="" higher="" than="" the="" highest="" tariffed="" or="" publicly="" available="" rate="" charged="" to="" a="" commercial="" customer="" for="" a="" similar="" service="" provided="" over="" the="" same="" distance="" in="" the="" nearest="" large="" city="" in="" the="" state,="" calculated="" as="" if="" the="" service="" were="" provided="" between="" two="" points="" within="" the="" city.="" for="" purposes="" of="" calculating="" the="" appropriate="" amount="" of="" universal="" service="" support,="" this="" urban="" rate="" will="" then="" be="" compared="" with="" the="" rural="" rate="" for="" a="" similar="" service="" over="" the="" same="" distance.="" if="" a="" rural="" health="" care="" provider="" requests="" a="" service="" to="" be="" provided="" over="" a="" distance="" that="" is="" greater="" than="" the="" standard="" urban="" distance="" for="" the="" state="" in="" which="" it="" is="" located,="" the="" urban="" rate="" shall="" be="" no="" higher="" than="" the="" highest="" tariffed="" or="" publicly="" available="" rate="" charged="" to="" a="" commercial="" customer="" for="" a="" similar="" service="" provided="" over="" the="" standard="" urban="" distance="" in="" the="" nearest="" large="" city="" in="" the="" state,="" calculated="" as="" if="" the="" service="" were="" provided="" between="" two="" points="" within="" the="" city.="" this="" urban="" rate="" will="" then="" be="" compared="" to="" the="" rural="" rate="" for="" the="" same="" or="" similar="" telecommunciations="" service="" provided="" over="" a="" distance="" not="" to="" exceed="" the="" distance="" between="" the="" health="" care="" provider="" and="" the="" point="" on="" the="" jurisdictional="" boundary="" of="" the="" city="" used="" to="" calculate="" the="" urban="" rate="" that="" is="" most="" distant="" from="" the="" health="" care="" provider's="" location.="" 401.="" interlata="" charges="" we="" decline="" to="" provide="" additional="" mechanisms="" to="" support="" what="" commenters="" and="" the="" joint="" board="" referred="" to="" as="" lata-crossing="" charges.="" to="" the="" extent="" that="" this="" term="" refers="" to="" rates="" for="" interexchange="" services,="" we="" note="" that,="" under="" the="" provisions="" of="" section="" 254(g),="" such="" rates="" charged="" to="" health="" care="" providers="" in="" rural="" areas="" are="" to="" be="" no="" higher="" than="" the="" rates="" charged="" to="" the="" ixc's="" subscribers="" in="" urban="" areas.="" to="" the="" extent="" that="" the="" term="" lata-crossing="" charges="" refers="" to="" access="" charges="" for="" a="" service="" provided="" to="" a="" rural="" customer,="" the="" mechanisms="" that="" we="" adopt="" will="" support="" such="" charges="" by="" supporting="" the="" difference="" between="" the="" rural="" rate="" and="" the="" urban="" rate.="" we="" will="" re-examine="" this="" issue="" no="" later="" than="" the="" next="" review="" of="" the="" services="" eligible="" for="" universal="" service="" support="" in="" the="" year="" 2001.="" 402.="" limiting="" supported="" services="" the="" act="" directs="" that="" universal="" service="" support="" mechanisms="" should="" be="" specific,="" predictable,="" and="" sufficient.="" in="" order="" to="" establish="" such="" mechanisms="" for="" a="" new="" and="" untried="" program,="" we="" conclude="" that="" we="" must="" limit="" the="" services="" that="" a="" rural="" health="" care="" provider="" may="" receive.="" we="" conclude="" that="" bandwidth="" transmission="" speeds="" above="" 1.544="" mbps="" are="" not="" necessary="" for="" the="" provision="" of="" health="" care="" services="" at="" this="" time.="" accordingly,="" we="" conclude="" that,="" upon="" submitting="" a="" bona="" fide="" request="" to="" a="" telecommunications="" carrier,="" a="" rural="" health="" care="" provider="" is="" eligible="" to="" receive,="" for="" each="" separate="" site="" or="" location,="" the="" most="" cost-effective,="" commercially-available="" telecommunications="" service="" with="" a="" bandwidth="" capacity="" of="" 1.544="" mbps="" at="" a="" rate="" no="" higher="" than="" the="" urban="" rate,="" as="" defined="" herein,="" provided="" over="" a="" distance="" not="" to="" exceed="" the="" distance="" between="" the="" health="" care="" provider="" and="" the="" point="" on="" the="" jurisdictional="" boundary="" of="" the="" city="" used="" to="" calculate="" the="" urban="" rate="" that="" is="" the="" most="" distant="" from="" the="" health="" care="" provider's="" location="" (the="" allowable="" distance).="" the="" most="" cost="" effective="" service="" is="" the="" service="" available="" at="" the="" lowest="" cost="" after="" consideration="" of="" the="" features,="" quality="" of="" transmission,="" reliability,="" and="" other="" factors="" the="" health="" care="" provider="" deems="" necessary="" for="" the="" service="" adequately="" to="" transmit="" the="" health="" care="" services="" the="" provider="" requires.="" 403.="" we="" conclude="" that="" allowing="" a="" rural="" health="" care="" provider="" to="" purchase="" a="" service="" with="" a="" bandwidth="" capacity="" of="" 1.544="" mbps,="" at="" distances="" up="" to="" the="" limit="" described="" above,="" should="" enable="" such="" a="" provider="" to="" establish="" a="" connection="" with="" a="" health="" care="" provider="" located="" in="" the="" nearest="" city="" or="" with="" an="" internet="" service="" provider.="" the="" rural="" health="" care="" provider="" may="" request="" any="" other="" service="" or="" combination="" of="" services="" with="" transmission="" speeds="" slower="" than="" 1.544="" mbps,="" transmitted="" over="" the="" same="" or="" shorter="" distance,="" so="" long="" as="" the="" total="" annual="" support="" amount="" for="" all="" such="" services="" to="" that="" health="" care="" provider="" combined,="" calculated="" as="" provided="" herein,="" does="" not="" exceed="" what="" the="" support="" amount="" would="" have="" been="" for="" the="" most="" cost-effective="" service="" with="" a="" bandwidth="" capacity="" of="" 1.544="" mbps="" at="" the="" allowable="" distance,="" calculated="" as="" discussed="" above.="" use="" of="" transmission="" speeds="" slower="" than="" 1.544="" mbps="" may="" be="" required="" where="" no="" 1.544="" mbps="" service="" is="" commercially="" available="" or="" may="" be="" the="" preference="" of="" a="" rural="" health="" care="" provider="" that="" desires="" more="" than="" one="" supported="" service.="" for="" example,="" a="" rural="" health="" care="" provider="" could="" request="" one="" or="" more="" isdn="" connections="" to="" an="" urban="" health="" care="" provider="" in="" the="" nearest="" large="" city,="" so="" long="" as="" the="" total="" amount="" of="" support="" for="" all="" the="" requested="" services="" does="" not="" exceed="" the="" amount="" that="" would="" have="" been="" necessary="" to="" support="" the="" most="" cost-effective="" service="" with="" a="" bandwidth="" capacity="" of="" 1.544="" mbps="" connecting="" the="" rural="" health="" care="" provider="" to="" the="" farthest="" point="" on="" the="" jurisdictional="" boundary="" of="" the="" nearest="" large="" city.="" if="" the="" eligible="" health="" care="" provider="" is="" located="" in="" a="" rural="" area="" in="" which="" a="" service="" with="" a="" [[page="" 32919]]="" bandwidth="" capacity="" of="" 1.544="" mbps="" is="" not="" commercially="" available="" and="" the="" rate="" for="" such="" a="" service="" is="" therefore="" unavailable,="" the="" maximum="" amount="" of="" support="" available="" shall="" be="" the="" difference,="" if="" any,="" between="" the="" urban="" rate="" and="" the="" rural="" rate,="" as="" defined="" herein,="" for="" the="" most="" cost-effective="" service="" available="" using="" a="" bandwidth="" of="" 1.544="" mbps="" in="" another="" rural="" area="" of="" the="" state.="" 404.="" competitive="" bidding="" we="" conclude="" that="" eligible="" health="" care="" providers="" shall="" be="" required="" to="" seek="" competitive="" bids="" for="" all="" services="" eligible="" for="" support="" pursuant="" to="" section="" 254(h)="" by="" submitting="" their="" bona="" fide="" requests="" for="" services="" to="" the="" administrator.="" such="" requests="" shall="" include="" a="" statement,="" signed="" by="" an="" officer="" of="" the="" health="" care="" provider="" authorized="" to="" order="" telecommunications="" services,="" certifying="" under="" oath="" to="" the="" bona="" fide="" request="" requirements="" discussed="" below.="" the="" administrator="" shall="" post="" the="" descriptions="" of="" requested="" services="" on="" a="" website="" so="" that="" potential="" providers="" can="" see="" and="" respond="" to="" them.="" as="" with="" schools="" and="" libraries,="" the="" request="" may="" be="" as="" formal="" and="" detailed="" as="" the="" health="" care="" provider="" desires="" or="" as="" required="" by="" any="" applicable="" federal="" or="" state="" laws="" or="" other="" requirements.="" the="" request="" shall="" contain="" information="" sufficient="" to="" enable="" the="" carrier="" to="" identify="" and="" contact="" the="" requester="" and="" to="" know="" what="" services="" are="" being="" requested.="" the="" posting="" of="" a="" rural="" health="" care="" provider's="" description="" of="" services="" will="" satisfy="" the="" competitive="" bidding="" requirement="" for="" purposes="" of="" our="" universal="" service="" rules.="" we="" emphasize,="" however,="" that="" the="" submission="" of="" a="" request="" for="" posting="" under="" our="" rules="" is="" not="" a="" substitute="" for="" any="" additional="" and="" applicable="" state,="" local,="" or="" other="" procurement="" requirements.="" 405.="" after="" selecting="" a="" telecommunications="" carrier,="" the="" rural="" health="" care="" provider="" shall="" certify="" to="" the="" administrator="" that="" the="" service="" chosen="" is,="" to="" the="" best="" of="" the="" health="" care="" provider's="" knowledge,="" the="" most="" cost-effective="" service="" available.="" moreover,="" the="" health="" care="" provider="" shall="" submit="" to="" the="" administrator="" copies="" of="" the="" other="" responses="" or="" bids="" received="" in="" response="" to="" its="" request="" for="" services.="" as="" with="" schools="" and="" libraries,="" we="" are="" not="" requiring="" health="" care="" providers="" to="" select="" the="" lowest="" bids="" offered,="" but="" rather="" will="" permit="" them="" to="" take="" quality="" of="" service="" into="" account="" and="" to="" choose="" the="" offering="" or="" offerings="" that="" they="" find="" most="" cost-effective,="" where="" this="" is="" consistent="" with="" other="" procurement="" rules="" under="" which="" they="" are="" obligated="" to="" operate.="" after="" being="" selected,="" the="" carrier="" shall="" certify="" to="" the="" administrator="" the="" urban="" rate,="" the="" rural="" rate,="" and="" the="" difference="" sought="" as="" an="" offset="" against="" the="" carrier's="" universal="" service="" obligation.="" 406.="" insular="" areas="" and="" alaska:="" statutory="" authority="" we="" note="" that="" the="" provisions="" of="" section="" 254(h)(1)(a)="" apply="" to="" insular="" areas,="" because="" the="" act="" defines="" ``state''="" to="" include="" all="" united="" states="" ``territories="" and="" possessions.''="" we="" conclude,="" moreover,="" that="" section="" 254(h)(2)(a)="" authorizes="" our="" adoption="" of="" special="" mechanisms="" by="" which="" to="" calculate="" support="" for="" these="" territories.="" section="" 254(h)(2)(a)="" directs="" us,="" in="" part,="" to="" establish="" competitively="" neutral="" rules="" ``to="" enhance,="" to="" the="" extent="" technically="" feasible="" and="" economically="" reasonable,="" access="" to="" advanced="" telecommunications="" *="" *="" *="" services="" for="" all="" public="" and="" nonprofit="" *="" *="" *="" health="" care="" providers.''="" 407.="" insular="" areas="" although="" the="" common="" carrier="" bureau="" sought="" comment="" on="" whether="" insular="" areas="" experience="" a="" disparity="" in="" telecommunications="" rates="" between="" urbanized="" and="" non-urbanized="" areas,="" the="" record="" contains="" little="" information="" on="" this="" point.="" the="" record="" does="" indicate,="" however,="" that="" the="" unique="" geographic="" and="" demographic="" circumstances="" of="" cnmi="" and="" guam--="" including="" their="" uniformly="" rural="" character,="" their="" lack="" of="" a="" city="" with="" a="" population="" as="" large="" as="" 50,000,="" or="" indeed="" any="" real="" urbanized="" population="" centers,="" their="" lack="" of="" counties="" or="" county="" equivalents,="" and="" the="" relatively="" small="" size="" and="" low="" density="" of="" their="" populations--render="" the="" mechanisms="" we="" adopt="" under="" section="" 254(h)(1)(a)="" ill-suited="" to="" these="" territories="" without="" modifications.="" 408.="" we="" note="" that="" the="" record="" contains="" no="" information="" about="" the="" status="" and="" availability="" of="" health="" care="" services="" and="" telemedicine="" in="" american="" samoa,="" the="" u.s.="" virgin="" islands,="" or="" any="" other="" insular="" areas="" except="" for="" cnmi,="" guam,="" and="" puerto="" rico.="" given="" the="" lack="" of="" comprehensive="" information="" in="" the="" record="" regarding="" the="" telecommunications="" needs="" of="" insular="" areas="" and="" the="" costs="" of="" supporting="" such="" services,="" we="" will="" issue="" a="" public="" notice="" regarding="" these="" issues.="" we="" will="" seek="" additional="" proposals="" for="" support="" mechanisms="" by="" which="" we="" could="" ensure="" that="" health="" care="" providers="" located="" in="" these="" territories="" will="" have="" access="" to="" the="" telecommunications="" services="" available="" in="" urban="" areas="" in="" the="" country,="" at="" affordable="" rates,="" as="" congress="" intended.="" 409.="" in="" this="" order,="" we="" designate="" urban="" and="" rural="" areas="" in="" these="" territories="" by="" which="" to="" set="" the="" ``urban="" rate''="" and="" calculate="" the="" amount="" of="" support="" under="" section="" 254(h)(1)(a)="" consistent="" with="" our="" general="" approach="" to="" that="" section.="" based="" on="" their="" status="" as="" the="" largest="" population="" centers="" in="" the="" territories,="" we="" designate="" the="" following="" areas="" as="" urban="" areas="" for="" purposes="" of="" setting="" the="" urban="" rate:="" for="" american="" samoa,="" the="" island="" of="" tutuila;="" for="" cnmi,="" the="" island="" of="" saipan;="" for="" guam,="" the="" town="" of="" agana;="" and="" for="" the="" u.s.="" virgin="" islands,="" the="" town="" of="" charlotte="" amalie.="" for="" purposes="" of="" calculating="" the="" ``rural="" rate,''="" all="" other="" areas="" in="" each="" of="" the="" above-listed="" territories="" are="" designated="" as="" rural="" areas.="" 410.="" the="" ``urban="" rate''="" shall="" be="" no="" higher="" than="" the="" highest="" tariffed="" or="" publicly="" available="" rate="" charged="" for="" the="" requested="" service="" in="" each="" territory's="" designated="" urban="" area.="" the="" ``rural="" rate,''="" used="" to="" calculate="" the="" support="" amount,="" shall="" be="" the="" average="" of="" tariffed="" and="" other="" publicly="" available="" rates,="" not="" including="" rates="" reduced="" by="" universal="" service="" mechanisms,="" charged="" for="" the="" same="" or="" similar="" services="" in="" the="" rural="" areas="" of="" the="" territory.="" if="" no="" such="" services="" are="" available="" in="" the="" rural="" areas="" of="" the="" territory,="" or,="" at="" the="" carrier's="" option,="" the="" carrier="" may="" submit="" for="" the="" territorial="" commission's="" approval,="" a="" cost-="" based="" rate="" for="" the="" provision="" of="" the="" service="" in="" the="" most="" economically="" efficient,="" reasonably="" available="" manner.="" in="" addition="" to="" the="" support="" outlined="" here,="" we="" will="" provide="" additional="" support="" for="" limited="" toll-free="" access="" to="" an="" internet="" service="" provider="" pursuant="" to="" section="" 254(h)(2)(a),="" as="" discussed="" below,="" which="" applies="" equally="" to="" health="" care="" providers="" in="" insular="" areas.="" 411.="" puerto="" rico="" we="" find="" it="" unnecessary="" to="" adopt="" measures="" beyond="" those="" adopted="" for="" rural="" health="" care="" providers="" in="" other="" areas="" to="" ensure="" that="" rural="" health="" care="" providers="" in="" puerto="" rico="" have="" access="" to="" affordable="" telecommunications="" services="" that="" are="" necessary="" to="" provide="" health="" care="" services.="" the="" record="" shows="" that="" puerto="" rico="" has="" a="" population="" of="" 3.74="" million="" people="" and="" well-defined="" metropolitan="" and="" nonmetropolitan="" areas,="" including="" 28="" municipalities="" listed="" as="" msas.="" these="" facts="" suggest="" that="" the="" universal="" service="" support="" mechanisms="" for="" rural="" health="" care="" providers="" that="" we="" have="" adopted="" under="" section="" 254(h)(1)(a)="" can="" be="" applied="" within="" the="" territorial="" limits="" of="" puerto="" rico.="" 412.="" alaska="" the="" record="" developed="" in="" response="" to="" the="" recommended="" decision="" suggests="" that="" much="" of="" the="" difficulty="" of="" implementing="" telemedicine="" programs="" in="" the="" vast="" frontier="" areas="" in="" alaska="" arises="" from="" the="" lack="" of="" basic="" telecommunications="" network="" infrastructure="" necessary="" to="" support="" telemedicine.="" alaska="" asserts="" that="" [[page="" 32920]]="" because="" of="" the="" state's="" vast="" size,="" rugged="" terrain,="" harsh="" weather,="" and="" sparse="" population,="" ``the="" major="" obstacle="" to="" providing="" telemedicine="" services="" in="" alaska="" is="" that="" the="" public="" switched="" network="" is="" not="" currently="" capable="" of="" providing="" services="" in="" rural="" locations="" where="" there="" is="" significant="" need.''="" the="" alaska="" puc="" states="" that="" alaska="" is="" ``heavily="" dependent="" on="" satellite="" communications="" to="" provide="" links="" between="" the="" majority="" of="" remote,="" rural="" health="" care="" providers="" and="" the="" few="" regional="" hospitals,''="" and="" affordable="" satellite="" connectivity="" is="" often="" limited="" to="" bandwidth="" of="" 9.6="" kbps.="" the="" need="" to="" ``hop''="" satellite="" signals="" through="" multiple="" earth="" stations="" and="" the="" use="" of="" antiquated="" analog="" earth="" stations="" reduce="" transmission="" speed="" and="" reliability="" even="" further="" and="" often="" result="" in="" the="" inability="" to="" use="" fax="" machines="" or="" computer="" modems.="" 413.="" to="" the="" extent="" that="" rural="" health="" care="" providers="" in="" alaska="" experience="" distance-sensitive="" telecommunications="" charges="" greater="" than="" those="" faced="" in="" urban="" areas="" in="" that="" state,="" the="" mechanisms="" adopted="" in="" this="" section="" should="" afford="" some="" relief="" to="" those="" health="" care="" providers="" by="" reducing="" or="" eliminating="" such="" disparities.="" as="" discussed="" above,="" however,="" we="" decline="" at="" this="" time="" to="" adopt="" support="" mechanisms="" for="" infrastructure="" development,="" including="" infrastructure="" development="" in="" alaska,="" but="" encourage="" parties="" interested="" in="" obtaining="" such="" support="" for="" alaska="" to="" present="" comments="" in="" response="" to="" our="" public="" notice="" on="" this="" issue.="" 414.="" capping="" and="" administering="" the="" mechanisms="" we="" will="" use="" a="" unified="" mechanism="" for="" eligible="" health="" care="" providers="" and="" schools="" and="" libraries="" with="" separate="" accounting="" and="" allocation="" systems="" for="" the="" funds="" collected="" for="" the="" two="" groups.="" we="" agree="" with="" the="" joint="" board="" and="" the="" parties="" contending="" that="" separate="" funding="" mechanisms="" would="" be="" expensive="" and="" unnecessary.="" we="" further="" agree="" that="" separate="" accounting="" and="" allocation="" systems="" are="" necessary="" because="" the="" 1996="" act="" establishes="" different="" requirements="" for="" calculating="" disbursements="" to="" schools="" and="" libraries="" and="" to="" health="" care="" providers.="" moreover,="" we="" find="" that="" establishing="" two="" separate="" systems="" (within="" the="" single="" fund)="" will="" facilitate="" monitoring="" for="" fraud,="" waste,="" and="" abuse="" and,="" if="" necessary,="" amending="" the="" systems="" governing="" support="" to="" one="" group="" without="" necessarily="" altering="" the="" systems="" for="" the="" other="" group.="" 415.="" funding="" cap="" although="" the="" joint="" board="" did="" not="" propose="" a="" funding="" cap="" on="" the="" amount="" of="" universal="" service="" support="" for="" health="" care="" providers,="" we="" agree="" with="" those="" commenters="" who="" advocate="" a="" total="" cap="" to="" control="" the="" size="" of="" the="" support="" mechanisms.="" we="" note="" that="" there="" is="" no="" existing="" program="" to="" help="" us="" estimate="" the="" cost="" of="" funding="" the="" support="" program="" for="" health="" care="" providers="" that="" we="" adopt="" under="" sections="" 254(h)(1)(a)="" and="" 254(h)(2)(a),="" unlike="" our="" programs="" for="" high-cost="" and="" low-income="" assistance="" for="" which="" we="" have="" historical="" data.="" moreover,="" it="" is="" difficult="" to="" estimate="" costs="" given="" that="" technologies="" are="" developing="" rapidly="" and="" demand="" is="" inherently="" difficult="" to="" predict.="" therefore,="" to="" fulfill="" our="" statutory="" obligation="" to="" create="" specific,="" predictable,="" and="" sufficient="" universal="" service="" support="" mechanisms,="" we="" establish="" an="" annual="" cap="" of="" $400="" million="" on="" the="" amount="" of="" funds="" available="" to="" health="" care="" providers.="" collection="" and="" distribution="" of="" the="" funding="" will="" begin="" in="" january="" 1998,="" consistent="" with="" other="" universal="" service="" support="" mechanisms="" implemented="" pursuant="" to="" this="" order.="" 416.="" timing="" of="" funding="" requests="" we="" adopt="" an="" annual="" cap="" of="" $400="" million="" for="" universal="" service="" support="" for="" health="" care="" providers="" pursuant="" to="" sections="" 254(h)(1)(a)="" and="" 254(h)(2)="" of="" the="" act.="" support="" will="" be="" committed="" on="" a="" first-come-first-="" served="" basis.="" consistent="" with="" other="" universal="" service="" support="" mechanisms="" implemented="" pursuant="" to="" this="" order,="" the="" funding="" year="" for="" health="" care="" providers="" will="" begin="" on="" january="" 1,="" with="" requests="" for="" support="" accepted="" beginning="" on="" the="" first="" of="" july="" prior="" to="" each="" calendar="" year.="" for="" the="" first="" year="" only,="" requests="" for="" support="" will="" be="" accepted="" as="" soon="" as="" the="" health="" care="" website="" is="" open="" and="" the="" applications="" are="" available.="" health="" care="" providers="" will="" be="" permitted="" to="" submit="" funding="" requests="" once="" they="" have="" made="" agreements="" for="" specific="" eligible="" services,="" and="" the="" administrator="" will="" commit="" funds="" based="" on="" those="" agreements="" until="" the="" total="" payments="" committed="" during="" a="" funding="" year="" reach="" the="" amount="" of="" the="" cap.="" 417.="" the="" administrator="" shall="" measure="" commitments="" against="" the="" $400="" million="" limit="" based="" on="" the="" contractually-specified="" expenditures="" for="" recurring="" flat-rate="" charges="" for="" telecommunications="" services="" that="" a="" health="" care="" provider="" has="" agreed="" to="" pay="" and="" the="" commitment="" of="" an="" estimated="" variable="" usage="" charge,="" based="" on="" documentation="" from="" the="" health="" care="" provider="" of="" the="" estimated="" expenditures="" that="" it="" has="" budgeted="" to="" pay="" for="" its="" share="" of="" usage="" charges.="" health="" care="" providers="" must="" file="" their="" contracts="" with="" the="" administrator="" either="" electronically="" or="" by="" paper="" copy.="" moreover,="" health="" care="" providers="" must="" file="" new="" funding="" requests="" for="" each="" funding="" year.="" such="" requests="" will="" be="" placed="" in="" the="" funding="" queue="" based="" on="" the="" date="" and="" time="" they="" are="" received="" by="" the="" administrator.="" 418.="" adjustments="" to="" cap="" we="" do="" not="" anticipate="" that="" the="" cost="" of="" funding="" eligible="" services="" will="" exceed="" the="" cap,="" given="" the="" limits="" on="" the="" services="" that="" any="" one="" health="" care="" provider="" may="" request,="" and="" we="" do="" not="" want="" to="" create="" incentives="" for="" health="" care="" providers="" to="" file="" requests="" for="" services="" prematurely="" to="" ensure="" funding.="" if="" the="" amount="" of="" support="" needed="" for="" requested="" services="" exceeds="" the="" funding="" cap,="" this="" will="" indicate="" that="" our="" estimates="" were="" less="" accurate="" than="" we="" expect="" and="" will="" suggest="" that="" we="" must="" adjust="" the="" cap.="" we="" will="" consider="" the="" need="" to="" revise="" the="" cap="" in="" our="" three-year="" review="" proceeding="" and="" sooner="" if="" we="" find="" it="" necessary="" to="" ensure="" the="" sufficiency="" of="" the="" fund="" or="" to="" respond="" to="" requests="" from="" interested="" parties="" for="" expedited="" review.="" 419.="" advance="" payment="" for="" multi-year="" contracts="" we="" conclude="" that="" providing="" funding="" in="" advance="" for="" multiple="" years="" of="" recurring="" charges="" could="" enable="" an="" individual="" health="" care="" provider="" to="" guarantee="" that="" its="" full="" needs="" over="" a="" multi-year="" period="" were="" met,="" even="" if="" other="" health="" care="" providers="" were="" unable="" to="" obtain="" support="" due="" to="" insufficient="" funds.="" moreover,="" we="" are="" also="" concerned="" that="" funds="" would="" be="" wasted="" if="" a="" prepaid="" service="" provider's="" business="" failed="" before="" it="" had="" provided="" all="" of="" the="" prepaid="" services.="" at="" the="" same="" time,="" we="" recognize="" that="" health="" care="" providers="" often="" will="" be="" able="" to="" negotiate="" better="" rates="" for="" pre-paid/multi-year="" contracts,="" reducing="" the="" costs="" that="" both="" they="" and="" the="" universal="" service="" support="" mechanisms="" incur.="" therefore,="" we="" conclude="" that="" while="" eligible="" health="" care="" providers="" should="" be="" permitted="" to="" enter="" into="" pre-paid/multi-year="" contracts="" for="" supported="" services,="" the="" administrator="" will="" only="" commit="" funds="" to="" cover="" the="" portion="" of="" a="" long-="" term="" contract="" that="" is="" scheduled="" to="" be="" delivered="" during="" the="" funding="" year.="" eligible="" health="" care="" providers="" may="" either="" structure="" their="" contracts="" so="" that="" payment="" is="" required="" on="" at="" least="" a="" yearly="" basis="" or,="" if="" they="" wish="" to="" enter="" into="" contracts="" requiring="" advance="" payment="" for="" multiple="" years="" of="" service,="" they="" may="" use="" their="" own="" funds="" to="" pay="" full="" price="" for="" the="" portion="" of="" the="" contract="" exceeding="" one="" year="" (pro="" rata),="" and="" request="" that="" the="" service="" provider="" rebate="" the="" payments="" from="" the="" support="" mechanism="" that="" it="" receives="" in="" subsequent="" years="" to="" the="" eligible="" health="" care="" provider.="" [[page="" 32921]]="" 420.="" collections="" we="" lack="" sufficient="" historical="" data="" to="" estimate="" accurately="" the="" funding="" demands="" for="" the="" first="" year="" of="" this="" program.="" in="" the="" past="" when="" the="" commission="" has="" established="" similar="" funding="" mechanisms,="" the="" commission="" or="" the="" administrator="" has="" had="" access="" to="" information="" upon="" which="" to="" base="" an="" estimate="" of="" necessary="" first-year="" contribution="" levels.="" no="" unified="" mechanism="" exists="" to="" provide="" telecommunications="" and="" information="" services="" to="" the="" nation's="" health="" care="" providers.="" we="" agree="" with="" nynex="" and="" bell="" atlantic="" that="" funds="" should="" be="" collected="" for="" assistance="" to="" health="" care="" providers="" on="" an="" as-needed="" basis,="" to="" meet="" anticipated="" actual="" expenditures="" over="" time.="" therefore,="" we="" direct="" the="" administrator="" to="" collect="" $100="" million="" for="" the="" first="" three="" months="" of="" 1998="" and="" to="" adjust="" future="" contribution="" assessments="" quarterly="" based="" on="" its="" evaluation="" of="" health="" care="" provider="" demand="" for="" funds,="" within="" the="" limits="" of="" the="" spending="" cap="" we="" establish="" here.="" we="" direct="" the="" administrator="" to="" report="" to="" the="" commission,="" on="" a="" quarterly="" basis,="" both="" the="" total="" amount="" of="" payments="" made="" to="" entities="" providing="" services="" to="" health="" care="" providers="" to="" finance="" universal="" service="" support="" and="" its="" determination="" regarding="" contribution="" assessments="" for="" the="" next="" quarter.="" as="" with="" the="" schools="" and="" libraries="" mechanism,="" we="" find="" that="" adjustments="" for="" any="" large="" reserve="" of="" remaining="" funds="" can="" be="" addressed="" in="" our="" review="" in="" the="" year="" 2001.="" as="" part="" of="" its="" review="" in="" the="" year="" 2001,="" the="" joint="" board="" likewise="" will="" review="" the="" appropriate="" level="" of="" funding="" of="" the="" health="" care="" program.="" 421.="" restrictions="" and="" administration:="" consortia="" we="" agree="" with="" the="" joint="" board="" and="" those="" commenters="" observing="" that="" aggregated="" purchase="" or="" network="" sharing="" arrangements="" can="" substantially="" reduce="" costs="" and="" in="" some="" cases="" are="" necessary="" to="" sustain="" a="" rural="" telecommunications="" network.="" as="" the="" joint="" board="" stated,="" and="" as="" we="" did="" with="" schools="" and="" libraries,="" we="" recognize="" that="" aggregation="" into="" consortia="" can="" promote="" efficient="" shared="" use="" of="" facilities="" to="" which="" each="" consortium="" member="" might="" need="" access,="" but="" for="" which="" no="" single="" user="" needs="" more="" than="" a="" small="" portion="" of="" the="" facilities'="" full="" capacity.="" we="" also="" recognize,="" however,="" that="" allowing="" health="" care="" providers="" to="" aggregate="" with="" other="" local="" customers,="" such="" as="" schools="" and="" libraries,="" may="" increase="" the="" difficulty="" of="" enforcing="" the="" eligibility="" and="" resale="" limitations.="" nevertheless,="" as="" we="" did="" for="" schools="" and="" libraries,="" we="" conclude="" that="" the="" benefits="" of="" aggregation="" outweigh="" the="" administrative="" difficulties="" discussed="" below.="" therefore,="" we="" adopt,="" with="" slight="" modification,="" the="" joint="" board's="" recommendation="" to="" encourage="" health="" care="" providers="" to="" enter="" into="" aggregate="" purchasing="" and="" maintenance="" agreements="" for="" telecommunications="" services="" with="" other="" entities="" and="" individuals,="" as="" long="" as="" the="" entities="" not="" eligible="" for="" universal="" service="" support="" pay="" full="" rates="" for="" their="" portion="" of="" the="" services.="" consistent="" with="" the="" schools="" and="" libraries="" directive="" and="" reasoning="" regarding="" aggregated="" purchase="" arrangements,="" however,="" eligible="" health="" care="" providers="" participating="" in="" consortia="" that="" include="" private="" sector="" members="" will="" not="" be="" eligible="" to="" receive="" universal="" service="" support,="" with="" one="" exception.="" eligible="" health="" care="" providers="" participating="" in="" such="" a="" consortium="" may="" receive="" support,="" if="" the="" consortium="" is="" receiving="" tariffed="" rates="" or="" market="" rates,="" from="" those="" providers="" who="" do="" not="" file="" tariffs.="" we="" find="" that="" this="" prohibition="" will="" deter="" ineligible,="" private="" entities="" from="" entering="" into="" aggregated="" purchase="" arrangements="" with="" rural="" health="" care="" providers="" to="" receive="" below-tariff="" or="" below-market="" rates="" that="" they="" otherwise="" would="" not="" be="" entitled="" to="" receive.="" 422.="" consistent="" with="" our="" directives="" pertaining="" to="" support="" for="" schools="" and="" libraries="" and="" the="" joint="" board's="" recommendation,="" we="" require="" telecommunications="" carriers="" to="" carefully="" maintain="" complete="" records="" of="" how="" they="" allocate="" the="" costs="" of="" shared="" facilities="" among="" consortium="" participants="" in="" order="" to="" charge="" eligible="" health="" care="" providers="" the="" appropriate="" amounts.="" we="" emphasize="" that="" under="" such="" arrangements,="" the="" rural="" health="" care="" provider="" is="" eligible="" for="" reduced="" rates="" and="" the="" telecommunications="" carrier="" is="" eligible="" for="" support="" only="" on="" that="" portion="" of="" the="" services="" purchased="" and="" used="" by="" that="" eligible="" health="" care="" provider.="" we="" adopt="" the="" joint="" board's="" recommendation="" that="" these="" arrangements="" be="" subject="" to="" full="" disclosure="" requirements="" and="" closely="" scrutinized="" under="" an="" audit="" program.="" carriers="" shall="" also="" be="" required="" to="" keep="" detailed="" records="" of="" services="" provided="" to="" rural="" health="" care="" providers.="" these="" records="" shall="" be="" maintained="" by="" carriers="" and="" shall="" be="" available="" for="" public="" inspection.="" the="" carriers="" must="" quantify="" and="" justify="" the="" amount="" of="" support="" for="" which="" members="" of="" consortia="" are="" eligible.="" accordingly,="" a="" provider="" of="" telecommunications="" services="" to="" a="" health="" care="" provider="" participating="" in="" a="" consortium="" must="" establish="" the="" applicable="" rural="" rate="" for="" the="" health="" care="" provider's="" portion="" of="" the="" shared="" telecommunications="" services,="" as="" well="" as="" the="" relevant="" urban="" rate.="" absent="" supporting="" documentation="" that="" quantifies="" and="" justifies="" the="" amount="" of="" universal="" service="" support="" requested="" by="" an="" eligible="" telecommunications="" carrier,="" the="" administrator="" shall="" not="" allow="" that="" carrier="" to="" offset,="" or="" receive="" reimbursement="" for,="" the="" costs="" of="" providing="" services="" to="" rural="" health="" care="" providers="" participating="" in="" consortia.="" 423.="" health="" care="" providers="" that="" belong="" to="" consortia="" that="" share="" facilities="" should="" maintain="" their="" own="" records="" of="" use,="" in="" addition="" to="" the="" records="" that="" service="" providers="" keep.="" such="" records="" may="" be="" subject="" to="" an="" audit="" or="" examination="" by="" the="" administrator="" or="" other="" state="" or="" federal="" agency="" with="" jurisdiction,="" as="" described="" below.="" such="" monitoring="" should="" reduce="" the="" opportunity="" for="" fraud="" or="" misappropriation="" of="" universal="" service="" funds.="" 424.="" these="" requirements="" would="" not="" prevent="" state="" telecommunications="" agencies="" like="" doas-it="" or="" urban="" based="" health="" care="" providers="" from="" aggregating="" demand="" and="" providing="" services="" to="" rural="" health="" care="" providers="" participating="" in="" consortia="" at="" volume="" discounted="" rates="" or="" from="" providing="" technical="" assistance,="" such="" as="" network="" management="" or="" centralized="" administrative="" functions.="" we="" conclude="" that="" it="" is="" unlikely="" that="" any="" of="" the="" entities="" providing="" services="" under="" such="" an="" arrangement="" could="" be="" eligible="" for="" support="" under="" section="" 254(h)(1)(a),="" because="" rural="" health="" care="" providers="" obtaining="" services="" at="" prices="" averaged="" throughout="" the="" state="" are="" unlikely="" to="" be="" paying="" more="" than="" the="" urban="" rate.="" therefore,="" unless="" telecommunications="" carriers="" can="" demonstrate="" to="" the="" administrator="" that="" the="" average="" rate="" that="" members="" of="" a="" consortium="" pay="" is="" greater="" than="" the="" applicable="" urban="" rate,="" such="" carriers="" will="" not="" be="" able="" to="" receive="" universal="" service="" support="" under="" this="" provision.="" health="" care="" providers="" participating="" in="" consortia="" that="" are="" not="" eligible="" to="" receive="" services="" supported="" under="" section="" 254(h)(1)(a)="" may="" be="" eligible="" to="" receive="" limited="" toll-free="" access="" to="" an="" internet="" service="" provider.="" 425.="" use="" of="" multi-purpose="" telecommunications="" connections="" to="" reduce="" costs="" to="" health="" care="" providers,="" we="" also="" encourage="" the="" use="" of="" shared="" lines.="" a="" health="" care="" provider="" may="" use="" a="" single="" line="" to="" provide="" multiple="" services,="" not="" all="" of="" which="" are="" eligible="" for="" support.="" an="" eligible="" health="" care="" provider,="" however,="" can="" be="" eligible="" for="" reduced="" rates,="" and="" the="" telecommunications="" carrier="" can="" be="" eligible="" for="" support,="" only="" on="" that="" portion="" of="" the="" telecommunications="" services="" purchased="" and="" used="" by="" the="" health="" care="" provider="" for="" an="" eligible="" purpose.="" we="" [[page="" 32922]]="" agree="" with="" that,="" in="" order="" to="" ensure="" that="" only="" eligible="" services="" receive="" support,="" single="" health="" care="" providers="" that="" use="" lines="" for="" several="" purposes="" must="" maintain="" records="" of="" use,="" which="" may="" be="" the="" subject="" of="" an="" audit="" by="" the="" administrator="" or="" other="" state="" or="" federal="" agency="" with="" jurisdiction.="" moreover,="" carriers="" must="" retain="" careful="" records="" regarding="" how="" they="" have="" allocated="" the="" costs="" of="" shared="" facilities.="" we="" expect="" the="" administrator="" to="" work="" with="" rural="" health="" care="" providers="" to="" keep="" any="" record="" keeping="" requirements="" to="" a="" minimum="" consistent="" with="" the="" need="" to="" ensure="" the="" integrity="" of="" the="" program.="" 426.="" certification="" requirements="" we="" adopt="" the="" joint="" board's="" recommendation,="" with="" modifications,="" to="" require="" every="" health="" care="" provider="" that="" requests="" universal="" service="" supported="" telecommunications="" services="" to="" submit="" to="" the="" carrier="" a="" written="" request,="" signed="" by="" an="" officer="" of="" the="" health="" care="" provider="" authorized="" to="" order="" telecommunications="" services,="" certifying="" under="" oath="" to="" the="" first="" five="" conditions="" detailed="" below="" in="" order="" to="" establish="" a="" bona="" fide="" request="" for="" services.="" we="" clarify,="" however,="" that="" a="" health="" care="" provider="" requesting="" services="" eligible="" for="" support="" under="" section="" 254(h)(2)(a)="" need="" not="" establish="" that="" it="" is="" located="" in="" a="" rural="" area="" but="" rather="" that="" it="" cannot="" obtain="" toll-free="" access="" to="" an="" internet="" service="" provider,="" as="" discussed="" below.="" we="" also="" impose="" an="" additional="" condition:="" that="" the="" health="" care="" provider="" requesting="" telecommunications="" services="" certify="" that="" it="" is="" ordering="" the="" most="" cost-effective="" method(s)="" of="" providing="" the="" requested="" services.="" this="" is="" consistent="" with="" our="" requirement="" that="" health="" care="" providers="" seek="" to="" minimize="" the="" cost="" to="" the="" universal="" service="" support="" mechanisms="" by="" using="" a="" competitive="" bidding="" process="" to="" secure="" the="" most="" cost-effective="" service="" arrangement.="" we="" define="" the="" most="" cost-effective="" method="" of="" providing="" service="" as="" the="" method="" available="" at="" the="" lowest="" cost,="" after="" consideration="" of="" features,="" quality="" of="" transmission,="" reliability,="" and="" other="" factors="" that="" the="" health="" care="" provider="" deems="" relevant="" to="" choosing="" an="" adequate="" method="" of="" providing="" the="" required="" health="" care="" services.="" consistent="" with="" the="" joint="" board's="" recommendation,="" we="" require="" health="" care="" providers="" to="" renew="" their="" certification="" annually.="" health="" care="" providers="" are="" required="" to="" certify="" to="" the="" following="" conditions:="" (1)="" that="" the="" requester="" is="" a="" public="" or="" nonprofit="" entity="" that="" falls="" within="" one="" of="" the="" seven="" categories="" set="" forth="" in="" the="" definition="" of="" health="" care="" provider="" in="" section="" 254(h)(5)(b);="" (2)="" unless="" the="" requested="" service="" is="" supported="" under="" section="" 254(h)(2)(a),="" that="" the="" requester="" is="" physically="" located="" in="" a="" rural="" area="" (omb="" defined="" non-metro="" county="" or="" goldsmith-defined="" rural="" section="" of="" an="" omb="" metro="" county);="" or,="" if="" the="" requested="" service="" is="" supported="" under="" sec.="" 254(h)(2)(a),="" that="" the="" requester="" cannot="" obtain="" toll-free="" access="" to="" an="" internet="" service="" provider;="" (3)="" that="" the="" services="" requested="" will="" be="" used="" solely="" for="" purposes="" reasonably="" related="" to="" the="" provision="" of="" health="" care="" services="" or="" instruction="" that="" the="" health="" care="" provider="" is="" legally="" authorized="" to="" provide="" under="" the="" law="" of="" the="" state="" in="" which="" they="" are="" provided;="" (4)="" that="" the="" services="" will="" not="" be="" sold,="" resold,="" or="" transferred="" in="" consideration="" of="" money="" or="" any="" other="" thing="" of="" value;="" (5)="" if="" the="" services="" are="" being="" purchased="" as="" part="" of="" an="" aggregated="" purchase="" with="" other="" entities="" or="" individuals,="" the="" full="" details="" of="" any="" such="" arrangement="" governing="" the="" purchase,="" including="" the="" identities="" of="" all="" co-purchasers="" and="" the="" portion="" of="" the="" services="" being="" purchased="" by="" the="" health="" care="" provider;="" (6)="" that="" it="" is="" ordering="" the="" most="" cost-effective="" method(s)="" of="" providing="" the="" requested="" services.="" 427.="" compliance="" review="" we="" adopt="" the="" joint="" board's="" recommendation="" that="" we="" require="" the="" administrator="" to="" establish="" and="" administer="" a="" monitoring="" and="" evaluation="" program="" to="" oversee="" the="" use="" of="" supported="" services="" by="" health="" care="" providers="" and="" the="" pricing="" of="" those="" services,="" and="" we="" adopt="" an="" approach="" consistent="" with="" the="" requirements="" for="" schools="" and="" libraries.="" like="" the="" joint="" board,="" we="" conclude="" that="" a="" compliance="" program="" is="" necessary="" to="" ensure="" that="" services="" are="" being="" used="" for="" the="" provision="" of="" lawful="" health="" care,="" that="" requesters="" are="" complying="" with="" certification="" requirements,="" that="" requesters="" are="" otherwise="" eligible="" to="" receive="" universal="" service="" support,="" that="" rates="" charged="" comply="" with="" the="" statute="" and="" regulations,="" and="" that="" the="" prohibitions="" against="" resale="" or="" transfer="" for="" profit="" are="" strictly="" enforced.="" 428.="" accordingly,="" we="" conclude="" that="" health="" care="" providers,="" as="" well="" as="" telecommunications="" carriers,="" should="" maintain="" the="" same="" kind="" of="" procurement="" records="" for="" purchases="" under="" this="" program="" as="" they="" now="" keep="" for="" other="" purchases.="" we="" conclude="" that="" health="" care="" providers="" must="" be="" able="" to="" produce="" these="" records="" at="" the="" request="" of="" any="" auditor="" appointed="" by="" the="" administrator="" or="" any="" other="" state="" or="" federal="" agency="" with="" jurisdiction="" that="" might,="" for="" example,="" suspect="" fraud="" or="" other="" illegal="" conduct,="" or="" merely="" be="" conducting="" a="" routine,="" random="" audit.="" we="" further="" conclude="" that="" health="" care="" providers="" may="" be="" subject="" to="" random="" compliance="" audits="" by="" any="" auditor="" appointed="" by="" the="" administrator="" or="" any="" other="" state="" or="" federal="" agency="" with="" jurisdiction="" to="" ensure="" that="" services="" are="" being="" used="" for="" the="" provision="" of="" state="" authorized="" health="" care,="" that="" requesting="" providers="" are="" complying="" with="" certification="" requirements,="" that="" requesting="" providers="" are="" otherwise="" eligible="" to="" receive="" supported="" services,="" that="" rates="" charged="" comply="" with="" the="" statute="" and="" regulations,="" and="" that="" the="" prohibitions="" against="" resale="" or="" transfer="" for="" profit="" are="" strictly="" enforced.="" the="" compliance="" audits="" will="" also="" be="" used="" to="" evaluate="" what="" services="" health="" care="" providers="" are="" purchasing,="" the="" costs="" of="" such="" services,="" and="" how="" such="" services="" are="" being="" used.="" such="" information="" will="" permit="" the="" commission="" to="" determine="" whether="" universal="" service="" support="" policies="" require="" adjustment.="" 429.="" the="" administrator="" shall="" develop="" a="" method="" for="" obtaining="" information="" from="" health="" care="" providers="" on="" what="" services="" they="" are="" purchasing="" and="" how="" such="" services="" are="" being="" used="" and="" shall="" submit="" a="" report="" to="" the="" commission="" on="" the="" first="" business="" day="" in="" may="" of="" each="" year.="" the="" commission="" will="" use="" this="" report,="" in="" conjunction="" with="" any="" information="" provided="" by="" the="" joint="" working="" group="" on="" telemedicine,="" to="" monitor="" the="" progress="" of="" health="" care="" providers="" in="" obtaining="" access="" to="" telecommunications="" and="" other="" information="" services.="" from="" such="" monitoring="" activities,="" the="" administrator="" should="" gather="" and="" report="" the="" following="" data:="" (1)="" the="" number="" and="" nature="" of="" requests="" for="" supported="" services="" submitted="" to="" the="" administrator="" and="" posted="" by="" the="" administrator;="" (2)="" the="" number="" and="" kinds="" of="" services="" requested;="" (3)="" the="" number,="" locations,="" and="" descriptions="" of="" health="" care="" providers="" requesting="" services;="" (4)="" the="" number="" and="" nature="" of="" the="" requests="" that="" are="" filled,="" delayed,="" partially="" filled,="" or="" unfilled,="" and="" the="" reasons="" therefore;="" (5)="" the="" number,="" nature,="" and="" descriptions="" of="" carriers="" offering="" to="" provide="" or="" providing="" supported="" services;="" (6)="" the="" requested="" services="" that="" are="" found="" ineligible="" for="" support;="" (7)="" the="" rates,="" prices,="" and="" charges="" for="" services,="" including="" the="" submissions="" of="" proposed="" urban="" and="" rural="" rates="" for="" each="" service;="" and="" (8)="" the="" number="" and="" nature="" of="" rate="" submissions="" to="" state="" commissions="" and="" the="" commission.="" 430.="" carrier="" notification="" we="" also="" adopt="" the="" joint="" board's="" recommendation="" to="" encourage="" carriers="" across="" the="" country="" to="" notify="" all="" health="" care="" providers="" in="" their="" service="" areas="" of="" the="" availability="" of="" lower="" rates="" resulting="" from="" universal="" service="" support="" so="" that="" eligible="" health="" care="" providers="" can="" take="" full="" advantage="" of="" the="" supported="" services.="" [[page="" 32923]]="" we="" expect="" that="" carriers="" will="" market="" to="" health="" care="" providers.="" as="" with="" schools="" and="" libraries,="" however,="" we="" decline="" to="" impose="" a="" requirement="" that="" carriers="" notify="" health="" care="" providers="" about="" the="" availability="" of="" supported="" services.="" 431.="" selecting="" between="" offset="" or="" reimbursement="" for="" telecommunications="" carriers="" subject="" to="" the="" limitations="" on="" services="" previously="" described,="" a="" telecommunications="" carrier="" shall="" receive="" support="" for="" providing="" an="" eligible="" telecommunications="" service="" under="" section="" 254(h)(1)(a)="" equal="" to="" the="" difference,="" if="" any,="" between="" the="" rural="" rate="" and="" the="" urban="" rate="" charged="" for="" the="" service,="" as="" defined="" above.="" a="" telecommunications="" carrier="" shall="" also="" receive="" support="" for="" providing="" services="" under="" section="" 254(h)(2)(a),="" as="" set="" forth="" below.="" with="" modifications,="" we="" adopt="" the="" joint="" board's="" recommendation="" that="" we="" require="" carriers="" to="" receive="" this="" support="" through="" offsets="" to="" the="" amount="" they="" would="" otherwise="" have="" to="" contribute="" to="" federal="" universal="" service="" support="" mechanisms,="" rather="" than="" through="" direct="" reimbursement.="" we="" conclude="" that="" allowing="" direct="" compensation="" under="" some="" circumstances="" is="" consistent="" with="" both="" the="" statutory="" language="" and="" sound="" public="" policy.="" we="" conclude="" that="" a="" telecommunications="" carrier="" providing="" eligible="" services="" to="" rural="" health="" care="" providers="" at="" reasonably="" comparable="" rates="" under="" the="" provisions="" of="" section="" 254(h)(1)(a)="" should="" treat="" the="" amount="" eligible="" for="" support="" as="" an="" offset="" against="" the="" carrier's="" universal="" service="" support="" obligation="" for="" the="" year="" in="" which="" the="" costs="" were="" incurred.="" to="" the="" extent="" that="" the="" amount="" of="" universal="" service="" support="" owed="" a="" carrier="" exceeds="" that="" carrier's="" universal="" service="" obligation,="" calculated="" on="" an="" annual="" basis,="" the="" carrier="" may="" receive="" a="" direct="" reimbursement="" in="" the="" amount="" of="" the="" difference,="" as="" the="" majority="" of="" the="" state="" members="" of="" the="" joint="" board="" recommend.="" any="" reimbursement="" due="" a="" carrier="" will="" be="" made="" after="" the="" offset="" is="" credited="" against="" that="" carrier's="" universal="" service="" obligation,="" but="" in="" any="" event,="" no="" later="" than="" the="" first="" quarter="" of="" the="" calendar="" year="" following="" the="" year="" in="" which="" the="" costs="" for="" services="" were="" incurred.="" 432.="" advanced="" telecommunications="" and="" information="" services="" we="" agree="" with="" the="" joint="" board's="" conclusion="" that="" the="" rules="" we="" establish="" for="" the="" provision="" of="" universal="" service="" support="" pursuant="" to="" section="" 254(h)(1)(a)="" should="" significantly="" increase="" the="" availability="" and="" deployment="" of="" telecommunications="" services="" for="" rural="" health="" care="" providers.="" moreover,="" we="" find="" that="" the="" additional="" support="" mechanisms="" adopted="" in="" this="" proceeding,="" for="" example,="" those="" adopted="" for="" high="" cost="" areas,="" also="" should="" enhance="" access="" to="" advanced="" telecommunications="" and="" information="" services="" for="" these="" and="" other="" health="" care="" providers.="" 433.="" nonetheless,="" we="" provide="" additional="" support="" under="" section="" 254(h)(2)(a)="" ``to="" enhance="" *="" *="" *="" access="" to="" advanced="" telecommunications="" and="" information="" services="" for="" all="" public="" and="" nonprofit="" *="" *="" *="" health="" care="" providers.''="" for="" the="" reasons="" discussed="" below,="" we="" will="" provide="" universal="" service="" support="" for="" a="" limited="" amount="" of="" toll-free="" access="" to="" an="" internet="" service="" provider.="" although="" the="" joint="" board="" did="" not="" explicitly="" recommend="" supporting="" toll="" charges="" imposed="" for="" connecting="" with="" an="" internet="" service="" provider="" under="" section="" 254(h)(2)(a),="" it="" did="" recommend="" that="" the="" commission="" seek="" comment="" and="" further="" information="" on="" the="" need="" for="" and="" costs="" of="" providing="" advanced="" telecommunications="" and="" information="" services="" for="" rural="" health="" care="" providers.="" in="" providing="" support="" for="" a="" limited="" amount="" of="" toll-free="" internet="" access="" under="" section="" 254(h)(2)(a),="" we="" agree="" with="" the="" joint="" board's="" conclusion="" that="" all="" public="" and="" non-profit="" health="" care="" providers="" shall="" benefit="" from="" the="" implementation="" of="" section="" 254(h)(2)(a).="" this="" conclusion="" is="" consistent="" with="" the="" plain="" language="" and="" purpose="" of="" section="" 254(h)(2).="" 434.="" toll-free="" access="" to="" an="" internet="" service="" provider="" we="" agree="" with="" the="" joint="" board="" that="" securing="" access="" to="" the="" internet="" may="" be="" a="" more="" cost-effective="" method="" of="" meeting="" some="" telemedicine="" needs="" than="" relying="" on="" other="" kinds="" of="" telecommunications="" services.="" we="" also="" agree="" with="" those="" commenters="" that="" suggest="" that="" toll-free="" access="" to="" an="" internet="" service="" provider="" is="" important="" to="" provide="" cost-effective="" access="" to="" and="" use="" of="" numerous="" sources="" of="" medical="" information="" and="" to="" facilitate="" the="" flow="" of="" health="" care-related="" information.="" 435.="" we="" agree="" with="" the="" majority="" of="" the="" state="" members="" of="" the="" joint="" board="" that="" the="" major="" cost="" for="" rural="" health="" care="" providers="" seeking="" access="" to="" an="" internet="" service="" provider="" is="" toll="" charges="" incurred="" by="" providers="" who="" lack="" local="" dial-up="" access.="" accordingly,="" we="" conclude="" that="" each="" health="" care="" provider="" that="" cannot="" obtain="" toll-free="" access="" to="" an="" internet="" service="" provider="" is="" entitled="" to="" receive="" a="" limited="" amount="" of="" toll-free="" access.="" upon="" submitting="" a="" request="" to="" a="" telecommunications="" carrier,="" each="" such="" health="" care="" provider="" may="" receive="" the="" lesser="" of="" the="" toll="" charges="" incurred="" for="" 30="" hours="" of="" access="" to="" an="" internet="" service="" provider="" or="" $180.00="" per="" month="" in="" toll="" charge="" credits="" for="" toll="" charges="" imposed="" for="" connecting="" to="" an="" internet="" service="" provider.="" we="" clarify="" that="" such="" support="" will="" fund="" toll="" charges="" but="" not="" distance-sensitive="" charges="" for="" a="" dedicated="" connection="" to="" an="" internet="" service="" provider.="" 436.="" like="" the="" majority="" of="" the="" state="" members="" of="" the="" joint="" board,="" we="" believe="" that="" a="" dollar="" cap="" on="" support="" for="" toll-free="" internet="" access="" is="" consistent="" with="" the="" joint="" board's="" objective="" to="" develop="" a="" cost-effective="" program.="" we="" agree="" with="" nebraska="" hospitals="" that="" approximately="" $180.00="" of="" support="" for="" each="" eligible="" health="" care="" provider,="" each="" month,="" is="" a="" reasonable="" amount="" of="" access="" to="" support="" and="" should="" create="" sufficient="" mechanisms.="" while="" nebraska="" hospitals="" proposed="" support="" for="" 15="" hours="" of="" access="" at="" $.20="" per="" minute,="" we="" adopt="" a="" dollar="" cap="" based="" on="" 30="" hours="" of="" use="" at="" a="" $.10="" per="" minute="" toll="" charge.="" we="" find="" that="" this="" dollar="" cap="" per="" provider="" on="" support="" for="" toll-free="" access="" to="" an="" internet="" service="" provider="" is="" a="" specific,="" sufficient,="" and="" predictable="" mechanism,="" as="" required="" by="" section="" 254(b)(5)="" of="" the="" act,="" because="" it="" limits="" the="" amount="" of="" support="" that="" each="" health="" care="" provider="" may="" receive="" per="" month="" to="" a="" reasonable="" level.="" this="" limit="" should="" also="" cause="" support="" for="" toll-free="" access="" to="" an="" internet="" service="" provider="" not="" to="" increase="" the="" size="" of="" the="" fund="" significantly.="" interstate="" subscriber="" line="" charges="" and="" carrier="" common="" line="" charges="" 437.="" lts="" payments="" we="" agree="" with="" the="" joint="" board="" that="" lts="" payments="" constitute="" a="" universal="" service="" support="" mechanism.="" lts="" payments="" reduce="" the="" access="" charges="" of="" small,="" rural="" ilecs="" participating="" in="" the="" loop-cost="" pool="" by="" raising="" the="" access="" charges="" of="" non-participating="" ilecs.="" like="" the="" joint="" board,="" we="" conclude="" that="" this="" support="" mechanism="" is="" inconsistent="" with="" the="" act's="" requirements="" that="" support="" be="" collected="" from="" all="" providers="" of="" interstate="" telecommunications="" services="" on="" a="" non-discriminatory="" basis="" and="" be="" available="" to="" all="" eligible="" telecommunications="" carriers.="" currently,="" only="" ilecs="" participating="" in="" the="" neca="" ccl="" tariff="" receive="" lts="" support="" and="" only="" ilecs="" that="" do="" not="" participate="" in="" the="" neca="" ccl="" tariff="" make="" lts="" payments.="" we="" further="" conclude="" that="" the="" joint="" board="" correctly="" rejected="" some="" commenters'="" argument="" that="" the="" act="" only="" requires="" new="" universal="" service="" support="" mechanisms="" to="" comply="" with="" section="" 254.="" we="" find="" that="" congress="" also="" intended="" that="" we="" reform="" existing="" support="" mechanisms,="" such="" as="" lts,="" if="" necessary.="" we="" therefore="" adopt="" the="" joint="" board's="" recommendation="" that="" lts="" should="" be="" removed="" from="" access="" charges.="" [[page="" 32924]]="" 438.="" although="" we="" conclude="" that="" the="" recovery="" of="" lts="" revenue="" through="" access="" charges="" represents="" an="" impermissibly="" discriminatory="" universal="" service="" support="" mechanism,="" we="" agree="" with="" the="" joint="" board="" that="" lts="" payments="" serve="" the="" public="" interest="" by="" reducing="" the="" amount="" of="" loop="" cost="" that="" high="" cost="" lecs="" must="" recover="" from="" ixcs="" through="" ccl="" charges="" and="" thereby="" facilitating="" interexchange="" service="" in="" high="" cost="" areas="" consistent="" with="" the="" express="" goals="" of="" section="" 254.="" thus,="" although="" we="" remove="" the="" lts="" system="" from="" the="" access="" charge="" regime,="" we="" adopt="" the="" joint="" board's="" recommendation="" that="" we="" enable="" rural="" lecs="" to="" continue="" to="" receive="" payments="" comparable="" to="" lts="" from="" the="" new="" universal="" service="" support="" mechanisms.="" 439.="" slc="" caps="" we="" agree="" with="" the="" joint="" board's="" conclusions="" that="" current="" rates="" generally="" are="" affordable,="" and="" that="" the="" level="" of="" the="" slc="" cap="" implicates="" affordability="" concerns.="" we="" also="" concur="" with="" the="" joint="" board="" that="" determination="" of="" the="" proper="" level="" of="" the="" slc="" cap="" depends="" upon="" a="" number="" of="" interdependent="" factors.="" the="" affordability="" of="" rates="" in="" coming="" years="" will="" be="" affected="" by="" future="" joint="" board="" recommendations="" and="" commission="" action="" in="" this="" proceeding.="" the="" slc="" also="" is="" part="" of="" the="" interstate="" access="" charge="" system,="" which="" we="" are="" currently="" reviewing="" in="" the="" companion="" access="" charge="" reform="" docket.="" as="" part="" of="" the="" recovery="" mechanism="" for="" interstate-allocated="" loop="" costs,="" the="" slc="" cap="" also="" may="" be="" affected="" by="" the="" separations="" joint="" board's="" recommendations.="" we="" therefore="" conclude="" that="" it="" would="" be="" inappropriate="" to="" make="" significant="" changes="" to="" the="" slc="" cap="" for="" primary="" residential="" and="" single="" line="" business="" lines="" at="" this="" time.="" in="" light="" of="" these="" considerations,="" we="" adopt="" the="" joint="" board's="" recommendation="" that="" the="" slc="" cap="" for="" primary="" residential="" and="" single-line="" business="" lines="" should="" remain="" unchanged.="" 440.="" ccl="" charges="" in="" our="" access="" charge="" reform="" order,="" the="" commission="" adopts="" the="" joint="" board's="" suggestion="" that="" the="" ccl="" charge="" should="" be="" recovered="" in="" a="" more="" efficient="" manner.="" specifically,="" in="" the="" access="" charge="" reform="" order,="" we="" create="" and="" implement="" a="" system="" of="" flat,="" per-line="" charges="" on="" the="" pic.="" where="" an="" end="" user="" declines="" to="" select="" a="" pic,="" we="" adopt="" the="" joint="" board's="" suggestion="" that="" the="" pic="" charge="" be="" assessed="" on="" the="" end="" user.="" as="" more="" fully="" described="" in="" our="" access="" charge="" reform="" order,="" we="" contemplate="" that,="" over="" time,="" all="" implicit="" subsidies="" will="" be="" removed="" from="" these="" flat-rate="" charges="" and="" that="" any="" universal="" service="" costs="" will="" be="" borne="" explicitly="" by="" our="" universal="" service="" support="" mechanisms.="" 441.="" replacement="" of="" lts="" as="" we="" have="" stated,="" rural="" carriers'="" lts="" payments="" will="" be="" replaced="" with="" comparable,="" per-line="" payments="" from="" the="" new="" universal="" service="" support="" mechanisms="" on="" january="" 1,="" 1998.="" because="" current="" lts="" payments="" will="" cease="" on="" that="" date,="" our="" rules="" must="" be="" modified="" so="" that="" ilecs="" that="" currently="" contribute="" to="" lts="" also="" will="" stop="" making="" lts="" payments="" on="" that="" date.="" lts="" contributors="" currently="" recover="" the="" revenue="" necessary="" for="" their="" lts="" contributions="" through="" their="" own="" ccl="" charges.="" because="" current="" lts="" contributors="" will="" no="" longer="" be="" making="" such="" contributions="" after="" january="" 1,="" 1998,="" their="" ccl="" charges="" should="" be="" adjusted="" to="" account="" for="" this="" change.="" if="" we="" did="" not="" adjust="" ccl="" charges="" to="" reflect="" the="" elimination="" of="" lts="" payment="" obligations,="" ilecs="" would="" recover="" funds="" through="" their="" access="" charges="" for="" which="" they="" incurred="" no="" corresponding="" cost;="" the="" result="" would="" be="" an="" inappropriate="" transfer="" of="" funds="" from="" ixcs="" or="" their="" customers="" to="" ilecs.="" 442.="" we="" also="" observe="" that="" the="" replacement="" of="" lts="" with="" per-line="" support="" from="" the="" new="" universal="" service="" support="" mechanisms="" will="" affect="" our="" current="" rule="" that="" sets="" the="" neca="" ccl="" tariff="" at="" the="" average="" of="" price-="" cap="" lecs'="" ccl="" charges,="" as="" our="" rules="" currently="" provide.="" the="" elimination="" of="" price-cap="" ilecs'="" lts="" obligations="" will="" allow="" their="" ccl="" charges="" to="" fall,="" but="" there="" is="" no="" corresponding="" reason="" for="" a="" reduction="" in="" the="" neca="" ccl="" tariff.="" yet="" under="" our="" current="" rules,="" the="" neca="" ccl="" charge="" would="" fall="" simply="" because="" of="" our="" regulatory="" changes="" to="" price-cap="" ilecs'="" lts="" payment="" obligations.="" we="" must="" therefore="" establish="" a="" new="" method="" to="" set="" the="" neca="" ccl="" tariff.="" we="" address="" this="" question,="" too,="" in="" the="" access="" charge="" reform="" proceeding.="" administration="" of="" support="" mechanisms="" 443.="" criteria="" for="" mandatory="" contribution="" we="" agree="" with="" the="" joint="" board's="" recommendation="" that="" all="" telecommunications="" carriers="" that="" provide="" interstate="" telecommunications="" services="" must="" contribute="" to="" the="" support="" mechanisms.="" to="" be="" considered="" a="" mandatory="" contributor="" to="" universal="" service="" under="" section="" 254(d):="" (1)="" a="" telecommunications="" carrier="" must="" offer="" ``interstate''="" ``telecommunications'';="" (2)="" those="" interstate="" telecommunications="" must="" be="" offered="" ``for="" a="" fee'';="" and="" (3)="" those="" interstate="" telecommunications="" must="" be="" offered="" ``directly="" to="" the="" public,="" or="" to="" such="" classes="" of="" users="" as="" to="" be="" effectively="" available="" to="" the="" public.''="" 444.="" interstate="" telecommunications="" are="" ``interstate''="" when="" the="" communication="" or="" transmission="" originates="" in="" any="" state,="" territory,="" possession="" of="" the="" united="" states,="" or="" the="" district="" of="" columbia="" and="" terminates="" in="" another="" state,="" territory,="" possession,="" or="" the="" district="" of="" columbia="" (47="" u.s.c.="" 153(22)).="" in="" addition,="" under="" the="" commission's="" rules,="" if="" over="" ten="" percent="" of="" the="" traffic="" carried="" over="" a="" private="" or="" wats="" line="" is="" interstate,="" then="" the="" revenues="" and="" costs="" generated="" by="" the="" entire="" line="" are="" classified="" as="" interstate="" (47="" cfr="" 36.154(a)).="" we="" agree="" with="" the="" joint="" board's="" conclusion="" that="" interstate="" telecommunications="" services="" include="" telecommunications="" services="" among="" u.s.="" territories="" and="" possessions="" because="" such="" areas="" are="" expressly="" included="" within="" the="" definition="" of="" ``interstate.''="" 445.="" we="" also="" agree="" that="" the="" base="" of="" contributors="" to="" universal="" service="" should="" be="" construed="" broadly="" and="" should="" include="" international="" communications="" revenues="" generated="" by="" carriers="" of="" interstate="" telecommunications.="" although="" we="" agree="" that="" by="" definition,="" foreign="" or="" international="" telecommunications="" are="" not="" ``interstate''="" because="" they="" are="" not="" carried="" between="" states,="" territories,="" or="" possessions="" of="" the="" united="" states,="" we="" find="" that,="" pursuant="" to="" our="" statutory="" authority="" to="" assess="" contributions="" to="" universal="" service="" on="" an="" equitable="" and="" nondiscriminatory="" basis,="" we="" shall="" include="" the="" foreign="" telecommunications="" revenues="" of="" interstate="" carriers="" within="" the="" revenue="" base.="" contributors="" that="" provide="" international="" telecommunications="" services="" benefit="" from="" universal="" service="" because="" they="" must="" either="" terminate="" or="" originate="" telecommunications="" on="" the="" domestic="" pstn.="" therefore,="" we="" find="" that="" contributors="" that="" provide="" international="" telecommunications="" services="" should="" contribute="" to="" universal="" service="" on="" the="" basis="" of="" revenues="" derived="" from="" those="" services.="" foreign="" communications="" are="" defined="" as="" a="" ``communication="" or="" transmission="" from="" or="" to="" any="" place="" in="" the="" united="" states="" to="" or="" from="" a="" foreign="" country,="" or="" between="" a="" station="" in="" the="" united="" states="" and="" a="" mobile="" station="" located="" outside="" of="" the="" united="" states.''="" (47="" u.s.c.="" 153(17)).="" communications="" that="" are="" billed="" to="" domestic="" end="" users="" should="" be="" included="" in="" the="" revenue="" base,="" including="" country="" direct="" calls="" when="" provided="" between="" the="" united="" states="" and="" a="" foreign="" point.="" revenues="" from="" communications="" between="" two="" international="" points="" or="" foreign="" countries="" would="" not="" be="" included="" in="" the="" universal="" service="" base,="" for="" example,="" if="" a="" domestic="" [[page="" 32925]]="" end="" user="" used="" country="" direct="" calling="" between="" two="" foreign="" points.="" we="" find="" that="" carriers="" that="" provide="" only="" international="" telecommunications="" services="" are="" not="" required="" to="" contribute="" to="" universal="" service="" support="" mechanisms="" because="" they="" are="" not="" ``telecommunications="" carriers="" that="" provide="" interstate="" telecommunications="" services.''="" 446.="" telecommunications="" telecommunications="" is="" defined="" as="" a="" ``transmission,="" between="" or="" among="" points="" specified="" by="" the="" user,="" of="" information="" of="" the="" user's="" choosing,="" without="" change="" in="" the="" form="" or="" content="" of="" the="" information="" as="" sent="" and="" received.''="" (47="" u.s.c.="" 153(46).="" to="" provide="" more="" specific="" guidance="" as="" to="" what="" services="" qualify="" as="" ``telecommunications,''="" we="" adopt,="" with="" slight="" modification,="" the="" joint="" board's="" list="" of="" examples="" and="" find="" that="" the="" following="" services="" satisfy="" the="" above="" definition="" and="" are="" examples="" of="" interstate="" telecommunications:="" cellular="" telephone="" and="" paging="" services;="" mobile="" radio="" services;="" operator="" services;="" pcs;="" access="" to="" interexchange="" service;="" special="" access;="" wide="" area="" telephone="" service="" (wats);="" toll-free="" services;="" 900="" services;="" mts;="" private="" line;="" telex;="" telegraph;="" video="" services;="" satellite="" services;="" and="" resale="" services.="" 447.="" we="" also="" clarify="" the="" scope="" of="" contribution="" obligations="" for="" ``satellite''="" and="" ``video''="" services,="" which="" are="" among="" the="" services="" listed="" in="" the="" exemplary="" list="" provided="" by="" the="" joint="" board.="" the="" joint="" board="" recommended="" that="" the="" commission="" adopt="" ``the="" trs="" approach''="" to="" identifying="" providers="" of="" interstate="" telecommunications="" services.="" under="" our="" trs="" rules,="" carriers="" must="" contribute="" to="" the="" trs="" fund="" based="" on="" their="" gross="" telecommunications="" services="" revenues.="" consistent="" with="" its="" recommendation,="" the="" joint="" board="" concluded="" that="" satellite="" operators="" should="" contribute="" to="" universal="" service="" to="" the="" extent="" that="" they="" provide="" ``telecommunications="" services.''="" we="" adopt="" the="" joint="" board's="" approach="" and="" clarify="" that="" satellite="" and="" video="" service="" providers="" must="" contribute="" to="" universal="" service="" only="" to="" the="" extent="" that="" they="" are="" providing="" interstate="" telecommunications="" services.="" thus,="" for="" example,="" entities="" providing,="" on="" a="" common="" carrier="" basis,="" video="" conferencing="" services,="" channel="" service="" or="" video="" distribution="" services="" to="" cable="" head-ends="" would="" contribute="" to="" universal="" service.="" entities="" providing="" open="" video="" systems="" (ovs),="" cable="" leased="" access,="" or="" direct="" broadcast="" satellite="" (dbs)="" services="" would="" not="" be="" required="" to="" contribute="" on="" the="" basis="" of="" revenues="" derived="" from="" those="" services.="" we="" agree="" with="" the="" joint="" board="" that="" this="" list="" is="" not="" exhaustive.="" other="" services="" not="" on="" the="" list="" or="" services="" that="" may="" be="" developed="" may="" also="" qualify="" as="" interstate="" telecommunications.="" 448.="" for="" a="" fee="" we="" agree="" with="" the="" joint="" board's="" interpretation="" of="" the="" plain="" language="" of="" section="" 3(46)="" and="" find="" that="" the="" plain="" meaning="" of="" the="" phrase="" ``for="" a="" fee''="" means="" services="" rendered="" in="" exchange="" for="" something="" of="" value="" or="" a="" monetary="" payment.="" we="" do="" not="" find="" persuasive="" utc's="" argument="" that="" ``for="" a="" fee''="" means="" ``for-profit.''="" we="" do="" not="" assume="" that="" congress="" intended="" to="" limit="" ``telecommunications="" services''="" to="" those="" which="" are="" offered="" ``for-profit''="" when="" congress="" could="" have,="" but="" did="" not,="" so="" state.="" in="" response="" to="" lcra's="" request,="" we="" note="" that="" cost="" sharing="" for="" the="" construction="" and="" operation="" of="" private="" telecommunications="" networks="" does="" not="" render="" participants="" ``telecommunications="" carriers''="" because="" such="" arrangements="" do="" not="" involve="" service="" ``directly="" to="" the="" public.''="" 449.="" directly="" to="" the="" public="" we="" find="" that="" the="" definition="" of="" ``telecommunications="" services''="" in="" which="" the="" phrase="" ``directly="" to="" the="" public''="" appears="" is="" intended="" to="" encompass="" only="" telecommunications="" provided="" on="" a="" common="" carrier="" basis.="" this="" conclusion="" is="" based="" on="" the="" joint="" explanatory="" statement,="" which="" explains="" that="" the="" term="" telecommunications="" service="" ``is="" defined="" as="" those="" services="" and="" facilities="" offered="" on="" a="" `common="" carrier'="" basis,="" recognizing="" the="" distinction="" between="" common="" carrier="" offerings="" that="" are="" provided="" to="" the="" public="" *="" *="" *="" and="" private="" services.''="" federal="" precedent="" holds="" that="" a="" carrier="" may="" be="" a="" common="" carrier="" if="" it="" holds="" itself="" out="" ``to="" service="" indifferently="" all="" potential="" users.''="" such="" users,="" however,="" are="" not="" limited="" to="" end="" users.="" common="" carrier="" services="" include="" services="" offered="" to="" other="" carriers,="" such="" as="" exchange="" access="" service,="" which="" is="" offered="" on="" a="" common="" carrier="" basis,="" but="" is="" offered="" primarily="" to="" other="" carriers.="" precedent="" further="" holds="" that="" a="" carrier="" will="" not="" be="" a="" common="" carrier="" ``where="" its="" practice="" is="" to="" make="" individualized="" decisions="" in="" particular="" cases="" whether="" and="" on="" what="" terms="" to="" serve.''="" 450.="" we="" conclude="" that="" only="" common="" carriers="" should="" be="" considered="" mandatory="" contributors="" to="" the="" support="" mechanisms.="" we="" agree="" with="" the="" joint="" board's="" recommendation="" that="" any="" entity="" that="" provides="" interstate="" telecommunications="" to="" users="" other="" than="" significantly="" restricted="" classes="" for="" a="" fee="" should="" contribute="" to="" the="" support="" mechanisms.="" we="" find,="" however,="" that="" the="" statute="" supports="" reaching="" the="" joint="" board's="" goal="" under="" our="" permissive="" authority="" rather="" than="" our="" mandatory="" authority.="" we="" agree="" with="" the="" joint="" board="" that="" private="" network="" operators="" that="" lease="" excess="" capacity="" on="" a="" non-common="" carrier="" basis="" should="" contribute="" to="" universal="" service="" support;="" we="" do="" not,="" however,="" include="" them="" in="" the="" category="" of="" mandatory="" contributors.="" we="" classify="" these="" service="" providers="" as="" ``other="" providers="" of="" interstate="" telecommunications''="" because="" we="" find="" that="" private="" network="" operators="" that="" lease="" excess="" capacity="" on="" a="" non-="" common="" carrier="" basis="" are="" not="" common="" carriers="" or="" mandatory="" contributors="" under="" the="" first="" sentence="" of="" section="" 254(d).="" nevertheless,="" we="" find="" that,="" pursuant="" to="" our="" permissive="" authority,="" the="" public="" interest="" requires="" them,="" as="" providers="" of="" interstate="" telecommunications,="" to="" contribute="" to="" universal="" service="" because="" they="" compete="" against="" telecommunications="" carriers="" in="" the="" provision="" of="" interstate="" telecommunications.="" 451.="" we="" agree="" with="" the="" joint="" board="" and="" find="" no="" reason="" to="" exempt="" from="" contribution="" any="" of="" the="" broad="" classes="" of="" telecommunications="" carriers="" that="" provides="" interstate="" telecommunications="" services,="" including="" satellite="" operators,="" resellers,="" wholesalers,="" paging="" companies,="" utility="" companies,="" or="" carriers="" that="" serve="" rural="" or="" high="" cost="" areas,="" because="" the="" act="" requires="" ``every="" telecommunications="" carrier="" that="" provides="" interstate="" telecommunications="" services''="" to="" contribute="" to="" the="" support="" mechanisms.="" thus,="" we="" agree="" with="" the="" joint="" board="" that="" any="" entity="" that="" provides="" interstate="" telecommunications="" services,="" including="" offering="" any="" of="" the="" services="" identified="" above="" for="" a="" fee="" directly="" to="" the="" public="" or="" to="" such="" classes="" of="" users="" as="" to="" be="" effectively="" available="" directly="" to="" the="" public,="" must="" contribute="" to="" the="" support="" mechanisms.="" 452.="" furthermore,="" we="" agree="" with="" the="" joint="" board="" that="" information="" service="" providers="" (isp)="" and="" enhanced="" service="" providers="" are="" not="" required="" to="" contribute="" to="" support="" mechanisms="" to="" the="" extent="" they="" provide="" such="" services.="" the="" act="" defines="" an="" ``information="" service''="" as="" ``the="" offering="" of="" a="" capability="" for="" generating,="" acquiring,="" storing,="" transforming,="" processing,="" retrieving,="" utilizing,="" or="" making="" available="" information="" via="" telecommunications="" *="" *="" *="" but="" does="" not="" include="" any="" use="" of="" any="" such="" capability="" for="" the="" management,="" control,="" or="" operation="" of="" a="" telecommunications="" system="" or="" the="" management="" of="" a="" telecommunications="" service.''="" (47="" u.s.c.="" section="" 153(20).="" the="" commission's="" rules="" define="" ``enhanced="" services''="" as="" ``services="" offered="" over="" common="" carrier="" transmission="" facilities="" used="" in="" interstate="" communications="" which="" employ="" computer="" processing="" applications="" that="" act="" on="" the="" format,="" content,="" code,="" [[page="" 32926]]="" protocol,="" or="" similar="" aspects="" of="" the="" subscriber's="" transmitted="" information;="" provide="" the="" subscriber="" additional,="" different,="" or="" restructured="" information;="" or="" involve="" subscriber="" interaction="" with="" stored="" information.''="" (47="" cfr="" section="" 64.702).="" the="" definition="" of="" enhanced="" services="" is="" substantially="" similar="" to="" the="" definition="" of="" information="" services.="" in="" the="" non-accounting="" safeguards="" first="" report="" and="" order="" (62="" fr="" 2927="" (january="" 21,="" 1997))="" in="" which="" the="" commission="" found="" that="" all="" services="" previously="" considered="" ``enhanced="" services''="" are="" ``information="" services,''="" the="" commission="" indicated="" that,="" to="" ensure="" regulatory="" certainty="" and="" continuity,="" it="" was="" preserving="" the="" definitional="" scheme="" by="" which="" certain="" services="" (enhanced="" and="" information="" services)="" are="" exempted="" from="" regulation="" under="" title="" ii="" of="" the="" act.="" we="" have="" issued="" a="" notice="" of="" inquiry="" (62="" fr="" 4670="" (january="" 31,="" 1997))="" seeking="" comment="" on="" the="" treatment="" of="" internet="" access="" and="" other="" information="" services="" that="" use="" the="" public="" switched="" network.="" we="" intend="" in="" that="" proceeding="" to="" review="" the="" status="" of="" isps="" under="" the="" 1996="" act="" in="" a="" comprehensive="" manner.="" 453.="" with="" respect="" to="" the="" issue="" of="" whether="" states="" may="" require="" cmrs="" providers="" to="" contribute="" to="" state="" universal="" service="" support="" mechanisms,="" we="" agree="" with="" the="" joint="" board="" and="" find="" that="" section="" 332(c)(3)="" does="" not="" preclude="" states="" from="" requiring="" cmrs="" providers="" to="" contribute="" to="" state="" support="" mechanisms.="" section="" 254(f)="" states="" that="" states="" may="" require="" telecommunications="" carriers="" that="" provide="" intrastate="" telecommunications="" services="" to="" make="" equitable="" and="" nondiscriminatory="" contributions="" to="" state="" support="" mechanisms.="" section="" 332(c)(3)="" prohibits="" states="" from="" regulating="" the="" rates="" charged="" by="" cmrs="" providers.="" section="" 332(c)(3)="" also="" states="" that="" ``[n]othing="" in="" this="" subparagraph="" shall="" exempt="" providers="" of="" commercial="" mobile="" services="" (where="" such="" services="" are="" a="" substitute="" for="" land="" line="" telephone="" exchange="" service="" for="" a="" substantial="" portion="" of="" the="" communications="" within="" such="" [s]tate)''="" from="" state="" universal="" service="" requirements.="" several="" commenters="" argue="" that="" section="" 332(c)(3)="" prohibits="" states="" from="" requiring="" cmrs="" providers="" operating="" within="" a="" state="" to="" contribute="" to="" state="" universal="" service="" programs="" unless="" the="" cmrs="" provider's="" service="" is="" a="" substitute="" for="" land="" line="" service="" in="" a="" substantial="" portion="" of="" the="" state.="" the="" joint="" board,="" however,="" disagreed.="" california="" puc="" has="" adopted="" this="" interpretation="" and="" has="" required="" cmrs="" providers="" in="" california="" to="" contribute="" to="" the="" state's="" programs="" for="" lifeline="" and="" high="" cost="" small="" companies="" since="" january="" 1,="" 1995.="" 454.="" other="" providers="" of="" interstate="" telecommunications="" we="" require="" all="" the="" entities="" identified="" by="" the="" joint="" board="" in="" its="" recommended="" decision="" to="" contribute="" to="" the="" support="" mechanisms,="" subject="" to="" the="" slight="" modification="" discussed="" above="" regarding="" carriers="" that="" provide="" only="" international="" services.="" because="" of="" the="" statutory="" language="" and="" legislative="" history="" discussed="" above,="" however,="" we="" reach="" the="" result="" recommended="" by="" the="" joint="" board="" in="" a="" slightly="" different="" manner.="" we="" find="" under="" our="" permissive="" authority="" over="" ``other="" providers="" of="" telecommunications''="" that="" the="" public="" interest="" requires="" private="" service="" providers="" that="" offer="" their="" services="" to="" others="" for="" a="" fee="" and="" payphone="" aggregators="" to="" contribute="" to="" our="" support="" mechanisms.="" 455.="" we="" find="" that="" the="" principle="" of="" competitive="" neutrality,="" recommended="" by="" the="" joint="" board="" and="" adopted="" by="" the="" commission,="" suggests="" that="" we="" should="" require="" certain="" ``providers="" of="" interstate="" telecommunications''="" to="" contribute="" to="" the="" support="" mechanisms.="" we="" find="" that="" the="" public="" interest="" requires="" both="" private="" service="" providers="" that="" offer="" interstate="" telecommunications="" to="" others="" for="" a="" fee="" and="" payphone="" aggregators="" to="" contribute="" to="" the="" preservation="" and="" advancement="" of="" universal="" service="" in="" the="" same="" manner="" as="" carriers="" that="" provide="" ``interstate="" telecommunications="" services''="" because="" this="" approach="" reduces="" the="" possibility="" that="" carriers="" with="" universal="" service="" obligations="" will="" compete="" directly="" with="" carriers="" without="" such="" obligations.="" in="" addition,="" the="" inclusion="" of="" such="" providers="" as="" contributors="" to="" the="" support="" mechanisms="" will="" broaden="" the="" funding="" base,="" lessening="" contribution="" requirements="" on="" telecommunications="" carriers="" or="" any="" particular="" class="" of="" telecommunications="" providers.="" 456.="" although="" some="" private="" service="" providers="" serve="" only="" their="" own="" internal="" needs,="" some="" provide="" services="" or="" lease="" excess="" capacity="" on="" a="" private="" contractual="" basis.="" the="" provision="" of="" services="" or="" the="" lease="" of="" excess="" capacity="" on="" a="" private="" contractual="" basis="" alone="" does="" not="" render="" these="" private="" service="" providers="" common="" carriers="" and="" thus="" mandatory="" contributors.="" we="" find="" justification,="" however,="" pursuant="" to="" our="" permissive="" authority,="" for="" requiring="" these="" providers="" that="" provide="" telecommunications="" to="" others="" in="" addition="" to="" serving="" their="" internal="" needs="" to="" contribute="" to="" federal="" universal="" service="" on="" the="" same="" basis="" as="" telecommunications="" carriers.="" without="" the="" benefit="" of="" access="" to="" the="" pstn,="" which="" is="" supported="" by="" universal="" service="" mechanisms,="" these="" providers="" would="" be="" unable="" to="" sell="" their="" services="" to="" others="" for="" a="" fee.="" accordingly,="" these="" providers,="" like="" telecommunications="" or="" common="" carriers,="" have="" built="" their="" businesses="" or="" a="" part="" of="" their="" businesses="" on="" access="" to="" the="" pstn,="" provide="" telecommunications="" in="" competition="" with="" common="" carriers,="" and="" their="" non-common="" carrier="" status="" results="" solely="" from="" the="" manner="" in="" which="" they="" have="" chosen="" to="" structure="" their="" operations.="" even="" if="" a="" private="" network="" operator="" is="" not="" connected="" to="" the="" pstn,="" if="" it="" provides="" telecommunications,="" it="" competes="" with="" common="" carriers,="" and="" the="" principle="" of="" competitive="" neutrality="" dictates="" that="" we="" should="" secure="" contributions="" from="" it="" as="" well="" as="" its="" competitors.="" thus,="" pursuant="" to="" our="" permissive="" authority,="" we="" find="" that="" the="" public="" interest="" requires="" private="" service="" providers="" that="" offer="" services="" to="" others="" for="" a="" fee="" on="" a="" non-common="" carrier="" basis="" to="" contribute="" to="" the="" support="" mechanisms.="" 457.="" we="" agree="" with="" rboc="" payphone="" coalition="" that="" payphone="" service="" providers="" are="" not="" telecommunications="" carriers="" because="" they="" are="" ``aggregators.''="" payphone="" service="" providers="" do,="" however,="" provide="" interstate="" telecommunications="" and="" thus="" are="" subject="" to="" our="" permissive="" authority="" to="" require="" contributions="" if="" the="" public="" interest="" so="" requires.="" telecommunications="" carriers="" that="" provide="" payphone="" services="" must="" contribute="" on="" the="" basis="" of="" their="" telecommunications="" revenues,="" including="" the="" revenues="" derived="" from="" their="" payphone="" operations,="" because="" payphone="" revenues="" are="" revenues="" derived="" from="" end="" users="" for="" telecommunications="" services.="" if="" we="" did="" not="" exercise="" our="" permissive="" authority,="" aggregators="" that="" provide="" only="" payphone="" service="" would="" not="" be="" required="" to="" contribute,="" while="" their="" telecommunications="" carrier="" competitors="" would.="" we="" do="" not="" want="" to="" create="" incentives="" for="" telecommunications="" carriers="" to="" alter="" their="" business="" structures="" by="" divesting="" their="" payphone="" operations="" in="" order="" to="" reduce="" their="" contributions="" to="" the="" support="" mechanisms.="" thus,="" we="" find="" that="" because="" payphone="" aggregators="" are="" connected="" to="" the="" pstn="" and="" because="" they="" directly="" compete="" with="" mandatory="" contributors="" to="" universal="" service="" the="" public="" interest="" requires="" payphone="" providers="" to="" contribute="" to="" the="" support="" mechanisms.="" 458.="" we="" do="" not="" wish,="" however,="" to="" require="" contributions="" from="" payphone="" aggregators,="" such="" as="" beauty="" shop="" or="" grocery="" store="" owners,="" retail="" establishment="" franchisees,="" restaurant="" owners,="" or="" schools="" that="" provide="" payphones="" primarily="" as="" a="" convenience="" to="" the="" customers="" of="" their="" primary="" business="" and="" do="" not="" provide="" payphone="" services="" as="" part="" of="" their="" core="" business.="" [[page="" 32927]]="" the="" provision="" of="" a="" payphone="" is="" merely="" incidental="" to="" their="" primary="" non-="" telecommunications="" business="" and="" constitutes="" a="" minimal="" percentage="" of="" their="" total="" annual="" business="" revenues.="" we="" anticipate="" that="" these="" entities="" will="" qualify="" for="" the="" de="" minimis="" exemption="" and="" that="" they="" will="" not="" be="" required="" to="" contribute="" because="" their="" contributions="" will="" be="" less="" than="" $100.00="" per="" year.="" if="" their="" contributions="" exceed="" the="" de="" minimis="" level,="" however,="" they="" will="" be="" required="" to="" contribute.="" 459.="" finally,="" we="" agree="" with="" the="" joint="" board="" that="" those="" ``other="" providers="" of="" telecommunications''="" that="" provide="" telecommunications="" solely="" to="" meet="" their="" internal="" needs="" should="" not="" be="" required="" to="" contribute="" to="" the="" support="" mechanisms="" at="" this="" time,="" because="" telecommunications="" do="" not="" comprise="" the="" core="" of="" their="" business.="" private="" network="" operators="" that="" serve="" only="" their="" internal="" needs="" do="" not="" lease="" excess="" capacity="" to="" others="" and="" do="" not="" charge="" others="" for="" use="" of="" their="" network.="" thus,="" we="" find="" that="" they="" have="" not="" structured="" their="" businesses="" around="" the="" provision="" of="" telecommunications="" to="" others.="" in="" addition,="" it="" would="" be="" administratively="" burdensome="" to="" assess="" a="" special="" non-revenues-="" based="" contribution="" on="" these="" providers="" because="" they="" do="" not="" derive="" revenues="" from="" the="" provision="" of="" services="" to="" themselves.="" 460.="" we="" note="" that="" cost-sharing="" for="" the="" construction="" and="" operation="" of="" private="" networks="" would="" not="" render="" participants="" ``other="" providers="" of="" telecommunications''="" that="" must="" contribute="" to="" the="" support="" mechanisms="" because="" the="" participants="" are="" a="" consortium="" of="" customers="" of="" a="" carrier.="" if,="" however,="" a="" lead="" participant="" owned="" and="" operated="" its="" own="" telecommunications="" network="" and="" received="" monetary="" payments="" for="" service="" from="" other="" participants,="" the="" lead="" participant="" would="" be="" a="" provider="" of="" telecommunications="" and,="" if="" it="" provided="" interstate="" telecommunications,="" would="" be="" included="" within="" the="" group="" that="" we="" require="" to="" contribute="" to="" the="" support="" mechanisms,="" subject="" to="" the="" de="" minimis="" exemption.="" we="" also="" find,="" however,="" that="" government="" entities="" that="" purchase="" telecommunications="" services="" in="" bulk="" on="" behalf="" of="" themselves,="" e.g.,="" state="" networks="" for="" schools="" and="" libraries,="" will="" not="" be="" considered="" ``other="" providers="" of="" telecommunications''="" that="" will="" be="" required="" to="" contribute.="" such="" government="" entities="" would="" be="" purchasing="" services="" for="" local="" or="" state="" governments="" or="" related="" agencies.="" therefore,="" we="" find="" that="" such="" government="" agencies="" serve="" only="" their="" internal="" needs="" and="" should="" not="" be="" required="" to="" contribute.="" similarly,="" we="" conclude="" that="" public="" safety="" and="" local="" governmental="" entities="" licensed="" under="" subpart="" b="" of="" part="" 90="" of="" our="" rules="" will="" not="" be="" required="" to="" contribute="" because="" of="" the="" restrictive="" eligibility="" requirements="" for="" these="" services="" and="" because="" of="" the="" important="" public="" safety="" and="" welfare="" functions="" for="" which="" these="" services="" are="" used.="" similarly,="" if="" an="" entity="" exclusively="" provides="" interstate="" telecommunications="" to="" public="" safety="" or="" government="" entities="" and="" does="" not="" offer="" services="" to="" others,="" that="" entity="" will="" not="" be="" required="" to="" contribute.="" 461.="" the="" de="" minimis="" exemption="" we="" adopt="" the="" joint="" board's="" view="" that="" contributors="" whose="" contributions="" are="" less="" than="" the="" administrator's="" administrative="" costs="" of="" collection="" should="" be="" exempt="" from="" reporting="" and="" contribution="" requirements.="" section="" 254(d)="" itself="" does="" not="" provide="" specific="" guidance="" on="" how="" the="" commission="" should="" exercise="" its="" authority="" to="" exempt="" carriers="" whose="" contributions="" would="" be="" de="" minimis.="" the="" joint="" explanatory="" statement,="" however,="" states="" the="" congressional="" expectation="" that="" ``this="" authority="" would="" only="" be="" used="" in="" cases="" where="" the="" administrative="" cost="" of="" collecting="" contributions="" from="" a="" carrier="" or="" carriers="" would="" exceed="" the="" contribution="" that="" carrier="" would="" otherwise="" have="" to="" make="" under="" the="" formula="" for="" contributions="" selected="" by="" the="" commission.''="" thus,="" we="" find="" that="" the="" legislative="" history="" of="" section="" 254(d)="" clarifies="" congress's="" intent="" that="" this="" exemption="" be="" narrowly="" construed.="" it="" also="" clarifies="" that="" the="" purpose="" of="" the="" de="" minimis="" exemption="" is="" to="" prevent="" waste="" resulting="" from="" requiring="" contributions="" when="" the="" administrative="" costs="" of="" collecting="" them="" will="" exceed="" the="" amounts="" collected.="" thus,="" we="" adopt="" the="" joint="" board's="" recommendation="" and="" reject="" commenters'="" arguments="" in="" support="" of="" other="" factors="" for="" determining="" when="" a="" carrier="" providing="" interstate="" telecommunications="" services="" should="" be="" exempt="" from="" the="" statutory="" obligation="" to="" contribute="" to="" federal="" universal="" service="" support="" mechanisms.="" 462.="" we="" agree="" with="" the="" joint="" board="" which="" advocates="" basing="" the="" exemption="" on="" the="" administrator's="" and="" contributors'="" costs,="" and="" conclude="" that="" the="" cost="" of="" collection="" should="" encompass="" only="" the="" administrator's="" costs="" to="" bill="" and="" collect="" individual="" carrier="" contributions.="" although="" we="" agree="" that="" a="" de="" minimis="" exemption,="" as="" defined="" above,="" will="" serve="" the="" public="" interest,="" commenters="" did="" not="" submit="" data="" regarding="" the="" incremental="" cost="" of="" collection="" for="" the="" record.="" we="" will="" adopt="" the="" $100.00="" minimum="" contribution="" requirement="" used="" for="" trs="" contribution="" purposes="" because="" we="" assume="" that="" the="" administrator's="" administrative="" costs="" of="" collection="" could="" possibly="" equal="" as="" much="" as="" $100.00.="" therefore,="" if="" a="" contributor's="" contribution="" would="" be="" less="" than="" $100.00,="" it="" will="" not="" be="" required="" to="" contribute="" or="" comply="" with="" reporting="" requirements.="" we="" instruct="" the="" administrator="" to="" re-evaluate="" incremental="" administrative="" costs,="" taking="" into="" account="" inflation,="" after="" the="" contribution="" mechanisms="" have="" been="" implemented.="" 463.="" we="" reject="" the="" argument="" that="" requiring="" contributions="" by="" paging="" carriers="" represents="" an="" unconstitutional="" tax="" because="" paging="" carriers="" do="" not="" derive="" any="" benefit="" from="" universal="" service.="" first,="" we="" note="" that="" although="" some="" paging="" carriers="" may="" be="" ineligible="" to="" receive="" support,="" all="" telecommunications="" carriers="" benefit="" from="" a="" ubiquitous="" telecommunications="" network.="" customers="" who="" receive="" pages="" would="" not="" be="" able="" to="" receive="" or="" respond="" to="" those="" pages="" absent="" use="" of="" the="" pstn.="" second,="" as="" we="" explained="" above,="" our="" contribution="" requirements="" do="" not="" constitute="" a="" tax.="" some="" commenters="" also="" argue="" that="" carriers="" ineligible="" to="" receive="" support="" should="" be="" allowed="" to="" make="" reduced="" contributions="" to="" universal="" service.="" because="" section="" 254(d)="" states="" that="" ``every="" telecommunications="" carrier="" that="" provides="" interstate="" telecommunications="" services''="" must="" contribute="" to="" universal="" service="" and="" does="" not="" limit="" contributions="" to="" ``eligible="" carriers,''="" we="" agree="" with="" the="" joint="" board="" and="" reject="" these="" arguments.="" thus,="" we="" find="" that="" the="" de="" minimis="" exemption="" cannot="" and="" should="" not="" be="" interpreted="" to="" allow="" reduced="" contributions="" or="" contribution="" exemptions="" for="" ineligible="" carriers.="" 464.="" general="" jurisdiction="" over="" universal="" service="" support="" we="" conclude="" that="" the="" commission="" has="" jurisdiction="" to="" assess="" contributions="" for="" the="" universal="" service="" support="" mechanisms="" from="" intrastate="" as="" well="" as="" interstate="" revenues="" and="" to="" require="" carriers="" to="" seek="" state="" (and="" not="" federal)="" authority="" to="" recover="" a="" portion="" of="" the="" contribution="" in="" intrastate="" rates.="" although="" we="" expressly="" decline="" to="" exercise="" the="" entirety="" of="" this="" jurisdiction,="" we="" believe="" it="" is="" important="" to="" set="" forth="" the="" contours="" of="" our="" authority.="" 465.="" our="" authority="" over="" the="" universal="" service="" support="" mechanisms="" is="" derived="" first="" and="" foremost="" from="" the="" plain="" language="" of="" section="" 254.="" first,="" section="" 254(a)="" provides="" that="" rules="" ``to="" implement''="" the="" section="" are="" to="" be="" recommended="" by="" the="" joint="" board,="" and="" those="" recommendations,="" in="" turn,="" are="" to="" be="" implemented="" by="" the="" commission.="" thus,="" the="" commission="" has="" the="" ultimate="" responsibility="" to="" effectuate="" section="" 254.="" further,="" congress="" reemphasized="" the="" [[page="" 32928]]="" commission's="" authority="" independent="" of="" the="" joint="" board="" by="" directing="" in="" section="" 254(c)(2)="" that="" the="" concept="" of="" universal="" service="" is="" an="" ``evolving="" level="" of="" telecommunications="" that="" the="" commission="" shall="" establish="" periodically.''="" thus,="" congress="" expressly="" authorized="" the="" commission="" to="" define="" the="" parameters="" of="" universal="" service.="" 466.="" section="" 254(d)="" also="" mandates="" that="" interstate="" telecommunications="" carriers="" ``shall="" contribute,="" on="" an="" equitable="" and="" nondiscriminatory="" basis,="" to="" the="" specific,="" predictable,="" and="" sufficient="" mechanisms="" established="" by="" the="" commission="" to="" preserve="" and="" advance="" universal="" service.''="" in="" thus="" prescribing="" that="" the="" support="" mechanisms="" be="" ``sufficient,''="" congress="" obligated="" the="" commission="" to="" ensure="" that="" the="" support="" mechanisms="" satisfy="" section="" 254's="" goal="" of="" ``preserving="" and="" advancing="" universal="" service,''="" consistent="" with="" the="" principles="" set="" forth="" in="" section="" 254(b),="" including="" the="" principle="" that="" quality="" services="" should="" be="" available="" at="" ``just,="" reasonable,="" and="" affordable="" rates.''="" in="" so="" doing,="" congress="" expressly="" granted="" the="" commission="" jurisdiction="" to="" establish="" support="" mechanisms="" of="" a="" sufficient="" size="" adequately="" to="" support="" universal="" service.="" 467.="" in="" section="" 254(b),="" congress="" made="" affordable="" basic="" service="" a="" goal="" of="" federal="" universal="" service,="" by="" that="" determination,="" congress="" meant="" that="" both="" interstate="" and="" intrastate="" services="" should="" be="" affordable.="" congress="" also="" directed="" the="" commission="" and="" the="" states="" to="" strive="" to="" make="" implicit="" support="" mechanisms="" explicit.="" we="" have="" found="" nothing="" in="" the="" statute="" or="" legislative="" history="" to="" show="" that,="" notwithstanding="" congress's="" mandate="" to="" make="" universal="" service="" subsidies="" explicit,="" congress="" intended="" to="" alter="" the="" current="" arrangement="" by="" requiring="" interstate="" services="" to="" assume="" the="" entire="" burden="" of="" providing="" for="" universal="" service.="" accordingly,="" the="" section="" 254="" mandate="" covers="" both="" interstate="" and="" intrastate="" services="" and="" therefore="" it="" is="" also="" reasonable="" that="" the="" commission,="" in="" ensuring="" that="" the="" overall="" amount="" of="" the="" universal="" support="" mechanisms="" is="" ``specific,="" predictable,="" and="" sufficient,''="" may="" also="" mandate="" that="" contributions="" be="" based="" on="" carriers'="" provision="" of="" intrastate="" services.="" as="" discussed="" below,="" however,="" we="" decline="" to="" exercise="" the="" full="" extent="" of="" this="" authority="" out="" of="" respect="" for="" the="" states="" and="" the="" joint="" board's="" expertise="" in="" protecting="" universal="" service.="" .="" 468.="" we="" have="" concluded="" that="" we="" will="" assess="" contributions="" for="" the="" support="" mechanisms="" for="" eligible="" schools,="" libraries,="" and="" rural="" health="" care="" providers="" from="" intrastate="" and="" interstate="" revenues.="" we="" also="" conclude="" that,="" when="" we="" assess="" contributions="" based="" on="" intrastate="" as="" well="" as="" interstate="" revenues,="" we="" have="" the="" authority="" to="" refer="" carriers="" to="" the="" states="" to="" seek="" authority="" to="" recover="" a="" portion="" of="" their="" intrastate="" contribution="" from="" intrastate="" rates.="" we="" have="" not="" adopted="" this="" approach="" in="" this="" order.="" in="" section="" 254(f)="" congress="" expressly="" allowed="" only="" for="" those="" state="" universal="" service="" mechanisms="" that="" are="" not="" ``inconsistent="" with="" the="" commission's="" rules="" to="" preserve="" and="" advance="" universal="" service.''="" thus,="" the="" statutory="" scheme="" of="" section="" 254="" demonstrates="" that="" the="" commission="" ultimately="" is="" responsible="" for="" ensuring="" sufficient="" support="" mechanisms,="" that="" the="" states="" are="" encouraged="" to="" become="" partners="" with="" the="" commission="" in="" ensuring="" sufficient="" support="" mechanisms,="" and="" that="" the="" states="" may="" prescribe="" additional,="" supplemental="" mechanisms.="" 469.="" section="" 2(b)="" of="" the="" communications="" act="" is="" not="" implicated="" in="" this="" jurisdictional="" analysis.="" section="" 2(b)="" provides="" that="" ``nothing="" in="" (the="" communications="" act)="" shall="" be="" construed="" to="" apply="" or="" give="" the="" commission="" jurisdiction="" with="" respect="" to="" *="" *="" *="" charges,="" classifications,="" practices,="" services,="" facilities,="" or="" regulations="" for="" or="" in="" connection="" with="" intrastate="" communications="" service="" by="" wire="" or="" radio.''="" even="" when="" the="" commission="" exercises="" jurisdiction="" to="" assess="" contributions="" for="" universal="" service="" support="" from="" intrastate="" as="" well="" as="" interstate="" revenues="" (i.e.,="" for="" eligible="" schools="" and="" libraries="" and="" rural="" health="" care="" providers),="" such="" an="" approach="" does="" not="" constitute="" rate="" regulation="" of="" those="" services="" or="" regulation="" of="" those="" services="" so="" as="" to="" violate="" section="" 2(b).="" instead,="" the="" commission="" merely="" is="" supporting="" those="" services,="" as="" expressly="" required="" by="" congress="" in="" section="" 254.="" 470.="" moreover,="" although="" the="" commission="" is="" not="" adopting="" this="" approach,="" section="" 2(b)="" would="" not="" be="" implicated="" even="" if="" the="" commission="" were="" to="" refer="" carriers="" to="" the="" states="" to="" obtain="" authorization="" to="" recover="" their="" intrastate="" contributions="" via="" intrastate="" rates,="" which="" it="" is="" not="" doing,="" because="" the="" commission="" would="" still="" be="" referring="" the="" matter="" to="" the="" states'="" authority="" over="" changes="" in="" intrastate="" rates="" and="" the="" commission="" itself="" would="" not="" be="" regulating="" those="" rates.="" in="" any="" event,="" to="" the="" extent="" that="" section="" 2(b)="" would="" be="" implicated="" in="" either="" of="" these="" approaches="" (assessment="" or="" recovery),="" section="" 254's="" express="" directive="" that="" universal="" service="" support="" mechanisms="" be="" ``sufficient''="" ameliorates="" any="" section="" 2(b)="" concerns="" because,="" as="" a="" rule="" of="" construction="" section="" 2(b)="" only="" is="" implicated="" where="" the="" statutory="" provision="" is="" ambiguous.="" section="" 254="" is="" unambiguous="" in="" that="" the="" services="" to="" be="" supported="" have="" intrastate="" as="" well="" as="" interstate="" characteristics="" and="" in="" that="" the="" commission="" is="" to="" promulgate="" regulations="" implementing="" federal="" support="" mechanisms="" covering="" the="" intrastate="" and="" interstate="" characteristics="" of="" the="" supported="" services.="" therefore,="" the="" unambiguous="" language="" of="" section="" 254="" overrides="" section="" 2(b)'s="" otherwise-applicable="" rule="" of="" construction.="" 471.="" further,="" to="" the="" extent="" that="" commenters="" assert="" that="" the="" communications="" act="" generally="" divides="" the="" world="" into="" two="" spheres--="" commission="" jurisdiction="" over="" interstate="" carriers="" and="" interstate="" revenues="" and="" state="" jurisdiction="" over="" intrastate="" carriers="" and="" intrastate="" revenues--section="" 254="" blurs="" any="" perceived="" bright="" line="" between="" interstate="" and="" intrastate="" matters.="" the="" services="" that="" will="" be="" supported="" pursuant="" to="" this="" order="" include="" both="" intrastate="" and="" interstate="" services.="" although="" section="" 254="" anticipates="" a="" federal-state="" universal="" service="" partnership,="" section="" 254="" grants="" the="" commission="" primary="" responsibility="" for="" defining="" the="" parameters="" of="" universal="" service.="" indeed,="" the="" recognition="" of="" this="" fact="" presumably="" led="" congress="" to="" require="" joint="" board="" involvement="" in="" that="" congress="" recognized="" that="" it="" was="" important="" for="" the="" commission="" to="" consider="" the="" states'="" recommendations="" because="" the="" regulations="" ultimately="" adopted="" inevitably="" would="" affect="" the="" states'="" traditional="" universal="" service="" programs.="" the="" new="" requirements="" in="" the="" statute="" to="" consider="" the="" needs="" of="" schools,="" libraries,="" and="" health="" care="" providers="" in="" and="" of="" themselves="" require="" a="" fresh="" look="" at="" universal="" service.="" the="" legislative="" history="" also="" indicates="" that="" the="" commission,="" in="" consultation="" with="" the="" joint="" board,="" was="" not="" to="" be="" bound="" by="" mechanisms="" used="" currently.="" therefore,="" we="" conclude="" that="" section="" 254="" grants="" us="" the="" authority="" to="" assess="" contributions="" for="" the="" universal="" service="" support="" mechanisms="" from="" intrastate="" as="" well="" as="" interstate="" revenues="" and="" to="" refer="" carriers="" to="" seek="" state="" (and="" not="" federal)="" authorization="" to="" recover="" a="" portion="" of="" the="" contribution="" in="" intrastate="" rates.="" we="" see="" no="" need="" at="" this="" time="" to="" exercise="" the="" full="" extent="" of="" our="" jurisdiction.="" 472.="" scope="" of="" the="" revenue="" base="" for="" the="" high="" cost="" and="" low-income="" support="" mechanisms="" we="" have="" determined="" that="" we="" will="" assess="" and="" permit="" recovery="" of="" contributions="" to="" the="" rural,="" insular,="" and="" high="" cost="" and="" low-income="" support="" mechanisms="" based="" only="" on="" interstate="" revenues.="" we="" will="" seek="" further="" guidance="" on="" this="" subject="" from="" the="" joint="" board="" because="" the="" joint="" board="" makes="" a="" recommendation="" as="" to="" whether="" the="" revenue="" base="" for="" the="" high="" cost="" and="" low-="" [[page="" 32929]]="" income="" mechanisms="" should="" include="" intrastate="" as="" well="" as="" interstate="" revenues.="" 473.="" recovery="" of="" carriers'="" contributions="" to="" the="" high="" cost="" and="" low-="" income="" support="" mechanisms="" we="" have="" determined="" to="" continue="" our="" historical="" approach="" to="" recovery="" of="" universal="" service="" support="" mechanisms,="" that="" is,="" to="" permit="" carriers="" to="" recover="" contributions="" to="" universal="" service="" support="" mechanisms="" through="" rates="" for="" interstate="" services="" only.="" in="" discussing="" recovery="" we="" are="" referring="" to="" the="" process="" by="" which="" carriers'="" recoup="" the="" amount="" of="" their="" contributions="" to="" universal="" service.="" although="" the="" joint="" board="" did="" not="" address="" this="" issue,="" the="" joint="" board="" concluded="" that="" the="" ``role="" of="" complementary="" state="" and="" federal="" universal="" service="" mechanisms="" require[d]="" further="" reflection''="" before="" the="" joint="" board="" could="" recommend="" that="" we="" assess="" contributions="" based="" on="" intrastate="" as="" well="" as="" interstate="" revenues.="" therefore,="" we="" believe="" that="" our="" decision="" to="" provide="" for="" recovery="" based="" only="" on="" rates="" for="" interstate="" services="" is="" not="" inconsistent="" with="" the="" joint="" board="" recommended="" decision.="" 474.="" under="" our="" recovery="" mechanism,="" carriers="" will="" be="" permitted,="" but="" not="" required,="" to="" pass="" through="" their="" contributions="" to="" their="" interstate="" access="" and="" interexchange="" customers.="" we="" note="" that,="" if="" some="" carriers="" (e.g.,="" ixcs)="" decide="" to="" recover="" their="" contribution="" costs="" from="" their="" customers,="" the="" carriers="" may="" not="" shift="" more="" than="" an="" equitable="" share="" of="" their="" contributions="" to="" any="" customer="" or="" group="" of="" customers.="" we="" also="" have="" determined="" that="" the="" interstate="" contributions="" will="" constitute="" the="" substantial="" cause="" that="" would="" provide="" a="" public="" interest="" justification="" for="" filing="" federal="" tariff="" changes="" or="" making="" contract="" adjustments.="" 475.="" we="" have="" determined="" that="" ilecs="" subject="" to="" our="" price="" cap="" rules="" may="" treat="" their="" contributions="" for="" the="" new="" universal="" service="" support="" mechanisms="" as="" an="" exogenous="" cost="" change.="" we="" outline="" the="" precise="" contours="" of="" the="" exogenous="" change="" available="" to="" federal="" price="" cap="" carriers="" in="" our="" access="" charge="" reform="" order,="" adopted="" contemporaneously="" with="" this="" order.="" for="" carriers="" not="" subject="" to="" federal="" price="" caps="" (e.g.,="" other="" ilecs),="" we="" have="" determined="" to="" permit="" recovery="" of="" universal="" service="" contributions="" by="" applying="" a="" factor="" to="" increase="" their="" carrier="" common="" line="" charge="" revenue="" requirement.="" of="" course,="" lecs="" and="" their="" affiliates="" that="" provide="" interlata="" interstate="" services="" each="" will="" have="" their="" own="" universal="" service="" obligations="" and,="" therefore,="" the="" affiliates="" will="" be="" required="" to="" recover="" their="" own="" universal="" service="" contributions.="" 476.="" assessment="" of="" the="" revenue="" base="" for="" the="" high="" cost="" and="" low-income="" support="" mechanisms="" in="" addition="" to="" the="" recovery="" mechanisms,="" we="" also="" consider="" whether="" we="" should="" assess="" contributions="" to="" the="" universal="" service="" support="" mechanisms="" based="" solely="" on="" interstate="" revenues="" or="" on="" both="" interstate="" and="" intrastate="" revenues.="" to="" promote="" comity="" between="" the="" federal="" and="" state="" governments,="" we="" have="" decided="" to="" follow="" our="" approach="" to="" the="" recovery="" issues="" and="" thus="" to="" assess="" contributions="" for="" the="" high="" cost="" and="" low="" income="" support="" mechanisms="" based="" solely="" on="" interstate="" revenues.="" 477.="" the="" approach="" we="" adopt="" today="" is="" consistent="" with="" the="" approach="" taken="" by="" the="" joint="" board.="" specifically,="" the="" joint="" board="" concluded="" that="" the="" ``decision="" as="" to="" whether="" intrastate="" revenues="" should="" be="" used="" to="" support="" the="" high="" cost="" and="" low="" income="" assistance="" programs="" should="" be="" coordinated="" with="" the="" establishment="" of="" the="" scope="" and="" magnitude="" of="" the="" proxy-based="" fund,="" as="" well="" as="" with="" state="" universal="" service="" support="" mechanisms.''="" although="" the="" joint="" board="" may="" have="" anticipated="" that="" these="" decisions="" all="" would="" be="" made="" in="" this="" order,="" the="" crux="" of="" the="" joint="" board's="" analysis="" is="" that="" the="" question="" of="" interstate/intrastate="" contribution="" should="" be="" coordinated="" with="" the="" issues="" of="" appropriate="" forward-looking="" mechanisms="" and="" appropriate="" revenue="" benchmarks.="" because="" those="" issues="" will="" be="" resolved="" in="" the="" future,="" we="" believe="" it="" would="" be="" premature="" for="" us="" to="" assess="" contributions="" on="" intrastate="" as="" well="" as="" interstate="" revenues.="" 478.="" our="" assessment="" procedure="" is="" as="" follows.="" between="" january="" 1,="" 1998="" and="" january="" 1,="" 1999,="" contributions="" for="" the="" existing="" high="" cost="" support="" mechanisms="" and="" low-income="" support="" programs="" will="" be="" assessed="" against="" interstate="" end-user="" telecommunications="" revenues.="" beginning="" on="" january="" 1,="" 1999,="" the="" commission="" will="" modify="" universal="" service="" assessments="" to="" fund="" 25="" percent="" of="" the="" difference="" between="" cost="" of="" service="" defined="" by="" the="" applicable="" forward-looking="" economic="" cost="" method="" less="" the="" national="" benchmark,="" through="" a="" percentage="" contribution="" on="" interstate="" end-user="" telecommunications="" revenues.="" we="" have="" decided="" to="" institute="" this="" approach="" to="" assessment="" on="" january="" 1,="" 1999="" to="" coordinate="" it="" with="" the="" shift="" of="" universal="" service="" support="" for="" rural,="" insular,="" and="" high="" cost="" areas="" served="" by="" large="" lecs="" from="" the="" access="" charge="" regime="" to="" the="" section="" 254="" universal="" service="" mechanisms.="" 479.="" in="" response="" to="" comsat's="" comments,="" we="" clarify="" that="" carriers="" that="" provide="" interstate="" services="" must="" include="" all="" revenues="" derived="" from="" interstate="" and="" international="" telecommunications="" services.="" thus,="" international="" telecommunications="" services="" billed="" to="" a="" domestic="" end="" user="" will="" be="" included="" in="" the="" contribution="" base="" of="" a="" carrier="" that="" provides="" interstate="" telecommunications="" services.="" section="" 2(b)="" of="" the="" act="" grants="" states="" the="" authority="" to="" regulate="" intrastate="" rates,="" but="" in="" contrast="" section="" 2(a)="" grants="" the="" commission="" sole="" jurisdiction="" over="" interstate="" and="" foreign="" communications.="" foreign="" communications="" are="" defined="" as="" a="" ``communication="" or="" transmission="" from="" or="" to="" any="" place="" in="" the="" united="" states="" to="" or="" from="" a="" foreign="" country,="" or="" between="" a="" station="" in="" the="" united="" states="" and="" a="" mobile="" station="" located="" outside="" of="" the="" united="" states.''="" we="" find="" that="" it="" would="" serve="" the="" public="" interest="" to="" require="" carriers="" providing="" interstate="" telecommunications="" services="" to="" base="" their="" contributions="" on="" revenues="" derived="" from="" their="" interstate="" and="" foreign="" or="" international="" telecommunications="" services.="" contributors="" that="" provide="" international="" telecommunications="" services="" benefit="" from="" universal="" service="" because="" they="" must="" either="" terminate="" or="" originate="" telecommunications="" on="" the="" domestic="" pstn.="" therefore,="" we="" find="" that="" contributors="" that="" provide="" international="" telecommunications="" services="" should="" contribute="" to="" universal="" service="" on="" the="" basis="" of="" revenues="" derived="" from="" international="" communication="" services,="" although="" revenues="" from="" communications="" between="" two="" international="" points="" would="" not="" be="" included="" in="" the="" revenue="" base.="" 480.="" scope="" of="" revenue="" base="" for="" the="" support="" mechanisms="" for="" eligible="" schools,="" libraries,="" and="" rural="" health="" care="" providers="" we="" adopt="" the="" joint="" board's="" recommendation="" that="" ``universal="" support="" mechanisms="" for="" schools="" and="" libraries="" and="" rural="" health="" care="" providers="" be="" funded="" by="" contributions="" based="" on="" both="" the="" intrastate="" and="" interstate="" revenues="" of="" providers="" of="" interstate="" telecommunications="" services.''="" we="" adopt="" this="" approach="" not="" only="" because="" the="" joint="" board="" recommended="" it,="" but="" also="" because="" the="" eligible="" schools,="" libraries,="" and="" rural="" health="" care="" mechanisms="" are="" new,="" unique="" support="" mechanisms="" that="" have="" not="" historically="" been="" supported="" through="" a="" universal="" service="" funding="" mechanism.="" nonetheless,="" for="" now,="" we="" will="" provide="" for="" recovery="" of="" the="" entirety="" of="" these="" contributions="" via="" interstate="" mechanisms.="" 481.="" we="" find="" that="" our="" approach="" minimizes="" any="" perceived="" jurisdictional="" difficulties="" under="" section="" 2(b)="" because="" we="" do="" not="" require="" carriers="" to="" seek="" state="" authorization="" to="" recover="" the="" contributions="" attributable="" to="" intrastate="" [[page="" 32930]]="" revenues.="" nonetheless,="" carriers="" with="" interstate="" revenues="" far="" less="" than="" their="" intrastate="" revenues="" assert="" that="" they="" will="" be="" required="" to="" recover="" unfairly="" large="" contributions="" from="" their="" interstate="" customers="" and="" that="" this="" outcome="" is="" inequitable.="" these="" carriers="" misinterpret="" the="" statute's="" direction="" that="" contributions="" be="" ``equitable="" and="" non-discriminatory.''="" ``equitable''="" does="" not="" mean="" ``equal.''="" in="" the="" past,="" telecommunications="" subsidies="" have="" been="" raised="" by="" assessing="" greater="" amounts="" from="" services="" other="" than="" basic="" residential="" dialtone="" services.="" competition="" in="" the="" telecommunications="" marketplace,="" however,="" should="" drive="" prices="" for="" services="" closer="" to="" cost="" and="" eliminate="" the="" viability="" of="" shifting="" costs="" from="" residential="" to="" business="" or="" from="" basic="" local="" service="" to="" long="" distance.="" congress="" did="" direct="" that="" contributions="" be="" non-discriminatory.="" this="" we="" accomplish="" by="" making="" the="" formula="" for="" calculating="" contributions="" the="" same="" for="" all="" competitors="" competing="" in="" the="" same="" market="" segment.="" 482.="" as="" to="" the="" assessment="" of="" contributions="" for="" the="" support="" mechanisms="" for="" eligible="" schools,="" libraries,="" and="" rural="" health="" care="" providers,="" the="" commission="" is="" adopting="" the="" joint="" board's="" recommendation="" that="" these="" contributions="" be="" based="" upon="" both="" interstate="" and="" intrastate="" revenues.="" we="" have="" selected="" this="" approach="" because="" these="" are="" new="" and="" unique="" federal="" programs="" and="" states="" have="" not="" supported="" these="" initiatives="" to="" the="" same="" extent="" that="" they="" have="" supported="" other="" universal="" service="" support="" mechanisms.="" in="" contrast="" to="" the="" high="" cost="" mechanisms,="" many="" states="" do="" not="" already="" have="" programs="" in="" place="" that="" would="" guarantee="" sufficient="" support="" mechanisms="" for="" eligible="" schools,="" libraries,="" and="" rural="" health="" care="" providers.="" therefore,="" we="" are="" not="" as="" confident="" that="" a="" federal-state="" partnership="" would="" sufficiently="" support="" these="" new="" and="" unique="" support="" mechanisms,="" particularly="" in="" the="" early="" years="" of="" the="" program.="" because="" section="" 254="" obligates="" the="" commission="" to="" ensure="" the="" sufficiency="" of="" this="" support="" program,="" we="" deem="" it="" necessary="" to="" adopt="" an="" approach="" that="" will="" guarantee="" that="" this="" statutory="" mandate="" is="" satisfied.="" in="" addition,="" assessing="" both="" intrastate="" and="" interstate="" revenues="" to="" fund="" the="" support="" mechanisms="" for="" eligible="" schools,="" libraries,="" and="" rural="" health="" care="" providers="" is="" more="" feasible="" than="" for="" the="" other="" mechanisms="" because="" the="" amount="" of="" the="" new="" support="" mechanisms="" will="" be="" smaller="" than="" the="" other="" mechanisms="" (i.e.,="" the="" combined="" amounts="" of="" the="" federal="" and="" state="" high="" cost="" and="" low-income="" support="" mechanisms="" will="" be="" greater="" than="" the="" total="" amount="" of="" the="" schools,="" libraries,="" and="" rural="" health="" care="" mechanisms).="" therefore,="" we="" believe="" that="" it="" is="" appropriate="" for="" us="" to="" assess="" a="" contributor="" based="" upon="" its="" intrastate="" and="" interstate="" revenues="" for="" the="" schools,="" libraries,="" and="" rural="" health="" care="" support="" mechanisms.="" 483.="" basis="" for="" assessing="" contributions="" we="" agree="" with="" the="" joint="" board's="" recommendation="" that="" we="" must="" assess="" contributions="" in="" a="" manner="" that="" eliminates="" the="" double="" payment="" problem,="" is="" competitively="" neutral="" and="" is="" easy="" to="" administer.="" we="" find="" that="" contributions="" should="" be="" based="" on="" end-user="" telecommunications="" revenues.="" based="" on="" new="" information="" in="" the="" record,="" we="" find="" that="" this="" basis="" for="" assessing="" contributions="" represents="" a="" basis="" for="" our="" universal="" service="" support="" mechanisms="" more="" administratively="" efficient="" than="" the="" net="" telecommunications="" revenues="" method="" recommended="" by="" the="" joint="" board="" while="" still="" advancing="" the="" goals="" embraced="" by="" the="" joint="" board.="" we="" note="" that="" we="" will="" assess="" contributions,="" i.e.,="" raise="" sufficient="" funds="" to="" cover="" universal="" service's="" funding="" needs,="" only="" after="" we="" have="" determined="" the="" total="" size="" of="" the="" support="" mechanisms.="" 484.="" we="" will="" assess="" contributions="" based="" on="" telecommunications="" revenues="" derived="" from="" end="" users="" for="" several="" reasons,="" including="" administrative="" ease="" and="" competitive="" neutrality.="" the="" net="" telecommunications="" revenues="" and="" end-user="" telecommunications="" revenues="" methods="" are="" relatively="" equivalent="" because="" they="" assess="" contributions="" based="" on="" substantially="" similar="" pools="" of="" revenues.="" therefore,="" we="" conclude="" that="" contributions="" will="" be="" based="" on="" revenues="" derived="" from="" end="" users="" for="" telecommunications="" and="" telecommunications="" services,="" or="" ``retail="" revenues.''="" unlike="" retail="" revenues,="" however,="" end-user="" telecommunications="" revenues="" include="" revenues="" derived="" from="" slcs.="" end-="" user="" revenues="" would="" also="" include="" revenues="" derived="" from="" other="" carriers="" when="" such="" carriers="" utilize="" telecommunications="" services="" for="" their="" own="" internal="" uses="" because="" such="" carriers="" would="" be="" end="" users="" for="" those="" services.="" this="" methodology="" is="" both="" competitively="" neutral="" and="" relatively="" easy="" to="" administer.="" 485.="" basing="" contributions="" on="" end-user="" revenues,="" rather="" than="" gross="" revenues,="" is="" competitively="" neutral="" because="" it="" eliminates="" the="" problem="" of="" counting="" revenues="" derived="" from="" the="" same="" services="" twice.="" the="" double="" counting="" of="" revenues="" distorts="" competition="" because="" it="" disadvantages="" resellers.="" 486.="" we="" seek="" to="" avoid="" a="" contribution="" assessment="" methodology="" that="" distorts="" how="" carriers="" choose="" to="" structure="" their="" businesses="" or="" the="" types="" of="" services="" that="" they="" provide.="" basing="" contributions="" on="" end-user="" revenues="" eliminates="" the="" double-counting="" problem="" and="" the="" market="" distortions="" assessments="" based="" on="" gross="" revenues="" create="" because="" transactions="" are="" only="" counted="" once="" at="" the="" end-user="" level.="" although="" it="" will="" relieve="" wholesale="" carriers="" from="" contributing="" directly="" to="" the="" support="" mechanisms,="" the="" end-user="" method="" does="" not="" exclude="" wholesale="" revenues="" from="" the="" contribution="" base="" of="" carriers="" that="" sell="" to="" end="" users="" because="" wholesale="" charges="" are="" built="" into="" retail="" rates.="" 487.="" calculating="" assessments="" based="" upon="" end-user="" telecommunications="" revenues="" also="" will="" be="" administratively="" easy="" to="" implement.="" like="" the="" net="" telecommunications="" revenues="" approach,="" the="" end-user="" telecommunications="" revenues="" approach="" will="" require="" carriers="" to="" track="" their="" sales="" to="" end="" users;="" carriers,="" however,="" must="" already="" track="" their="" sales="" for="" billing="" purposes.="" although="" the="" end-user="" telecommunications="" revenues="" method="" will="" require="" carriers="" to="" distinguish="" sales="" to="" end="" users="" from="" sales="" to="" resellers,="" we="" do="" not="" foresee="" that="" this="" will="" be="" difficult="" because="" resellers="" will="" have="" an="" incentive="" to="" notify="" wholesalers="" that="" they="" are="" purchasing="" services="" for="" resale="" in="" order="" to="" get="" a="" lower="" price="" that="" does="" not="" reflect="" universal="" service="" contribution="" requirements.="" although="" the="" end-user="" telecommunications="" revenues="" approach="" requires="" that="" a="" distinction="" be="" made="" between="" retail="" and="" wholesale="" revenues,="" using="" end-="" user="" telecommunications="" revenues="" will="" still="" be="" easier="" to="" administer="" and="" less="" burdensome="" than="" the="" net="" telecommunications="" revenues="" approach="" because="" it="" will="" not="" require="" wholesale="" carriers="" to="" submit="" annual="" or="" monthly="" contributions="" directly="" to="" the="" administrator,="" as="" they="" would="" under="" the="" net="" telecommunications="" revenues="" approach.="" 488.="" another="" reason="" we="" adopt="" an="" end-user="" telecommunications="" revenues="" method="" of="" assessing="" contributions="" rather="" than="" a="" net="" telecommunications="" revenues="" method="" is="" that,="" although="" the="" two="" methods="" are="" theoretically="" equivalent,="" the="" former="" method="" eliminates="" some="" economic="" distortions="" associated="" with="" the="" latter="" method="" that="" can="" occur="" in="" practice.="" as="" an="" initial="" matter,="" we="" observe="" that,="" contrary="" to="" some="" commenters'="" assertions,="" both="" methods="" are="" competitively="" neutral="" because="" they="" both="" eliminate="" double-counting="" of="" revenues="" and="" assess="" the="" same="" total="" amount="" of="" contributions.="" 489.="" although="" the="" two="" assessment="" methods="" are="" theoretically="" equivalent,="" we="" conclude="" that,="" in="" practice,="" the="" net="" telecommunications="" revenues="" approach="" [[page="" 32931]]="" is="" likely="" to="" cause="" distortions="" that="" could="" be="" avoided="" by="" using="" the="" end-="" user="" telecommunications="" revenues="" approach.="" for="" example,="" the="" theoretical="" equivalence="" of="" the="" two="" methods="" assumes="" that="" all="" carriers="" will="" be="" able="" to="" recover="" fully="" their="" contributions="" from="" their="" customers.="" some="" carriers,="" however,="" particularly="" those="" with="" long-term="" contracts,="" may="" be="" unable="" to="" recover="" fully="" those="" costs.="" if="" contributions="" are="" assessed="" on="" the="" basis="" of="" net="" telecommunications="" revenues="" and="" some="" intermediate="" carriers="" cannot="" incorporate="" their="" contributions="" into="" their="" prices,="" uneconomic="" substitution="" could="" result="" because="" other="" carriers="" would="" have="" an="" incentive="" to="" purchase="" services="" from="" those="" intermediate="" carriers,="" rather="" than="" to="" provide="" those="" services="" with="" their="" own="" facilities,="" to="" reduce="" their="" direct="" contribution="" to="" universal="" service.="" basing="" contributions="" on="" end-user="" telecommunications="" revenues="" eliminates="" this="" potential="" economic="" distortion="" because="" contributions="" will="" be="" assessed="" at="" the="" end-user="" level,="" not="" at="" the="" wholesale="" and="" end-user="" level.="" contributors="" will="" not="" have="" more="" of="" an="" incentive="" to="" build="" their="" own="" facilities="" or="" purchase="" services="" for="" resale="" in="" order="" to="" reduce="" their="" contribution="" because,="" regardless="" of="" how="" the="" services="" are="" provided,="" their="" contributions="" will="" be="" assessed="" only="" on="" revenues="" derived="" from="" end="" users.="" 490.="" we="" state="" that="" ilecs="" are="" prohibited="" from="" incorporating="" universal="" service="" support="" into="" rates="" for="" unbundled="" network="" elements="" because="" universal="" service="" contributions="" are="" not="" part="" of="" the="" forward-="" looking="" costs="" of="" providing="" unbundled="" network="" elements.="" although="" we="" do="" not="" mandate="" that="" carriers="" recover="" contributions="" in="" a="" particular="" manner,="" we="" note="" that="" carriers="" are="" permitted="" to="" pass="" through="" their="" contribution="" requirements="" to="" all="" of="" their="" customers="" of="" interstate="" services="" in="" an="" equitable="" and="" nondiscriminatory="" fashion.="" furthermore,="" we="" find="" that="" universal="" service="" contributions="" constitute="" a="" sufficient="" public="" interest="" rationale="" to="" justify="" contract="" adjustments.="" section="" 254="" gives="" the="" commission="" authority="" to="" require="" new="" contributions="" to="" the="" universal="" service="" support="" mechanisms="" from="" telecommunications="" carriers="" that="" provide="" interstate="" telecommunications="" services="" and="" other="" providers="" of="" interstate="" telecommunications.="" contributions="" will="" be="" assessed="" against="" revenues="" derived="" from="" end="" users="" for="" telecommunications="" or="" telecommunications="" services.="" some="" of="" those="" revenues="" will="" be="" derived="" from="" private="" contractual="" agreements.="" by="" assessing="" a="" new="" contribution="" requirement,="" we="" create="" an="" expense="" or="" cost="" of="" doing="" business="" that="" was="" not="" anticipated="" at="" the="" time="" contracts="" were="" signed.="" thus,="" we="" find="" that="" it="" would="" serve="" the="" public="" interest="" to="" allow="" telecommunications="" carriers="" and="" providers="" to="" make="" changes="" to="" existing="" contracts="" for="" service="" in="" order="" to="" adjust="" for="" this="" new="" cost="" of="" doing="" business.="" we="" clarify,="" however,="" that="" this="" finding="" is="" not="" intended="" to="" pre-empt="" state="" contract="" laws.="" 491.="" furthermore,="" we="" agree="" with="" the="" joint="" board="" and="" reject="" commenters'="" suggestions="" that="" the="" commission="" mandate="" that="" carriers="" recover="" contributions="" through="" an="" end-user="" surcharge.="" the="" state="" joint="" board="" members="" also="" assert="" that="" state="" commissions="" ``should="" have="" the="" discretion="" to="" determine="" if="" the="" imposition="" of="" an="" end-user="" surcharge="" would="" render="" local="" rates="" unaffordable.''="" a="" federally="" prescribed="" end-="" user="" surcharge="" would="" dictate="" how="" carriers="" recover="" their="" contribution="" obligations="" and="" would="" violate="" congress's="" mandate="" and="" the="" wish="" of="" the="" state="" members="" of="" the="" joint="" board.="" 492.="" to="" the="" extent="" that="" carriers="" seek="" to="" pass="" all="" or="" part="" of="" their="" contributions="" on="" to="" their="" customers="" in="" customer="" bills,="" we="" wish="" to="" ensure="" that="" carriers="" include="" complete="" and="" truthful="" information="" regarding="" the="" contribution="" amount.="" we="" do="" not="" assume="" that="" contributors="" will="" provide="" false="" or="" misleading="" statements,="" but="" we="" are="" concerned="" that="" consumers="" receive="" complete="" information="" regarding="" the="" nature="" of="" the="" universal="" service="" contribution.="" unlike="" the="" slc,="" the="" universal="" service="" contribution="" is="" not="" a="" federally="" mandated="" direct="" end-user="" surcharge.="" we="" believe="" that="" it="" would="" be="" misleading="" for="" a="" carrier="" to="" characterize="" its="" contribution="" as="" a="" surcharge.="" specifically,="" we="" believe="" that="" characterizing="" the="" mechanism="" as="" a="" surcharge="" would="" be="" misleading="" because="" carriers="" retain="" the="" flexibility="" to="" structure="" their="" recovery="" of="" the="" costs="" of="" universal="" service="" in="" many="" ways,="" including="" creating="" new="" pricing="" plans="" subject="" to="" monthly="" fees.="" as="" competition="" intensifies="" in="" the="" markets="" for="" local="" and="" interexchange="" services="" in="" the="" wake="" of="" the="" 1996="" act,="" it="" will="" likely="" lessen="" the="" ability="" of="" carriers="" and="" other="" providers="" of="" telecommunications="" to="" pass="" through="" to="" customers="" some="" or="" all="" of="" the="" former's="" contribution="" to="" the="" universal="" service="" mechanisms.="" if="" contributors,="" however,="" choose="" to="" pass="" through="" part="" of="" their="" contributions="" and="" to="" specify="" that="" fact="" on="" customers'="" bills,="" contributors="" must="" be="" careful="" to="" convey="" information="" in="" a="" manner="" that="" does="" not="" mislead="" by="" omitting="" important="" information="" that="" indicates="" that="" the="" contributor="" has="" chosen="" to="" pass="" through="" the="" contribution="" or="" part="" of="" the="" contribution="" to="" its="" customers="" and="" that="" accurately="" describes="" the="" nature="" of="" the="" charge.="" 493.="" in="" addition,="" we="" agree="" with="" the="" joint="" board="" that,="" if="" carriers="" provide="" services="" eligible="" for="" support="" from="" universal="" service="" support="" mechanisms="" at="" a="" discount="" or="" below="" cost,="" carriers="" may="" receive="" credits="" against="" their="" contributions.="" contributions="" to="" the="" support="" mechanisms="" may="" be="" made="" in="" cash.="" in="" addition,="" carriers="" that="" provide="" services="" to="" eligible="" schools,="" libraries,="" or="" rural="" health="" care="" providers="" may="" offset="" their="" required="" contribution="" by="" an="" amount="" equal="" to="" the="" difference="" between="" the="" pre-discount="" price="" for="" service="" and="" the="" amount="" charged="" to="" the="" eligible="" institution.="" allowing="" or="" requiring="" an="" offset="" will="" not="" prevent="" carriers="" from="" recovering="" the="" full,="" pre-offset="" contribution="" due="" on="" its="" revenues="" in="" the="" manner="" in="" which="" the="" carrier="" chooses.="" 494.="" finally,="" we="" agree="" with="" snet="" that="" carriers="" should="" not="" include="" support="" mechanisms="" payments="" when="" calculating="" their="" contributions.="" we="" find="" that="" payments="" received="" from="" the="" universal="" service="" support="" mechanisms="" do="" not="" qualify="" as="" revenues="" derived="" from="" end="" users="" for="" telecommunications="" revenues="" and="" should="" not="" be="" included="" in="" the="" assessment="" base.="" finally,="" in="" response="" to="" excel's="" comments="" that="" resellers="" should="" receive="" credits="" against="" their="" universal="" service="" contributions="" for="" the="" provision="" of="" supported="" services,="" we="" note="" that="" ``pure''="" resellers="" may="" not="" be="" designated="" as="" ``eligible="" carriers''="" under="" section="" 214(e)="" and="" may="" not="" receive="" universal="" service="" support="" payments.="" carriers="" selling="" supported="" services="" to="" resellers,="" however,="" may="" be="" eligible="" to="" receive="" universal="" service="" support.="" in="" addition,="" carriers="" that="" offer="" supported="" services="" through="" the="" use="" of="" unbundled="" network="" elements,="" in="" whole="" or="" in="" part,="" may="" be="" eligible="" to="" receive="" universal="" service="" support.="" 495.="" administration="" of="" the="" support="" mechanisms="" based="" on="" the="" joint="" board's="" recommendation="" and="" the="" record="" in="" this="" proceeding,="" we="" will="" create="" a="" federal="" advisory="" committee="" (committee),="" pursuant="" to="" the="" faca,="" whose="" sole="" responsibility="" will="" be="" to="" recommend="" to="" the="" commission="" through="" a="" competitive="" process="" a="" neutral,="" third-party="" administrator="" to="" administer="" the="" support="" mechanisms.="" we="" adopt="" the="" joint="" board's="" recommendation="" and="" conclude="" that="" administration="" by="" a="" central="" administrator="" would="" be="" most="" efficient="" and="" would="" ensure="" uniform="" application="" of="" the="" rules="" governing="" the="" collection="" and="" distribution="" of="" funding="" for="" universal="" service="" support="" mechanisms="" [[page="" 32932]]="" nationwide.="" we="" also="" adopt="" the="" joint="" board's="" recommendation="" that="" neca="" be="" appointed="" the="" temporary="" administrator="" of="" the="" support="" mechanisms.="" 496.="" like="" the="" joint="" board,="" we="" believe="" that="" broad="" participation="" by="" representatives="" of="" contributors,="" support="" recipients,="" state="" pucs,="" and="" other="" interested="" parties="" in="" the="" administrator="" selection="" process,="" as="" required="" by="" the="" faca,="" will="" eliminate="" concerns="" that="" the="" chosen="" administrator="" will="" not="" be="" neutral.="" a="" federal="" advisory="" committee="" may="" be="" established="" only="" after="" consultation="" with="" the="" office="" of="" management="" and="" budget="" and="" the="" general="" services="" administration="" and="" the="" filing="" of="" a="" charter="" with="" congress.="" the="" commission="" has="" initiated="" this="" process="" and="" will="" solicit="" nominations="" to="" the="" committee="" as="" soon="" as="" possible.="" 497.="" we="" agree="" with="" the="" joint="" board's="" recommendation="" and="" adopt="" their="" four="" proposed="" requirements.="" as="" a="" result,="" the="" administrator="" must:="" (1)="" be="" neutral="" and="" impartial;="" (2)="" not="" advocate="" specific="" positions="" to="" the="" commission="" in="" proceedings="" not="" related="" to="" the="" administration="" of="" the="" universal="" service="" support="" mechanisms;="" (3)="" not="" be="" aligned="" or="" associated="" with="" any="" particular="" industry="" segment;="" and="" (4)="" not="" have="" a="" direct="" financial="" interest="" in="" the="" support="" mechanisms="" established="" by="" the="" commission.="" 498.="" we="" clarify="" the="" joint="" board's="" criteria="" as="" follows.="" first,="" the="" administrator="" must="" not="" advocate="" positions="" before="" the="" commission="" in="" non-="" universal="" service="" administration="" proceedings="" related="" to="" common="" carrier="" issues,="" although="" membership="" in="" a="" trade="" association="" that="" advocates="" positions="" before="" the="" commission="" will="" not="" render="" an="" entity="" ineligible="" to="" serve="" as="" the="" administrator.="" second,="" the="" administrator="" may="" not="" be="" an="" affiliate="" of="" any="" provider="" of="" ``telecommunications="" services.''="" an="" ``affiliate''="" is="" a="" ``person="" that="" (directly="" or="" indirectly)="" owns="" or="" controls,="" is="" owned="" or="" controlled="" by,="" or="" is="" under="" common="" ownership="" or="" control="" with,="" another="" person.''="" a="" person="" shall="" be="" deemed="" to="" control="" another="" if="" such="" person="" possesses,="" directly="" or="" indirectly,="" (1)="" an="" equity="" interest="" by="" stock,="" partnership="" (general="" or="" limited)="" interest,="" joint="" venture="" participation,="" or="" member="" interest="" in="" the="" other="" person="" equal="" to="" ten="" (10%)="" percent="" or="" more="" of="" the="" total="" outstanding="" equity="" interests="" in="" the="" other="" person,="" or="" (2)="" the="" power="" to="" vote="" ten="" (10%)="" percent="" or="" more="" of="" the="" securities="" (by="" stock,="" partnership="" (general="" or="" limited)="" interest,="" joint="" venture="" participation,="" or="" member="" interest)="" having="" ordinary="" voting="" power="" for="" the="" election="" of="" directors,="" general="" partner,="" or="" management="" of="" such="" other="" person,="" or="" (3)="" the="" power="" to="" direct="" or="" cause="" the="" direction="" of="" the="" management="" and="" policies="" of="" such="" other="" person,="" whether="" through="" the="" ownership="" of="" or="" right="" to="" vote,="" voting="" rights="" attributable="" to="" the="" stock,="" partnership="" (general="" or="" limited)="" interest,="" joint="" venture="" participation,="" or="" member="" interest)="" of="" such="" other="" person,="" by="" contract="" (including="" but="" not="" limited="" to="" stockholder="" agreement,="" partnership="" (general="" or="" limited))="" agreement,="" joint="" venture="" agreement,="" or="" operating="" agreement),="" or="" otherwise.="" third,="" the="" administrator="" and="" any="" affiliate="" thereof="" may="" not="" issue="" a="" majority="" of="" its="" debt="" to,="" nor="" may="" it="" derive="" a="" majority="" of="" its="" revenues="" from="" any="" provider(s)="" of="" telecommunications="" services.="" fourth,="" if="" the="" administrator="" has="" a="" board="" of="" directors="" that="" contains="" members="" with="" direct="" financial="" interests="" in="" entities="" that="" contribute="" to="" or="" benefit="" from="" the="" support="" mechanisms,="" no="" more="" than="" a="" third="" of="" the="" board="" members="" may="" represent="" interests="" from="" any="" one="" segment="" of="" contributing="" carriers="" or="" support="" recipients,="" and="" the="" board's="" composition="" must="" reflect="" the="" broad="" base="" of="" contributors="" to="" and="" recipients="" of="" universal="" service="" support.="" an="" individual="" does="" not="" have="" a="" direct="" financial="" interest="" in="" the="" support="" mechanisms="" if="" he="" or="" she="" is="" not="" an="" employee="" of="" a="" telecommunications="" carrier,="" provider="" of="" telecommunications,="" or="" a="" recipient="" of="" support="" mechanisms="" funds,="" does="" not="" own="" equity="" interests="" in="" bonds="" or="" equity="" instruments="" issued="" by="" any="" telecommunications="" carrier,="" and="" does="" not="" own="" mutual="" funds="" that="" specialize="" in="" the="" telecommunications="" industry.="" we="" also="" create="" a="" de="" minimis="" exemption="" from="" this="" rule.="" we="" will="" define="" an="" individual's="" ownership="" interest="" in="" the="" telecommunications="" industry="" as="" de="" minimis="" if="" in="" aggregate="" the="" individual,="" spouse,="" and="" minor="" children's="" impermissible="" interests="" do="" not="" exceed="" $5,000.00.="" 499.="" to="" ensure="" the="" administrator's="" neutrality="" and="" appearance="" of="" neutrality,="" we="" conclude="" that="" we="" must="" require="" that="" no="" one="" in="" a="" position="" of="" influence="" within="" the="" administrator's="" organization="" have="" a="" direct="" financial="" interest="" in="" the="" support="" mechanisms,="" subject="" to="" the="" board="" of="" directors'="" standard="" above.="" any="" candidate="" must="" also="" have="" the="" ability="" to="" process="" large="" amounts="" of="" data="" efficiently="" and="" quickly="" and="" to="" bill="" large="" numbers="" of="" carriers.="" the="" administrator's="" costs="" will="" be="" added="" to="" the="" support="" mechanisms="" and="" will="" be="" funded="" by="" the="" contributing="" carriers.="" 500.="" even="" though="" neca="" has="" administered="" the="" existing="" high="" cost="" assistance="" fund="" and="" the="" trs="" fund,="" many="" commenters="" question="" neca's="" ability="" to="" act="" as="" a="" neutral="" arbitrator="" among="" contributing="" carriers="" because="" neca's="" membership="" is="" restricted="" to="" ilecs,="" its="" board="" of="" directors="" is="" composed="" primarily="" of="" representatives="" of="" ilecs,="" and="" it="" has="" taken="" advocacy="" positions="" in="" several="" commission="" proceedings.="" given="" that="" the="" appearance="" of="" impartiality="" for="" the="" new="" administrator="" is="" essential,="" and="" considering="" the="" importance="" and="" magnitude="" of="" the="" universal="" service="" support="" programs,="" we="" agree="" with="" the="" joint="" board="" and="" find="" that="" neca="" would="" not="" be="" qualified="" to="" be="" the="" permanent="" administrator.="" if,="" however,="" changes="" to="" its="" board="" of="" directors="" or="" its="" corporate="" structure="" render="" it="" able="" to="" satisfy="" the="" neutrality="" criteria="" discussed="" above,="" neca="" would="" be="" permitted="" to="" participate="" in="" the="" permanent="" administrator="" selection="" process.="" finally,="" in="" the="" interest="" of="" speedy="" implementation="" of="" the="" support="" mechanisms,="" we="" adopt="" the="" joint="" board's="" recommendation="" that="" neca="" be="" appointed="" the="" temporary="" administrator="" of="" the="" support="" mechanisms,="" subject="" to="" changes="" in="" neca's="" governance="" that="" render="" it="" more="" representative="" of="" non-ilec="" interests.="" we="" note="" that="" the="" temporary="" administrator="" may="" not="" spend="" universal="" service="" support="" mechanisms'="" funds="" until="" it="" is="" appointed="" by="" the="" commission.="" 501.="" we="" require="" in="" this="" order="" that="" the="" committee="" recommend="" a="" neutral,="" third-party="" administrator="" through="" a="" competitive="" process="" no="" later="" than="" six="" months="" after="" the="" committee's="" first="" meeting.="" within="" the="" six-month="" period,="" the="" committee="" must="" create="" a="" document="" describing="" what="" the="" administrator="" of="" the="" support="" mechanisms="" will="" be="" required="" to="" do="" and="" the="" criteria="" by="" which="" candidates="" will="" be="" evaluated,="" solicit="" applications="" from="" qualifying="" entities,="" and="" recommend="" the="" most="" qualified="" candidate.="" we="" intend="" to="" act="" upon="" the="" committee's="" recommendation="" within="" six="" months.="" the="" administrator="" will="" be="" appointed="" for="" a="" five-year="" term,="" beginning="" on="" the="" date="" that="" the="" commission="" selects="" it="" as="" the="" administrator.="" we="" also="" require="" the="" chosen="" administrator="" to="" be="" prepared="" to="" administer="" all="" facets="" of="" the="" universal="" service="" support="" mechanisms="" within="" six="" months="" of="" its="" appointment.="" the="" commission="" will="" review="" the="" administrator's="" performance="" to="" ensure="" that="" it="" is="" fulfilling="" its="" responsibilities="" in="" an="" acceptable="" and="" impartial="" manner="" two="" years="" after="" its="" appointment.="" at="" any="" time="" prior="" to="" the="" end="" of="" the="" administrator's="" five-year="" term,="" the="" commission="" may="" re-appoint="" the="" administrator="" for="" up="" to="" another="" five="" years.="" otherwise,="" the="" commission="" will="" create="" another="" federal="" advisory="" committee="" to="" recommend="" another="" neutral,="" third-party="" administrator.="" [[page="" 32933]]="" 502.="" the="" commission="" will="" direct="" the="" chosen="" administrator="" to="" report="" annually="" to="" the="" commission="" an="" itemization="" of="" monthly="" administrative="" costs="" that="" shall="" consist="" of="" all="" expenses,="" receipts,="" and="" payments="" associated="" with="" the="" administration="" of="" the="" universal="" service="" support="" mechanisms.="" the="" administrator="" shall="" file="" a="" cost="" allocation="" manual="" (cam)="" with="" the="" commission,="" and="" shall="" provide="" the="" commission="" full="" access="" to="" all="" data="" collected="" pursuant="" to="" the="" administration="" of="" the="" universal="" service="" support="" mechanisms.="" we="" further="" require="" that="" the="" administrator="" shall="" be="" subject="" to="" a="" yearly="" audit="" by="" an="" independent="" accounting="" firm="" and="" an="" additional="" yearly="" audit="" by="" the="" commission,="" if="" the="" commission="" so="" requests.="" the="" administrator="" is="" further="" required="" to="" keep="" the="" universal="" service="" support="" mechanisms="" separate="" from="" all="" other="" funds="" under="" the="" control="" of="" the="" administrator.="" 503.="" the="" administrator="" is="" directed="" to="" maintain="" and="" report="" to="" the="" commission="" detailed="" records="" relating="" to="" the="" determination="" and="" amounts="" of="" payments="" made="" and="" monies="" received="" in="" the="" universal="" service="" support="" mechanisms.="" information="" based="" on="" these="" reports="" should="" be="" made="" public="" at="" least="" once="" a="" year="" as="" part="" of="" a="" monitoring="" report.="" because="" the="" current="" monitoring="" program="" in="" cc="" docket="" no.="" 87-339,="" which="" monitors="" the="" current="" universal="" service="" fund,="" will="" end="" with="" the="" may="" 1997="" report="" and="" because="" naruc="" has="" petitioned="" the="" commission="" to="" continue="" this="" monitoring="" program,="" we="" delegate="" to="" the="" common="" carrier="" bureau,="" in="" consultation="" with="" the="" state="" staffs="" of="" the="" joint="" boards="" in="" cc="" docket="" no.="" 96-45="" and="" cc="" docket="" no.="" 80-286,="" the="" creation="" of="" a="" new="" monitoring="" program="" to="" serve="" as="" a="" vehicle="" for="" these="" monitoring="" reports.="" we="" also="" delegate="" to="" the="" bureau="" the="" details="" of="" the="" exact="" content="" and="" timing="" of="" release="" of="" these="" reports.="" final="" regulatory="" flexibility="" analysis="" 504.="" as="" required="" by="" section="" 603="" of="" the="" regulatory="" flexibility="" act="" (rfa),="" 5="" u.s.c.="" section="" 603,="" an="" initial="" regulatory="" flexibility="" analysis="" (irfa)="" was="" incorporated="" in="" the="" notice="" of="" proposed="" rulemaking="" and="" order="" establishing="" joint="" board.="" in="" addition,="" the="" commission="" prepared="" an="" ifra="" in="" conjunction="" with="" the="" recommended="" decision,="" seeking="" written="" public="" comment="" on="" the="" proposals="" in="" the="" nprm="" and="" recommended="" decision.="" the="" commission's="" final="" regulatory="" flexibility="" analysis="" (frfa)="" in="" this="" report="" and="" order="" conforms="" to="" the="" rfa,="" as="" amended.="" 505.="" to="" the="" extent="" that="" any="" statement="" contained="" in="" this="" frfa="" is="" perceived="" as="" creating="" ambiguity="" with="" respect="" to="" our="" rules="" or="" statements="" made="" in="" preceding="" sections="" of="" this="" order,="" the="" rules="" and="" statements="" set="" forth="" in="" those="" preceding="" sections="" shall="" be="" controlling.="" we="" also="" note="" that="" future="" revisions="" of="" the="" rules="" may="" alter="" our="" analysis="" of="" the="" potential="" economic="" impact="" upon="" some="" small="" entities.="" a.="" need="" for="" and="" objectives="" of="" this="" report="" and="" order="" and="" the="" rules="" adopted="" herein="" 506.="" the="" commission="" is="" required="" by="" sections="" 254(a)(2)="" and="" 410(c)="" of="" the="" act,="" as="" amended="" by="" the="" 1996="" act,="" to="" promulgate="" these="" rules="" to="" implement="" promptly="" the="" universal="" service="" provisions="" of="" section="" 254.="" the="" principal="" goal="" of="" these="" rules="" is="" to="" reform="" our="" system="" of="" universal="" service="" support="" mechanisms="" so="" that="" universal="" service="" is="" preserved="" and="" advanced="" as="" markets="" move="" toward="" competition.="" 507.="" the="" rules="" adopted="" in="" this="" order="" establish="" universal="" service="" support="" mechanisms="" to="" preserve="" and="" advance="" universal="" service="" support.="" the="" rules="" are="" designed="" to="" implement="" as="" quickly="" and="" effectively="" as="" possible="" the="" national="" telecommunications="" policies="" embodied="" in="" the="" 1996="" act="" and="" to="" promote="" access="" to="" advanced="" telecommunications="" and="" information="" technologies="" to="" all="" americans="" in="" all="" regions="" of="" the="" nation.="" b.="" summary="" and="" analysis="" of="" the="" significant="" issues="" raised="" by="" public="" comments="" in="" response="" to="" the="" irfa="" 508.="" summary="" of="" the="" initial="" regulatory="" flexibility="" analysis.="" the="" commission="" performed="" an="" irfa="" in="" the="" nprm="" and="" an="" irfa="" in="" connection="" with="" the="" recommended="" decision.="" in="" the="" irfas,="" the="" commission="" sought="" comment="" on="" possible="" exemptions="" from="" the="" proposed="" rules="" for="" small="" telecommunications="" companies="" and="" measures="" to="" avoid="" significant="" economic="" impact="" on="" small="" business="" entities,="" as="" defined="" by="" section="" 601(3)="" of="" the="" rfa.="" the="" commission="" also="" sought="" comment="" on="" the="" type="" and="" number="" of="" small="" entities,="" such="" as="" schools,="" libraries,="" and="" health="" care="" providers,="" potentially="" affected="" by="" the="" recommendations="" set="" forth="" in="" the="" recommended="" decision.="" comments="" 509.="" general="" comments="" comments="" were="" filed="" in="" response="" to="" both="" the="" nprm="" and="" recommended="" decision="" irfas.="" although="" it="" agrees="" that="" no="" irfa="" was="" required="" for="" the="" recommended="" decision,="" the="" sba="" contends="" that="" the="" irfa="" issued="" in="" connection="" with="" the="" recommended="" decision="" was="" untimely="" and="" did="" not="" adequately="" take="" into="" consideration="" the="" impact="" of="" the="" joint="" board="" recommendations="" upon="" small="" entities.="" the="" sba="" also="" contends="" that="" the="" nprm's="" lack="" of="" specificity="" concerning="" rules="" and="" reporting="" requirements="" made="" it="" difficult="" to="" evaluate="" the="" impact="" upon="" small="" business.="" 510.="" businesses="" with="" single="" connections="" many="" commenters="" oppose="" the="" recommendation="" to="" reduce="" universal="" service="" support="" for="" businesses="" with="" single="" connections.="" the="" sba="" contends="" that="" reduced="" levels="" of="" support="" would="" discourage="" or="" prohibit="" small="" businesses="" from="" utilizing="" telecommunications="" services.="" the="" sba="" also="" contends="" that="" the="" joint="" board's="" recommendation="" to="" restrict="" support="" to="" businesses="" with="" a="" single="" connection="" effectively="" would="" define="" a="" small="" business="" in="" violation="" of="" the="" small="" business="" act.="" the="" sba="" proposes="" that="" entities="" with="" $5="" million="" or="" less="" in="" annual="" gross="" revenue="" be="" exempt="" from="" any="" reduction="" of="" universal="" service="" support="" and="" that="" all="" other="" businesses="" receive="" support="" for="" up="" to="" five="" lines.="" the="" sba="" asserts="" that="" restricting="" support="" to="" a="" single="" connection="" would="" adversely="" affect="" small="" government="" jurisdictions,="" including="" fire="" and="" police="" departments,="" that="" currently="" receive="" full="" universal="" service="" support.="" some="" commenters="" contend="" that="" universal="" service="" support="" should="" not="" be="" extended="" to="" any="" business="" customers.="" 511.="" businesses="" with="" multiple="" connections="" several="" commenters="" contend="" that="" universal="" service="" support="" should="" be="" extended="" to="" businesses="" with="" multiple="" connections.="" they="" cite="" the="" importance="" of="" multiple-connections="" for="" small="" businesses,="" the="" potential="" negative="" impact="" upon="" rural="" areas="" of="" excluding="" such="" support,="" and="" the="" principles="" of="" the="" act="" that="" provide="" for="" affordable="" access="" to="" telecommunications="" services="" to="" all="" consumers,="" including="" reasonably="" comparable="" rates="" and="" access="" by="" rural="" consumers="" to="" telecommunications="" services.="" the="" sba="" cites="" the="" vulnerability="" of="" small="" businesses="" to="" substantial="" rate="" increases.="" the="" sba="" contends="" that="" the="" recommended="" decision="" construes="" the="" reference="" to="" ``consumers''="" in="" section="" 254(b)(3)="" too="" narrowly="" by="" excluding="" support="" to="" small="" businesses.="" the="" sba="" also="" contends="" that="" exclusion="" of="" universal="" service="" support="" for="" small="" businesses="" would="" violate="" the="" universal="" service="" mandate="" that="" rates="" be="" affordable="" and="" discourage="" access="" to="" advanced="" telecommunications="" services="" by="" small="" businesses.="" [[page="" 32934]]="" 512.="" forward-looking="" cost="" methodology="" a="" few="" commenters="" state="" that="" forward-looking="" cost="" methodologies="" may="" not="" have="" the="" ability="" to="" accurately="" predict="" costs="" for="" small,="" rural="" telephone="" companies.="" others="" contend="" that="" small,="" rural="" carriers="" in="" the="" continental="" united="" states="" should="" be="" exempt="" from="" forward-looking="" cost="" methodologies="" in="" the="" same="" manner="" as="" alaska="" and="" insular="" areas="" because="" they="" face="" similar="" challenges.="" 513.="" schools="" and="" libraries="" in="" response="" to="" the="" nprm="" irfa,="" nsba="" ii="" comments="" that="" the="" proposals="" in="" the="" nprm="" would="" have="" a="" significant="" effect="" on="" a="" substantial="" number="" of="" small="" government="" entities,="" including="" 38,000="" small="" government="" jurisdictions="" with="" school="" and="" library="" districts,="" in="" addition="" to="" the="" ``small="" telecommunications="" service="" providers''="" mentioned="" in="" the="" nprm.="" it="" contends="" that="" the="" bona="" fide="" request="" for="" service="" and="" applicable="" procedures="" may="" result="" in="" significant="" paperwork="" burdens="" on="" small="" government="" agencies="" and="" that="" restrictions="" on="" the="" resale="" or="" transfer="" of="" telecommunications="" services="" and="" network="" capacity="" may="" impose="" significant="" fiscal="" burdens="" on="" schools="" and="" libraries.="" in="" response="" to="" the="" recommended="" decision,="" vermont="" psb="" contends="" that="" a="" waiver="" from="" the="" processing="" and="" reporting="" requirements="" should="" be="" adopted="" for="" schools="" and="" libraries="" with="" fewer="" than="" 10="" lines="" to="" avoid="" discouraging="" such="" organizations="" from="" applying="" for="" available="" discounts.="" 514.="" some="" commenters="" contend="" that="" any="" entity="" that="" provides="" eligible="" services="" to="" a="" school="" or="" library="" should="" be="" eligible="" for="" universal="" service="" support.="" they="" state="" that="" such="" eligibility="" is="" provided="" under="" section="" 254(h)="" and="" that="" congress="" sought="" to="" expand="" deployment="" of="" telecommunications="" and="" information="" services="" to="" schools="" and="" libraries.="" small="" cable="" ii="" is="" concerned="" that="" the="" competitive="" bidding="" process="" for="" educational="" telecommunications="" services="" may="" provide="" ilecs="" with="" an="" unfair="" advantage.="" it="" contends="" that="" small="" businesses,="" such="" as="" small="" cable="" operators,="" must="" be="" allowed="" to="" compete="" for="" the="" opportunity="" to="" provide="" services="" supported="" by="" universal="" service="" on="" a="" level="" playing="" field.="" pagemart="" expresses="" concern="" that="" inclusion="" of="" such="" things="" as="" support="" for="" internal="" connections="" for="" schools="" and="" libraries="" may="" negatively="" affect="" small="" carriers="" by="" increasing="" the="" size="" of="" the="" universal="" service="" support="" mechanisms.="" 515.="" other="" california="" sba="" asserts="" that="" small="" businesses="" will="" only="" benefit="" when="" competition="" is="" opened="" to="" all="" entities="" in="" the="" telecommunications="" industry.="" united="" utilities="" contends="" that="" requiring="" carriers="" to="" treat="" the="" amount="" eligible="" for="" support="" to="" eligible="" health="" care="" providers="" as="" an="" offset="" to="" carriers'="" universal="" service="" support="" obligation="" is="" anti-="" competitive="" for="" small="" carriers="" whose="" funding="" obligations="" are="" insufficient="" to="" allow="" them="" to="" receive="" the="" full="" offset="" in="" the="" current="" year.="" a="" few="" commenters="" state="" that="" ``small''="" carriers="" should="" be="" either="" exempt="" from="" contribution="" to="" universal="" support="" mechanisms="" or="" should="" be="" allowed="" to="" make="" discounted="" contributions.="" discussion="" 516.="" general="" we="" disagree="" with="" the="" sba's="" general="" criticisms="" of="" our="" irfas="" procedure.="" although="" under="" no="" obligation="" to="" do="" so,="" the="" commission="" prepared="" a="" second="" irfa="" in="" connection="" with="" the="" recommended="" decision="" to="" expand="" upon="" and="" seek="" comment="" upon="" issues="" relating="" to="" small="" entities.="" these="" irfas="" sought="" comment="" on="" the="" many="" alternatives="" discussed="" in="" the="" body="" of="" the="" nprm="" and="" recommended="" decision,="" including="" statutory="" exemptions="" for="" certain="" small="" companies.="" the="" numerous="" general="" public="" comments="" concerning="" the="" impact="" of="" our="" proposal="" on="" small="" entities,="" including="" comments="" filed="" directly="" in="" response="" to="" the="" irfas,="" as="" discussed="" above,="" lead="" us="" to="" conclude="" that="" the="" irfas="" were="" sufficiently="" timely="" and="" detailed="" to="" enable="" parties="" to="" comment="" meaningfully="" on="" the="" proposed="" rules="" and="" to="" enable="" us="" to="" prepare="" this="" frfa.="" we="" have="" been="" working="" with,="" and="" will="" continue="" to="" work="" with,="" the="" sba="" to="" ensure="" that="" both="" our="" irfas="" and="" the="" frfa="" fully="" meet="" the="" requirements="" of="" the="" rfa.="" 517.="" business="" connections="" we="" make="" no="" change="" in="" the="" existing="" support="" mechanisms="" to="" business="" connections="" until="" a="" forward-looking="" cost="" methodology="" is="" established="" to="" determine="" universal="" service="" support.="" all="" residential="" and="" business="" connections="" that="" are="" currently="" supported="" will="" continue="" to="" be="" supported.="" the="" joint="" board's="" recommendation="" will="" be="" revisited="" as="" we="" establish="" a="" forward-looking="" cost="" methodology,="" and,="" therefore,="" we="" do="" not="" find="" it="" necessary="" to="" address="" comments="" relating="" to="" the="" joint="" board's="" recommendation="" on="" the="" extent="" of="" support="" for="" business="" connections="" at="" this="" time.="" 518.="" forward-looking="" cost="" methodology="" we="" have="" taken="" into="" consideration="" the="" concerns="" of="" harris="" and="" others="" that="" forward-looking="" cost="" methodologies="" do="" not="" have="" the="" ability="" to="" predict="" costs="" for="" small,="" rural="" telephone="" companies.="" to="" minimize="" the="" financial="" impact="" of="" this="" change="" on="" small="" entities,="" we="" shall="" permit="" small,="" rural="" carriers="" to="" shift="" to="" a="" forward-looking="" cost="" methodology="" more="" gradually="" than="" larger="" carriers.="" we="" believe="" that="" upon="" development="" of="" an="" appropriate="" forward-looking="" cost="" methodology,="" the="" commission's="" mechanism="" for="" calculating="" support="" for="" small,="" rural="" carriers="" will="" minimize="" the="" adverse="" effects="" of="" an="" immediate="" shift="" to="" a="" forward-looking="" cost="" methodology.="" in="" 1998="" and="" 1999,="" small,="" rural="" carriers="" will="" continue="" to="" receive="" high="" cost="" loop="" support="" based="" on="" the="" existing="" system.="" we="" will="" revisit="" the="" issue="" of="" support="" for="" small,="" rural="" companies="" and="" the="" conversion="" to="" an="" alternative="" methodology="" when="" we="" adopt="" a="" forward-="" looking="" cost="" methodology="" for="" rural="" carriers.="" small,="" rural="" carriers="" in="" alaska="" and="" insular="" areas="" will="" not="" be="" required="" to="" transition="" to="" a="" forward-looking="" cost="" methodology="" until="" further="" review.="" 519.="" schools="" and="" libraries="" despite="" the="" concerns="" of="" some="" commenters="" that="" the="" irfas="" performed="" in="" conjunction="" with="" the="" nprm="" and="" recommended="" decision="" overlooked="" small="" government="" jurisdictions,="" we="" note="" that="" the="" irfa="" that="" was="" adopted="" pursuant="" to="" the="" recommended="" decision="" specifically="" acknowledged="" the="" 112,314="" public="" and="" private="" schools="" and="" 15,904="" libraries="" potentially="" affected="" by="" the="" recommendations="" made="" by="" the="" joint="" board.="" we="" also="" reject="" nsba="" ii's="" assertion="" that="" the="" commission="" should="" not="" impose="" reporting="" requirements="" and="" restrictions="" upon="" resale="" of="" telecommunications="" services.="" in="" section="" 254(h)(3),="" congress="" clearly="" prohibits="" eligible="" public="" institutions="" from="" reselling="" supported="" telecommunications="" services="" to="" ensure="" that="" only="" eligible="" institutions="" can="" purchase="" services="" at="" a="" discount.="" 520.="" to="" foster="" vigorous="" competition="" for="" serving="" schools="" and="" libraries,="" we="" conclude="" that="" non-telecommunications="" carriers="" must="" also="" be="" permitted="" to="" compete="" to="" provide="" these="" services="" in="" conjunction="" with="" telecommunications="" carriers="" or="" even="" on="" their="" own.="" therefore,="" we="" encourage="" non-telecommunications="" carriers,="" many="" of="" which="" may="" be="" small="" businesses,="" either="" to="" enter="" into="" partnerships="" or="" joint="" ventures="" with="" telecommunications="" carriers="" that="" are="" not="" currently="" serving="" the="" areas="" in="" which="" the="" [[page="" 32935]]="" libraries="" and="" schools="" are="" located="" or="" to="" offer="" services="" on="" their="" own.="" we="" have="" also="" made="" every="" effort="" to="" ensure="" that="" all="" entities,="" including="" small="" entities,="" are="" allowed="" to="" participate="" and="" compete="" in="" the="" universal="" service="" program="" on="" an="" equal="" basis="" by="" adopting="" the="" additional="" principle="" of="" competitive="" neutrality="" in="" the="" requirement="" for="" contribution,="" and="" distribution="" of,="" and="" the="" determination="" of="" eligibility="" for="" universal="" service="" support.="" 521.="" we="" share="" the="" concerns="" of="" pagemart="" that="" the="" size="" of="" the="" fund="" not="" infringe="" upon="" the="" ability="" of="" small="" entities="" to="" participate="" and="" utilize="" telecommunications="" services="" by="" unduly="" increasing="" the="" expense="" of="" such="" services.="" we="" have="" made="" every="" effort="" to="" implement="" the="" mandate="" established="" by="" congress="" to="" provide="" discounted="" access="" to="" telecommunications="" services="" to="" schools="" and="" libraries="" in="" the="" most="" cost-="" effective="" and="" economical="" manner="" possible="" including,="" imposing="" a="" cap="" on="" the="" schools="" and="" libraries="" fund.="" 522.="" other="" we="" acknowledge="" the="" concern="" of="" united="" utilities="" that="" requiring="" carriers="" to="" treat="" the="" support="" amount="" to="" eligible="" health="" care="" providers="" as="" an="" offset="" may="" be="" burdensome="" to="" small="" carriers="" whose="" funding="" obligations="" may="" be="" insufficient="" to="" allow="" recovery="" of="" the="" full="" offset="" in="" the="" current="" year.="" although="" we="" agree="" with="" the="" joint="" board's="" recommendation="" initially="" to="" limit="" carriers="" to="" offsets,="" we="" also="" expressly="" agree="" that="" small="" carriers="" should="" not="" be="" required="" to="" carry="" forward="" such="" offset="" credits="" beyond="" one="" year.="" accordingly,="" we="" conclude="" that="" telecommunications="" carriers="" providing="" services="" to="" rural="" health="" care="" providers="" at="" reasonably="" comparable="" rates="" under="" section="" 254(h)(1)(a)="" should="" treat="" the="" support="" amount="" as="" an="" offset="" toward="" the="" carrier's="" universal="" service="" support="" obligation="" for="" the="" year="" in="" which="" the="" expenses="" were="" incurred.="" to="" the="" extent="" that="" the="" amount="" of="" universal="" service="" support="" due="" to="" a="" carrier="" exceeds="" the="" carrier's="" universal="" service="" obligation,="" calculated="" on="" an="" annual="" basis,="" the="" carrier="" may="" receive="" a="" direct="" reimbursement="" in="" the="" amount="" of="" the="" difference.="" we="" believe="" allowing="" carriers="" to="" receive="" direct="" reimbursement="" on="" those="" terms="" should="" help="" ensure="" that="" they="" have="" adequate="" resources="" to="" cover="" the="" costs="" of="" providing="" supported="" services.="" small="" carriers="" may="" find="" it="" difficult="" to="" sustain="" such="" costs="" absent="" prompt="" reimbursement.="" 523.="" we="" disagree="" with="" florida="" psc="" and="" others="" that="" suggest="" that="" ``small''="" carriers="" should="" be="" treated="" differently="" from="" ``large''="" carriers="" for="" purposes="" of="" assessing="" contributions="" to="" universal="" service.="" section="" 254(d)="" requires="" that="" ``every="" telecommunications="" carrier="" that="" provides="" interstate="" telecommunications="" service="" shall="" contribute,="" on="" an="" equitable="" and="" non-discriminatory="" basis''="" to="" preserve="" and="" advance="" universal="" service.="" this="" section="" makes="" no="" distinction="" between="" large="" and="" small="" carriers.="" while="" some="" commenters="" contend="" that="" the="" de="" minimis="" exemption="" should="" be="" applied="" to="" small="" carriers,="" we="" find="" the="" de="" minimis="" exemption="" should="" be="" limited="" to="" cases="" in="" which="" a="" carrier's="" contribution="" to="" universal="" service="" in="" any="" given="" year="" is="" less="" than="" $100.00.="" c.="" description="" and="" estimates="" of="" the="" number="" of="" small="" entities="" to="" which="" the="" rules="" adopted="" in="" this="" report="" and="" order="" will="" apply="" 524.="" the="" rfa="" generally="" defines="" ``small="" entity''="" as="" having="" the="" same="" meaning="" as="" the="" terms="" ``small="" business,''="" ``small="" organization,''="" and="" ``small="" governmental="" jurisdiction''="" and="" the="" same="" meaning="" as="" the="" term="" ``small="" business="" concern''="" under="" the="" small="" business="" act,="" 15="" u.s.c.="" 632,="" unless="" the="" commission="" has="" developed="" one="" or="" more="" definitions="" that="" are="" appropriate="" to="" its="" activities.="" under="" the="" small="" business="" act,="" a="" ``small="" business="" concern''="" is="" one="" that:="" (1)="" is="" independently="" owned="" and="" operated;="" (2)="" is="" not="" dominant="" in="" its="" field="" of="" operation;="" and="" (3)="" meets="" any="" additional="" criteria="" established="" by="" the="" small="" business="" administration="" (sba).="" the="" rfa="" also="" applies="" to="" nonprofit="" organizations="" and="" to="" governmental="" organizations="" such="" as="" governments="" of="" cities,="" counties,="" towns,="" townships,="" villages,="" school="" districts,="" or="" special="" districts="" with="" populations="" of="" less="" than="" 50,000.="" as="" of="" 1992,="" the="" most="" recent="" figures="" available,="" there="" were="" 85,006="" governmental="" entities="" in="" the="" united="" states.="" 525.="" the="" sba="" has="" defined="" a="" small="" business="" for="" standard="" industrial="" classification="" (sic)="" categories="" 4812="" (radiotelephone="" communications)="" and="" 4813="" (telephone="" communications,="" except="" radiotelephone)="" to="" be="" small="" entities="" having="" fewer="" than="" 1,500="" employees.="" this="" frfa="" first="" discusses="" generally="" the="" total="" number="" of="" small="" telephone="" companies="" falling="" within="" both="" of="" those="" sic="" categories.="" then,="" we="" discuss="" other="" small="" entities="" potentially="" affected="" and="" attempt="" to="" refine="" those="" estimates="" pursuant="" to="" this="" report="" and="" order.="" 526.="" small="" incumbent="" lecs="" subject="" to="" these="" rules="" are="" either="" dominant="" in="" their="" field="" of="" operation="" or="" are="" not="" independently="" owned="" and="" operated,="" and,="" consistent="" with="" our="" prior="" practice,="" they="" are="" excluded="" from="" the="" definition="" of="" ``small="" entity''="" and="" ``small="" business="" concerns.''="" accordingly,="" our="" use="" of="" the="" terms="" ``small="" entities''="" and="" ``small="" business''="" does="" not="" encompass="" small="" incumbent="" lecs.="" out="" of="" an="" abundance="" of="" caution,="" however,="" for="" regulatory="" flexibility="" analysis="" purposes,="" we="" will="" consider="" small="" incumbent="" lecs="" within="" this="" analysis="" and="" use="" the="" term="" ``small="" incumbent="" lecs''="" to="" refer="" to="" any="" incumbent="" lecs="" that="" arguably="" might="" be="" defined="" by="" the="" sba="" as="" ``small="" business="" concerns.''="" 527.="" we="" note="" that="" our="" analysis="" of="" the="" entities="" affected="" by="" the="" rules="" promulgated="" in="" this="" order="" is="" subject="" to="" change="" as="" future="" revisions="" are="" made="" in="" the="" universal="" service="" rules.="" moreover,="" we="" note="" that="" section="" xiii.b="" of="" the="" order="" discusses="" specific="" examples="" of="" some="" of="" the="" entities="" affected="" by="" our="" rules="" but="" is="" not="" to="" be="" considered="" an="" exhaustive="" list="" of="" all="" of="" the="" entities="" potentially="" affected.="" we="" also="" note="" that="" our="" analysis="" as="" to="" the="" impact="" of="" the="" rules="" upon="" small="" entities="" may="" be="" revised="" pending="" any="" revision="" of="" the="" rules.="" i.="" telephone="" companies="" (sic="" 4813)="" 528.="" total="" number="" of="" telephone="" companies="" affected="" many="" of="" the="" decisions="" and="" rules="" adopted="" herein="" may="" have="" a="" significant="" effect="" on="" a="" substantial="" number="" of="" the="" small="" telephone="" companies="" identified="" by="" the="" sba.="" the="" united="" states="" bureau="" of="" the="" census="" (``the="" census="" bureau'')="" reports="" that,="" at="" the="" end="" of="" 1992,="" there="" were="" 3,497="" firms="" engaged="" in="" providing="" telephone="" services,="" as="" defined="" therein,="" for="" at="" least="" one="" year.="" this="" number="" contains="" a="" variety="" of="" different="" categories="" of="" carriers,="" including="" local="" exchange="" carriers,="" interexchange="" carriers,="" competitive="" access="" providers,="" cellular="" carriers,="" mobile="" service="" carriers,="" operator="" service="" providers,="" pay="" telephone="" operators,="" pcs="" providers,="" covered="" smr="" providers,="" and="" resellers.="" it="" seems="" certain="" that="" some="" of="" those="" 3,497="" telephone="" service="" firms="" may="" not="" qualify="" as="" small="" entities="" or="" small="" incumbent="" lecs="" because="" they="" are="" not="" ``independently="" owned="" and="" operated.''="" for="" example,="" a="" pcs="" provider="" that="" is="" affiliated="" with="" an="" interexchange="" carrier="" having="" more="" than="" 1,500="" employees="" would="" not="" meet="" the="" definition="" of="" a="" small="" business.="" it="" seems="" reasonable="" to="" conclude,="" therefore,="" that="" fewer="" than="" 3,497="" telephone="" service="" firms="" would="" qualify="" as="" small="" entity="" telephone="" service="" firms="" or="" small="" incumbent="" lecs,="" as="" defined="" above,="" that="" may="" be="" affected="" by="" this="" order.="" 529.="" wireline="" carriers="" and="" service="" providers="" the="" sba="" has="" developed="" a="" definition="" of="" small="" entities="" for="" telecommunications="" [[page="" 32936]]="" companies="" other="" than="" radiotelephone="" (wireless)="" companies="" (telephone="" communications,="" except="" radiotelephone).="" the="" census="" bureau="" reports="" that="" there="" were="" 2,321="" such="" telephone="" companies="" in="" operation="" for="" at="" least="" one="" year="" at="" the="" end="" of="" 1992.="" according="" to="" the="" sba's="" definition,="" a="" small="" business="" telephone="" company="" other="" than="" a="" radiotelephone="" company="" is="" one="" employing="" fewer="" than="" 1,500="" persons.="" of="" the="" 2,321="" non-radiotelephone="" companies="" listed="" by="" the="" census="" bureau,="" 2,295="" were="" reported="" to="" have="" fewer="" than="" 1,000="" employees.="" thus,="" at="" least="" 2,295="" non-radiotelephone="" companies="" might="" qualify="" as="" small="" entities="" or="" small="" incumbent="" lecs="" or="" small="" entities="" based="" on="" these="" employment="" statistics.="" as="" it="" seems="" certain="" that="" some="" of="" these="" carriers="" are="" not="" independently="" owned="" and="" operated,="" however,="" this="" figure="" necessarily="" overstates="" the="" actual="" number="" of="" non-radiotelephone="" companies="" that="" would="" qualify="" as="" ``small="" business="" concerns''="" under="" the="" sba's="" definition.="" consequently,="" we="" estimate="" using="" this="" methodology="" that="" there="" are="" fewer="" than="" 2,295="" small="" entity="" telephone="" communications="" companies="" (other="" than="" radiotelephone="" companies)="" that="" may="" be="" affected="" by="" the="" proposed="" decisions="" and="" rules="" adopted="" in="" this="" order.="" 530.="" local="" exchange="" carriers="" according="" to="" the="" most="" recent="" data,="" 1,347="" companies="" reported="" that="" they="" were="" engaged="" in="" the="" provision="" of="" local="" exchange="" services.="" as="" some="" of="" these="" carriers="" have="" more="" than="" 1,500="" employees,="" we="" are="" unable="" at="" this="" time="" to="" estimate="" with="" greater="" precision="" the="" number="" of="" lecs="" that="" would="" qualify="" as="" small="" business="" concerns="" under="" the="" sba's="" definition.="" consequently,="" we="" estimate="" that="" there="" are="" fewer="" than="" 1,347="" small="" incumbent="" lecs="" that="" may="" be="" affected="" by="" the="" decisions="" and="" rules="" adopted="" in="" this="" order.="" 531.="" interexchange="" carriers="" according="" to="" the="" most="" recent="" data,="" 130="" companies="" reported="" that="" they="" were="" engaged="" in="" the="" provision="" of="" interexchange="" services.="" as="" some="" of="" these="" carriers="" have="" more="" than="" 1,500="" employees,="" we="" are="" unable="" at="" this="" time="" to="" estimate="" with="" greater="" precision="" the="" number="" of="" ixcs="" that="" would="" qualify="" as="" small="" business="" concerns="" under="" the="" sba's="" definition.="" consequently,="" we="" estimate="" that="" there="" are="" fewer="" than="" 130="" small="" entity="" ixcs="" that="" may="" be="" affected="" by="" the="" decisions="" and="" rules="" adopted="" in="" this="" order.="" 532.="" competitive="" access="" providers="" according="" to="" the="" most="" recent="" data,="" 57="" companies="" reported="" that="" they="" were="" engaged="" in="" the="" provision="" of="" competitive="" access="" services.="" we="" have="" no="" information="" on="" the="" number="" of="" carriers="" that="" are="" not="" independently="" owned="" and="" operated,="" nor="" on="" those="" that="" have="" more="" than="" 1,500="" employees,="" and="" thus="" are="" unable="" at="" this="" time="" to="" estimate="" with="" greater="" precision="" the="" number="" of="" caps="" that="" would="" qualify="" as="" small="" business="" concerns="" under="" the="" sba's="" definition.="" consequently,="" we="" estimate="" that="" there="" are="" fewer="" than="" 57="" small="" entity="" caps="" that="" may="" be="" affected="" by="" the="" decisions="" and="" rules="" adopted="" in="" this="" order.="" 533.="" operator="" service="" providers="" according="" to="" the="" most="" recent="" data,="" 25="" companies="" reported="" that="" they="" were="" engaged="" in="" the="" provision="" of="" operator="" services.="" we="" do="" not="" have="" information="" on="" the="" number="" of="" carriers="" that="" are="" not="" independently="" owned="" and="" operated,="" nor="" have="" more="" than="" 1,500="" employees,="" and="" thus="" are="" unable="" at="" this="" time="" to="" estimate="" with="" greater="" precision="" the="" number="" of="" operator="" service="" providers="" that="" would="" qualify="" as="" small="" business="" concerns="" under="" the="" sba's="" definition.="" consequently,="" we="" estimate="" that="" there="" are="" fewer="" than="" 25="" small="" entity="" operator="" service="" providers="" that="" may="" be="" affected="" by="" the="" decisions="" and="" rules="" adopted="" in="" this="" order.="" 534.="" pay="" telephone="" operators="" according="" to="" the="" most="" recent="" data,="" 271="" companies="" reported="" that="" they="" were="" engaged="" in="" the="" provision="" of="" pay="" telephone="" services.="" we="" have="" no="" information="" on="" the="" number="" of="" carriers="" that="" are="" not="" independently="" owned="" and="" operated,="" nor="" on="" those="" that="" have="" more="" than="" 1,500="" employees,="" and="" thus="" are="" unable="" at="" this="" time="" to="" estimate="" with="" greater="" precision="" the="" number="" of="" pay="" telephone="" operators="" that="" would="" qualify="" as="" small="" business="" concerns="" under="" the="" sba's="" definition.="" consequently,="" we="" estimate="" that="" there="" are="" fewer="" than="" 271="" small="" entity="" pay="" telephone="" operators="" that="" may="" be="" affected="" by="" the="" decisions="" and="" rules="" adopted="" in="" this="" order.="" 535.="" radiotelephone="" (wireless)="" carriers="" we="" do="" not="" have="" information="" on="" the="" number="" of="" carriers="" that="" are="" not="" independently="" owned="" and="" operated,="" and="" thus="" are="" unable="" at="" this="" time="" to="" estimate="" with="" greater="" precision="" the="" number="" of="" radiotelephone="" carriers="" and="" service="" providers="" that="" would="" qualify="" as="" small="" business="" concerns="" under="" the="" sba's="" definition.="" consequently,="" we="" estimate="" that="" there="" are="" fewer="" than="" 1,164="" small="" entity="" radiotelephone="" companies="" that="" may="" be="" affected="" by="" the="" decisions="" and="" rules="" adopted="" in="" this="" order.="" 536.="" cellular="" service="" carriers="" according="" to="" the="" most="" recent="" data,="" 792="" companies="" reported="" that="" they="" were="" engaged="" in="" the="" provision="" of="" cellular="" services.="" we="" have="" no="" information="" on="" the="" number="" of="" carriers="" that="" are="" not="" independently="" owned="" and="" operated,="" nor="" on="" those="" that="" have="" more="" than="" 1,500="" employees,="" and="" thus="" are="" unable="" at="" this="" time="" to="" estimate="" with="" greater="" precision="" the="" number="" of="" cellular="" service="" carriers="" that="" would="" qualify="" as="" small="" business="" concerns="" under="" the="" sba's="" definition.="" consequently,="" we="" estimate="" that="" there="" are="" fewer="" than="" 792="" small="" entity="" cellular="" service="" carriers="" that="" may="" be="" affected="" by="" the="" decisions="" and="" rules="" adopted="" in="" this="" order.="" 537.="" mobile="" service="" carriers="" according="" to="" the="" most="" recent="" data,="" 117="" companies="" reported="" that="" they="" were="" engaged="" in="" the="" provision="" of="" mobile="" services.="" we="" have="" no="" information="" on="" the="" number="" of="" carriers="" that="" are="" not="" independently="" owned="" and="" operated,="" nor="" on="" those="" that="" have="" more="" than="" 1,500="" employees,="" and="" thus="" are="" unable="" at="" this="" time="" to="" estimate="" with="" greater="" precision="" the="" number="" of="" mobile="" service="" carriers="" that="" would="" qualify="" under="" the="" sba's="" definition.="" consequently,="" we="" estimate="" that="" there="" are="" fewer="" than="" 117="" small="" entity="" mobile="" service="" carriers="" that="" may="" be="" affected="" by="" the="" decisions="" and="" rules="" adopted="" in="" this="" order.="" 538.="" broadband="" personal="" communications="" service="" (pcs)="" licensees="" no="" small="" businesses="" within="" the="" sba-approved="" definition="" bid="" successfully="" for="" licenses="" in="" blocks="" a="" and="" b.="" there="" were="" 90="" winning="" bidders="" that="" qualified="" as="" small="" entities="" in="" the="" block="" c="" auctions.="" a="" total="" of="" 93="" small="" and="" very="" small="" business="" bidders="" won="" approximately="" 40%="" of="" the="" 1,479="" licenses="" for="" blocks="" d,="" e,="" and="" f.="" however,="" licenses="" for="" blocks="" c="" through="" f="" have="" not="" been="" awarded="" fully,="" therefore="" there="" are="" few,="" if="" any,="" small="" businesses="" currently="" providing="" pcs="" services.="" based="" on="" this="" information,="" we="" conclude="" that="" the="" number="" of="" small="" broadband="" pcs="" licensees="" will="" include="" the="" 90="" winning="" bidders="" and="" the="" 93="" qualifying="" bidders="" in="" the="" d,="" e,="" and="" f="" blocks,="" for="" a="" total="" of="" 183="" small="" pcs="" providers="" as="" defined="" by="" the="" sba="" and="" the="" commission's="" auction="" rules.="" 539.="" narrowband="" pcs="" the="" commission="" has="" auctioned="" nationwide="" and="" regional="" licenses="" for="" narrowband="" pcs.="" there="" are="" 11="" nationwide="" and="" 30="" regional="" licensees="" for="" [[page="" 32937]]="" narrowband="" pcs.="" the="" commission="" does="" not="" have="" sufficient="" information="" to="" determine="" whether="" any="" of="" these="" licensees="" are="" small="" businesses="" within="" the="" sba-approved="" definition.="" at="" present,="" there="" have="" been="" no="" auctions="" held="" for="" the="" major="" trading="" area="" (mta)="" and="" basic="" trading="" area="" (bta)="" narrowband="" pcs="" licenses.="" the="" commission="" anticipates="" a="" total="" of="" 561="" mta="" licenses="" and="" 2,958="" bta="" licenses="" will="" be="" awarded="" in="" the="" auctions.="" 540.="" rural="" radiotelephone="" service="" the="" commission="" has="" not="" adopted="" a="" definition="" of="" small="" business="" specific="" to="" the="" rural="" radiotelephone="" service,="" which="" is="" defined="" in="" sec.="" 22.99="" of="" the="" commission's="" rules.="" a="" subset="" of="" the="" rural="" radiotelephone="" service="" is="" betrs,="" or="" basic="" exchange="" telephone="" radio="" systems.="" accordingly,="" we="" will="" use="" the="" sba's="" definition="" applicable="" to="" radiotelephone="" companies,="" i.e.,="" an="" entity="" employing="" fewer="" than="" 1,500="" persons.="" there="" are="" approximately="" 1,000="" licensees="" in="" the="" rural="" radiotelephone="" service,="" and="" we="" estimate="" that="" almost="" all="" of="" them="" qualify="" as="" small="" under="" the="" sba's="" definition="" of="" a="" small="" business.="" 541.="" public="" safety="" radio="" services="" public="" safety="" radio="" services="" include="" police,="" fire,="" local="" government,="" forestry="" conservation,="" highway="" maintenance,="" and="" emergency="" medical="" services.="" there="" are="" a="" total="" of="" approximately="" 127,540="" licensees="" within="" these="" services.="" governmental="" entities="" as="" well="" as="" private="" businesses="" comprise="" the="" licensees="" for="" these="" services.="" as="" we="" indicated,="" all="" governmental="" entities="" with="" populations="" of="" less="" than="" 50,000="" fall="" within="" the="" definition="" of="" a="" small="" business.="" there="" are="" approximately="" 37,566="" governmental="" entities="" with="" populations="" of="" less="" than="" 50,000.="" 542.="" specialized="" mobile="" radio="" (smr)="" licensees="" the="" commission="" recently="" held="" auctions="" for="" geographic="" area="" licenses="" in="" the="" 900="" mhz="" smr="" band.="" there="" were="" 60="" winning="" bidders="" who="" qualified="" as="" small="" entities="" in="" the="" 900="" mhz="" auction.="" based="" on="" this="" information,="" we="" conclude="" that="" the="" number="" of="" geographic="" area="" smr="" licensees="" affected="" by="" the="" rule="" adopted="" in="" this="" order="" includes="" these="" 60="" small="" entities.="" no="" auctions="" have="" been="" held="" for="" 800="" mhz="" geographic="" area="" smr="" licenses.="" therefore,="" no="" small="" entities="" currently="" hold="" these="" licenses.="" a="" total="" of="" 525="" licenses="" will="" be="" awarded="" for="" the="" upper="" 200="" channels="" in="" the="" 800="" mhz="" geographic="" area="" smr="" auction.="" the="" commission="" has="" not="" yet="" determined="" how="" many="" licenses="" will="" be="" awarded="" for="" the="" lower="" 230="" channels="" in="" the="" 800="" mhz="" geographic="" area="" smr="" auction.="" 543.="" resellers="" according="" to="" our="" most="" recent="" data,="" 260="" companies="" reported="" that="" they="" were="" engaged="" in="" the="" resale="" of="" telephone="" services.="" we="" have="" no="" information="" on="" the="" number="" of="" carriers="" that="" are="" not="" independently="" owned="" and="" operated,="" nor="" on="" those="" that="" have="" more="" than="" 1,500="" employees,="" and="" thus="" are="" unable="" at="" this="" time="" to="" estimate="" with="" greater="" precision="" the="" number="" of="" resellers="" that="" would="" qualify="" as="" small="" business="" concerns="" under="" the="" sba's="" definition.="" consequently,="" we="" estimate="" that="" there="" are="" fewer="" than="" 260="" small="" entity="" resellers="" that="" may="" be="" affected="" by="" the="" decisions="" and="" rules="" adopted="" in="" this="" order.="" 544.="" 900="" service="" according="" to="" our="" most="" recent="" data,="" 68="" carriers="" reported="" that="" they="" were="" engaged="" in="" 900="" service.="" consequently,="" we="" estimate="" that="" there="" are="" fewer="" than="" 68="" small="" entity="" 900="" service="" providers="" that="" may="" be="" affected="" by="" the="" decisions="" and="" rules="" adopted="" in="" this="" order.="" 545.="" private="" line="" service="" according="" to="" our="" most="" recent="" data,="" 635="" lecs="" and="" other="" carriers="" reported="" that="" they="" were="" engaged="" in="" private="" line="" service.="" consequently,="" we="" estimate="" that="" there="" are="" fewer="" than="" 635="" lecs="" and="" other="" carriers="" providing="" private="" line="" service="" that="" may="" be="" affected="" by="" the="" decisions="" and="" rules="" adopted="" in="" this="" order.="" 546.="" telegraph="" according="" to="" our="" most="" recent="" data,="" 4="" facilities="" based="" and="" 1="" resale="" provider="" reported="" that="" they="" engaged="" in="" international="" telegraph="" service.="" according="" to="" the="" census="" bureau,="" there="" were="" 286="" total="" telegraph="" firms="" and="" 247="" had="" less="" than="" $5="" million="" in="" annual="" revenue.="" consequently,="" we="" estimate="" that="" there="" are="" less="" than="" 247="" small="" telegraph="" firms="" that="" may="" be="" affected="" by="" the="" decisions="" and="" rules="" adopted="" in="" this="" order.="" 547.="" telex="" according="" to="" our="" most="" recent="" data,="" 5="" facilities="" based="" and="" 2="" resale="" provider="" reported="" that="" they="" engaged="" in="" telex="" service.="" consequently,="" we="" estimate="" that="" there="" are="" fewer="" than="" 7="" telex="" providers="" that="" may="" be="" affected="" by="" the="" decisions="" and="" rules="" adopted="" in="" this="" order.="" 548.="" message="" telephone="" service="" according="" to="" our="" most="" recent="" data,="" 1,092="" carriers="" reported="" that="" they="" engaged="" in="" message="" telephone="" service.="" consequently,="" we="" estimate="" that="" there="" are="" fewer="" than="" 1,092="" message="" telephone="" service="" providers="" that="" may="" be="" affected="" by="" the="" decisions="" and="" rules="" adopted="" in="" this="" order.="" 549.="" 800="" subscribers="" according="" to="" our="" most="" recent="" data,="" the="" number="" of="" 800="" numbers="" in="" use="" was="" 6,987,063.="" we="" do="" not="" have="" information="" on="" the="" number="" of="" carriers="" not="" independently="" owned="" and="" operated,="" nor="" having="" more="" than="" 1,500="" employees,="" and="" thus="" are="" unable="" to="" estimate="" with="" greater="" precision="" the="" number="" of="" 800="" subscribers="" that="" would="" qualify="" as="" small="" business="" concerns="" under="" the="" sba's="" definition.="" consequently,="" we="" estimate="" that="" there="" are="" fewer="" than="" 6,987,063="" small="" entity="" 800="" subscribers.="" ii.="" cable="" system="" operators="" (sic="" 4841)="" 550.="" the="" sba="" has="" developed="" a="" definition="" of="" small="" entities="" for="" cable="" and="" other="" pay="" television="" services="" that="" includes="" all="" such="" companies="" generating="" less="" than="" $11="" million="" in="" revenue="" annually.="" this="" definition="" includes="" cable="" systems="" operators,="" closed="" circuit="" television="" services,="" direct="" broadcast="" satellite="" services,="" multipoint="" distribution="" systems,="" satellite="" master="" antenna="" systems,="" and="" subscription="" television="" services.="" according="" to="" the="" census="" bureau,="" there="" were="" 1,758="" total="" cable="" and="" other="" pay="" television="" services="" and="" 1,423="" had="" less="" than="" $11="" million="" in="" revenue.="" we="" note="" that="" cable="" system="" operators="" are="" included="" in="" our="" analysis="" due="" to="" their="" ability="" to="" provide="" telephony.="" 551.="" the="" commission="" has="" developed="" with="" the="" sba's="" approval="" our="" own="" definition="" of="" a="" small="" cable="" system="" operator="" for="" the="" purposes="" of="" rate="" regulation.="" under="" the="" commission's="" rules,="" a="" ``small="" cable="" company,''="" is="" one="" serving="" fewer="" than="" 400,000="" subscribers="" nationwide.="" based="" on="" our="" most="" recent="" information,="" we="" estimate="" that="" there="" were="" 1,439="" cable="" operators="" that="" qualified="" as="" small="" cable="" system="" operators="" at="" the="" end="" of="" 1995.="" since="" then,="" some="" of="" those="" companies="" may="" have="" grown="" to="" serve="" over="" 400,000="" subscribers,="" and="" others="" may="" have="" been="" involved="" in="" transactions="" that="" caused="" them="" to="" be="" combined="" with="" other="" cable="" operators.="" consequently,="" we="" estimate="" that="" there="" are="" less="" than="" 1,439="" small="" entity="" cable="" system="" operators="" that="" may="" be="" affected="" by="" the="" decisions="" and="" rules="" adopted="" in="" this="" order.="" we="" conclude="" that="" only="" a="" small="" percentage="" of="" these="" entities="" currently="" provide="" qualifying="" ``telecommunications="" services''="" required="" by="" the="" act="" and,="" therefore,="" estimate="" that="" the="" number="" of="" such="" entities="" affected="" are="" significantly="" fewer="" than="" noted.="" 552.="" the="" act="" also="" contains="" a="" definition="" of="" small="" cable="" system="" [[page="" 32938]]="" operator,="" which="" is="" ``a="" cable="" operator="" that,="" directly="" or="" through="" an="" affiliate,="" serves="" in="" the="" aggregate="" fewer="" than="" 1="" percent="" of="" all="" subscribers="" in="" the="" united="" states="" and="" is="" not="" affiliated="" with="" any="" entity="" or="" entities="" whose="" gross="" annual="" revenues="" in="" the="" aggregate="" exceed="" $250,000,000.''="" the="" commission="" has="" determined="" that="" there="" are="" 61,700,000="" subscribers="" in="" the="" united="" states.="" therefore,="" we="" found="" that="" an="" operator="" serving="" fewer="" than="" 617,000="" subscribers="" shall="" be="" deemed="" a="" small="" operator,="" if="" its="" annual="" revenues,="" when="" combined="" with="" the="" total="" annual="" revenues="" of="" all="" of="" its="" affiliates,="" do="" not="" exceed="" $250="" million="" in="" the="" aggregate.="" based="" on="" available="" data,="" we="" find="" that="" the="" number="" of="" cable="" operators="" serving="" 617,000="" subscribers="" or="" less="" total="" 1,450.="" we="" do="" not="" request="" nor="" do="" we="" collect="" information="" concerning="" whether="" cable="" system="" operators="" are="" affiliated="" with="" entities="" whose="" gross="" annual="" revenues="" exceed="" $250,000,000,="" and="" thus="" are="" unable="" at="" this="" time="" to="" estimate="" with="" greater="" precision="" the="" number="" of="" cable="" system="" operators="" that="" would="" qualify="" as="" small="" cable="" operators="" under="" the="" definition="" in="" the="" act.="" 553.="" direct="" broadcast="" satellites="" (dbs)="" as="" of="" december="" 1996,="" there="" were="" eight="" dbs="" licensees.="" the="" commission,="" however,="" does="" not="" collect="" annual="" revenue="" data="" for="" dbs="" and,="" therefore,="" is="" unable="" to="" ascertain="" the="" number="" of="" small="" dbs="" licensees="" that="" could="" be="" impacted="" by="" these="" rules.="" 554.="" international="" services="" according="" to="" the="" census="" bureau,="" there="" were="" a="" total="" of="" 848="" communications="" services,="" nec="" in="" operation="" in="" 1992,="" and="" a="" total="" of="" 775="" had="" annual="" receipts="" of="" less="" than="" $9,999="" million.="" we="" note="" that="" those="" entities="" providing="" only="" international="" service="" will="" not="" be="" affected="" by="" our="" rules.="" we="" do="" not,="" however,="" have="" sufficient="" data="" to="" estimate="" with="" greater="" detail="" those="" providing="" both="" international="" and="" interstate="" services.="" consequently,="" we="" estimate="" that="" there="" are="" fewer="" than="" 775="" small="" international="" service="" entities="" potentially="" impacted="" by="" our="" rules.="" 555.="" international="" broadcast="" stations="" commission="" records="" show="" that="" there="" are="" 20="" international="" broadcast="" station="" licensees.="" we="" do="" not="" request="" nor="" collect="" annual="" revenue="" information,="" and="" thus="" are="" unable="" to="" estimate="" the="" number="" of="" international="" broadcast="" licensees="" that="" would="" constitute="" a="" small="" business="" under="" the="" sba="" definition.="" we="" note="" that="" those="" entities="" providing="" only="" international="" service="" will="" not="" be="" affected="" by="" our="" rules.="" we="" do="" not,="" however,="" have="" sufficient="" data="" to="" estimate="" with="" greater="" detail="" those="" providing="" both="" international="" and="" interstate="" services.="" consequently,="" we="" estimate="" that="" there="" are="" fewer="" than="" 20="" international="" broadcast="" stations="" potentially="" impacted="" by="" our="" rules.="" iii.="" municipalities="" 556.="" the="" term="" ``small="" government="" jurisdiction''="" is="" defined="" as="" ``government="" of="" .="" .="" .="" districts="" with="" populations="" of="" less="" than="" 50,000.''="" the="" most="" recent="" figures="" indicate="" that="" there="" are="" 85,006="" governmental="" entities="" in="" the="" united="" states.="" this="" number="" includes="" such="" entities="" as="" states,="" counties,="" cities,="" utility="" districts="" and="" school="" districts.="" of="" the="" 85,006="" governmental="" entities,="" 38,978="" are="" counties,="" cities="" and="" towns.="" the="" remainder="" are="" primarily="" utility="" districts,="" school="" districts,="" and="" states.="" of="" the="" 38,978="" counties,="" cities,="" and="" towns,="" 37,566="" or="" 96%,="" have="" populations="" of="" fewer="" than="" 50,000.="" consequently,="" we="" estimate="" that="" there="" are="" 37,566="" ``small="" government="" jurisdictions''="" that="" will="" be="" affected="" by="" our="" rules.="" iv.="" rural="" health="" care="" providers="" 557.="" section="" 254(h)(5)(b)="" defines="" the="" term="" ``health="" care="" provider''="" and="" sets="" forth="" the="" seven="" categories="" of="" health="" care="" providers="" eligible="" to="" receive="" universal="" service="" support.="" we="" estimate="" that="" there="" are:="" (1)="" 625="" ``post-secondary="" educational="" institutions="" offering="" health="" care="" instruction,="" teaching="" hospitals,="" and="" medical="" schools,''="" including="" 403="" rural="" community="" colleges,="" 124="" medical="" schools="" with="" rural="" programs,="" and="" 98="" rural="" teaching="" hospitals;="" (2)="" 1,200="" ``community="" health="" centers="" or="" health="" centers="" providing="" health="" care="" to="" migrants;''="" (3)="" 3,093="" ``local="" health="" departments="" or="" agencies''="" including="" 1,271="" local="" health="" departments="" and="" 1,822="" local="" boards="" of="" health;="" (4)="" 2,000="" ``community="" mental="" health="" centers;''="" (5)="" 2,049="" ``not-for-profit="" hospitals;''="" and="" (6)="" 3,329="" ``rural="" health="" clinics.''="" we="" do="" not="" have="" sufficient="" information="" to="" make="" an="" estimate="" of="" the="" number="" of="" consortia="" of="" health="" care="" providers="" at="" this="" time.="" the="" total="" of="" these="" categorical="" numbers="" is="" 12,296.="" consequently,="" we="" estimate="" that="" there="" are="" fewer="" than="" 12,296="" health="" care="" providers="" potentially="" affected="" by="" the="" rules="" in="" this="" order.="" according="" to="" the="" sba="" definition,="" hospitals="" must="" have="" annual="" gross="" receipts="" of="" $5="" million="" or="" less="" to="" qualify="" as="" a="" small="" business="" concern.="" there="" are="" approximately="" 3,856="" hospital="" firms,="" of="" which="" 294="" have="" gross="" annual="" receipts="" of="" $5="" million="" or="" less.="" although="" some="" of="" these="" small="" hospital="" firms="" may="" not="" qualify="" as="" rural="" health="" care="" providers,="" we="" are="" unable="" at="" this="" time="" to="" estimate="" with="" greater="" precision="" the="" number="" of="" small="" hospital="" firms="" which="" may="" be="" affected="" by="" this="" order.="" consequently,="" we="" estimate="" that="" there="" are="" fewer="" than="" 294="" hospital="" firms="" affected="" by="" this="" order.="" v.="" schools="" (sic="" 8211)="" and="" libraries="" (sic="" 8231)="" 558.="" the="" sba="" has="" established="" a="" definition="" of="" small="" elementary="" and="" secondary="" schools="" and="" small="" libraries="" as="" those="" with="" under="" $5="" million="" in="" annual="" revenues.="" the="" most="" reliable="" source="" of="" information="" regarding="" the="" total="" number="" of="" kindergarten="" through="" 12th="" grade="" (k-12)="" schools="" and="" libraries="" nationwide="" of="" which="" we="" are="" aware="" appears="" to="" be="" data="" collected="" by="" the="" united="" states="" department="" of="" education="" and="" the="" national="" center="" for="" educational="" statistics.="" based="" on="" that="" information,="" it="" appears="" that="" there="" are="" approximately="" 86,221="" public="" and="" 26,093="" private="" k-12="" schools="" in="" the="" united="" states="" (sic="" 8211).="" it="" further="" appears="" that="" there="" are="" approximately="" 15,904="" libraries,="" including="" branches,="" in="" the="" united="" states="" (sic="" 8231).="" consequently,="" we="" estimate="" that="" there="" are="" fewer="" than="" 86,221="" public="" and="" 26,093="" private="" schools="" and="" fewer="" than="" 15,904="" libraries="" that="" may="" be="" affected="" by="" the="" decisions="" and="" rules="" adopted="" in="" this="" order.="" d.="" summary="" analysis="" of="" the="" projected="" reporting,="" recordkeeping,="" and="" other="" compliance="" requirements="" and="" significant="" alternatives="" and="" steps="" taken="" to="" minimize="" the="" significant="" economic="" impact="" on="" a="" substantial="" number="" of="" small="" entities="" consistent="" with="" stated="" objectives="" 559.="" structure="" of="" the="" analysis="" in="" this="" section="" of="" the="" frfa,="" we="" analyze="" the="" projected="" reporting,="" recordkeeping,="" and="" other="" compliance="" requirements="" that="" may="" apply="" to="" small="" entities="" and="" small="" incumbent="" lecs="" as="" a="" result="" of="" this="" order.="" as="" a="" part="" of="" this="" discussion,="" we="" mention="" some="" of="" the="" types="" of="" skills="" that="" will="" be="" needed="" to="" meet="" the="" new="" requirements.="" we="" also="" describe="" the="" steps="" taken="" to="" minimize="" the="" economic="" impact="" of="" our="" decisions="" on="" small="" entities="" and="" small="" incumbent="" lecs,="" including="" the="" significant="" alternatives="" considered="" and="" rejected.="" summary="" analysis:="" section="" iii="" principles="" summary="" of="" projected="" reporting,="" recordkeeping,="" and="" other="" compliance="" requirements="" 560.="" there="" are="" no="" reporting="" or="" other="" compliance="" requirements="" relating="" directly="" to="" the="" principles="" enumerated="" in="" section="" 254(b)="" or="" relating="" directly="" to="" the="" additional="" principle="" of="" competitive="" neutrality,="" as="" adopted="" by="" the="" [[page="" 32939]]="" commission="" pursuant="" to="" section="" 254(b)(7).="" significant="" alternatives="" and="" steps="" taken="" to="" minimize="" significant="" economic="" impact="" on="" a="" substantial="" number="" of="" small="" entities="" consistent="" with="" stated="" objectives="" 561.="" as="" set="" forth="" in="" section="" iii.c,="" we="" conclude="" that="" a="" fair="" and="" reasonable="" application="" of="" the="" principles="" enumerated="" by="" congress="" in="" section="" 254(b)="" and="" the="" additional="" principle="" of="" competitive="" neutrality="" will="" favorably="" impact="" all="" business="" entities,="" including="" smaller="" entities,="" and="" promote="" universal="" service.="" by="" adopting="" the="" additional="" principle="" of="" competitive="" neutrality,="" we="" seek="" to="" ensure="" that="" all="" entities,="" including="" smaller="" entities,="" are="" treated="" on="" an="" equal="" basis="" so="" that="" contributions="" to="" and="" disbursements="" from="" the="" universal="" service="" support="" mechanisms="" will="" not="" be="" unfairly="" biased="" either="" in="" favor="" of="" or="" against="" any="" entity="" or="" group.="" we="" acknowledge="" the="" comments="" of="" certain="" rural="" telephone="" carriers,="" many="" of="" whom="" may="" be="" small="" entities,="" who="" contend="" that="" promotion="" of="" competition="" must="" be="" considered="" only="" secondary="" to="" the="" advancement="" of="" universal="" service.="" these="" commenters="" contend="" that="" certain="" provisions="" of="" the="" 1996="" act="" are="" intended="" to="" provide="" ``rural="" safeguards''="" such="" as="" eligibility="" determinations="" for="" rural="" telephone="" carriers="" under="" section="" 214(e)(2).="" we="" balance="" these="" interests="" by="" acknowledging="" that="" a="" principal="" purpose="" of="" section="" 254="" is="" to="" create="" mechanisms="" that="" will="" sustain="" universal="" service="" as="" competition="" emerges.="" we="" expect="" that="" applying="" the="" policy="" of="" competitive="" neutrality="" will="" promote="" the="" most="" efficient="" technologies="" that,="" over="" time,="" may="" provide="" competitive="" alternatives="" in="" rural="" areas="" and="" thereby="" benefit="" rural="" consumers.="" we="" also="" recognize="" technological="" neutrality="" as="" a="" concept="" encompassed="" by="" competitive="" neutrality.="" in="" doing="" so,="" the="" commission="" has="" expanded="" universal="" service="" support="" to="" many="" small="" entities,="" both="" as="" providers="" and="" consumers="" of="" telecommunications="" services,="" in="" accordance="" with="" congressional="" intent="" to="" promote="" competition="" and="" provide="" affordable="" access="" to="" telecommunications="" and="" information="" services.="" summary="" analysis:="" section="" iv="" definition="" of="" universal="" service="" summary="" of="" projected="" reporting,="" recordkeeping,="" and="" other="" compliance="" requirements="" 562.="" all="" eligible="" carriers="" will="" be="" required="" to="" provide="" each="" of="" the="" core="" services="" designated="" for="" universal="" service="" support="" pursuant="" to="" section="" 254(c)(1)="" in="" order="" to="" receive="" universal="" service="" support,="" subject="" to="" certain="" enumerated="" exceptions.="" upon="" a="" showing="" by="" an="" otherwise="" eligible="" carrier="" that="" exceptional="" circumstances="" prevent="" that="" carrier="" from="" providing="" single-party="" service,="" access="" to="" e911="" service,="" or="" toll="" limitation="" services,="" a="" state="" commission="" may="" grant="" petitions="" by="" carriers="" for="" a="" period="" of="" time="" during="" which="" otherwise="" eligible="" carriers="" that="" are="" unable="" to="" provide="" those="" services="" can="" still="" receive="" universal="" service="" support="" while="" they="" make="" the="" network="" upgrades="" necessary="" to="" offer="" these="" services.="" significant="" alternatives="" and="" steps="" taken="" to="" minimize="" significant="" economic="" impact="" on="" a="" substantial="" number="" of="" small="" entities="" consistent="" with="" stated="" objectives="" 563.="" as="" set="" forth="" in="" section="" iv.b.2,="" we="" find="" that="" universal="" service="" support="" should="" be="" provided="" for="" eligible="" carriers="" that="" provide="" each="" of="" the="" designated="" services.="" in="" addition,="" we="" define="" the="" services="" designated="" for="" support="" in="" a="" competitively="" neutral="" manner,="" which="" permits="" wireless="" and="" other="" potential="" competing="" carriers="" to="" offer="" each="" of="" the="" designated="" services.="" this="" approach="" will="" permit="" cellular="" and="" other="" wireless="" carriers="" and="" non-incumbent="" providers,="" many="" of="" which="" may="" be="" small="" businesses,="" to="" compete="" in="" high="" cost="" areas.="" 564.="" in="" section="" iv.c,="" we="" seek="" to="" strike="" a="" reasonable="" balance="" between="" the="" need="" for="" single-party="" service,="" access="" to="" e911,="" and="" toll="" limitation="" services="" for="" low-income="" consumers,="" and="" the="" recognition="" that="" exceptional="" circumstances="" may="" prevent="" some="" carriers,="" particularly="" smaller="" carriers,="" from="" offering="" these="" services="" at="" present.="" thus,="" we="" take="" a="" number="" of="" actions="" in="" this="" section="" to="" minimize="" the="" burdens="" on="" smaller="" entities="" wishing="" to="" receive="" universal="" service="" support.="" for="" example,="" state="" commissions="" will="" be="" permitted="" to="" approve="" an="" eligible="" carrier's="" requests="" for="" periods="" of="" time="" during="" which="" the="" carrier="" can="" receive="" universal="" service="" support="" while="" making="" the="" network="" upgrades="" needed="" to="" offer="" single-party="" service,="" access="" to="" e911,="" or="" toll="" limitation="" service.="" to="" the="" extent="" that="" this="" class="" of="" carriers="" includes="" smaller="" carriers,="" this="" approach="" reduces="" the="" burden="" on="" these="" small="" carriers="" by="" permitting="" additional="" time="" to="" comply="" with="" the="" requirement="" to="" provide="" all="" universal="" services="" prior="" to="" receiving="" support.="" 565.="" although="" commenters="" suggest="" other="" services="" for="" inclusion="" in="" the="" definition="" of="" the="" supported="" core="" services,="" as="" set="" forth="" in="" section="" iv.b.2,="" we="" decline="" to="" expand="" the="" definition="" to="" include="" additional="" services="" at="" this="" time.="" we="" conclude="" that="" an="" overly="" broad="" definition="" of="" the="" sec.="" 254(c)(1)="" core="" services="" might="" have="" the="" unintended="" effect="" of="" creating="" a="" barrier="" to="" entry="" for="" some="" carriers,="" many="" of="" which="" may="" be="" small="" entities,="" because="" these="" carriers="" might="" be="" technically="" unable="" to="" provide="" the="" additional="" services.="" 566.="" as="" set="" forth="" in="" section="" iv.d,="" we="" acknowledge="" the="" many="" comments="" both="" in="" favor="" of="" and="" opposed="" to="" the="" joint="" board's="" recommendation="" to="" restrict="" support="" to="" businesses="" with="" a="" single="" connection.="" we="" note,="" however,="" that="" we="" are="" adopting="" a="" plan="" for="" implementing="" the="" new="" universal="" service="" mechanisms="" that="" includes="" extending="" the="" existing="" support="" mechanisms="" until="" such="" time="" as="" a="" forward-looking="" cost="" methodology="" is="" established.="" under="" this="" approach,="" all="" residential="" and="" business="" connections="" that="" are="" currently="" supported="" will="" continue="" to="" receive="" support.="" this="" approach="" will="" benefit="" small="" telecommunications="" carriers="" and,="" tangentially,="" small="" businesses="" located="" in="" rural="" areas.="" we="" will,="" however,="" re-examine="" whether="" to="" adopt="" the="" joint="" board's="" recommendation="" to="" limit="" support="" for="" designated="" services="" to="" single="" residential="" connections="" and="" businesses="" with="" a="" single="" connection="" during="" the="" course="" of="" implementing="" a="" forward-looking="" cost="" methodology.="" as="" we="" currently="" make="" no="" change="" in="" the="" existing="" support="" mechanisms="" and="" will="" revisit="" this="" issue="" at="" a="" later="" date,="" we="" find="" that="" comments="" relating="" to="" this="" issue="" will="" be="" addressed="" at="" that="" time.="" 567.="" we="" do="" not="" establish="" service="" quality="" standards="" in="" section="" iv.e.="" rather,="" we="" find="" that,="" to="" the="" extent="" possible,="" the="" commission="" should="" rely="" on="" existing="" data,="" including="" the="" armis="" data="" filed="" by="" price-cap="" lecs,="" to="" monitor="" service="" quality.="" we="" find="" that="" creating="" federal="" service="" quality="" standards="" would="" burden="" carriers,="" including="" small="" carriers,="" and="" would="" be="" inconsistent="" with="" the="" 1996="" act's="" goal="" of="" a="" ``pro-competitive,="" de-regulatory="" national="" policy="" framework.''="" summary="" analysis:="" section="" v="" affordability="" summary="" of="" projected="" reporting,="" recordkeeping,="" and="" other="" compliance="" requirements="" 568.="" the="" 1996="" act="" does="" not="" require,="" and="" we="" did="" not="" adopt,="" any="" new="" reporting,="" recordkeeping="" or="" other="" compliance="" requirements="" in="" this="" section.="" [[page="" 32940]]="" significant="" alternatives="" and="" steps="" taken="" to="" minimize="" significant="" economic="" impact="" on="" a="" substantial="" number="" of="" small="" entities="" consistent="" with="" stated="" objectives="" 569.="" as="" set="" forth="" in="" section="" v.b,="" we="" agree="" with="" commenters="" that="" consumer="" income="" levels="" should="" be="" among="" the="" factors="" considered="" when="" assessing="" rate="" affordability.="" we="" find="" that="" a="" rate="" that="" is="" affordable="" to="" most="" consumers="" in="" affluent="" areas="" may="" not="" be="" affordable="" to="" lower="" income="" consumers.="" we="" conclude,="" in="" light="" of="" the="" significant="" disparity="" in="" income="" levels="" throughout="" the="" country,="" that="" per="" capita="" income="" of="" a="" local="" or="" regional="" area,="" and="" not="" a="" national="" median,="" should="" be="" considered="" in="" determining="" affordability.="" in="" doing="" so,="" we="" decline="" to="" adopt="" proposals="" to="" establish="" nationwide="" standards="" for="" measuring="" the="" impact="" of="" consumer="" income="" levels="" on="" affordability.="" we="" find="" that="" establishing="" a="" formula="" based="" on="" percentage="" of="" consumers'="" disposable="" income="" dedicated="" to="" telecommunications="" services="" would="" over-emphasize="" income="" levels="" in="" relation="" to="" other="" non-rate="" factors="" that="" may="" affect="" affordability="" and="" fail="" to="" reflect="" the="" effect="" of="" local="" circumstances="" on="" the="" affordability="" of="" a="" particular="" rate.="" we="" similarly="" reject="" proposals="" to="" define="" affordability="" based="" on="" a="" percentage="" of="" national="" median="" income="" and="" because="" such="" a="" standard="" would="" tend="" to="" overestimate="" the="" price="" at="" which="" service="" is="" affordable="" when="" applied="" to="" a="" service="" area="" where="" income="" level="" is="" significantly="" below="" the="" national="" median.="" we="" conclude="" that="" this="" approach="" will="" benefit="" small="" businesses="" located="" in="" rural="" areas="" by="" taking="" into="" consideration="" the="" economic="" factors="" relating="" to="" local="" areas="" rather="" than="" applying="" uniform="" national="" standards="" in="" making="" determinations="" relating="" to="" affordability.="" 570.="" small="" entities="" will="" be="" impacted="" by="" our="" determination,="" as="" set="" forth="" in="" section="" v.b,="" that="" the="" states="" should="" have="" primary="" responsibility="" for="" monitoring="" the="" affordability="" of="" telephone="" service="" rates="" and="" in="" working="" in="" concert="" with="" the="" commission="" to="" ensure="" the="" affordability="" of="" such="" rates.="" the="" commission="" will="" work="" with="" affected="" states="" to="" determine="" the="" causes="" of="" both="" declining="" statewide="" subscribership="" levels="" and="" below="" average="" statewide="" subscribership="" levels.="" we="" conclude="" that="" small="" businesses,="" as="" well="" as="" other="" telecommunications="" consumers,="" will="" benefit="" from="" the="" joint="" effort="" of="" the="" states="" and="" commission="" to="" monitor="" the="" affordability="" of="" telephone="" service="" rates="" and="" identify="" potential="" corrective="" measures.="" summary="" analysis:="" section="" vi="" carriers="" eligible="" for="" universal="" service="" support="" summary="" of="" projected="" reporting,="" recordkeeping,="" and="" other="" compliance="" requirements="" 571.="" to="" receive="" most="" types="" of="" universal="" service="" support,="" the="" act="" requires="" that="" a="" carrier="" must="" demonstrate="" to="" the="" relevant="" state="" commission="" that="" it="" has="" complied="" with="" criteria="" that="" congress="" established="" in="" section="" 214(e),="" implemented="" by="" this="" order.="" the="" statutory="" criteria="" require="" that="" a="" telecommunications="" carrier="" be="" a="" common="" carrier="" and="" offer,="" throughout="" a="" service="" area="" designated="" by="" the="" state="" commission,="" the="" services="" supported="" by="" federal="" universal="" service="" support="" mechanisms,="" either="" using="" its="" own="" facilities="" or="" a="" combination="" of="" its="" own="" facilities="" and="" resale="" of="" another="" carrier's="" services.="" a="" carrier="" must="" also="" advertise="" the="" availability="" of="" and="" charges="" for="" these="" services="" throughout="" its="" service="" area.="" an="" eligible="" telecommunications="" carrier="" that="" seeks="" to="" relinquish="" its="" eligible="" telecommunications="" carrier="" designation="" for="" an="" area="" served="" by="" more="" than="" one="" eligible="" telecommunications="" carrier="" shall="" give="" advanced="" notice="" to="" the="" state="" commission="" of="" such="" relinquishment.="" applying="" for="" designation="" as="" an="" eligible="" carrier="" and="" demonstrating="" fulfillment="" of="" the="" statutory="" criteria="" may="" require="" administrative="" and="" legal="" skills.="" 572.="" pursuant="" to="" section="" 214(e)(5),="" a="" state="" commission="" must="" seek="" the="" commission's="" concurrence="" before="" a="" new="" definition="" of="" a="" rural="" service="" area="" may="" be="" adopted.="" the="" state="" commission="" or="" the="" affected="" carrier="" must="" submit="" the="" proposal="" to="" the="" commission,="" which="" may="" require="" legal="" and="" administrative="" skills.="" significant="" alternatives="" and="" steps="" taken="" to="" minimize="" significant="" economic="" impact="" on="" a="" substantial="" number="" of="" small="" entities="" consistent="" with="" stated="" objectives="" 573.="" as="" set="" forth="" in="" section="" vi.b,="" we="" adopt="" no="" additional="" federal="" criteria="" for="" eligibility,="" requiring="" only="" that="" carriers="" meet="" the="" eligibility="" criteria="" established="" by="" congress="" in="" the="" 1996="" act.="" we="" reject="" arguments="" calling="" for="" more="" stringent="" eligibility="" rules,="" such="" as="" requiring="" new="" entrants="" to="" comply="" with="" any="" state="" rules="" applicable="" to="" the="" incumbent="" carrier,="" that="" could="" have="" imposed="" additional="" burdens="" on="" new="" entrants,="" many="" of="" which="" may="" be="" small="" entities.="" we="" conclude="" that="" a="" carrier="" can="" use="" any="" technology="" to="" meet="" the="" eligibility="" criteria,="" thus="" preserving="" the="" competitive="" neutrality="" of="" the="" eligibility="" requirements,="" and="" protecting="" all="" providers,="" including="" small="" providers.="" our="" interpretation="" of="" the="" section="" 214(e)="" facilities="" requirement="" promotes="" the="" universal="" service="" policies="" adopted="" by="" congress="" and="" avoids="" imposing="" undue="" burdens="" on="" all="" eligible="" carriers,="" including="" small="" carriers.="" this="" interpretation="" enables="" small="" competitive="" carriers="" to="" become="" eligible="" telecommunications="" carriers.="" we="" also="" conclude="" that="" any="" burdens="" that="" might="" be="" placed="" on="" small="" incumbent="" lecs="" facing="" competition="" from="" competitive="" lecs="" may="" be="" avoided="" or="" mitigated="" by="" the="" states="" when="" they="" consider="" petitions="" for="" exemptions,="" suspensions="" or="" modifications="" of="" the="" requirements="" of="" section="" 251(c)="" by="" rural="" telephone="" companies="" and="" when="" they="" consider="" designating="" multiple="" eligible="" carriers="" pursuant="" to="" section="" 214(e)(3).="" 574.="" additionally,="" as="" discussed="" in="" section="" vi.c,="" where="" states="" alone="" are="" responsible="" for="" designating="" a="" carrier's="" service="" area,="" we="" encourage="" states="" to="" adopt="" service="" areas="" that="" are="" not="" unreasonably="" large="" because="" unreasonably="" large="" service="" areas="" might="" discourage="" competitive="" entry="" or="" favor="" some="" carriers,="" including="" large="" carriers.="" we="" also="" indicate="" that,="" if="" a="" state="" commission="" agrees="" and="" the="" commission="" does="" not="" disagree,="" the="" service="" area="" served="" by="" a="" rural="" telephone="" company="" (which="" is="" likely="" to="" be="" a="" small="" company),="" should="" be="" the="" study="" area="" in="" which="" they="" currently="" provide="" service.="" this="" requirement="" minimizes="" any="" burdens="" rural="" telephone="" companies="" would="" face="" from="" needing="" to="" recalculate="" costs="" over="" a="" differently-sized="" area.="" this="" requirement="" also="" protects="" small="" incumbent="" lecs="" from="" competitors="" that="" may="" target="" only="" the="" most="" financially="" lucrative="" customers="" in="" an="" area.="" we="" find="" that="" these="" provisions="" should="" minimize="" burdens="" on="" small="" entities.="" 575.="" we="" also="" conclude="" that="" the="" ``pro-competitive,="" de-regulatory''="" intent="" of="" the="" 1996="" act="" would="" be="" furthered="" if="" we="" take="" action="" to="" minimize="" any="" procedural="" delay="" caused="" by="" the="" need="" for="" federal-state="" coordination="" to="" redefine="" rural="" service="" areas.="" under="" the="" procedures="" we="" adopt,="" after="" a="" state="" has="" concluded="" that="" a="" service="" area="" definition="" different="" from="" a="" rural="" telephone="" company's="" study="" area="" is="" appropriate,="" either="" the="" state="" or="" a="" carrier="" must="" seek="" the="" agreement="" of="" the="" commission.="" upon="" the="" receipt="" of="" the="" proposal,="" the="" commission="" will="" issue="" a="" public="" notice="" on="" the="" proposal.="" if="" the="" commission="" does="" not="" act="" upon="" the="" proposal="" within="" 90="" days="" of="" the="" public="" notice="" release="" date,="" the="" proposal="" will="" be="" deemed="" approved="" by="" the="" commission="" and="" may="" take="" effect="" according="" to="" state="" procedure="" without="" further="" action="" on="" the="" part="" of="" the="" commission.="" this="" procedure="" minimizes="" the="" burden="" on="" all="" parties,="" [[page="" 32941]]="" including="" small="" parties,="" that="" might="" seek="" to="" alter="" the="" definition="" of="" a="" rural="" service="" area.="" summary="" analysis:="" section="" vii="" high="" cost="" support="" summary="" of="" projected="" reporting,="" recordkeeping,="" and="" other="" compliance="" requirements="" 576.="" small,="" rural="" carriers="" comprise="" the="" specific="" class="" of="" small="" entities="" that="" are="" subject="" to="" high="" cost="" reporting="" requirements.="" we="" define="" ``rural''="" as="" those="" carriers="" that="" meet="" the="" statutory="" definition="" of="" a="" ``rural="" telephone="" company''="" set="" forth="" at="" 47="" u.s.c.="" 153(37).="" 577.="" to="" receive="" high="" cost="" support="" small,="" rural="" carriers="" have="" been="" required,="" under="" previous="" rules,="" to="" report="" the="" number="" of="" lines="" they="" serve="" and="" their="" embedded="" costs="" at="" the="" end="" of="" each="" year.="" because="" small,="" rural="" carriers="" will="" receive="" support="" based="" on="" their="" embedded="" costs="" from="" 1998="" until="" a="" forward-looking="" cost="" methodology="" is="" chosen,="" their="" reporting="" and="" recordkeeping="" requirements="" will="" remain="" the="" same.="" these="" requirements="" should="" not="" affect="" small="" entities="" disproportionately="" because="" in="" order="" to="" receive="" support,="" large,="" non-rural="" carriers="" must="" also="" report="" the="" number="" of="" lines="" they="" serve="" and="" their="" embedded="" costs.="" significant="" alternatives="" and="" steps="" taken="" to="" minimize="" significant="" economic="" impact="" on="" a="" substantial="" number="" of="" small="" entities="" consistent="" with="" stated="" objectives="" 578.="" currently,="" an="" ilec="" is="" eligible="" for="" support="" if="" its="" embedded="" loop="" costs,="" as="" reported="" annually,="" exceed="" 115="" percent="" of="" the="" national="" average="" loop="" cost.="" we="" anticipate="" that="" we="" will="" adopt="" a="" forward-looking="" cost="" methodology="" for="" large,="" non-rural="" carriers="" to="" take="" effect="" on="" january="" 1,="" 1999.="" until="" a="" forward-looking="" cost="" methodology="" for="" non-rural="" carriers="" takes="" effect,="" large,="" non-rural="" carriers="" will="" continue="" to="" receive="" high="" cost="" loop="" support="" and="" lts="" based="" on="" the="" mechanisms="" in="" place="" for="" small,="" rural="" carriers.="" 579.="" to="" minimize="" the="" financial="" impact="" of="" this="" rule="" change="" on="" small="" entities,="" however,="" we="" shall="" permit="" small,="" rural="" carriers="" to="" shift="" to="" a="" forward-looking="" cost="" methodology="" more="" gradually="" than="" the="" large="" carriers.="" we="" believe="" that="" the="" commission's="" mechanism="" for="" calculating="" support="" for="" small,="" rural="" carriers="" will="" minimize="" the="" adverse="" effects="" of="" an="" immediate="" shift="" to="" a="" forward-looking="" cost="" methodology.="" in="" 1998="" and="" 1999,="" small,="" rural="" carriers="" will="" continue="" to="" receive="" high="" cost="" loop="" support="" based="" on="" the="" existing="" system.="" beginning="" on="" january="" 1,="" 2000,="" the="" nationwide="" average="" loop="" costs,="" on="" which="" carriers'="" high="" cost="" loop="" support="" is="" currently="" based,="" will="" be="" indexed="" to="" changes="" in="" the="" gdp-cpi.="" starting="" january="" 1,="" 1998,="" dem="" weighting="" for="" small,="" rural="" carriers="" will="" continue="" to="" be="" calculated="" under="" the="" existing="" prescribed="" formulas,="" but="" the="" interstate="" allocation="" factor="" will="" be="" maintained="" at="" 1996="" levels.="" lts="" support="" for="" rural="" carriers="" will="" be="" indexed="" to="" changes="" in="" the="" nationwide="" average="" loop="" costs="" starting="" in="" 1998.="" we="" will="" revisit="" the="" issue="" of="" support="" for="" small,="" rural="" companies="" and="" the="" conversion="" to="" an="" alternative="" methodology="" when="" we="" adopt="" a="" forward-looking="" cost="" methodology="" for="" rural="" carriers.="" we="" find="" that="" a="" gradual="" shift="" for="" rural="" carriers="" should="" enable="" these="" carriers="" to="" adjust="" their="" operations="" in="" preparation="" for="" the="" use="" of="" a="" forward-looking="" cost="" methodology.="" 580.="" all="" carriers'="" high="" cost="" loop="" support="" for="" corporate="" operations="" expense,="" however,="" will="" be="" limited="" to="" 115="" percent="" of="" an="" amount="" defined="" by="" a="" formula="" based="" upon="" a="" statistical="" study="" that="" predicts="" corporate="" operations="" based="" on="" the="" number="" of="" access="" lines.="" because="" we="" will="" determine="" the="" benchmark="" for="" corporate="" and="" overhead="" expenses="" based="" on="" a="" carrier's="" number="" of="" lines,="" any="" limitation="" on="" corporate="" expenses="" would="" not="" disproportionately="" impact="" small="" carriers.="" we="" will="" also="" continue="" the="" current="" cap="" limiting="" growth="" of="" the="" high="" cost="" loop="" support="" mechanism.="" in="" order="" to="" ensure="" that="" the="" index="" accurately="" represents="" small="" carriers'="" loop="" growth,="" we="" will="" reset="" the="" cap="" based="" on="" small="" carriers'="" cost="" studies="" once="" large="" carriers="" move="" to="" a="" forward-looking="" cost="" methodology.="" in="" addition,="" carriers="" may="" petition="" the="" commission="" for="" a="" waiver="" to="" receive="" additional="" support="" should="" they="" experience="" unusual="" circumstances="" that="" require="" support="" in="" excess="" of="" the="" amount="" distributed.="" 581.="" some="" commenters="" support="" the="" joint="" board's="" recommendation="" to="" place="" rural="" carriers="" on="" a="" protected="" support="" mechanism="" pending="" the="" adoption="" of="" a="" forward-looking="" cost="" methodology.="" many="" commenters="" also="" advocate="" continuing="" the="" existing="" high="" cost="" support="" mechanisms="" according="" to="" the="" existing="" rules.="" other="" commenters,="" however,="" offered="" alternative="" proposals="" to="" modify="" the="" existing="" system="" based="" on="" embedded="" costs.="" the="" proposals="" included:="" capping="" support="" levels;="" changing="" the="" benchmark="" for="" high="" cost="" loop="" support="" to="" an="" indexed="" nationwide="" average="" loop="" cost;="" maintaining="" the="" interstate="" dem="" allocation="" factor="" to="" a="" historic="" level;="" and="" calculating="" lts="" based="" on="" the="" percentage="" of="" the="" common="" line="" pool="" represented="" by="" lts="" in="" 1996.="" a="" few="" commenters,="" however,="" suggest="" placing="" rural="" carriers="" on="" a="" forward-looking="" mechanism="" immediately.="" 582.="" we="" decline="" to="" adopt="" the="" joint="" board's="" recommendation="" to="" calculate="" support="" for="" each="" line="" based="" on="" protected="" historical="" amounts="" at="" this="" time="" because="" we="" conclude="" that="" such="" a="" mechanism="" would="" not="" provide="" rural="" carriers="" adequate="" support="" for="" providing="" universal="" service="" because="" carriers="" would="" not="" be="" able="" to="" afford="" prudent="" facility="" upgrades.="" instead,="" we="" adopt="" the="" proposal="" to="" calculate="" high="" cost="" loop="" support="" based="" on="" an="" inflation="" adjusted="" nationwide="" loop="" cost.="" we="" also="" adopt="" the="" proposal="" to="" calculate="" dem="" weighting="" assistance="" by="" maintaining="" the="" interstate="" allocation="" factor="" defined="" by="" the="" weighted="" dem="" at="" 1996="" levels="" for="" each="" of="" their="" study="" areas.="" we="" find,="" however,="" that="" the="" proposal="" to="" calculate="" lts="" based="" on="" the="" percentage="" of="" the="" common="" line="" pool="" represented="" by="" lts="" in="" 1996="" will="" not="" work="" because="" we="" will="" no="" longer="" be="" able="" to="" determine="" a="" nationwide="" ccl="" charge="" once="" the="" non-pooling="" carriers="" switch="" to="" per-line,="" rather="" than="" a="" per-minute,="" ccl="" charge.="" instead,="" we="" adopt="" a="" modified="" form="" of="" the="" joint="" board's="" recommendation="" regarding="" lts="" by="" calculating="" a="" rural="" carrier's="" lts="" support="" based="" on="" the="" percentage="" of="" increase="" of="" the="" nationwide="" average="" loop="" cost="" because="" increases="" in="" lts="" support="" shall="" be="" tied="" to="" changes="" in="" common="" line="" revenue="" requirements.="" in="" order="" to="" control="" the="" growth="" of="" the="" support="" mechanisms="" without="" impacting="" an="" individual="" carrier="" disproportionately,="" we="" adopt="" the="" proposal="" to="" cap="" support="" levels="" by="" continuing="" to="" cap="" the="" high="" cost="" loop="" support="" mechanism.="" we="" conclude="" that="" we="" should="" not="" convert="" small,="" rural="" carriers="" to="" an="" alternative="" forward-looking="" cost="" methodology="" immediately="" because="" the="" carriers="" may="" not="" be="" able="" to="" absorb="" a="" significant="" change="" in="" support="" levels.="" summary="" analysis:="" section="" viii="" support="" for="" low-income="" consumers="" summary="" of="" projected="" reporting,="" recordkeeping,="" and="" other="" compliance="" requirements="" 583.="" the="" state="" commission="" shall="" file="" or="" require="" the="" carrier="" to="" file="" information="" with="" the="" administrator="" demonstrating="" that="" the="" carrier's="" lifeline="" plan="" meets="" the="" criteria="" set="" forth="" in="" the="" federal="" rules,="" and="" stating="" the="" number="" of="" qualifying="" low-income="" consumers="" and="" the="" amount="" of="" state="" assistance.="" these="" recommended="" reporting="" and="" recordkeeping="" requirements="" may="" require="" clerical="" and="" administrative="" skills.="" 584.="" consumers="" in="" participating="" states="" who="" seek="" to="" receive="" lifeline="" support="" shall="" follow="" state="" consumer="" [[page="" 32942]]="" qualification="" guidelines.="" consumers="" in="" non-participating="" states="" who="" seek="" to="" receive="" lifeline="" support="" shall="" sign="" a="" document,="" provided="" by="" the="" carrier="" offering="" lifeline="" service,="" certifying="" under="" penalty="" of="" perjury="" that="" the="" consumer="" receives="" benefits="" from="" one="" of="" the="" programs="" included="" in="" the="" federal="" default="" qualification="" standard.="" carriers="" in="" non-="" participating="" states="" shall="" provide="" consumers="" seeking="" lifeline="" service="" with="" such="" forms.="" 585.="" carriers="" can="" request="" from="" their="" state="" utilities="" regulator="" a="" period="" of="" time="" during="" which="" they="" may="" receive="" universal="" service="" support="" for="" serving="" lifeline="" consumers="" while="" they="" complete="" upgrading="" their="" switches="" in="" order="" to="" be="" able="" to="" offer="" toll-limitation.="" carriers="" may="" also="" request="" from="" their="" state="" utilities="" regulator="" a="" waiver="" of="" the="" requirement="" prohibiting="" disconnection="" of="" local="" service="" for="" non-payment="" of="" toll="" charges.="" significant="" alternatives="" and="" steps="" taken="" to="" minimize="" significant="" economic="" impact="" on="" a="" substantial="" number="" of="" small="" entities="" consistent="" with="" stated="" objectives="" 586.="" based="" on="" the="" commission's="" prior="" experience="" administering="" lifeline,="" we="" find="" that="" requiring="" carriers="" to="" keep="" track="" of="" the="" number="" of="" their="" lifeline="" consumers="" and="" to="" file="" information="" with="" the="" federal="" universal="" service="" administrator="" will="" not="" impose="" a="" significant="" burden="" on="" small="" carriers="" since="" little="" information="" is="" required="" and="" the="" information="" is="" generally="" accessible.="" accordingly,="" we="" do="" not="" anticipate="" that="" this="" requirement="" will="" impose="" a="" significant="" burden="" on="" small="" carriers.="" summary="" analysis:="" section="" ix="" insular="" areas="" summary="" of="" projected="" reporting,="" recordkeeping,="" and="" other="" compliance="" requirements="" 587.="" section="" 254(b)(3)="" establishes="" the="" principle="" that="" consumers="" in="" insular="" areas="" should="" have="" access="" to="" telecommunications="" and="" information="" services="" that="" are="" reasonably="" comparable,="" and="" at="" rates="" that="" are="" reasonably="" comparable,="" to="" those="" provided="" in="" urban="" areas.="" the="" 1996="" act="" does="" not="" require="" and="" we="" did="" not="" establish="" any="" new="" reporting="" or="" recordkeeping="" requirements="" in="" this="" section.="" significant="" alternatives="" and="" steps="" taken="" to="" minimize="" significant="" economic="" impact="" on="" a="" substantial="" number="" of="" small="" entities="" consistent="" with="" stated="" objectives="" 588.="" as="" set="" forth="" in="" section="" ix.c,="" we="" find="" that="" residents="" and="" carriers="" in="" the="" insular="" areas,="" including="" the="" pacific="" island="" territories,="" should="" have="" access="" to="" all="" the="" universal="" service="" programs,="" including="" those="" for="" high="" cost="" support,="" low-income="" assistance,="" schools,="" libraries,="" and="" rural="" health="" care="" providers.="" to="" the="" extent="" that="" they="" qualify,="" we="" conclude="" that="" small="" entities="" in="" insular="" areas="" will="" benefit,="" both="" as="" consumers="" and="" providers="" of="" telecommunications="" and="" information="" services,="" from="" such="" support.="" summary="" analysis:="" section="" x="" schools="" and="" libraries="" summary="" of="" projected="" reporting,="" recordkeeping,="" and="" other="" compliance="" requirements="" 589.="" we="" will="" require="" service="" providers="" to="" certify="" to="" the="" administrator="" that="" the="" price="" offered="" to="" schools,="" libraries,="" library="" consortia,="" or="" consortia="" that="" include="" schools="" or="" libraries="" is="" no="" more="" than="" the="" lowest="" corresponding="" price.="" this="" requirement="" is="" designed="" to="" ensure="" that="" schools,="" libraries,="" and="" library="" consortia="" receive="" the="" lowest="" possible="" pre-discount="" price.="" we="" also="" require="" service="" providers="" to="" keep="" and="" retain="" careful="" records="" of="" how="" they="" have="" allocated="" the="" costs="" of="" shared="" facilities="" used="" by="" consortia="" to="" ensure="" that="" only="" eligible="" schools,="" libraries,="" and="" library="" consortia="" derive="" the="" benefits="" of="" discounts="" under="" sec.="" 254(h)="" and="" to="" ensure="" that="" no="" prohibited="" resale="" occurs.="" 590.="" we="" will="" require,="" for="" schools="" and="" school="" districts,="" that="" the="" person="" responsible="" for="" ordering="" telecommunications="" and="" other="" supported="" services="" and="" facilities="" certify="" to="" the="" administrator="" the="" percentage="" of="" students="" eligible="" for="" the="" national="" school="" lunch="" program.="" we="" also="" permit="" schools="" to="" use="" federally="" approved="" alternative="" mechanisms="" to="" compute="" the="" percentage="" of="" students="" eligible="" for="" the="" national="" school="" lunch="" program.="" this="" latter="" option="" is="" particularly="" helpful="" to="" schools="" that="" either="" do="" not="" participate="" in="" the="" school="" lunch="" program="" or="" that="" have="" a="" tradition="" of="" undercounting="" eligible="" students="" (e.g.,="" secondary="" schools,="" urban="" schools="" with="" highly="" transient="" populations,="" and="" some="" rural="" schools).="" we="" require="" libraries="" to="" certify="" to="" the="" percentage="" of="" students="" eligible="" for="" the="" national="" school="" lunch="" program="" in="" the="" school="" district="" in="" which="" the="" library="" is="" located="" or="" to="" which="" children="" would="" attend="" public="" school.="" this="" requirement="" is="" necessary="" to="" enable="" the="" administrator="" to="" determine="" how="" disadvantaged="" the="" entity="" is="" and,="" thus,="" its="" eligibility="" for="" the="" greater="" discounts="" provided="" to="" more="" disadvantaged="" entities.="" 591.="" we="" will="" also="" require="" that="" schools="" and="" libraries="" secure="" a="" certification="" from="" their="" state="" or="" an="" independent="" entity="" approved="" by="" the="" commission="" that="" they="" have="" a="" technology="" plan="" for="" using="" the="" services="" ordered="" pursuant="" to="" section="" 254(h).="" moreover,="" we="" will="" also="" require="" them="" to="" certify="" that="" they="" have="" budgeted="" sufficient="" funds,="" and="" that="" such="" funding="" will="" have="" been="" approved="" prior="" to="" the="" start="" of="" service,="" to="" support="" all="" of="" the="" costs="" they="" will="" face="" to="" use="" effectively="" all="" of="" the="" purchases="" they="" make="" under="" this="" program.="" this="" requirement="" will="" help="" to="" ensure="" that="" schools="" and="" libraries="" avoid="" the="" waste="" that="" might="" arise="" if="" schools="" and="" libraries="" ordered="" expensive="" services="" before="" they="" had="" other="" resources="" needed="" to="" use="" those="" services="" effectively.="" 592.="" we="" will="" require="" schools,="" libraries,="" library="" consortia,="" and="" consortia="" that="" include="" schools="" or="" libraries="" to="" send="" a="" description="" of="" the="" services="" they="" are="" requesting="" to="" a="" subcontractor="" of="" the="" administrator.="" the="" subcontractor="" will="" then="" post="" a="" description="" of="" the="" services="" sought="" on="" an="" internet="" website="" for="" all="" potential="" competing="" service="" providers="" to="" review.="" we="" conclude="" that="" this="" requirement="" will="" help="" achieve="" congress's="" intent="" that="" schools="" and="" libraries="" take="" advantage="" of="" the="" potential="" for="" competitive="" bids.="" we="" conclude="" that="" the="" request="" for="" service="" should="" be="" signed="" by="" the="" person="" authorized="" to="" order="" telecommunications="" and="" other="" supported="" services="" and="" facilities="" for="" the="" school,="" library,="" or="" library="" consortium,="" certifying="" the="" following="" under="" oath:="" (1)="" the="" school="" or="" library="" is="" an="" eligible="" entity="" under="" section="" 254(h)(4);="" (2)="" the="" services="" requested="" will="" be="" used="" solely="" for="" educational="" purposes;="" and="" (3)="" the="" services="" will="" not="" be="" sold,="" resold,="" or="" transferred="" in="" consideration="" for="" money="" or="" any="" other="" thing="" of="" value.="" if="" the="" services="" are="" being="" purchased="" as="" part="" of="" an="" aggregated="" purchase="" with="" other="" entities,="" schools,="" libraries,="" and="" library="" consortia="" will="" also="" be="" required="" to="" list="" the="" identities="" of="" all="" consortium="" members.="" requiring="" schools,="" libraries,="" library="" consortia="" and="" consortia="" that="" include="" schools="" or="" libraries="" to="" disclose="" the="" identities="" of="" consortia="" members="" should="" be="" minimally="" burdensome="" because="" we="" only="" require="" the="" institutions="" to="" provide="" basic="" information,="" such="" as="" the="" names="" of="" all="" consortia="" members,="" addresses,="" and="" telephone="" numbers.="" 593.="" we="" will="" require="" schools="" and="" libraries,="" as="" well="" as="" carriers,="" to="" maintain="" records="" for="" their="" purchases="" of="" telecommunications="" and="" other="" supported="" services="" and="" facilities="" at="" discounted="" rates,="" similar="" to="" the="" kinds="" of="" procurement="" records="" that="" they="" already="" keep="" for="" other="" purchases.="" we="" expect="" that="" schools="" and="" libraries="" should="" be="" able="" to="" produce="" such="" records="" at="" the="" request="" of="" any="" auditor="" appointed="" by="" a="" state="" education="" department,="" the="" [[page="" 32943]]="" administrator,="" or="" any="" other="" state="" or="" federal="" agency="" with="" jurisdiction="" to="" review="" such="" records="" for="" possible="" misuse.="" we="" conclude="" carriers="" should="" provide="" notification="" on="" the="" availability="" of="" discounts.="" we="" find="" that="" these="" reporting="" and="" recordkeeping="" requirements="" are="" necessary="" to="" ensure="" that="" schools="" and="" libraries="" use="" the="" discounted="" telecommunications="" services="" for="" the="" purposes="" intended="" by="" congress.="" for="" all="" of="" these="" requirements="" described="" in="" this="" section="" some="" administrative,="" accounting,="" and="" clerical="" skills="" may="" be="" required.="" significant="" alternatives="" and="" steps="" taken="" to="" minimize="" significant="" economic="" impact="" on="" a="" substantial="" number="" of="" small="" entities="" consistent="" with="" stated="" objectives.="" 594.="" the="" requirement="" that="" service="" providers="" certify="" to="" the="" administrator="" that="" the="" prices="" they="" charge="" to="" eligible="" schools,="" libraries,="" library="" consortia,="" and="" consortia="" that="" include="" schools="" or="" libraries="" are="" no="" more="" than="" the="" lowest="" corresponding="" price="" should="" be="" minimally="" burdensome,="" given="" that="" service="" providers="" could="" be="" expected="" to="" review="" the="" prices="" they="" charge="" to="" similarly="" situated="" customers="" when="" they="" set="" the="" price="" for="" schools="" and="" libraries.="" we="" reject="" suggestions="" to="" require="" all="" carriers="" to="" offer="" services="" at="" total="" service="" long-run="" incremental="" cost="" levels="" because="" of="" the="" burdens="" it="" would="" create.="" similarly,="" because="" schools="" and="" libraries="" that="" form="" consortia="" with="" non-="" eligible="" entities="" will="" need="" to="" inform="" the="" service="" provider="" of="" what="" portion="" of="" shared="" facilities="" purchased="" by="" the="" consortia="" should="" be="" charged="" to="" eligible="" schools="" and="" libraries="" (and="" discounted="" by="" the="" appropriate="" amounts),="" it="" should="" not="" be="" burdensome="" for="" carriers="" to="" maintain="" records="" of="" those="" allocations="" for="" some="" appropriate="" amount="" of="" time.="" 595.="" with="" respect="" to="" service="" providers,="" we="" reject="" the="" suggestion="" to="" interpret="" ``geographic="" area''="" to="" mean="" the="" entire="" state="" in="" which="" a="" service="" provider="" serves.="" this="" could="" force="" service="" providers="" to="" serve="" areas="" in="" a="" state="" that="" they="" were="" not="" previously="" serving,="" thereby="" unreasonably="" burdening="" small="" carriers="" that="" were="" only="" prepared="" to="" serve="" some="" small="" segment="" of="" a="" state.="" we="" also="" reject="" an="" annual="" carrier="" notification="" requirement.="" we="" conclude="" that="" we="" should="" only="" require="" that="" carriers="" provide="" notification="" on="" availability="" of="" discounts.="" 596.="" schools="" and="" libraries="" should="" not="" be="" significantly="" burdened="" by="" the="" requirement="" that="" they="" certify="" the="" following:="" (1)="" that="" they="" are="" eligible="" for="" support="" under="" sections="" 254(h)(4)="" and="" 254(h)(5);="" (2)="" that="" the="" services="" purchased="" at="" a="" discount="" are="" used="" for="" educational="" services;="" and="" (3)="" that="" those="" services="" will="" not="" be="" resold.="" assuming="" that="" schools="" and="" libraries="" will="" need="" to="" inform="" carriers="" about="" what="" discount="" they="" are="" eligible="" to="" receive,="" there="" should="" be="" no="" significant="" burden="" imposed="" by="" requiring="" them="" to="" certify="" that="" they="" will="" satisfy="" the="" statutory="" requirements="" imposed="" by="" congress.="" requiring="" schools,="" libraries,="" library="" consortia="" and="" consortia="" that="" include="" schools="" or="" libraries="" to="" disclose="" the="" identities="" of="" consortia="" members="" should="" be="" minimally="" burdensome="" because="" we="" only="" require="" the="" institutions="" to="" provide="" basic="" information,="" such="" as="" the="" names="" of="" all="" consortia="" members,="" addresses,="" and="" telephone="" numbers.="" this="" information="" should="" be="" readily="" available="" to="" schools,="" libraries,="" and="" library="" consortia="" and="" will="" be="" necessary="" for="" the="" administrator="" to="" compile="" in="" the="" event="" of="" an="" audit="" designed="" to="" prevent="" waste,="" fraud,="" and="" abuse.="" we="" note,="" however,="" that="" schools="" and="" libraries="" need="" not="" participate="" in="" consortia="" for="" purposes="" of="" the="" universal="" service="" discount="" program.="" we="" conclude="" that="" by="" purchasing="" as="" a="" consortium,="" individual="" schools="" and="" libraries="" would="" be="" in="" a="" better="" position="" to="" take="" advantage="" of="" any="" price="" discounts="" a="" provider="" may="" offer="" as="" a="" result="" of="" either="" efficiencies="" that="" it="" may="" enjoy="" from="" supplying="" services="" to="" a="" large="" customer,="" or="" from="" the="" natural="" incentives="" for="" sellers="" in="" a="" competitive="" market="" to="" offer="" quantity="" discounts="" to="" large="" users.="" we="" find="" that="" the="" possibility="" of="" reaping="" such="" benefits="" will="" often="" lead="" schools="" and="" libraries="" to="" join="" consortia="" despite="" any="" attendant="" administrative="" burdens.="" 597.="" the="" requirement="" that="" schools="" and="" libraries="" submit="" a="" description="" of="" the="" services="" and="" facilities="" that="" they="" are="" requesting="" to="" the="" subcontractor="" of="" the="" administrator="" should="" also="" be="" minimally="" burdensome.="" school="" and="" library="" boards="" generally="" require="" schools="" and="" libraries="" to="" seek="" competitive="" bids="" for="" substantial="" purchases;="" this="" forces="" them="" to="" create="" a="" description="" of="" their="" purchase="" needs.="" we="" find="" that="" it="" will="" be="" minimally="" burdensome="" to="" require="" schools,="" libraries,="" and="" library="" consortia="" to="" submit="" a="" copy="" of="" that="" description="" to="" the="" subcontractor.="" we="" further="" find="" that="" this="" requirement="" will="" be="" much="" less="" burdensome="" than="" requiring="" schools="" and="" libraries="" to="" submit="" a="" description="" of="" their="" requests="" to="" all="" telecommunications="" carriers="" in="" their="" state,="" as="" proposed="" by="" one="" commenter.="" it="" also="" will="" be="" less="" burdensome="" than="" a="" requirement="" that="" schools="" and="" libraries="" demonstrate="" that="" they="" have="" participated="" in="" a="" more="" formal="" competitive="" bidding="" process.="" 598.="" we="" conclude="" that="" it="" will="" not="" be="" unreasonably="" burdensome="" to="" require="" schools="" and="" libraries="" to="" secure="" certification="" from="" their="" state="" or="" an="" independent="" entity="" approved="" by="" the="" commission,="" that="" they="" have="" undertaken="" a="" technology="" assessment/inventory="" and="" adopted="" a="" plan="" for="" deploying="" any="" resources="" necessary="" to="" use="" their="" discounted="" services="" and="" facilities="" effectively.="" we="" expect="" that="" few="" schools="" or="" libraries="" will="" propose="" to="" spend="" their="" own="" money="" for="" discounted="" services="" until="" they="" believe="" that="" they="" could="" use="" the="" services="" effectively.="" therefore,="" requiring="" them="" to="" secure="" a="" certification="" from="" an="" independent="" expert="" source="" that="" they="" had="" done="" such="" planning="" and="" conducted="" a="" technology="" assessment="" will="" be="" a="" minimally="" burdensome="" way="" to="" ensure="" that="" schools="" and="" libraries="" are="" aware="" of="" the="" other="" resources="" they="" need="" to="" procure="" before="" ordering="" discounted="" telecommunications="" and="" other="" supported="" services="" and="" facilities.="" furthermore,="" we="" observe="" that="" the="" commission="" will="" provide="" information="" to="" schools="" and="" libraries="" lacking="" information="" about="" what="" resources="" they="" may="" need="" through="" a="" department="" of="" education="" website.="" although="" this="" alternative="" is="" more="" burdensome="" than="" the="" use="" of="" a="" self-certification="" standard,="" we="" find="" that="" it="" is="" necessary="" to="" provide="" the="" level="" of="" accountability="" that="" is="" in="" the="" public="" interest.="" 599.="" we="" also="" conclude="" that="" the="" least="" burdensome="" manner="" for="" schools="" to="" demonstrate="" that="" they="" are="" disadvantaged="" will="" be="" to="" certify="" to="" the="" administrator="" the="" percentage="" of="" students="" eligible="" for="" the="" national="" school="" lunch="" program="" in="" the="" individual="" schools="" or="" school="" district="" because="" the="" vast="" majority="" of="" schools="" already="" participate="" in="" the="" national="" student="" lunch="" program.="" we="" also="" conclude="" that="" allowing="" schools="" to="" use="" federally="" approved="" proxies="" as="" a="" method="" for="" computing="" the="" percentage="" of="" eligible="" students="" lessens="" the="" administrative="" burden="" for="" schools="" that="" either="" do="" not="" participate="" in="" the="" national="" school="" lunch="" program="" or="" have="" a="" tradition="" of="" undercounting="" eligible="" students.="" we="" also="" find="" that="" requiring="" libraries="" to="" demonstrate="" their="" level="" of="" disadvantage="" by="" relying="" on="" national="" school="" lunch="" data="" for="" the="" school="" district="" in="" which="" they="" are="" located="" provides="" a="" reasonable="" result="" with="" a="" minimal="" burden.="" many="" libraries="" urged="" that="" they="" be="" allowed="" to="" use="" census="" poverty="" data,="" rather="" than="" the="" student="" lunch="" eligibility="" standard.="" in="" fact,="" the="" ala="" volunteered="" to="" provide="" every="" library="" with="" the="" appropriate="" poverty="" level="" figures,="" based="" on="" the="" use="" of="" a="" commercially="" available="" software="" program="" for="" calculating="" poverty="" levels="" for="" a="" 1-mile="" radius="" around="" each="" library="" from="" census="" data.="" those="" parties,="" however,="" failed="" to="" provide="" support="" for="" [[page="" 32944]]="" us="" to="" conclude="" that="" the="" poverty="" level="" in="" a="" 1-mile="" radius="" of="" the="" library="" was="" a="" reasonable="" approximation="" of="" the="" poverty="" level="" for="" the="" library's="" entire="" service="" area.="" meanwhile,="" eligible="" schools="" and="" libraries="" that="" prefer="" not="" to="" provide="" information="" on="" their="" levels="" of="" economic="" disadvantage="" will="" still="" qualify="" for="" the="" minimum="" 20="" percent="" discount="" on="" eligible="" purchases.="" 600.="" to="" foster="" vigorous="" competition="" for="" serving="" schools="" and="" libraries,="" we="" conclude="" that="" non-telecommunications="" carriers="" must="" also="" be="" permitted="" to="" compete="" to="" provide="" these="" services="" in="" conjunction="" with="" telecommunications="" carriers="" or="" even="" their="" own.="" therefore,="" we="" encourage="" non-telecommunications="" carriers="" either="" to="" enter="" into="" partnerships="" or="" joint="" ventures="" with="" telecommunications="" carriers="" that="" are="" not="" currently="" serving="" the="" areas="" in="" which="" the="" libraries="" and="" schools="" are="" located="" or="" to="" offer="" services="" on="" their="" own.="" we="" encourage="" small="" businesses="" both="" to="" form="" such="" joint="" ventures="" and="" compete="" on="" their="" own.="" summary="" analysis:="" section="" xi="" health="" care="" providers="" summary="" of="" projected="" reporting,="" recordkeeping="" and="" other="" compliance="" requirements="" 601.="" section="" 254(h)(1)(a)="" provides="" that="" a="" telecommunications="" carrier="" shall="" be="" required="" to="" provide="" rural="" health="" care="" providers="" with="" services="" at="" rates="" reasonably="" comparable="" to="" those="" charged="" for="" similar="" services="" in="" urban="" areas="" of="" their="" state.="" the="" providing="" telecommunications="" carrier="" shall="" then="" be="" entitled="" to="" universal="" service="" support="" based="" on="" the="" difference,="" if="" any,="" between="" the="" rate="" charged="" to="" the="" health="" care="" provider="" and="" the="" rate="" for="" similar="" services="" provided="" to="" other="" customers="" in="" comparable="" rural="" areas="" of="" the="" state.="" we="" find="" that="" every="" health="" care="" provider,="" including="" small="" entities,="" that="" makes="" a="" request="" for="" universal="" service="" support="" for="" telecommunications="" services="" shall="" be="" required="" to="" submit="" to="" the="" administrator="" a="" written="" request,="" signed="" by="" an="" authorized="" officer="" of="" the="" health="" care="" provider,="" certifying="" under="" oath="" information="" designed="" to="" ensure="" that="" universal="" service="" support="" to="" eligible="" health="" care="" providers="" is="" used="" for="" its="" intended="" purpose="" and="" not="" abused.="" these="" requirements="" may="" require="" some="" administrative,="" accounting,="" and="" legal="" skills.="" 602.="" to="" minimize="" the="" administrative="" burden="" on="" health="" care="" providers="" to="" the="" extent="" consistent="" with="" section="" 254,="" we="" adopt="" the="" least="" burdensome="" certification="" plan="" that="" will="" provide="" safeguards="" that="" are="" adequate="" to="" ensure="" that="" the="" supported="" services="" will="" be="" obtained="" lawfully="" and="" for="" their="" intended="" purpose.="" 603.="" we="" are="" requiring="" the="" administrator="" to="" establish="" and="" administer="" a="" monitoring="" and="" evaluation="" program="" to="" oversee="" the="" use="" of="" supported="" services="" by="" health="" care="" providers="" and="" the="" pricing="" of="" those="" services="" by="" carriers.="" accordingly,="" health="" care="" providers,="" as="" well="" as="" carriers,="" will="" be="" required="" to="" maintain="" the="" same="" kind="" of="" procurement="" records="" for="" purchases="" under="" this="" program="" as="" they="" now="" keep="" for="" other="" purchases="" involving="" government="" programs="" or="" third-party="" payors.="" health="" care="" providers="" must="" be="" able="" to="" produce="" such="" records="" at="" the="" request="" of="" any="" auditor="" appointed="" by="" the="" administrator="" or="" any="" state="" or="" federal="" agency="" with="" jurisdiction="" that="" might="" conduct="" audits.="" health="" care="" providers="" may="" be="" subject="" to="" random="" compliance="" audits="" to="" ensure="" that="" services="" are="" being="" used="" for="" the="" provision="" of="" state="" authorized="" health="" care,="" that="" they="" are="" complying="" with="" other="" certification="" requirements,="" that="" they="" are="" otherwise="" eligible="" to="" receive="" universal="" service="" support,="" that="" rates="" charged="" comply="" with="" the="" statute="" and="" regulations="" and="" that="" prohibitions="" against="" resale="" or="" transfer="" for="" profit="" are="" strictly="" enforced,="" particularly="" with="" respect="" to="" consortia.="" such="" information="" will="" permit="" the="" commission="" to="" determine="" whether="" universal="" service="" support="" policies="" require="" adjustment.="" the="" administrator="" shall="" also="" develop="" a="" method="" for="" obtaining="" information="" from="" health="" care="" providers="" regarding="" which="" services="" they="" are="" purchasing="" and="" how="" such="" services="" are="" being="" used,="" and="" shall="" submit="" an="" annual="" report="" to="" the="" commission.="" this="" report="" will="" enable="" the="" commission="" to="" monitor="" the="" progress="" of="" health="" care="" providers="" in="" obtaining="" access="" to="" telecommunications="" and="" other="" information="" services.="" 604.="" we="" encourage="" carriers="" across="" the="" country="" to="" notify="" eligible="" health="" care="" providers="" in="" their="" service="" areas="" of="" the="" availability="" of="" lower="" rates="" resulting="" from="" universal="" service="" support="" so="" that="" rural="" health="" care="" providers="" are="" able="" to="" take="" full="" advantage="" of="" the="" supported="" services.="" significant="" alternatives="" and="" steps="" taken="" to="" minimize="" significant="" economic="" impact="" on="" a="" substantial="" number="" of="" small="" entities="" consistent="" with="" stated="" objectives="" 605.="" we="" have="" considered="" several="" certification="" plans="" suggested="" by="" commenters.="" we="" seek="" to="" adopt="" the="" least="" burdensome="" certification="" plan="" that="" will="" provide="" adequate="" safeguards="" to="" ensure="" that="" the="" supported="" services="" are="" being="" used="" for="" their="" intended="" purpose.="" we="" reject="" a="" suggestion="" that="" certification="" include="" verification="" of="" the="" existence="" of="" a="" technology="" plan="" and="" a="" checklist="" of="" other="" information="" for="" tracking="" universal="" service.="" although="" such="" plans="" might="" be="" useful="" in="" a="" discount="" plan="" where="" disincentives="" to="" overpurchasing="" are="" needed,="" we="" find="" that="" such="" a="" requirement="" will="" be="" unnecessarily="" burdensome="" where="" health="" care="" providers,="" many="" of="" whom="" may="" be="" small="" entities,="" would="" be="" required="" to="" invest="" substantial="" resources="" in="" order="" to="" pay="" urban="" rates="" for="" these="" services.="" we="" also="" reject,="" for="" similar="" reasons,="" suggestions="" that="" health="" care="" providers="" be="" required="" to="" certify="" that="" hardware,="" wiring,="" on-site="" networking,="" and="" training="" would="" be="" deployed="" simultaneously="" with="" the="" service.="" finally,="" we="" reject="" a="" proposal="" that="" the="" financial="" officers="" of="" health="" care="" provider="" organizations="" be="" required="" to="" attest="" under="" oath="" that="" funds="" have="" been="" used="" as="" intended="" by="" the="" 1996="" act,="" because="" we="" find="" that="" the="" pre-expenditure="" certification="" described="" above,="" which="" will="" be="" submitted="" to="" the="" carrier="" along="" with="" the="" request="" for="" services,="" is="" sufficient="" under="" these="" circumstances.="" 606.="" to="" minimize="" the="" administrative="" burden="" on="" regulators="" and="" carriers,="" to="" the="" extent="" consistent="" with="" section="" 254,="" we="" find="" that="" the="" urban="" rate="" should="" be="" based="" on="" the="" rates="" charged="" for="" similar="" services="" in="" the="" urban="" area="" with="" a="" population="" of="" at="" least="" 50,000="" closest="" to="" the="" health="" care="" provider's="" location.="" we="" conclude="" that="" this="" one-step="" process="" will="" be="" easy="" to="" use="" and="" understand="" and="" will,="" therefore,="" be="" less="" administratively="" burdensome="" than="" other="" possible="" approaches.="" this="" method="" is="" also="" preferable="" to="" one="" that="" would="" require="" information="" about="" private="" contract="" rates,="" which="" are="" proprietary="" and="" cannot="" be="" obtained="" without="" elaborate="" confidentiality="" safeguards.="" 607.="" we="" acknowledge="" the="" concern="" of="" some="" commenters="" that="" requiring="" carriers="" to="" treat="" the="" amount="" of="" support="" for="" health="" care="" providers="" as="" an="" offset="" to="" the="" carrier's="" universal="" service="" obligation="" is="" anti-="" competitive="" for="" small="" carriers="" that="" have="" such="" small="" funding="" obligations="" that="" they="" would="" not="" receive="" the="" full="" offset="" to="" which="" they="" were="" entitled="" in="" the="" current="" year.="" therefore,="" while="" we="" adopt="" the="" joint="" board's="" recommendation="" to="" limit="" carriers="" to="" offsets="" rather="" than="" direct="" reimbursement="" for="" the="" first="" year's="" service,="" we="" also="" adopt="" modifications="" to="" reflect="" these="" concerns.="" although="" we="" disagree="" with="" nynex's="" suggestion="" that="" the="" statute="" precludes="" a="" mandatory="" offset="" rule,="" we="" conclude="" that="" allowing="" direct="" compensation="" under="" some="" circumstances="" is="" consistent="" with="" the="" statutory="" language="" and="" sound="" policy.="" we="" conclude="" that="" telecommunications="" carriers="" providing="" services="" to="" health="" care="" providers="" at="" reasonably="" comparable="" rates="" under="" the="" provisions="" of="" section="" [[page="" 32945]]="" 254(h)(1)(a)="" should="" treat="" the="" amount="" eligible="" for="" support="" as="" an="" offset="" toward="" the="" carrier's="" universal="" service="" support="" obligation="" for="" the="" year="" in="" which="" the="" expenses="" were="" incurred.="" to="" the="" extent="" that="" the="" amount="" of="" universal="" service="" support="" due="" to="" a="" carrier="" exceeds="" the="" carrier's="" universal="" service="" obligation,="" calculated="" on="" an="" annual="" basis,="" however,="" we="" find="" that="" the="" carrier="" may="" receive="" a="" direct="" reimbursement="" in="" the="" amount="" of="" the="" difference.="" 608.="" this="" approach="" should="" address="" the="" potential="" problem="" when="" the="" total="" amount="" of="" a="" carrier's="" rate="" reductions="" exceed="" its="" universal="" service="" obligation="" in="" any="" one="" year.="" moreover,="" allowing="" carriers="" to="" receive="" direct="" reimbursements="" should="" help="" ensure="" that="" they="" have="" adequate="" resources="" to="" cover="" the="" costs="" of="" providing="" supported="" services.="" as="" some="" commenters="" suggest,="" small="" carriers="" will="" find="" it="" difficult="" to="" sustain="" such="" costs="" absent="" prompt="" reimbursement.="" pursuant="" to="" this="" approach,="" those="" small="" carriers="" who="" do="" not="" contribute="" to="" the="" universal="" service="" fund="" because="" they="" are="" subject="" to="" the="" de="" minimis="" exemption="" may="" receive="" direct="" reimbursement="" as="" well.="" we="" agree="" with="" the="" joint="" board="" that="" an="" offset="" mechanism="" is="" both="" less="" vulnerable="" to="" manipulation="" and="" more="" easily="" administered="" and="" monitored="" than="" direct="" reimbursement.="" we="" conclude,="" however,="" that="" the="" approach="" we="" adopt="" appropriately="" balances="" the="" concerns="" of="" carriers="" whose="" rate="" reductions="" exceed="" their="" contributions="" in="" a="" given="" year="" against="" the="" need="" to="" adopt="" a="" reimbursement="" method="" that="" may="" be="" easily="" administered="" and="" monitored.="" 609.="" to="" identify="" rural="" health="" care="" providers,="" we="" adopt="" the="" office="" of="" management="" and="" budget's="" metropolitan="" statistical="" area="" method="" of="" designating="" rural="" areas="" along="" with="" the="" goldsmith="" modification="" because="" it="" will="" meet="" the="" ``ease="" of="" administration''="" criterion.="" since="" lists="" of="" msa="" counties="" and="" goldsmith-identified="" census="" blocks="" and="" tracts="" already="" exist,="" updated="" to="" 1995,="" it="" should="" be="" relatively="" easy="" for="" any="" health="" care="" provider="" to="" determine="" if="" it="" is="" located="" in="" a="" rural="" area="" and,="" therefore,="" whether="" it="" will="" meet="" the="" test="" of="" eligibility="" for="" support.="" summary="" analysis:="" section="" xii="" subscriber="" line="" charges="" and="" carrier="" common="" line="" charges="" summary="" of="" projected="" reporting,="" recordkeeping,="" and="" other="" compliance="" requirements="" 610.="" the="" commission's="" universal="" service="" rules="" regarding="" the="" interstate="" subscriber="" line="" charge="" and="" carrier="" common="" line="" charges="" will="" not="" impose="" any="" additional="" reporting="" requirements="" on="" any="" entities,="" including="" small="" entities.="" although="" we="" changed="" the="" amount="" of="" the="" charges,="" the="" changes="" will="" have="" no="" impact="" on="" the="" information="" collection="" requirement,="" and="" will="" not="" extend="" the="" charges="" to="" additional="" carriers.="" some="" accounting="" skills="" may="" be="" necessary="" to="" modify="" the="" charges.="" significant="" alternatives="" and="" steps="" taken="" to="" minimize="" significant="" economic="" impact="" on="" a="" substantial="" number="" of="" small="" entities="" consistent="" with="" stated="" objectives="" 611.="" because="" the="" slc="" and="" ccl="" charges="" will="" recover="" ilecs'="" costs="" for="" portions="" of="" their="" network,="" reporting="" requirements="" were="" deemed="" necessary="" to="" track="" the="" costs="" and="" allow="" for="" their="" recovery.="" no="" alternatives="" were="" presented="" that="" would="" have="" eliminated="" or="" substantially="" reduced="" those="" reporting="" requirements.="" the="" commission's="" findings="" have="" no="" impact="" on="" the="" information="" collection="" requirement="" and="" will="" not="" extend="" the="" charges="" to="" any="" additional="" carriers.="" 612.="" we="" note,="" in="" section="" xii.c,="" that="" some="" commenters="" suggest="" that="" the="" slc="" cap="" for="" businesses="" with="" single="" connections="" be="" raised="" above="" the="" $3.50="" cap.="" we="" reject="" this="" suggestion="" noting="" that="" the="" slc="" charge="" is="" assessed="" directly="" on="" local="" telephone="" subscribers="" and,="" therefore,="" has="" an="" impact="" on="" universal="" service="" concerns="" such="" as="" affordability="" of="" rates.="" we="" do="" not="" agree="" with="" the="" sba="" that="" the="" slc="" should="" be="" reduced="" for="" businesses="" with="" multiple="" connections.="" while="" not="" all="" businesses="" with="" multiple="" connections="" may="" be="" large="" corporations,="" we="" conclude="" that="" such="" businesses="" have="" demonstrated="" that="" telecommunication="" services="" are="" affordable="" by="" subscribing="" to="" multiple="" connections.="" we="" are="" also="" concerned="" that="" a="" reduction="" in="" slc="" caps="" would="" have="" a="" negative="" impact="" on="" the="" economic="" efficiency="" of="" the="" commission's="" common="" line="" recovery="" regime.="" we="" conclude="" that="" a="" reduction="" in="" the="" slc="" cap="" for="" businesses="" with="" multiple="" connections="" is="" not="" warranted="" at="" this="" time.="" summary="" analysis:="" section="" xiii="" administration="" summary="" of="" projected="" reporting,="" recordkeeping,="" and="" other="" compliance="" requirements="" 613.="" section="" 254(d)="" states="" ``that="" all="" telecommunications="" carriers="" that="" provide="" interstate="" telecommunications="" services="" shall="" make="" equitable="" and="" nondiscriminatory="" contributions''="" toward="" the="" preservation="" and="" advancement="" of="" universal="" service.="" we="" shall="" require="" all="" telecommunications="" carriers="" that="" provide="" interstate="" telecommunications="" services="" and="" some="" providers="" of="" interstate="" telecommunications="" to="" contribute="" to="" the="" universal="" service="" support="" mechanisms.="" contributions="" for="" support="" for="" programs="" for="" high="" cost="" areas="" and="" low-income="" consumers="" will="" be="" assessed="" on="" the="" basis="" of="" interstate="" and="" international="" end-user="" telecommunications="" revenues.="" contributions="" for="" support="" for="" programs="" for="" schools,="" libraries,="" and="" rural="" health="" care="" providers="" will="" be="" assessed="" on="" the="" basis="" of="" interstate,="" intrastate,="" and="" international="" end-user="" telecommunications="" revenues.="" contributors="" will="" be="" required="" to="" submit="" information="" regarding="" their="" end-user="" telecommunications="" revenues.="" approximately="" 5,000="" telecommunications="" carriers="" and="" providers="" will="" be="" required="" to="" submit="" contributions.="" these="" tasks="" may="" require="" some="" administrative,="" accounting,="" and="" legal="" skills.="" significant="" alternatives="" and="" steps="" taken="" to="" minimize="" significant="" economic="" impact="" on="" a="" substantial="" number="" of="" small="" entities="" consistent="" with="" stated="" objectives="" 614.="" we="" reject="" the="" suggestion="" of="" some="" commenters="" that="" cmrs="" providers,="" many="" of="" whom="" may="" qualify="" as="" small="" businesses,="" should="" not="" be="" required="" to="" contribute,="" or="" should="" be="" allowed="" to="" contribute="" at="" a="" reduced="" rate,="" due="" to="" their="" contention="" that="" they="" will="" not="" be="" eligible="" to="" receive="" universal="" service="" support.="" we="" note="" that="" section="" 254(d)="" provides="" that="" ``every="" telecommunications="" carrier="" that="" provides="" interstate="" telecommunications="" services="" shall="" contribute="" on="" an="" equitable="" and="" nondiscriminatory="" basis''="" with="" no="" such="" exemption="" for="" any="" cmrs="" providers="" or="" ineligible="" carriers.="" we="" find,="" however,="" that="" entities="" that="" provide="" only="" international="" telecommunications="" services="" are="" not="" required="" to="" contribute="" to="" universal="" service="" support="" because="" they="" are="" not="" ``telecommunications="" carriers="" that="" provide="" interstate="" telecommunications.''="" to="" the="" extent="" that="" small="" carriers="" provide="" only="" international="" telecommunications="" service,="" they="" will="" not="" be="" required="" to="" contribute="" to="" the="" universal="" service="" support="" mechanisms.="" 615.="" as="" set="" forth="" in="" section="" xiii.d,="" we="" conclude="" that="" small="" carriers="" should="" not="" be="" given="" preferential="" treatment="" in="" the="" determination="" of="" contributions="" to="" the="" universal="" service="" support="" mechanisms="" solely="" on="" the="" basis="" of="" being="" small="" entities="" because="" of="" section="" 254(d)'s="" explicit="" directive="" that="" every="" telecommunications="" carrier="" that="" provides="" interstate="" telecommunications="" services="" shall="" contribute="" to="" the="" preservation="" and="" advancement="" of="" [[page="" 32946]]="" universal="" service.="" we="" have="" considered="" the="" suggestions="" of="" commenters="" regarding="" various="" graduated="" contribution="" schemes="" that="" would="" favor="" small="" entities.="" we="" reject="" these="" suggestions="" based="" on="" the="" language="" of="" the="" statute,="" legislative="" history,="" and="" the="" regulatory="" burdens="" that="" such="" graduated="" schemes="" would="" entail.="" we="" have="" considered="" commenter="" suggestions="" that="" small="" carriers="" be="" exempted="" from="" contribution="" on="" the="" basis="" of="" the="" de="" minimis="" provision="" of="" section="" 254(d).="" we="" reject="" these="" suggestions="" on="" the="" basis="" of="" the="" legislative="" history="" surrounding="" section="" 254(d)="" that="" provides="" that="" the="" de="" minimis="" exemption="" should="" be="" limited="" to="" those="" carriers="" for="" whom="" the="" cost="" of="" collecting="" the="" contribution="" exceeds="" the="" amount="" of="" the="" contribution.="" as="" set="" forth="" in="" section="" xiii.d,="" we="" find="" that="" if="" a="" contributor's="" contribution="" to="" universal="" service="" in="" any="" given="" year="" is="" less="" than="" $100.00,="" that="" contributor="" will="" not="" be="" required="" to="" submit="" a="" contribution="" for="" that="" year.="" we="" conclude="" that="" expanding="" the="" definition="" of="" de="" minimis="" to="" include="" ``small''="" carriers="" would="" violate="" the="" ``pro-competitive''="" intent="" of="" the="" 1996="" act="" and="" require="" complex="" administration="" and="" regulation="" to="" determine="" and="" monitor="" eligibility="" for="" the="" exemption.="" we="" believe="" that="" small="" entities="" may="" benefit="" under="" the="" de="" minimis="" exemption="" as="" interpreted="" in="" the="" order="" without="" an="" explicit="" exemption="" for="" all="" small="" entities.="" we="" also="" believe="" that="" small="" payphone="" aggregators,="" such="" as="" grocery="" store="" owners,="" will="" be="" exempt="" from="" contribution="" requirements="" pursuant="" to="" our="" de="" minimis="" exemption.="" e.report="" to="" congress="" 616.="" the="" commission="" shall="" send="" a="" copy="" of="" this="" frfa,="" along="" with="" this="" report="" and="" order,="" in="" a="" report="" to="" congress="" pursuant="" to="" the="" small="" business="" regulatory="" enforcement="" fairness="" act="" of="" 1996,="" 5="" u.s.c.="" 801(a)(1)(a).="" a="" summary="" of="" this="" frfa="" will="" also="" be="" published="" in="" the="" federal="" register.="" ordering="" clauses="" accordingly,="" it="" is="" ordered="" that,="" pursuant="" to="" the="" authority="" contained="" in="" sections="" 1-4,="" 201-205,="" 218-220,="" 214,="" 254,="" 303(r),="" 403,="" and="" 410="" of="" the="" communications="" act="" of="" 1934,="" as="" amended,="" 47="" u.s.c.="" 151-154,="" 201-205,="" 218-220,="" 214,="" 254,="" 303(r),="" 403,="" and="" 410,="" the="" report="" and="" order="" is="" adopted,="" including="" the="" collection="" of="" information="" provisions="" contained="" herein,="" effective="" july="" 17,="" 1997.="" it="" is="" further="" ordered="" that="" part="" 54="" of="" the="" commission's="" rules,="" 47="" cfr="" part="" 54="" is="" added="" as="" set="" forth="" below,="" effective="" july="" 17,="" 1997;="" except="" for="" subpart="" e="" which="" will="" become="" effective="" january="" 1,="" 1998.="" it="" is="" further="" ordered="" that="" part="" 36="" of="" the="" commission's="" rules,="" 47="" cfr="" part="" 36="" is="" amended="" as="" set="" forth="" below,="" effective="" july="" 17,="" 1997.="" it="" is="" further="" ordered="" that="" part="" 69="" of="" the="" commission's="" rules,="" 47="" cfr="" part="" 69="" is="" amended="" as="" set="" forth="" below,="" effective="" july="" 17,="" 1997.="" it="" is="" further="" ordered="" that,="" pursuant="" to="" section="" 5(c)(1)="" of="" the="" communications="" act="" of="" 1934,="" as="" amended,="" 47="" u.s.c.="" 155(c)(1),="" authority="" is="" delegated="" to="" the="" chief,="" common="" carrier="" bureau,="" to="" perform="" the="" following="" functions:="" (1)="" to="" propose,="" approve,="" or="" deny="" a="" new="" definition="" of="" a="" service="" area="" of="" a="" rural="" telephone="" company="" pursuant="" to="" 47="" u.s.c.="" 214(e)(5)="" and="" 47="" cfr="" 54.307;="" (2)="" to="" review="" an="" appeal="" filed="" by="" a="" carrier="" contending="" that="" a="" state="" commission="" has="" improperly="" denied="" a="" request="" for="" waiver="" of="" the="" rule="" prohibiting="" disconnection="" of="" lifeline="" service="" for="" non-payment="" of="" toll="" charges;="" and="" (3)="" to="" resolve="" a="" carrier's="" request="" for="" a="" waiver="" of="" the="" rule="" prohibiting="" disconnection="" of="" lifeline="" service="" for="" non-payment="" of="" toll="" charges="" when="" the="" relevant="" state="" commission="" chooses="" not="" to="" act="" on="" such="" a="" request.="" it="" is="" further="" ordered="" that="" if="" any="" portion="" of="" this="" order="" or="" any="" regulation="" implementing="" this="" order="" is="" held="" invalid,="" either="" generally="" or="" as="" applied="" to="" particular="" persons="" or="" circumstances,="" the="" remainder="" of="" the="" order="" or="" regulations,="" or="" their="" application="" to="" other="" persons="" or="" circumstances,="" shall="" not="" be="" affected.="" list="" of="" subjects="" 47="" cfr="" part="" 36="" communications="" common="" carriers,="" reporting="" and="" recordkeeping="" requirements,="" telephone,="" uniform="" system="" of="" accounts.="" 47="" cfr="" part="" 54="" health="" facilities,="" libraries,="" reporting="" and="" recordkeeping="" requirements,="" schools,="" telecommunications,="" telephone.="" 47="" cfr="" part="" 69="" communications="" common="" carriers,="" reporting="" and="" recordkeeping="" requirements,="" telephone.="" federal="" communications="" commission.="" william="" f.="" caton,="" acting="" secretary.="" parts="" 36="" and="" 69="" of="" title="" 47="" of="" the="" code="" of="" federal="" regulations="" are="" amended="" as="" follows:="" part="" 36--jurisdictional="" separations="" procedures;="" standard="" procedures="" for="" separating="" telecommunications="" property="" costs,="" revenues,="" expenses,="" taxes="" and="" reserves="" for="" telecommunications="" companies="" 1.="" the="" authority="" citation="" for="" part="" 36="" is="" revised="" to="" read="" as="" follows:="" authority:="" 47="" u.s.c.="" secs.="" 151,="" 154="" (i)="" and="" (j),="" 205,="" 221(c),="" 254,="" 403="" and="" 410.="" 2.="" section="" 36.125="" is="" amended="" by="" removing="" and="" reserving="" paragraphs="" (c),="" (d),="" and="" (e),="" adding="" paragraphs="" (a)(3),="" (a)(4)="" and="" (a)(5),="" and="" revising="" paragraphs="" (b)="" and="" (f)="" to="" read="" as="" follows:="" sec.="" 36.125="" local="" switching="" equipment--category="" 3.="" (a)="" *="" *="" *="" (3)="" dial="" equipment="" minutes="" of="" use="" (dem)="" is="" defined="" as="" the="" minutes="" of="" holding="" time="" of="" the="" originating="" and="" terminating="" local="" switching="" equipment.="" holding="" time="" is="" defined="" in="" the="" glossary.="" (4)="" the="" interstate="" allocation="" factor="" is="" the="" percentage="" of="" local="" switching="" investment="" apportioned="" to="" the="" interstate="" jurisdiction.="" (5)="" the="" interstate="" dem="" factor="" is="" the="" ratio="" of="" the="" interstate="" dem="" to="" the="" total="" dem.="" a="" weighted="" interstate="" dem="" factor="" is="" the="" product="" of="" multiplying="" a="" weighting="" factor,="" as="" defined="" in="" paragraph="" (f)="" of="" this="" section,="" to="" the="" dem="" factor.="" the="" state="" dem="" factor="" is="" the="" ratio="" of="" the="" state="" dem="" to="" the="" total="" dem.="" (b)="" beginning="" january="" 1,="" 1993,="" category="" 3="" investment="" for="" study="" areas="" with="" 50,000="" or="" more="" access="" lines="" is="" apportioned="" to="" the="" interstate="" jurisdiction="" on="" the="" basis="" of="" the="" interstate="" dem="" factor.="" category="" 3="" investment="" for="" study="" areas="" with="" 50,000="" or="" more="" access="" lines="" is="" apportioned="" to="" the="" state="" jurisdiction="" on="" the="" basis="" of="" the="" state="" dem="" factor.="" (c)="" [reserved]="" (d)="" [reserved]="" (e)="" [reserved]="" (f)="" beginning="" january="" 1,="" 1993="" and="" ending="" december="" 31,="" 1997,="" for="" study="" areas="" with="" fewer="" than="" 50,000="" access="" lines,="" category="" 3="" investment="" is="" apportioned="" to="" the="" interstate="" jurisdiction="" by="" the="" application="" of="" an="" interstate="" allocation="" factor="" that="" is="" the="" lesser="" of="" either="" .85="" or="" the="" product="" of="" the="" interstate="" dem="" factor="" specified="" in="" paragraph="" (a)(5)="" of="" this="" section="" multiplied="" by="" a="" weighting="" factor,="" as="" determined="" by="" the="" table="" below.="" beginning="" january="" 1,="" 1998,="" for="" study="" areas="" with="" fewer="" than="" 50,000="" access="" lines,="" category="" 3="" investment="" is="" apportioned="" to="" the="" interstate="" jurisdiction="" by="" the="" application="" of="" an="" interstate="" allocation="" factor="" that="" is="" the="" lesser="" of="" either="" .85="" or="" the="" sum="" of="" the="" interstate="" [[page="" 32947]]="" dem="" factor="" specified="" in="" paragraph="" (a)(5)="" of="" this="" section="" and="" the="" difference="" between="" the="" 1996="" weighted="" interstate="" dem="" factor="" and="" the="" 1996="" interstate="" dem="" factor.="" the="" category="" 3="" investment="" that="" is="" not="" assigned="" to="" the="" interstate="" jurisdiction="" pursuant="" to="" this="" paragraph="" is="" assigned="" to="" the="" state="" jurisdiction.="" ------------------------------------------------------------------------="" weighting="" number="" of="" access="" lines="" in="" service="" in="" study="" area="" factor="" ------------------------------------------------------------------------="" 0-10,000.....................................................="" 3.0="" 10,001-20,000................................................="" 2.5="" 20,001-50,000................................................="" 2.0="" 50,001-or="" above..............................................="" 1.0="" ------------------------------------------------------------------------="" *="" *="" *="" *="" *="" 3.="" section="" 36.601="" is="" amended="" by="" revising="" paragraphs="" (a)="" and="" (c)="" to="" read="" as="" follows:="" sec.="" 36.601="" general.="" (a)="" the="" term="" universal="" service="" fund="" in="" this="" subpart="" refers="" only="" to="" the="" support="" for="" loop-related="" costs="" included="" in="" sec.="" 36.621.="" the="" term="" universal="" service="" in="" part="" 54="" of="" this="" chapter="" refers="" to="" the="" comprehensive="" discussion="" of="" the="" commission's="" rules="" implementing="" section="" 254="" of="" the="" communications="" act="" of="" 1934,="" as="" amended,="" 47="" u.s.c.="" 254,="" which="" addresses="" universal="" service="" support="" for="" rural,="" insular,="" and="" high="" cost="" areas,="" low-income="" consumers,="" schools="" and="" libraries,="" and="" health="" care="" providers.="" the="" expense="" adjustment="" calculated="" pursuant="" to="" this="" subpart="" f="" shall="" be="" added="" to="" interstate="" expenses="" and="" deducted="" from="" state="" expenses="" after="" expenses="" and="" taxes="" have="" been="" apportioned="" pursuant="" to="" subpart="" d="" of="" this="" part.="" *="" *="" *="" *="" *="" (c)="" the="" annual="" amount="" of="" the="" total="" nationwide="" loop="" cost="" expense="" adjustment="" calculated="" pursuant="" to="" this="" subpart="" f="" shall="" not="" exceed="" the="" amount="" of="" the="" total="" loop="" cost="" expense="" adjustment="" for="" the="" immediately="" preceding="" calendar="" year,="" increased="" by="" a="" rate="" equal="" to="" the="" rate="" of="" increase="" in="" the="" total="" number="" of="" working="" loops="" during="" the="" calendar="" year="" preceding="" the="" july="" 31st="" filing.="" the="" total="" loop="" cost="" expense="" adjustment="" shall="" consist="" of="" the="" loop="" cost="" expense="" adjustments,="" including="" amounts="" calculated="" pursuant="" to="" secs.="" 36.612(a)="" and="" 36.631.="" the="" rate="" of="" increase="" in="" total="" working="" loops="" shall="" be="" based="" upon="" the="" difference="" between="" the="" number="" of="" total="" working="" loops="" on="" december="" 31="" of="" the="" calendar="" year="" preceding="" the="" july="" 31st="" filing="" and="" the="" number="" of="" total="" working="" loops="" on="" december="" 31="" of="" the="" second="" calendar="" year="" preceding="" that="" filing,="" both="" calculated="" pursuant="" to="" sec.="" 36.611(a)(8).="" beginning="" january="" 1,="" 1999,="" non-rural="" carriers="" shall="" no="" longer="" receive="" support="" pursuant="" to="" this="" subpart="" f.="" beginning="" january="" 1,="" 1999,="" the="" total="" loop="" cost="" expense="" adjustment="" shall="" not="" exceed="" the="" total="" amount="" of="" the="" loop="" cost="" expense="" adjustment="" provided="" to="" rural="" carriers="" for="" the="" immediately="" preceding="" calendar="" year,="" adjusted="" to="" reflect="" the="" rate="" of="" change="" in="" the="" total="" number="" of="" working="" loops="" of="" rural="" carriers="" during="" the="" calendar="" year="" preceding="" the="" july="" filing.="" in="" addition,="" effective="" on="" january="" 1="" of="" each="" year,="" beginning="" january="" 1,="" 1999,="" the="" maximum="" annual="" amount="" of="" the="" total="" loop="" cost="" expense="" adjustment="" for="" rural="" carriers="" must="" be="" further="" increased="" or="" decreased="" to="" reflect:="" (1)="" the="" addition="" of="" lines="" served="" by="" carriers="" that="" were="" classified="" as="" non-rural="" in="" the="" prior="" year="" but="" which,="" in="" the="" current="" year,="" meet="" the="" definition="" of="" ``rural="" telephone="" company;''="" and="" (2)="" the="" deletion="" of="" lines="" served="" by="" carriers="" that="" were="" classified="" as="" rural="" in="" the="" prior="" year="" but="" which,="" in="" the="" current="" year,="" no="" longer="" meet="" the="" definition="" of="" ``rural="" telephone="" company.''="" a="" rural="" carrier="" is="" defined="" as="" a="" carrier="" that="" meets="" the="" definition="" of="" a="" ``rural="" telephone="" company''="" in="" sec.="" 51.5="" of="" this="" chapter.="" limitations="" imposed="" by="" this="" subsection="" shall="" apply="" only="" to="" amounts="" calculated="" pursuant="" to="" this="" subpart="" f.="" 4.="" section="" 36.611="" is="" revised="" to="" read="" as="" follows:="" sec.="" 36.611="" submission="" of="" information="" to="" the="" national="" exchange="" carrier="" association="" (neca).="" in="" order="" to="" allow="" determination="" of="" the="" study="" areas="" that="" are="" entitled="" to="" an="" expense="" adjustment,="" each="" incumbent="" local="" exchange="" carrier="" (ilec)="" must="" provide="" the="" national="" exchange="" carrier="" association="" (neca)="" (established="" pursuant="" to="" part="" 69="" of="" this="" chapter)="" with="" the="" information="" listed="" below="" for="" each="" of="" its="" study="" areas.="" this="" information="" is="" to="" be="" filed="" with="" the="" association="" by="" july="" 31st="" of="" each="" year.="" the="" information="" filed="" on="" july="" 31st="" of="" each="" year="" will="" be="" used="" in="" the="" jurisdictional="" allocations="" underlying="" the="" cost="" support="" data="" for="" the="" access="" charge="" tariffs="" to="" be="" filed="" the="" following="" october.="" an="" incumbent="" local="" exchange="" carrier="" is="" defined="" as="" a="" carrier="" that="" meets="" the="" definition="" of="" an="" ``incumbent="" local="" exchange="" carrier''="" in="" sec.="" 51.5="" of="" this="" chapter.="" (a)="" unseparated,="" i.e.,="" state="" and="" interstate,="" gross="" plant="" investment="" in="" exchange="" line="" cable="" and="" wire="" facilities="" (c&wf)="" subcategory="" 1.3="" and="" exchange="" line="" central="" office="" (co)="" circuit="" equipment="" category="" 4.13.="" this="" amount="" shall="" be="" calculated="" as="" of="" december="" 31st="" of="" the="" calendar="" year="" preceding="" each="" july="" 31st="" filing.="" (b)="" unseparated="" accumulated="" depreciation="" and="" noncurrent="" deferred="" federal="" income="" taxes,="" attributable="" to="" exchange="" line="" c&wf="" subcategory="" 1.3="" investment,="" and="" exchange="" line="" co="" circuit="" equipment="" category="" 4.13="" investment.="" these="" amounts="" shall="" be="" calculated="" as="" of="" december="" 31st="" of="" the="" calendar="" year="" preceding="" each="" july="" 31st="" filing,="" and="" shall="" be="" stated="" separately.="" (c)="" unseparated="" depreciation="" expense="" attributable="" to="" exchange="" line="" c&wf="" subcategory="" 1.3="" investment,="" and="" exchange="" line="" co="" circuit="" equipment="" category="" 4.13="" investment.="" this="" amount="" shall="" be="" the="" actual="" depreciation="" expense="" for="" the="" calendar="" year="" preceding="" each="" july="" 31st="" filing.="" (d)="" unseparated="" maintenance="" expense="" attributable="" to="" exchange="" line="" c&wf="" subcategory="" 1.3="" investment="" and="" exchange="" line="" co="" circuit="" equipment="" category="" 4.13="" investment.="" this="" amount="" shall="" be="" the="" actual="" repair="" expense="" for="" the="" calendar="" year="" preceding="" each="" july="" 31st="" filing.="" (e)="" unseparated="" corporate="" operations="" expenses,="" operating="" taxes,="" and="" the="" benefits="" and="" rent="" portions="" of="" operating="" expenses.="" the="" amount="" for="" each="" of="" these="" categories="" of="" expense="" shall="" be="" the="" actual="" amount="" for="" that="" expense="" for="" the="" calendar="" year="" preceding="" each="" july="" 31st="" filing.="" the="" amount="" for="" each="" category="" of="" expense="" listed="" shall="" be="" stated="" separately.="" (f)="" unseparated="" gross="" telecommunications="" plant="" investment.="" this="" amount="" shall="" be="" calculated="" as="" of="" december="" 31st="" of="" the="" calendar="" year="" preceding="" each="" july="" 31st="" filing.="" (g)="" unseparated="" accumulated="" depreciation="" and="" noncurrent="" deferred="" federal="" income="" taxes="" attributable="" to="" total="" unseparated="" telecommunications="" plant="" investment.="" this="" amount="" shall="" be="" calculated="" as="" of="" december="" 31st="" of="" the="" calendar="" year="" preceding="" each="" july="" 31st="" filing.="" (h)="" the="" number="" of="" working="" loops="" for="" each="" study="" area.="" for="" universal="" service="" support="" purposes,="" working="" loops="" are="" defined="" as="" the="" number="" of="" working="" exchange="" line="" c&wf="" loops="" used="" jointly="" for="" exchange="" and="" message="" telecommunications="" service,="" including="" c&wf="" subscriber="" lines="" associated="" with="" pay="" telephones="" in="" c&wf="" category="" 1,="" but="" excluding="" wats="" closed="" end="" access="" and="" twx="" service.="" this="" figure="" shall="" be="" calculated="" as="" of="" december="" 31st="" of="" the="" calendar="" year="" preceding="" each="" july="" 31st="" filing.="" 5.="" section="" 36.612="" is="" amended="" by="" revising="" the="" introductory="" text="" of="" paragraph="" (a)="" to="" read="" as="" follows:="" sec.="" 36.612="" updating="" information="" submitted="" to="" the="" national="" exchange="" carrier="" association.="" (a)="" any="" telecommunications="" company="" may="" update="" the="" information="" submitted="" [[page="" 32948]]="" to="" the="" national="" exchange="" carrier="" association="" pursuant="" to="" sec.="" 36.611(a)(1)="" through="" (a)(8)="" of="" this="" part="" one="" or="" more="" times="" annually="" on="" a="" rolling="" year="" basis.="" carriers="" wishing="" to="" update="" the="" preceding="" calendar="" year="" data="" filed="" july="" 31st="" may:="" *="" *="" *="" *="" *="" 6.="" section="" 36.613="" is="" amended="" by="" revising="" the="" first="" sentence="" of="" the="" introductory="" text="" of="" paragraph="" (a)="" to="" read="" as="" follows:="" sec.="" 36.613="" submission="" of="" information="" by="" the="" national="" exchange="" carrier="" association.="" (a)="" on="" october="" 1="" of="" each="" year,="" the="" national="" exchange="" carrier="" association="" shall="" file="" with="" the="" commission="" and="" any="" other="" party="" designated="" as="" the="" permanent="" administrator="" the="" information="" listed="" below.="" *="" *="" *="" 7.="" section="" 36.621="" is="" amended="" by="" revising="" paragraph="" (a)(4)="" to="" read="" as="" follows:="" sec.="" 36.621="" study="" area="" total="" unseparated="" loop="" cost.="" (a)="" *="" *="" *="" (4)="" corporate="" operations="" expenses,="" operating="" taxes="" and="" the="" benefits="" and="" rent="" portions="" of="" operating="" expenses,="" as="" reported="" in="" sec.="" 36.611(a)(5)="" attributable="" to="" investment="" in="" c&wf="" category="" 1.3="" and="" coe="" category="" 4.13.="" this="" amount="" is="" calculated="" by="" multiplying="" the="" total="" amount="" of="" these="" expenses="" and="" taxes="" by="" the="" ratio="" of="" the="" unseparated="" gross="" exchange="" plant="" investment="" in="" c&wf="" category="" 1.3="" and="" coe="" category="" 4.13,="" as="" reported="" in="" sec.="" 36.611(a)(1),="" to="" the="" unseparated="" gross="" telecommunications="" plant="" investment,="" as="" reported="" in="" sec.="" 36.611(a)(6).="" total="" corporate="" operations="" expense,="" for="" purposes="" of="" calculating="" universal="" service="" support="" payments="" beginning="" january="" 1,="" 1998,="" shall="" be="" limited="" to="" the="" lesser="" of:="" (i)="" the="" actual="" average="" monthly="" per-line="" corporate="" operations="" expense;="" or="" (ii)="" a="" per-line="" amount="" computed="" according="" to="" paragraphs="" (a)(4)(ii)(a)="" and="" (a)(4)(ii)(b)="" of="" this="" section.="" to="" the="" extent="" that="" some="" carriers'="" corporate="" operations="" expenses="" are="" disallowed="" pursuant="" to="" these="" limitations,="" the="" national="" average="" unseparated="" cost="" per="" loop="" shall="" be="" adjusted="" accordingly.="" (a)="" for="" study="" areas="" of="" 10,000="" or="" fewer="" working="" loops;="" [$27.12="" minus="" (.002="" times="" the="" number="" of="" working="" loops)]="" times="" 1.15.="" (b)="" for="" study="" areas="" of="" more="" than="" 10,000="" working="" loops;="" $7.12="" times="" 1.15,="" which="" equals="" $8.19.="" 8.="" section="" 36.622="" is="" amended="" by="" revising="" paragraph="" (c)="" and="" adding="" paragraph="" (d)="" to="" read="" as="" follows:="" sec.="" 36.622="" national="" and="" study="" area="" average="" unseparated="" loop="" costs.="" *="" *="" *="" *="" *="" (c)="" the="" national="" average="" unseparated="" loop="" cost="" per="" working="" loop="" shall="" be="" the="" greater="" of:="" (1)="" the="" amount="" calculated="" pursuant="" to="" the="" method="" described="" in="" paragraph="" (a)="" of="" this="" section;="" or="" (2)="" an="" amount="" calculated="" to="" produce="" the="" maximum="" total="" universal="" service="" fund="" allowable="" pursuant="" to="" sec.="" 36.601(c).="" (d)="" beginning="" january="" 1,="" 2000,="" the="" national="" average="" unseparated="" loop="" cost="" per="" working="" loop="" shall="" be="" the="" greater="" of:="" (1)="" the="" 1997="" national-average="" unseparated="" loop="" cost="" per="" working="" loop="" plus="" an="" annual="" inflation="" adjustment.="" the="" annual="" inflation="" adjustment="" shall="" be="" based="" on="" the="" gross="" domestic="" product="" chained="" price="" index="" (gdp-cpi)="" of="" the="" year="" which="" the="" loop="" costs="" are="" reported="" pursuant="" to="" sec.="" 36.611.="" as="" an="" example,="" the="" inflation-adjusted="" nationwide="" average="" loop="" cost="" for="" the="" year="" 2000="" shall="" be="" calculated="" in="" the="" following="" manner:="" 1998="" gdp-cpi=""> 1997 GDP-CPI x 1997 nationwide average loop
cost = 2000 inflation-adjusted nationwide average loop cost.
or
(2) An amount calculated to produce the maximum total Universal
Service Fund allowable pursuant to Sec. 36.601(c).
9. In Sec. 36.701, paragraph (c) is added to read as follows:
Sec. 36.701 General
* * * * *
(c) This subpart shall be effective through December 31, 1997. On
January 1, 1998, Lifeline Connection Assistance shall be provided in
accordance with part 54, subpart E of this chapter.
10. Part 54 of Title 47 of the Code of Federal Regulations is added
to read as follows:
PART 54--UNIVERSAL SERVICE
Subpart A--General Information
Sec.
54.1 Basis and purpose.
54.5 Terms and definitions.
54.7 Intended use of federal universal service support.
Subpart B--Services Designated for Support
54.101 Supported services for rural, insular and high cost areas.
Subpart C--Carriers Eligible for Universal Service Support
54.201 Designation of eligible telecommunications carriers,
generally.
54.203 Designation of eligible telecommunications carriers for
unserved areas.
54.205 Relinquishment of universal service.
54.207 Service areas.
Subpart D--Universal Service Support for High Cost Areas
54.301 Local switching support.
54.303 Long term support.
54.305 Sale or transfer of exchanges.
54.307 Support to a competitive eligible telecommunications
carrier.
Subpart E--Universal Service Support for Low Income Consumers
54.400 Terms and definitions.
54.401 Lifeline defined.
54.403 Lifeline support amount.
54.405 Carrier obligation to offer Lifeline.
54.407 Reimbursement for offering Lifeline.
54.409 Consumer qualification for Lifeline.
54.411 Link up program defined.
54.413 Reimbursement for revenue forgone in offering a Link Up
program.
54.415 Consumer qualification for Link Up.
54.417 Transition to the new Lifeline and Link Up programs.
Subpart F--Universal Service Support for Schools and Libraries
54.500 Terms and definitions.
54.501 Eligibility for services provided by telecommunications
carriers.
54.502 Supported telecommunications services.
54.503 Other supported special services.
54.504 Requests for service.
54.505 Discounts.
54.507 Cap.
54.509 Adjustments to the discount matrix.
54.511 Ordering services.
54.513 Resale.
54.515 Distributing support.
54.516 Auditing.
54.517 Services provided by non-telecommunications carriers.
Subpart G--Universal Service Support for Health Care Providers
54.601 Eligibility.
54.603 Competitive bidding.
54.605 Determining the urban rate.
54.607 Determining the rural rate.
54.609 Calculating support.
54.611 Distributing support.
54.613 Limitations on supported services for rural health care
providers.
54.615 Obtaining services.
54.617 Resale.
54.619 Audit program.
54.621 Access to advanced telecommunications and
informationservices.
54.623 Cap.
Subpart H--Administration
54.701 Administrator of universal service support mechanisms.
54.703 Contributions.
54.705 De minimis exemption.
54.707 Audit controls.
Authority: 47 U.S.C. 1, 4(i), 201, 205, 214, and 254 unless
otherwise noted.
Subpart A--General Information
Sec. 54.1 Basis and purpose.
(a) Basis. These rules are issued pursuant to the Communications
Act of 1934, as amended.
[[Page 32949]]
(b) Purpose. The purpose of these rules is to implement section 254
of the Communications Act of 1934, as amended, 47 USC 254.
Sec. 54.5 Terms and definitions.
Terms used in this part have the following meanings:
Act. The term ``Act'' refers to the Communications Act of 1934, as
amended.
Administrator. The ``administrator'' is the entity that administers
the universal service support mechanisms in accord with subpart H of
this part.
Competitive eligible telecommunications carrier. A ``competitive
eligible telecommunications carrier'' is a carrier that meets the
definition of an ``eligible telecommunications carrier'' below and does
not meet the definition of an ``incumbent local exchange carrier'' in
Sec. 51.5 of this chapter.
Eligible telecommunications carrier. ``Eligible telecommunications
carrier'' means a carrier designated as such by a state commission
pursuant to Sec. 54.201.
Incumbent local exchange carrier. ``Incumbent local exchange
carrier'' or ``ILEC'' has the same meaning as that term is defined in
Sec. 51.5 of this chapter.
Information service. ``Information service'' is the offering of a
capability for generating, acquiring, storing, transforming,
processing, retrieving, utilizing, or making available information via
telecommunications, and includes electronic publishing, but does not
include any use of any such capability for the management, control, or
operation of a telecommunications system or the management of a
telecommunications service.
Internet access. ``Internet access'' includes the following
elements:
(1) The transmission of information as common carriage;
(2) The transmission of information as part of a gateway to an
information service, when that transmission does not involve the
generation or alteration of the content of information, but may include
data transmission, address translation, protocol conversion, billing
management, introductory information content, and navigational systems
that enable users to access information services, and that do not
affect the presentation of such information to users; and
(3) Electronic mail services (e-mail).
Interstate telecommunication. ``Interstate telecommunication'' is a
communication or transmission:
(1) From any State, Territory, or possession of the United States
(other than the Canal zone), or the District of Columbia, to any other
State, Territory, or possession of the United States (other than the
Canal Zone), or the District of Columbia,
(2) From or to the United States to or from the Canal Zone, insofar
as such communications or transmission takes place within the United
States, or
(3) Between points within the United States but through a foreign
country.
Interstate transmission. ``Interstate transmission'' is the same as
interstate telecommunication.
Intrastate telecommunication. ``Intrastate telecommunication'' is a
communication or transmission from within any State, Territory, or
possession of the United States, or the District of Columbia to a
location within that same State, Territory, or possession of the United
States, or the District of Columbia.
Intrastate transmission. ``Intrastate transmission'' is the same as
intrastate telecommunication.
LAN. ``LAN'' is a local area network, which is a set of high-speed
links connecting devices, generally computers, on a single shared
medium, usually on the user's premises.
Rural area. A ``rural area'' is a nonmetropolitan county or county
equivalent, as defined in the Office of Management and Budget's (OMB)
Revised Standards for Defining Metropolitan Areas in the 1990s and
identifiable from the most recent Metropolitan Statistical Area (MSA)
list released by OMB, or any contiguous non-urban Census Tract or Block
Numbered Area within an MSA-listed metropolitan county identified in
the most recent Goldsmith Modification published by the Office of Rural
Health Policy of the U.S. Department of Health and Human Services.
Rural telephone company. ``Rural telephone company'' has the same
meaning as that term is defined in Sec. 51.5 of this chapter.
State commission. The term ``state commission'' means the
commission, board or official (by whatever name designated) that, under
the laws of any state, has regulatory jurisdiction with respect to
intrastate operations of carriers.
Technically feasible. ``Technically feasible'' means capable of
accomplishment as evidenced by prior success under similar
circumstances. For example, preexisting access at a particular point
evidences the technical feasibility of access at substantially similar
points. A determination of technical feasibility does not consider
economic, accounting, billing, space or site except that space and site
may be considered if there is no possibility of expanding available
space.
Telecommunications. ``Telecommunications'' is the transmission,
between or among points specified by the user, of information of the
user's choosing, without change in the form or content of the
information as sent and received.
Telecommunications carrier. A ``telecommunications carrier'' is any
provider of telecommunications services, except that such term does not
include aggregators of telecommunications services as defined in
section 226 of the Act. A telecommunications carrier shall be treated
as a common carrier under the Act only to the extent that it is engaged
in providing telecommunications services, except that the Commission
shall determine whether the provision of fixed and mobile satellite
service shall be treated as common carriage. This definition includes
cellular mobile radio service (CMRS) providers, interexchange carriers
(IXCs) and, to the extent they are acting as telecommunications
carriers, companies that provide both telecommunications and
information services. Private mobile radio service (PMRS) providers are
telecommunications carriers to the extent they provide domestic or
international telecommunications for a fee directly to the public.
Telecommunications channel. ``Telecommunications channel'' means a
telephone line, or, in the case of wireless communications, a
transmittal line or cell site.
Telecommunications service. ``Telecommunications service'' is the
offering of telecommunications for a fee directly to the public, or to
such classes of users as to be effectively available directly to the
public, regardless of the facilities used.
Sec. 54.7 Intended use of federal universal service support.
A carrier that receives federal universal service support shall use
that support only for the provision, maintenance, and upgrading of
facilities and services for which the support is intended.
Subpart B--Services Designated for Support
Sec. 54.101 Supported services for rural, insular and high cost areas.
(a) Services designated for support. The following services or
functionalities shall be supported by Federal universal service support
mechanisms:
(1) Voice grade access to the public switched network. ``Voice
grade access'' is defined as a functionality that enables a user of
telecommunications services to
[[Page 32950]]
transmit voice communications, including signalling the network that
the caller wishes to place a call, and to receive voice communications,
including receiving a signal indicating there is an incoming call. For
purposes of this part, voice grade access shall occur within the
frequency range of between approximately 500 Hertz and 4,000 Hertz, for
a bandwidth of approximately 3,500 Hertz;
(2) Local usage. ``Local usage'' means an amount of minutes of use
of exchange service, prescribed by the Commission, provided free of
charge to end users;
(3) Dual tone multi-frequency signaling or its functional
equivalent. ``Dual tone multi-frequency'' (DTMF) is a method of
signaling that facilitates the transportation of signaling through the
network, shortening call set-up time;
(4) Single-party service or its functional equivalent. ``Single-
party service'' is telecommunications service that permits users to
have exclusive use of a wireline subscriber loop or access line for
each call placed, or, in the case of wireless telecommunications
carriers, which use spectrum shared among users to provide service, a
dedicated message path for the length of a user's particular
transmission;
(5) Access to emergency services. ``Access to emergency services''
includes access to services, such as 911 and enhanced 911, provided by
local governments or other public safety organizations. 911 is defined
as a service that permits a telecommunications user, by dialing the
three-digit code ``911,'' to call emergency services through a Public
Service Access Point (PSAP) operated by the local government.
``Enhanced 911'' is defined as 911 service that includes the ability to
provide automatic numbering information (ANI), which enables the PSAP
to call back if the call is disconnected, and automatic location
information (ALI), which permits emergency service providers to
identify the geographic location of the calling party. ``Access to
emergency services'' includes access to 911 and enhanced 911 services
to the extent the local government in an eligible carrier's service
area has implemented 911 or enhanced 911 systems;
(6) Access to operator services. ``Access to operator services'' is
defined as access to any automatic or live assistance to a consumer to
arrange for billing or completion, or both, of a telephone call;
(7) Access to interexchange service. ``Access to interexchange
service'' is defined as the use of the loop, as well as that portion of
the switch that is paid for by the end user, or the functional
equivalent of these network elements in the case of a wireless carrier,
necessary to access an interexchange carrier's network;
(8) Access to directory assistance. ``Access to directory
assistance'' is defined as access to a service that includes, but is
not limited to, making available to customers, upon request,
information contained in directory listings; and
(9) Toll limitation for qualifying low-income consumers. Toll
limitation for qualifying low-income consumers is described in subpart
E of this part.
(b) Requirement to offer all designated services. An eligible
telecommunications carrier must offer each of the services set forth in
paragraph (a) of this section in order to receive Federal universal
service support.
(c) Additional time to complete network upgrades. A state
commission may grant the petition of a telecommunications carrier that
is otherwise eligible to receive universal service support under
Sec. 54.201 requesting additional time to complete the network upgrades
needed to provide single-party service, access to enhanced 911 service,
or toll limitation. If such petition is granted, the otherwise eligible
telecommunications carrier will be permitted to receive universal
service support for the duration of the period designated by the state
commission. State commissions should grant such a request only upon a
finding that exceptional circumstances prevent an otherwise eligible
telecommunications carrier from providing single-party service, access
to enhanced 911 service, or toll limitation. The period should extend
only as long as the relevant state commission finds that exceptional
circumstances exist and should not extend beyond the time that the
state commission deems necessary for that eligible telecommunications
carrier to complete network upgrades. An otherwise eligible
telecommunications carrier that is incapable of offering one or more of
these three specific universal services must demonstrate to the state
commission that exceptional circumstances exist with respect to each
service for which the carrier desires a grant of additional time to
complete network upgrades.
Subpart C--Carriers Eligible for Universal Service Support
Sec. 54.201 Designation of eligible telecommunications carriers,
generally.
(a) Carriers eligible to receive support.
(1) Beginning January 1, 1998, only eligible telecommunications
carriers designated under paragraphs (b) through (d) of this section
shall receive universal service support distributed pursuant to part 36
and part 69 of this chapter, and subparts D and E of this part.
(2) Only eligible telecommunications carriers designated under
paragraphs (b) through (d) of this section shall receive universal
service support distributed pursuant to subpart G of this part. This
paragraph does not apply to support distributed pursuant to
Sec. 54.621(a).
(3) This paragraph does not apply to support distributed pursuant
to subpart F of this part.
(b) A state commission shall upon its own motion or upon request
designate a common carrier that meets the requirements of paragraph (d)
of this section as an eligible telecommunications carrier for a service
area designated by the state commission.
(c) Upon request and consistent with the public interest,
convenience, and necessity, the state commission may, in the case of an
area served by a rural telephone company, and shall, in the case of all
other areas, designate more than one common carrier as an eligible
telecommunications carrier for a service area designated by the state
commission, so long as each additional requesting carrier meets the
requirements of paragraph (d) of this section. Before designating an
additional eligible telecommunications carrier for an area served by a
rural telephone company, the state commission shall find that the
designation is in the public interest.
(d) A common carrier designated as an eligible telecommunications
carrier under this section shall be eligible to receive universal
service support in accordance with section 254 of the Act and shall,
throughout the service area for which the designation is received:
(1) Offer the services that are supported by federal universal
service support mechanisms under subpart B of this part and section
254(c) of the Act, either using its own facilities or a combination of
its own facilities and resale of another carrier's services (including
the services offered by another eligible telecommunications carrier);
and
(2) Advertise the availability of such services and the charges
therefore using media of general distribution.
(e) For the purposes of this section, the term facilities means any
physical components of the telecommunications network that are used in
the transmission or routing of the services
[[Page 32951]]
that are designated for support pursuant to subpart B of this part.
(f) For the purposes of this section, the term ``own facilities''
includes, but is not limited to, facilities obtained as unbundled
network elements pursuant to part 51 of this chapter, provided that
such facilities meet the definition of the term ``facilities'' under
this subpart.
(g) A state commission shall not require a common carrier, in order
to satisfy the requirements of paragraph (d)(1) of this section, to use
facilities that are located within the relevant service area, as long
as the carrier uses facilities to provide the services designated for
support pursuant to subpart B of this part within the service area.
(h) A state commission shall designate a common carrier that meets
the requirements of this section as an eligible telecommunications
carrier irrespective of the technology used by such carrier.
(i) A state commission shall not designate as an eligible
telecommunications carrier a telecommunications carrier that offers the
services supported by federal universal service support mechanisms
exclusively through the resale of another carrier's services.
Sec. 54.203 Designation of eligible telecommunications carriers for
unserved areas.
(a) If no common carrier will provide the services that are
supported by federal universal service support mechanisms under section
254(c) of the Act and subpart B of this part to an unserved community
or any portion thereof that requests such service, the Commission, with
respect to interstate services, or a state commission, with respect to
intrastate services, shall determine which common carrier or carriers
are best able to provide such service to the requesting unserved
community or portion thereof and shall order such carrier or carriers
to provide such service for that unserved community or portion thereof.
(b) Any carrier or carriers ordered to provide such service under
this section shall meet the requirements of section 54.201(d) and shall
be designated as an eligible telecommunications carrier for that
community or portion thereof.
Sec. 54.205 Relinquishment of universal service.
(a) A state commission shall permit an eligible telecommunications
carrier to relinquish its designation as such a carrier in any area
served by more than one eligible telecommunications carrier. An
eligible telecommunications carrier that seeks to relinquish its
eligible telecommunications carrier designation for an area served by
more than one eligible telecommunications carrier shall give advance
notice to the state commission of such relinquishment.
(b) Prior to permitting a telecommunications carrier designated as
an eligible telecommunications carrier to cease providing universal
service in an area served by more than one eligible telecommunications
carrier, the state commission shall require the remaining eligible
telecommunications carrier or carriers to ensure that all customers
served by the relinquishing carrier will continue to be served, and
shall require sufficient notice to permit the purchase or construction
of adequate facilities by any remaining eligible telecommunications
carrier. The state commission shall establish a time, not to exceed one
year after the state commission approves such relinquishment under this
section, within which such purchase or construction shall be completed.
Sec. 54.207 Service areas.
(a) The term service area means a geographic area established by a
state commission for the purpose of determining universal service
obligations and support mechanisms. A service area defines the overall
area for which the carrier shall receive support from federal universal
service support mechanisms.
(b) In the case of a service area served by a rural telephone
company, service area means such company's ``study area'' unless and
until the Commission and the states, after taking into account
recommendations of a Federal-State Joint Board instituted under section
410(c) of the Act, establish a different definition of service area for
such company.
(c) If a state commission proposes to define a service area served
by a rural telephone company to be other than such company's study
area, the Commission will consider that proposed definition in
accordance with the procedures set forth in this paragraph.
(1) A state commission or other party seeking the Commission's
agreement in redefining a service area served by a rural telephone
company shall submit a petition to the Commission. The petition shall
contain:
(i) The definition proposed by the state commission; and
(ii) The state commission's ruling or other official statement
presenting the state commission's reasons for adopting its proposed
definition, including an analysis that takes into account the
recommendations of any Federal-State Joint Board convened to provide
recommendations with respect to the definition of a service area served
by a rural telephone company.
(2) The Commission shall issue a Public Notice of any such petition
within fourteen (14) days of its receipt.
(3) The Commission may initiate a proceeding to consider the
petition within ninety (90) days of the release date of the Public
Notice.
(i) If the Commission initiates a proceeding to consider the
petition, the proposed definition shall not take effect until both the
state commission and the Commission agree upon the definition of a
rural service area, in accordance with paragraph (b) of this section
and section 214(e)(5) of the Act.
(ii) If the Commission does not act on the petition within ninety
(90) days of the release date of the Public Notice, the definition
proposed by the state commission will be deemed approved by the
Commission and shall take effect in accordance with state procedures.
(d) The Commission may, on its own motion, initiate a proceeding to
consider a definition of a service area served by a rural telephone
company that is different from that company's study area. If it
proposes such different definition, the Commission shall seek the
agreement of the state commission according to this paragraph.
(1) The Commission shall submit a petition to the state commission
according to that state commission's procedures. The petition submitted
to the relevant state commission shall contain:
(i) The definition proposed by the Commission; and
(ii) The Commission's decision presenting its reasons for adopting
the proposed definition, including an analysis that takes into account
the recommendations of any Federal-State Joint Board convened to
provide recommendations with respect to the definition of a service
area served by a rural telephone company.
(2) The Commission's proposed definition shall not take effect
until both the state commission and the Commission agree upon the
definition of a rural service area, in accordance with paragraph (b) of
this section and section 214(e)(5) of the Act.
(e) The Commission delegates its authority under paragraphs (c) and
(d) of this section to the Chief, Common Carrier Bureau.
Subpart D--Universal Service Support for High Cost Areas
Sec. 54.301 Local switching support.
Beginning January 1, 1998, eligible rural telephone company study
areas
[[Page 32952]]
with 50,000 or fewer access lines shall receive support for local
switching costs, defined as Category 3 local switching costs under part
36 of this chapter, using the following formula: the carrier's annual
unseparated local switching revenue requirement shall be multiplied by
the local switching support factor. The local switching support factor
shall be defined as the difference between the 1996 weighted interstate
DEM factor, calculated pursuant to Sec. 36.125(f) of this chapter, and
the 1996 unweighted interstate DEM factor. If the number of a study
area's access lines increases such that, under Sec. 36.125(f) of this
chapter, the weighted interstate DEM factor for 1997 or any successive
year would be reduced, that lower weighted interstate DEM factor shall
be applied to the carrier's 1996 unweighted interstate DEM factor to
derive a new local switching support factor. Beginning January 1, 1998,
the sum of the unweighted interstate DEM factor and the local switching
support factor shall not exceed .85. If the sum of those two factors
would exceed .85, the local switching support factor must be reduced to
a level that would reduce the sum of the factors to .85.
Sec. 54.303 Long term support.
Beginning January 1, 1998, eligible telephone companies that
participate in the NECA Carrier Common Line pool and competitive
eligible local telecommunications carriers will receive Long Term
Support. Long Term Support shall be the equivalent of the difference
between the projected Carrier Common Line revenue requirement of
association Common Line tariff participants and the projected revenue
recovered by the association Common Carrier Line charge as calculated
pursuant to Sec. 69.105(b)(1) of this chapter. For calendar years 1998
and 1999, the Long Term Support for each eligible service area shall be
adjusted each year to reflect the annual percentage change in the
actual nationwide average loop cost as filed by the fund administrator
in the previous calendar year, pursuant to Sec. 36.622 of this chapter.
Beginning January 1, 2000, the Long Term Support shall be adjusted each
year to reflect the annual percentage change in the Department of
Commerce's Gross Domestic Product-Chained Price Index (GDP-CPI).
Sec. 54.305 Sale or transfer of exchanges.
A carrier that acquires telephone exchanges from an unaffiliated
carrier shall receive universal service support for the acquired
exchanges at the same per-line support levels for which those exchanges
were eligible prior to the transfer of the exchanges. A carrier that
has entered into a binding commitment to buy exchanges prior to May 7,
1997 will receive support for the newly acquired lines based upon the
average cost of all of its lines, both those newly acquired and those
it had prior to execution of the sales agreement.
Sec. 54.307 Support to a competitive eligible telecommunications
carrier.
(a) Calculation of support. A competitive eligible
telecommunications carrier shall receive universal service support to
the extent that the competitive eligible telecommunications carrier
captures an incumbent local exchange carrier's (ILEC) subscriber lines
or serves new subscriber lines in the ILEC's service area.
(1) A competitive eligible telecommunications carrier shall receive
support for each line it serves based on the support the ILEC receives
for each line.
(2) The ILEC's per-line support shall be calculated by dividing the
ILEC's universal service support by the number of loops served by that
ILEC at its most recent annual loop count.
(3) A competitive eligible telecommunications carrier that uses
switching functionalities purchased as unbundled network elements
pursuant to Sec. 51.307 of this chapter to provide the supported
services shall receive the lesser of the unbundled network element
price for switching or the per-line DEM support of the ILEC, if any. A
competitive eligible telecommunications carrier that uses loops
purchased as unbundled network elements pursuant to Sec. 51.307 of this
chapter to provide the supported services shall receive the lesser of
the unbundled network element price for the loop or the ILEC's per-line
payment from the high cost loop support and LTS, if any. The ILEC
providing nondiscriminatory access to unbundled network elements to
such competitive eligible telecommunications carrier shall receive the
difference between the level of universal service support provided to
the competitive eligible telecommunications carrier and the per-
customer level of support previously provided to the ILEC.
(4) A competitive eligible telecommunications carrier that provides
the supported services using neither unbundled network elements
purchased pursuant to Sec. 51.307 of this chapter nor wholesale service
purchased pursuant to section 251(c)(4) of the Act will receive the
full amount of universal service support previously provided to the
ILEC for that customer.
(b) Submission of information to the Administrator. In order to
receive universal service support, a competitive eligible
telecommunications carrier must provide the Administrator on or before
July 31st of each year the number of working loops it serves in a
service area. For universal service support purposes, working loops are
defined as the number of working Exchange Line C&WF loops used jointly
for exchange and message telecommunications service, including C&WF
subscriber lines associated with pay telephones in C&WF Category 1, but
excluding WATS closed end access and TWX service. This figure shall be
calculated as of December 31st of the year preceding each July 31st
filing.
Subpart E--Universal Service Support for Low-Income Consumers
Sec. 54.400 Terms and definitions.
As used in this subpart, the following terms shall be defined as
follows:
(a) Qualifying low-income subscriber. A ``qualifying low-income
subscriber'' is a subscriber who meets the low-income eligibility
criteria established by the state commission, or, in states that do not
provide state Lifeline support, a subscriber who participates in one of
the following programs: Medicaid; food stamps; supplemental security
income; federal public housing assistance; or Low-Income Home Energy
Assistance Program.
(b) Toll blocking. ``Toll blocking'' is a service provided by
carriers that lets consumers elect not to allow the completion of
outgoing toll calls from their telecommunications channel.
(c) Toll control. ``Toll control'' is a service provided by
carriers that allows consumers to specify a certain amount of toll
usage that may be incurred on their telecommunications channel per
month or per billing cycle.
(d) Toll limitation. ``Toll limitation'' denotes both toll blocking
and toll control.
Sec. 54.401 Lifeline defined.
(a) As used in this subpart, Lifeline means a retail local service
offering:
(1) That is available only to qualifying low-income consumers;
(2) For which qualifying low-income consumers pay reduced charges
as a result of application of the Lifeline support amount described in
Sec. 54.403; and
(3) That includes the services or functionalities enumerated in
Sec. 54.101 (a)(1) through (a)(9). The carriers shall offer toll
limitation to all qualifying low-
[[Page 32953]]
income consumers at the time such consumers subscribe to Lifeline
service. If the consumer elects to receive toll limitation, that
service shall become part of that consumer's Lifeline service.
(b) Eligible telecommunications carriers may not disconnect
Lifeline service for non-payment of toll charges.
(1) State commissions may grant a waiver of this requirement if the
local exchange carrier can demonstrate that:
(i) It would incur substantial costs in complying with this
requirement;
(ii) It offers toll limitation to its qualifying low-income
consumers without charge; and
(iii) Telephone subscribership among low-income consumers in the
carrier's service area is greater than or equal to the national
subscribership rate for low-income consumers. For purposes of this
paragraph, a low-income consumer is one with an income below the
poverty level for a family of four residing in the state for which the
carrier seeks the waiver. The carrier may reapply for the waiver.
(2) A carrier may file a petition for review of the state
commission's decision with the Commission within 30 days of that
decision. If a state commission has not acted on a petition for a
waiver of this requirement within 30 days of its filing, the carrier
may file that petition with the Commission on the 31st day after that
initial filing.
(c) Eligible telecommunications carriers may not collect a service
deposit in order to initiate Lifeline service, if the qualifying low-
income consumer voluntarily elects toll blocking from the carrier,
where available. If toll blocking is unavailable, the carrier may
charge a service deposit.
(d) The state commission shall file or require the carrier to file
information with the Administrator demonstrating that the carrier's
Lifeline plan meets the criteria set forth in this subpart and stating
the number of qualifying low-income consumers and the amount of state
assistance. Lifeline assistance shall be made available to qualifying
low-income consumers as soon as the Administrator certifies that the
carrier's Lifeline plan satisfies the criteria set out in this Subpart.
Sec. 54.403 Lifeline support amount.
(a) The federal baseline Lifeline support amount shall equal $3.50
per qualifying low-income consumer. If the state commission approves an
additional reduction of $1.75 in the amount paid by consumers,
additional federal Lifeline support in the amount of $1.75 will be made
available to the carrier providing Lifeline service to that consumer.
Additional federal Lifeline support in an amount equal to one-half the
amount of any state Lifeline support will be made available to the
carrier providing Lifeline service to a qualifying low-income consumer
if the state commission approves an additional reduction in the amount
paid by that consumer equal to the state support multiplied by 1.5. The
federal Lifeline support amount shall not exceed $7.00 per qualifying
low-income consumer.
(b) Eligible carriers that charge federal End-User Common Line
charges or equivalent federal charges shall apply the federal baseline
Lifeline support to waive Lifeline consumers' federal End-User Common
Line charges. Such carriers shall apply any additional federal support
amount to a qualifying low-income consumer's intrastate rate, if the
state has approved of such additional support. Other carriers shall
apply the federal baseline Lifeline support amount, plus the additional
support amount, where applicable, to reduce their lowest tariffed (or
otherwise generally available) residential rate for the services
enumerated in Sec. 54.101(a)(1) through (a)(9), and charge Lifeline
consumers the resulting amount.
(c) Lifeline support for providing toll limitation shall equal the
eligible telecommunications carrier's incremental cost of providing
either toll blocking or toll control, whichever is selected by the
particular consumer.
Sec. 54.405 Carrier obligation to offer Lifeline.
All eligible telecommunications carriers shall make available
Lifeline service, as defined in Sec. 54.401, to qualifying low-income
consumers.
Sec. 54.407 Reimbursement for offering Lifeline.
(a) Universal service support for providing Lifeline shall be
provided directly to the eligible telecommunications carrier, based on
the number of qualifying low-income consumers it serves, under
administrative procedures determined by the Administrator.
(b) The eligible telecommunications carrier may receive universal
service support reimbursement for each qualifying low-income consumer
served. For each consumer receiving Lifeline service, the reimbursement
amount shall equal the federal support amount, including the support
amount described in Sec. 54.403(c). The eligible telecommunications
carrier's universal service support reimbursement shall not exceed the
carrier's standard, non-Lifeline rate.
(c) In order to receive universal service support reimbursement,
the eligible telecommunications carrier must keep accurate records of
the revenues it forgoes in providing Lifeline in conformity with
Sec. 54.401. Such records shall be kept in the form directed by the
Administrator and provided to the Administrator at intervals as
directed by the Administrator or as provided in this Subpart.
Sec. 54.409 Consumer qualification for Lifeline.
(a) To qualify to receive Lifeline service in states that provide
state Lifeline service support, a consumer must meet the criteria
established by the state commission. The state commission shall
establish narrowly targeted qualification criteria that are based
solely on income or factors directly related to income.
(b) To qualify to receive Lifeline in states that do not provide
state Lifeline support, a consumer must participate in one of the
following programs: Medicaid; food stamps; Supplemental Security
Income; federal public housing assistance; or Low-Income Home Energy
Assistance Program. In states not providing state Lifeline support,
each carrier offering Lifeline service to a consumer must obtain that
consumer's signature on a document certifying under penalty of perjury
that consumer receives benefits from one of the programs mentioned in
this paragraph and identifying the program or programs from which that
consumer receives benefits. On the same document, a qualifying low-
income consumer also must agree to notify the carrier if that consumer
ceases to participate in the program or programs.
Sec. 54.411 Link Up program defined.
(a) For purposes of this subpart, the term ``Link Up'' shall
describe the following assistance program for qualifying low-income
consumers, which an eligible telecommunications carrier shall offer as
part of its obligation set forth in Secs. 54.101(a)(9) and 54.101(b):
(1) A reduction in the carrier's customary charge for commencing
telecommunications service for a single telecommunications connection
at a consumer's principal place of residence. The reduction shall be
half of the customary charge or $30.00, whichever is less; and
(2) A deferred schedule for payment of the charges assessed for
commencing service, for which the consumer does not pay interest. The
interest charges not assessed to the consumer shall be
[[Page 32954]]
for connection charges of up to $200.00 that are deferred for a period
not to exceed one year. Charges assessed for commencing service include
any charges that the carrier customarily assesses to connect
subscribers to the network. These charges do not include any
permissible security deposit requirements.
(b) A qualifying low-income consumer may choose one or both of the
programs set forth in paragraph (a) of this section.
(c) A carrier's Link Up program shall allow a consumer to receive
the benefit of the Link Up program for a second or subsequent time only
for a principal place of residence with an address different from the
residence address at which the Link Up assistance was provided
previously.
Sec. 54.413 Reimbursement for revenue forgone in offering a Link Up
program.
(a) Eligible telecommunications carriers may receive universal
service support reimbursement for the revenue they forgo in reducing
their customary charge for commencing telecommunications service and
for providing a deferred schedule for payment of the charges assessed
for commencing service for which the consumer does not pay interest, in
conformity with Sec. 54.411.
(b) In order to receive universal service support reimbursement for
providing Link Up, eligible telecommunications carriers must keep
accurate records of the revenues they forgo in reducing their customary
charge for commencing telecommunications service and for providing a
deferred schedule for payment of the charges assessed for commencing
service for which the consumer does not pay interest, in conformity
with Sec. 54.411. Such records shall be kept in the form directed by
the Administrator and provided to the Administrator at intervals as
directed by the Administrator or as provided in this subpart. The
forgone revenues for which the eligible telecommunications carrier may
receive reimbursement shall include only the difference between the
carrier's customary connection or interest charges and the charges
actually assessed to the participating low-income consumer.
Sec. 54.415 Consumer qualification for Link Up.
(a) In states that provide state Lifeline service, the consumer
qualification criteria for Link Up shall be the same criteria that the
state established for Lifeline qualification in accord with
Sec. 54.409(a).
(b) In states that do not provide state Lifeline service, the
consumer qualification criteria for Link Up shall be the same as the
criteria set forth in Sec. 54.409(b).
Sec. 54.417 Transition to the new Lifeline and Link Up programs.
The rules in this subpart shall take effect on January 1, 1998.
Subpart F--Universal Service Support for Schools and Libraries
Sec. 54.500 Terms and definitions.
Terms used in this subpart have the following meanings:
(a) Elementary school. An ``elementary school'' is a non-profit
institutional day or residential school that provides elementary
education, as determined under state law.
(b) Internal connections. A given service is eligible for support
as a component of the institution's internal connections only if it is
necessary to transport information to individual classrooms. Thus,
internal connections includes items such as routers, hubs, network file
servers, and wireless LANs and their installation and basic maintenance
because all are needed to switch and route messages within a school or
library.
(c) Library. A ``library'' includes:
(1) A public library;
(2) A public elementary school or secondary school library;
(3) An academic library;
(4) A research library, which for the purposes of this definition
means a library that:
(i) Makes publicly available library services and materials
suitable for scholarly research and not otherwise available to the
public; and
(ii) Is not an integral part of an institution of higher education;
and
(5) A private library, but only if the state in which such private
library is located determines that the library should be considered a
library for the purposes of this definition.
(d) Library consortium. A ``library consortium'' is any local,
statewide, regional, or interstate cooperative association of libraries
that provides for the systematic and effective coordination of the
resources of school, public, academic, and special libraries and
information centers, for improving services to the clientele of such
libraries. For the purposes of these rules, references to library will
also refer to library consortium.
(e) Lowest corresponding price. ``Lowest corresponding price'' is
the lowest price that a service provider charges to non-residential
customers who are similarly situated to a particular school, library,
or library consortium for similar services.
(f) National school lunch program. The ``national school lunch
program'' is a program administered by the U.S. Department of
Agriculture and state agencies that provides free or reduced price
lunches to economically disadvantaged children. A child whose family
income is between 130 percent and 185 percent of applicable family size
income levels contained in the nonfarm poverty guidelines prescribed by
the Office of Management and Budget is eligible for a reduced price
lunch. A child whose family income is 130 percent or less of applicable
family size income levels contained in the nonfarm income poverty
guidelines prescribed by the Office of Management and Budget is
eligible for a free lunch.
(g) Pre-discount price. The ``pre-discount price'' means, in this
subpart, the price the service provider agrees to accept as total
payment for its telecommunications or information services. This amount
is the sum of the amount the service provider expects to receive from
the eligible school or library and the amount it expects to receive as
reimbursement from the universal service support mechanisms for the
discounts provided under this subpart.
(h) Secondary school. A ``secondary school'' is a non-profit
institutional day or residential school that provides secondary
education, as determined under state law. A secondary school does not
offer education beyond grade 12.
Sec. 54.501 Eligibility for services provide by telecommunications
carriers.
(a) Telecommunications carriers shall be eligible for universal
service support under this subpart for providing supported services to
eligible schools, libraries, and consortia including those entities.
(b) Schools.
(1) Only schools meeting the statutory definitions of ``elementary
school,'' as defined in 20 U.S.C. 8801(14), or ``secondary school,'' as
defined in 20 U.S.C. 8801(25), and not excluded under paragraphs (a)(2)
or (a)(3) of this section shall be eligible for discounts on
telecommunications and other supported services under this subpart.
(2) Schools operating as for-profit businesses shall not be
eligible for discounts under this subpart.
(3) Schools with endowments exceeding $50,000,000 shall not be
eligible for discounts under this subpart.
(c) Libraries:
[[Page 32955]]
(1) Only libraries eligible for assistance from a State library
administrative agency under the Library Services and Technology Act
(Pub. L. 104-208) and not excluded under paragraphs (b)(2) or (b)(3) of
this section shall be eligible for discounts under this subpart.
(2) A library's eligibility for universal service funding shall
depend on its funding as an independent entity. Only libraries whose
budgets are completely separate from any schools (including, but not
limited to, elementary and secondary schools, colleges, and
universities) shall be eligible for discounts as libraries under this
subpart.
(3) Libraries operating as for-profit businesses shall not be
eligible for discounts under this subpart.
(d) Consortia:
(1) For purposes of seeking competitive bids for telecommunications
services, schools and libraries eligible for support under this subpart
may form consortia with other eligible schools and libraries, with
health care providers eligible under subpart G of this part, and with
public sector (governmental) entities, including, but not limited to,
state colleges and state universities, state educational broadcasters,
counties, and municipalities, when ordering telecommunications and
other supported services under this subpart. With one exception,
eligible schools and libraries participating in consortia with
ineligible private sector members shall not be eligible for discounts
for interstate services under this subpart. A consortium may include
ineligible private sector entities if the pre-discount prices of any
services that such consortium receives from ILECs are generally
tariffed rates.
(2) For consortia, discounts under this subpart shall apply only to
the portion of eligible telecommunications and other supported services
used by eligible schools and libraries.
(3) State agencies may receive discounts on the purchase of
telecommunications and information services that they make on behalf of
and for the direct use of eligible schools and libraries, as through
state networks.
(4) Service providers shall keep and retain records of rates
charged to and discounts allowed for eligible schools and libraries--on
their own or as part of a consortium. Such records shall be available
for public inspection.
Sec. 54.502 Supported telecommunications services.
For the purposes of this subpart, supported telecommunications
services provided by telecommunications carriers include all
commercially available telecommunications services.
Sec. 54.503 Other supported special services.
For the purposes of this subpart, other supported special services
provided by telecommunications carriers include Internet access and
installation and maintenance of internal connections.
Sec. 54.504 Requests for service.
(a) Competitive bidding requirement. All eligible schools,
libraries, and consortia including those entities shall participate in
a competitive bidding process, pursuant to the requirements established
in this subpart, but this requirement shall not preempt state or local
competitive bidding requirements.
(b) Posting of requests for service. (1) Schools, libraries, and
consortia including those entities wishing to receive discounts for
eligible services under this subpart shall submit requests for services
to a subcontractor designated by the administrator for this purpose.
Requests for services shall include, at a minimum, the following
information, to the extent applicable to the services requested:
(i) The computer equipment currently available or budgeted for
purchase for the current, next, or other future academic years, as well
as whether the computers have modems and, if so, what speed modems;
(ii) The internal connections, if any, that the school or library
has in place or has budgeted to install in the current, next, or future
academic years, or any specific plans for an organized voluntary effort
to connect the classrooms;
(iii) The computer software necessary to communicate with other
computers over an internal network and over the public
telecommunications network currently available or budgeted for purchase
for the current, next, or future academic years;
(iv) The experience of, and training received by, the relevant
staff in the use of the equipment to be connected to the
telecommunications network and training programs for which funds are
committed for the current, next, or future academic years;
(v) Existing or budgeted maintenance contracts to maintain
computers; and
(vi) The capacity of the school's or library's electrical system in
terms of how many computers can be operated simultaneously without
creating a fire hazard.
(2) The request for services shall be signed by the person
authorized to order telecommunications and other supported services for
the school or library and shall include that person's certification
under oath that:
(i) The school or library is an eligible entity under
Secs. 254(h)(4) and 254(h)(5) of the Act and the rules adopted under
this subpart;
(ii) The services requested will be used solely for educational
purposes;
(iii) The services will not be sold, resold, or transferred in
consideration for money or any other thing of value;
(iv) If the services are being purchased as part of an aggregated
purchase with other entities, the request identifies all co-purchasers
and the services or portion of the services being purchased by the
school or library;
(v) All of the necessary funding in the current funding year has
been budgeted and approved to pay for the ``non-discount'' portion of
requested connections and services as well as any necessary hardware,
software, and to undertake the necessary staff training required to use
the services effectively;
(vi) The school, library, or consortium including those entities
has complied with all applicable state and local procurement processes;
and
(vii) The school, library, or consortium including those entities
has a technology plan that has been certified by its state or an
independent entity approved by the Commission.
(3) After posting a description of services from a school, library,
or consortium of these entities on the school and library website, the
administrator's subcontractor shall send confirmation of the posting to
the entity requesting services. That entity shall then wait at least
four weeks from the date on which its description of services is posted
on the website before making commitments with the selected providers of
services. The confirmation from the administrator shall include the
date after which the requestor may sign a contract with its chosen
provider(s).
(c) Rate disputes. Schools, libraries, and consortia including
those entities, and service providers may have recourse to the
Commission, regarding interstate rates, and to state commissions,
regarding intrastate rates, if they reasonably believe that the lowest
corresponding price is unfairly high or low.
(1) Schools, libraries, and consortia including those entities may
request lower rates if the rate offered by the carrier does not
represent the lowest corresponding price.
(2) Service providers may request higher rates if they can show
that the lowest corresponding price is not compensatory, because the
relevant school, library, or consortium including those entities is not
similarly situated to
[[Page 32956]]
and subscribing to a similar set of services to the customer paying the
lowest corresponding price.
Sec. 54.505 Discounts.
(a) Discount mechanism. Discounts for eligible schools and
libraries shall be set as a percentage discount from the pre-discount
price.
(b) Discount percentages. The discounts available to eligible
schools and libraries shall range from 20 percent to 90 percent of the
pre-discount price for all eligible services provided by eligible
providers, as defined in this subpart. The discounts available to a
particular school, library, or consortium of only such entities shall
be determined by indicators of poverty and high cost.
(1) For schools and school districts, the level of poverty shall be
measured by the percentage of their student enrollment that is eligible
for a free or reduced price lunch under the national school lunch
program or a federally-approved alternative mechanism. School districts
applying for eligible services on behalf of their individual schools
may calculate the district-wide percentage of eligible students using a
weighted average. For example, a school district would divide the total
number of students in the district eligible for the national school
lunch program by the total number of students in the district to
compute the district-wide percentage of eligible students.
Alternatively, the district could apply on behalf of individual schools
and use the respective percentage discounts for which the individual
schools are eligible.
(2) For libraries and library consortia, the level of poverty shall
be based on the percentage of the student enrollment that is eligible
for a free or reduced price lunch under the national school lunch
program or a federally-approved alternative mechanism in the public
school district in which they are located. If the library is not in a
school district then its level of poverty shall be based on an average
of the percentage of students eligible for the national school lunch
program in each of the school districts that children living in the
library's location attend. Library systems applying for discounted
services on behalf of their individual branches shall calculate the
system-wide percentage of eligible families using an unweighted average
based on the percentage of the student enrollment that is eligible for
a free or reduced price lunch under the national school lunch program
in the public school district in which they are located for each of
their branches or facilities.
(3) The administrator shall classify schools and libraries as
``urban'' or ``rural'' based on location in an urban or rural area,
according to the following designations.
(i) Schools and libraries located in metropolitan counties, as
measured by the Office of Management and Budget's Metropolitan
Statistical Area method, shall be designated as urban, except for those
schools and libraries located within metropolitan counties identified
by census block or tract in the Goldsmith Modification.
(ii) Schools and libraries located in non-metropolitan counties, as
measured by the Office of Management and Budget's Metropolitan
Statistical Area method, shall be designated as rural. Schools and
libraries located in rural areas within metropolitan counties
identified by census block or tract in the Goldsmith Modification shall
also be designated as rural.
(c) Matrix. The administrator shall use the following matrix to set
a discount rate to be applied to eligible interstate services purchased
by eligible schools, school districts, libraries, or library consortia
based on the institution's level of poverty and location in an
``urban'' or ``rural'' area.
----------------------------------------------------------------------------------------------------------------
Schools and Libraries discount matrix Discount level
----------------------------------------------------------------------------------------------------------------
How disadvantaged?
--------------------------------------------------------------------------- Urban discount Rural discount
% of students eligible for national school lunch program
----------------------------------------------------------------------------------------------------------------
<1........................................................................ 20="" 25="" 1-19......................................................................="" 40="" 50="" 20-34.....................................................................="" 50="" 60="" 35-49.....................................................................="" 60="" 70="" 50-74.....................................................................="" 80="" 80="" 75-100....................................................................="" 90="" 90="" ----------------------------------------------------------------------------------------------------------------="" (d)="" consortia.="" consortia="" applying="" for="" discounted="" services="" on="" behalf="" of="" their="" members="" shall="" calculate="" the="" portion="" of="" the="" total="" bill="" eligible="" for="" a="" discount="" using="" a="" weighted="" average="" based="" on="" the="" share="" of="" the="" pre-="" discount="" price="" for="" which="" each="" eligible="" school="" or="" library="" agrees="" to="" be="" financially="" liable.="" each="" eligible="" school,="" school="" district,="" library="" or="" library="" consortia="" will="" be="" credited="" with="" the="" discount="" to="" which="" it="" is="" entitled.="" (e)="" interstate="" and="" intrastate="" services.="" federal="" universal="" service="" support="" for="" schools="" and="" libraries="" shall="" be="" provided="" for="" both="" interstate="" and="" intrastate="" services.="" (1)="" federal="" universal="" service="" support="" under="" this="" subpart="" for="" eligible="" schools="" and="" libraries="" in="" a="" state="" is="" contingent="" upon="" the="" establishment="" of="" intrastate="" discounts="" no="" less="" than="" the="" discounts="" applicable="" for="" interstate="" services.="" (2)="" a="" state="" may,="" however,="" secure="" a="" temporary="" waiver="" of="" this="" latter="" requirement="" based="" on="" unusually="" compelling="" conditions.="" sec.="" 54.507="" cap.="" (a)="" amount="" of="" the="" annual="" cap.="" the="" annual="" cap="" on="" federal="" universal="" service="" support="" for="" schools="" and="" libraries="" shall="" be="" $2.25="" billion="" per="" funding="" year,="" and="" all="" funding="" authority="" for="" a="" given="" funding="" year="" that="" is="" unused="" shall="" be="" carried="" forward="" into="" subsequent="" years="" for="" use="" in="" accordance="" with="" demand,="" as="" determined="" by="" the="" administrator,="" with="" two="" exceptions.="" first,="" no="" more="" than="" $1="" billion="" shall="" be="" collected="" or="" spent="" for="" the="" funding="" period="" from="" january="" 1,="" 1998="" through="" june="" 30,="" 1998.="" second,="" no="" more="" than="" half="" of="" the="" unused="" portion="" of="" the="" funding="" authority="" for="" calendar="" year="" 1998="" shall="" be="" spent="" in="" calendar="" year="" 1999,="" and="" no="" more="" than="" half="" of="" the="" unused="" funding="" authority="" from="" calendar="" years="" 1998="" and="" 1999="" shall="" be="" used="" in="" calendar="" year="" 2000.="" (b)="" funding="" year.="" the="" funding="" year="" for="" purposes="" of="" the="" schools="" and="" libraries="" cap="" shall="" be="" the="" calendar="" year.="" (c)="" requests.="" funds="" shall="" be="" available="" to="" fund="" discounts="" for="" eligible="" schools="" and="" libraries="" and="" consortia="" of="" such="" eligible="" entities="" on="" a="" first-come-first-served="" basis,="" with="" requests="" accepted="" beginning="" on="" the="" first="" of="" july="" prior="" to="" each="" funding="" year.="" the="" administrator's="" subcontractor="" shall="" maintain="" a="" running="" tally="" of="" the="" funds="" that="" the="" administrator="" has="" already="" committed="" for="" the="" existing="" [[page="" 32957]]="" funding="" year="" on="" the="" school="" and="" library="" website.="" (d)="" annual="" filing="" requirement.="" schools="" and="" libraries,="" and="" consortia="" of="" such="" eligible="" entities="" shall="" file="" new="" funding="" requests="" for="" each="" funding="" year="" no="" sooner="" than="" the="" july="" 1="" prior="" to="" the="" start="" of="" that="" funding="" year.="" (e)="" long="" term="" contracts.="" if="" schools="" and="" libraries="" enter="" into="" long="" term="" contracts="" for="" eligible="" services,="" the="" administrator="" shall="" only="" commit="" funds="" to="" cover="" the="" pro="" rata="" portion="" of="" such="" a="" long="" term="" contract="" scheduled="" to="" be="" delivered="" during="" the="" funding="" year="" for="" which="" universal="" service="" support="" is="" sought.="" (f)="" rules="" of="" priority.="" when="" expenditures="" in="" any="" funding="" year="" reach="" the="" level="" where="" only="" $250="" million="" remains="" before="" the="" cap="" will="" be="" reached,="" funds="" shall="" be="" distributed="" in="" accordance="" to="" the="" following="" rules="" of="" priority:="" (1)="" the="" administrator's="" subcontractor="" shall="" post="" a="" message="" on="" the="" school="" and="" library="" website,="" notify="" the="" commission,="" and="" take="" reasonable="" steps="" to="" notify="" the="" educational="" and="" library="" communities="" that="" commitments="" for="" the="" remaining="" $250="" million="" of="" support="" will="" only="" be="" made="" to="" the="" most="" economically="" disadvantaged="" schools="" and="" libraries="" (those="" in="" the="" two="" most="" disadvantaged="" categories)="" for="" the="" next="" 30="" days="" or="" the="" remainder="" of="" the="" funding="" year,="" whichever="" is="" shorter.="" (2)="" the="" most="" economically="" disadvantaged="" schools="" and="" libraries="" (those="" in="" the="" two="" most="" disadvantaged="" categories)="" that="" have="" not="" received="" discounts="" from="" the="" universal="" service="" support="" mechanism="" in="" the="" previous="" or="" current="" funding="" years="" shall="" have="" exclusive="" rights="" to="" secure="" commitments="" for="" universal="" service="" support="" under="" this="" subpart="" for="" a="" 30-="" day="" period="" or="" the="" remainder="" of="" the="" funding="" year,="" whichever="" is="" shorter.="" if="" such="" schools="" and="" libraries="" have="" received="" universal="" service="" support="" only="" for="" basic="" telephone="" service="" in="" the="" previous="" or="" current="" funding="" years,="" they="" shall="" remain="" eligible="" for="" the="" highest="" priority="" once="" spending="" commitments="" leave="" only="" $250="" million="" remaining="" before="" the="" funding="" cap="" is="" reached.="" (3)="" other="" economically="" disadvantaged="" schools="" and="" libraries="" (those="" in="" the="" two="" most="" disadvantaged="" categories)="" that="" have="" received="" discounts="" from="" the="" universal="" service="" support="" mechanism="" in="" the="" previous="" or="" current="" funding="" years="" shall="" have="" the="" next="" highest="" priority,="" if="" additional="" funds="" are="" available="" at="" the="" end="" of="" the="" 30-day="" period="" or="" the="" funding="" year,="" whichever="" is="" shorter.="" (4)="" if="" funds="" still="" remain="" after="" all="" requests="" submitted="" by="" schools="" and="" libraries="" described="" in="" paragraphs="" (f)(2)="" and="" (f)(3)="" of="" this="" section="" during="" the="" 30-day="" period="" have="" been="" met,="" the="" administrator="" shall="" allocate="" the="" remaining="" available="" funds="" to="" all="" other="" eligible="" schools="" and="" libraries="" in="" the="" order="" in="" which="" their="" requests="" have="" been="" received,="" until="" the="" $250="" million="" is="" exhausted="" or="" the="" funding="" year="" ends.="" sec.="" 54.509="" adjustments="" to="" the="" discount="" matrix.="" (a)="" estimating="" future="" spending="" requests.="" when="" submitting="" their="" requests="" for="" specific="" amounts="" of="" funding="" for="" a="" funding="" year,="" schools,="" libraries,="" library="" consortia,="" and="" consortia="" including="" such="" entities="" shall="" also="" estimate="" their="" funding="" requests="" for="" the="" following="" funding="" year="" to="" enable="" the="" administrator="" to="" estimate="" funding="" demand="" for="" the="" following="" year.="" (b)="" reduction="" in="" percentage="" discounts.="" if="" the="" estimates="" schools="" and="" libraries="" make="" of="" their="" future="" funding="" needs="" lead="" the="" administrator="" to="" predict="" that="" total="" funding="" requests="" for="" a="" funding="" year="" will="" exceed="" the="" available="" funding="" then="" the="" administrator="" shall="" calculate="" the="" percentage="" reduction="" to="" all="" schools="" and="" libraries,="" except="" those="" in="" the="" two="" most="" disadvantaged="" categories,="" necessary="" to="" permit="" all="" requests="" in="" the="" next="" funding="" year="" to="" be="" fully="" funded.="" the="" administrator="" must="" then="" request="" the="" commission's="" approval="" of="" the="" recommended="" adjustments.="" (c)="" remaining="" funds.="" if="" funds="" remain="" under="" the="" cap="" at="" the="" end="" of="" the="" funding="" year="" in="" which="" discounts="" have="" been="" reduced="" below="" those="" set="" in="" the="" matrices="" above,="" the="" administrator="" shall="" consult="" with="" the="" commission="" to="" establish="" the="" best="" way="" to="" distribute="" those="" funds.="" sec.="" 54.511="" ordering="" services.="" (a)="" selecting="" a="" provider="" of="" eligible="" services.="" in="" selecting="" a="" provider="" of="" eligible="" services,="" schools,="" libraries,="" library="" consortia,="" and="" consortia="" including="" any="" of="" those="" entities="" shall="" carefully="" consider="" all="" bids="" submitted="" and="" may="" consider="" relevant="" factors="" other="" than="" the="" pre-discount="" prices="" submitted="" by="" providers.="" (b)="" lowest="" corresponding="" price.="" providers="" of="" eligible="" services="" shall="" not="" charge="" schools,="" school="" districts,="" libraries,="" library="" consortia,="" and="" consortia="" including="" any="" of="" those="" entities="" a="" price="" above="" the="" lowest="" corresponding="" price="" for="" supported="" services,="" unless="" the="" commission,="" with="" respect="" to="" interstate="" services="" or="" the="" state="" commission="" with="" respect="" to="" intrastate="" services,="" finds="" that="" the="" lowest="" corresponding="" price="" is="" not="" compensatory.="" (c)="" schools="" and="" libraries="" bound="" by="" existing="" contracts.="" schools="" and="" libraries="" bound="" by="" existing="" contracts="" for="" service="" shall="" not="" be="" required="" to="" breach="" those="" contracts="" in="" order="" to="" qualify="" for="" discounts="" under="" this="" subpart="" during="" the="" period="" for="" which="" they="" are="" bound.="" this="" exemption="" from="" competitive="" bidding="" requirements,="" however,="" shall="" not="" apply="" to="" voluntary="" extensions="" of="" existing="" contracts.="" sec.="" 54.513="" resale.="" (a)="" prohibition="" on="" resale.="" eligible="" services="" purchased="" at="" a="" discount="" under="" this="" subpart="" shall="" not="" be="" sold,="" resold,="" or="" transferred="" in="" consideration="" of="" money="" or="" any="" other="" thing="" of="" value.="" (b)="" permissible="" fees.="" this="" prohibition="" on="" resale="" shall="" not="" bar="" schools,="" school="" districts,="" libraries,="" and="" library="" consortia="" from="" charging="" either="" computer="" lab="" fees="" or="" fees="" for="" classes="" in="" how="" to="" navigate="" over="" the="" internet.="" there="" is="" no="" prohibition="" on="" the="" resale="" of="" services="" that="" are="" not="" purchased="" pursuant="" to="" the="" discounts="" provided="" in="" this="" subpart.="" sec.="" 54.515="" distributing="" support.="" (a)="" a="" telecommunications="" carrier="" providing="" services="" eligible="" for="" support="" under="" this="" subpart="" to="" eligible="" schools="" and="" libraries="" shall="" treat="" the="" amount="" eligible="" for="" support="" under="" this="" subpart="" as="" an="" offset="" against="" the="" carrier's="" universal="" service="" support="" obligation="" for="" the="" year="" in="" which="" the="" costs="" for="" providing="" eligible="" services="" were="" incurred.="" (b)="" if="" the="" total="" amount="" of="" support="" owed="" to="" a="" carrier,="" as="" set="" forth="" in="" paragraph="" (a)="" of="" this="" section,="" exceeds="" its="" universal="" service="" obligation,="" calculated="" on="" an="" annual="" basis,="" the="" carrier="" may="" receive="" a="" direct="" reimbursement="" in="" the="" amount="" of="" the="" difference.="" (c)="" any="" reimbursement="" due="" a="" carrier="" shall="" be="" made="" after="" the="" offset="" is="" credited="" against="" that="" carrier's="" universal="" service="" obligation.="" (d)="" any="" reimbursement="" due="" a="" carrier="" shall="" be="" submitted="" to="" that="" carrier="" no="" later="" than="" the="" end="" of="" the="" first="" quarter="" of="" the="" calendar="" year="" following="" the="" year="" in="" which="" the="" costs="" were="" incurred="" and="" the="" offset="" against="" the="" carrier's="" universal="" service="" obligation="" was="" applied.="" sec.="" 54.516="" auditing.="" (a)="" recordkeeping="" requirements.="" schools="" and="" libraries="" shall="" be="" required="" to="" maintain="" for="" their="" purchases="" of="" telecommunications="" and="" other="" supported="" services="" at="" discounted="" rates="" the="" kind="" of="" procurement="" records="" that="" they="" maintain="" for="" other="" purchases.="" (b)="" production="" of="" records.="" schools="" and="" libraries="" shall="" produce="" such="" records="" at="" the="" request="" of="" any="" auditor="" appointed="" by="" a="" state="" education="" department,="" the="" administrator,="" or="" any="" state="" or="" federal="" agency="" with="" jurisdiction.="" (c)="" random="" audits.="" schools="" and="" libraries="" shall="" be="" subject="" to="" random="" [[page="" 32958]]="" compliance="" audits="" to="" evaluate="" what="" services="" they="" are="" purchasing="" and="" how="" such="" services="" are="" being="" used.="" sec.="" 54.517="" services="" provided="" by="" non-telecommunications="" carriers.="" (a)="" non-telecommunications="" carriers="" shall="" be="" eligible="" for="" universal="" service="" support="" under="" this="" subpart="" for="" providing="" covered="" services="" for="" eligible="" schools,="" libraries="" and="" consortia="" including="" those="" entities.="" (b)="" supported="" services.="" non-telecommunications="" carriers="" shall="" be="" eligible="" for="" universal="" service="" support="" under="" this="" subpart="" for="" providing="" internet="" access="" and="" installation="" and="" maintenance="" of="" internal="" connections.="" (c)="" requirements.="" such="" services="" provided="" by="" non-telecommunications="" carriers="" shall="" be="" subject="" to="" all="" the="" provisions="" of="" this="" subpart,="" except="" secs.="" 54.501(a),="" 54.502,="" 54.503,="" 54.515.="" subpart="" g--universal="" service="" support="" for="" health="" care="" providers="" sec.="" 54.601="" eligibility.="" (a)="" health="" care="" providers.="" (1)="" only="" an="" entity="" meeting="" the="" definition="" of="" ``health="" care="" provider''="" as="" defined="" in="" this="" section="" shall="" be="" eligible="" to="" receive="" supported="" services="" under="" this="" subpart.="" (2)="" for="" purposes="" of="" this="" subpart,="" a="" ``health="" care="" provider''="" is="" any:="" (i)="" post-secondary="" educational="" institution="" offering="" health="" care="" instruction,="" including="" a="" teaching="" hospital="" or="" medical="" school;="" (ii)="" community="" health="" center="" or="" health="" center="" providing="" health="" care="" to="" migrants;="" (iii)="" local="" health="" department="" or="" agency;="" (iv)="" community="" mental="" health="" center;="" (v)="" not-for-profit="" hospital;="" (vi)="" rural="" health="" clinic;="" or="" (vii)="" consortium="" of="" health="" care="" providers="" consisting="" of="" one="" or="" more="" entities="" described="" in="" paragraphs="" (a)(2)(i)="" through="" (a)(2)(vi)="" of="" this="" section.="" (3)="" only="" public="" or="" non-profit="" health="" care="" providers="" shall="" be="" eligible="" to="" receive="" supported="" services="" under="" this="" subpart.="" (4)="" except="" with="" regard="" to="" those="" services="" provided="" under="" sec.="" 54.621,="" only="" a="" rural="" health="" care="" provider="" shall="" be="" eligible="" to="" receive="" supported="" services="" under="" this="" subpart.="" a="" ``rural="" health="" care="" provider''="" is="" a="" health="" care="" provider="" located="" in="" a="" rural="" area,="" as="" defined="" in="" this="" part.="" (5)="" each="" separate="" site="" or="" location="" of="" a="" health="" care="" provider="" shall="" be="" considered="" an="" individual="" health="" care="" provider="" for="" purposes="" of="" calculating="" and="" limiting="" support="" under="" this="" subpart.="" (b)="" consortia.="" (1)="" an="" eligible="" health="" care="" provider="" may="" join="" a="" consortium="" with="" other="" eligible="" health="" care="" providers;="" with="" schools,="" libraries,="" and="" library="" consortia="" eligible="" under="" subpart="" f;="" and="" with="" public="" sector="" (governmental)="" entities="" to="" order="" telecommunications="" services.="" with="" one="" exception,="" eligible="" health="" care="" providers="" participating="" in="" consortia="" with="" ineligible="" private="" sector="" members="" shall="" not="" be="" eligible="" for="" supported="" services="" under="" this="" subpart.="" a="" consortium="" may="" include="" ineligible="" private="" sector="" entities="" if="" such="" consortium="" is="" only="" receiving="" services="" at="" tariffed="" rates="" or="" at="" market="" rates="" from="" those="" providers="" who="" do="" not="" file="" tariffs.="" (2)="" for="" consortia,="" universal="" service="" support="" under="" this="" subpart="" shall="" apply="" only="" to="" the="" portion="" of="" eligible="" services="" used="" by="" an="" eligible="" health="" care="" provider.="" (3)="" telecommunications="" carriers="" shall="" carefully="" maintain="" complete="" records="" of="" how="" they="" allocate="" the="" costs="" of="" shared="" facilities="" among="" consortium="" participants="" in="" order="" to="" charge="" eligible="" health="" care="" providers="" the="" correct="" amounts.="" such="" records="" shall="" be="" available="" for="" public="" inspection.="" (4)="" telecommunications="" carriers="" shall="" calculate="" and="" justify="" with="" supporting="" documentation="" the="" amount="" of="" support="" for="" which="" each="" member="" of="" a="" consortium="" is="" eligible.="" (c)="" services.="" (1)="" any="" telecommunications="" service="" of="" a="" bandwidth="" up="" to="" and="" including="" 1.544="" mbps="" that="" is="" the="" subject="" of="" a="" properly="" completed="" bona="" fide="" request="" by="" a="" rural="" health="" care="" provider="" shall="" be="" eligible="" for="" universal="" service="" support,="" subject="" to="" the="" limitations="" described="" in="" this="" subpart.="" the="" length="" of="" a="" supported="" telecommunications="" service="" may="" not="" exceed="" the="" distance="" between="" the="" health="" care="" provider="" and="" the="" point="" farthest="" from="" that="" provider="" on="" the="" jurisdictional="" boundary="" of="" the="" nearest="" large="" city="" as="" defined="" in="" sec.="" 54.605(c).="" (2)="" limited="" toll-free="" access="" to="" an="" internet="" service="" provider="" shall="" be="" eligible="" for="" universal="" service="" support="" under="" sec.="" 54.621.="" sec.="" 54.603="" competitive="" bidding.="" (a)="" competitive="" bidding="" requirement.="" to="" select="" the="" telecommunications="" carriers="" that="" will="" provide="" services="" eligible="" for="" universal="" service="" support="" to="" it="" under="" this="" subpart,="" each="" eligible="" health="" care="" provider="" shall="" participate="" in="" a="" competitive="" bidding="" process="" pursuant="" to="" the="" requirements="" established="" in="" this="" subpart="" and="" any="" additional="" and="" applicable="" state,="" local,="" or="" other="" procurement="" requirements.="" (b)="" posting="" of="" requests="" for="" service.="" (1)="" health="" care="" providers="" seeking="" to="" receive="" telecommunications="" services="" eligible="" for="" universal="" service="" support="" under="" this="" subpart="" shall="" submit="" a="" description="" of="" the="" services="" requested.="" requests="" shall="" be="" signed="" by="" the="" person="" authorized="" to="" order="" telecommunications="" services="" for="" the="" health="" care="" provider="" and="" shall="" include="" that="" person's="" certification="" under="" oath="" that:="" (i)="" the="" requester="" is="" a="" public="" or="" non-profit="" entity="" that="" falls="" within="" one="" of="" the="" seven="" categories="" set="" forth="" in="" the="" definition="" of="" health="" care="" provider,="" listed="" in="" sec.="" 54.601(a);="" (ii)="" the="" requester="" is="" physically="" located="" in="" a="" rural="" area,="" unless="" the="" health="" care="" provider="" is="" requesting="" services="" provided="" under="" sec.="" 54.621;="" (iii)="" if="" the="" health="" care="" provider="" is="" requesting="" services="" provided="" under="" sec.="" 54.621,="" that="" the="" requester="" cannot="" obtain="" toll-free="" access="" to="" an="" internet="" service="" provider;="" (iv)="" the="" requested="" service="" or="" services="" will="" be="" used="" solely="" for="" purposes="" reasonably="" related="" to="" the="" provision="" of="" health="" care="" services="" or="" instruction="" that="" the="" health="" care="" provider="" is="" legally="" authorized="" to="" provide="" under="" the="" law="" in="" the="" state="" in="" which="" such="" health="" care="" services="" or="" instruction="" are="" provided;="" (v)="" the="" requested="" service="" or="" services="" will="" not="" be="" sold,="" resold="" or="" transferred="" in="" consideration="" of="" money="" or="" any="" other="" thing="" of="" value;="" and="" (vi)="" if="" the="" service="" or="" services="" are="" being="" purchased="" as="" part="" of="" an="" aggregated="" purchase="" with="" other="" entities="" or="" individuals,="" the="" full="" details="" of="" any="" such="" arrangement,="" including="" the="" identities="" of="" all="" co-="" purchasers="" and="" the="" portion="" of="" the="" service="" or="" services="" being="" purchased="" by="" the="" health="" care="" provider.="" (2)="" the="" administrator="" shall="" post="" each="" request="" for="" eligible="" services="" that="" it="" receives="" from="" an="" eligible="" health="" care="" provider="" on="" its="" website="" designated="" for="" this="" purpose.="" (3)="" after="" posting="" a="" description="" of="" services="" from="" a="" health="" care="" provider="" on="" the="" website,="" the="" administrator="" shall="" send="" confirmation="" of="" the="" posting="" to="" the="" entity="" requesting="" services.="" that="" health="" care="" provider="" shall="" then="" wait="" at="" least="" 28="" days="" from="" the="" date="" on="" which="" its="" description="" of="" services="" is="" posted="" on="" the="" website="" before="" making="" commitments="" with="" the="" selected="" telecommunications="" carrier(s).="" (4)="" after="" selecting="" a="" telecommunications="" carrier,="" the="" health="" care="" provider="" shall="" certify="" to="" the="" administrator="" that="" it="" is="" selecting="" the="" most="" cost-effective="" method="" of="" providing="" the="" requested="" service="" or="" services,="" where="" the="" most="" cost-effective="" method="" of="" providing="" a="" service="" is="" defined="" as="" the="" method="" that="" costs="" the="" least="" after="" consideration="" of="" the="" features,="" quality="" of="" transmission,="" reliability,="" and="" other="" factors="" that="" the="" health="" care="" provider="" deems="" relevant="" to="" choosing="" a="" method="" of="" [[page="" 32959]]="" providing="" the="" required="" health="" care="" services.="" the="" health="" care="" provider="" shall="" submit="" to="" the="" administrator="" paper="" copies="" of="" other="" responses="" or="" bids="" received="" in="" response="" to="" the="" request="" for="" services.="" (5)="" the="" confirmation="" from="" the="" administrator="" shall="" include="" the="" date="" after="" which="" the="" requester="" may="" sign="" a="" contract="" with="" its="" chosen="" telecommunications="" carrier(s).="" sec.="" 54.605="" determining="" the="" urban="" rate.="" (a)="" if="" a="" rural="" health="" care="" provider="" requests="" an="" eligible="" service="" to="" be="" provided="" over="" a="" distance="" that="" is="" less="" than="" or="" equal="" to="" the="" ``standard="" urban="" distance,''="" as="" defined="" in="" paragraph="" (d)="" of="" this="" section,="" for="" the="" state="" in="" which="" it="" is="" located,="" the="" urban="" rate="" for="" that="" service="" shall="" be="" a="" rate="" no="" higher="" than="" the="" highest="" tariffed="" or="" publicly-available="" rate="" charged="" to="" a="" commercial="" customer="" for="" a="" similar="" service="" provided="" over="" the="" same="" distance="" in="" the="" nearest="" large="" city="" in="" the="" state,="" calculated="" as="" if="" it="" were="" provided="" between="" two="" points="" within="" the="" city.="" (b)="" if="" a="" rural="" health="" care="" provider="" requests="" an="" eligible="" service="" to="" be="" provided="" over="" a="" distance="" that="" is="" greater="" than="" the="" ``standard="" urban="" distance''="" for="" the="" state="" in="" which="" it="" is="" located,="" the="" urban="" rate="" shall="" be="" no="" higher="" than="" the="" highest="" tariffed="" or="" publicly-available="" rate="" charged="" to="" a="" commercial="" customer="" for="" a="" similar="" service="" provided="" over="" the="" standard="" urban="" distance="" in="" the="" nearest="" large="" city="" in="" the="" state,="" calculated="" as="" if="" the="" service="" were="" provided="" between="" two="" points="" within="" the="" city.="" (c)="" the="" ``nearest="" large="" city''="" is="" the="" city="" located="" in="" the="" eligible="" health="" care="" provider's="" state,="" with="" a="" population="" of="" at="" least="" 50,000,="" that="" is="" nearest="" to="" the="" health="" care="" provider's="" location,="" measured="" point="" to="" point,="" from="" the="" health="" care="" provider's="" location="" to="" the="" point="" on="" that="" city's="" jurisdictional="" boundary="" closest="" to="" the="" health="" care="" provider's="" location.="" (d)="" the="" ``standard="" urban="" distance''="" for="" a="" state="" is="" the="" average="" of="" the="" longest="" diameters="" of="" all="" cities="" with="" a="" population="" of="" 50,000="" or="" more="" within="" the="" state,="" calculated="" by="" the="" administrator.="" sec.="" 54.607="" determining="" the="" rural="" rate.="" (a)="" the="" rural="" rate="" shall="" be="" the="" average="" of="" the="" rates="" actually="" being="" charged="" to="" commercial="" customers,="" other="" than="" health="" care="" providers,="" for="" identical="" or="" similar="" services="" provided="" by="" the="" telecommunications="" carrier="" providing="" the="" service="" in="" the="" rural="" area="" in="" which="" the="" health="" care="" provider="" is="" located.="" the="" rates="" included="" in="" this="" average="" shall="" be="" for="" services="" provided="" over="" the="" same="" distance="" as="" the="" eligible="" service.="" the="" rates="" averaged="" to="" calculate="" the="" rural="" rate="" must="" not="" include="" any="" rates="" reduced="" by="" universal="" service="" support="" mechanisms.="" the="" ``rural="" rate''="" shall="" be="" used="" as="" described="" in="" this="" subpart="" to="" determine="" the="" credit="" or="" reimbursement="" due="" to="" a="" telecommunications="" carrier="" that="" provides="" eligible="" telecommunications="" services="" to="" eligible="" health="" care="" providers.="" (b)="" if="" the="" telecommunications="" carrier="" serving="" the="" health="" care="" provider="" is="" not="" providing="" any="" identical="" or="" similar="" services="" in="" the="" rural="" area,="" then="" the="" rural="" rate="" shall="" be="" the="" average="" of="" the="" tariffed="" and="" other="" publicly="" available="" rates,="" not="" including="" any="" rates="" reduced="" by="" universal="" service="" programs,="" charged="" for="" the="" same="" or="" similar="" services="" in="" that="" rural="" area="" over="" the="" same="" distance="" as="" the="" eligible="" service="" by="" other="" carriers.="" if="" there="" are="" no="" tariffed="" or="" publicly="" available="" rates="" for="" such="" services="" in="" that="" rural="" area,="" or="" if="" the="" carrier="" reasonably="" determines="" that="" this="" method="" for="" calculating="" the="" rural="" rate="" is="" unfair,="" then="" the="" carrier="" shall="" submit="" for="" the="" state="" commission's="" approval,="" for="" intrastate="" rates,="" or="" the="" commission's="" approval,="" for="" interstate="" rates,="" a="" cost-based="" rate="" for="" the="" provision="" of="" the="" service="" in="" the="" most="" economically="" efficient,="" reasonably="" available="" manner.="" (1)="" the="" carrier="" must="" provide,="" to="" the="" state="" commission,="" or="" intrastate="" rates,="" or="" to="" the="" commission,="" for="" interstate="" rates,="" a="" justification="" of="" the="" proposed="" rural="" rate,="" including="" an="" itemization="" of="" the="" costs="" of="" providing="" the="" requested="" service.="" (2)="" the="" carrier="" must="" provide="" such="" information="" periodically="" thereafter="" as="" required,="" by="" the="" state="" commission="" for="" intrastate="" rates="" or="" the="" commission="" for="" interstate="" rates.="" in="" doing="" so,="" the="" carrier="" must="" take="" into="" account="" anticipated="" and="" actual="" demand="" for="" telecommunications="" services="" by="" all="" customers="" who="" will="" use="" the="" facilities="" over="" which="" services="" are="" being="" provided="" to="" eligible="" health="" care="" providers.="" sec.="" 54.609="" calculating="" support.="" (a)="" except="" with="" regard="" to="" services="" provided="" under="" sec.="" 54.621="" and="" subject="" to="" the="" limitations="" set="" forth="" in="" this="" subpart,="" the="" amount="" of="" universal="" service="" support="" for="" an="" eligible="" service="" provided="" to="" a="" rural="" health="" care="" provider="" shall="" be="" the="" difference,="" if="" any,="" between="" the="" urban="" rate="" and="" the="" rural="" rate="" charged="" for="" the="" service,="" as="" defined="" herein.="" (b)="" except="" with="" regard="" to="" services="" provided="" under="" sec.="" 54.621,="" a="" telecommunications="" carrier="" that="" provides="" telecommunications="" service="" to="" a="" rural="" health="" care="" provider="" participating="" in="" an="" eligible="" health="" care="" consortium="" must="" establish="" the="" applicable="" rural="" rate="" for="" the="" health="" care="" provider's="" portion="" of="" the="" shared="" telecommunications="" services,="" as="" well="" as="" the="" applicable="" urban="" rate.="" absent="" documentation="" justifying="" the="" amount="" of="" universal="" service="" support="" requested="" for="" health="" care="" providers="" participating="" in="" a="" consortium,="" the="" administrator="" shall="" not="" allow="" telecommunications="" carriers="" to="" offset,="" or="" receive="" reimbursement="" for,="" the="" amount="" eligible="" for="" universal="" service="" support.="" sec.="" 54.611="" distributing="" support.="" (a)="" a="" telecommunications="" carrier="" providing="" services="" eligible="" for="" support="" under="" this="" subpart="" to="" eligible="" health="" care="" providers="" shall="" treat="" the="" amount="" eligible="" for="" support="" under="" this="" subpart="" as="" an="" offset="" against="" the="" carrier's="" universal="" service="" support="" obligation="" for="" the="" year="" in="" which="" the="" costs="" for="" providing="" eligible="" services="" were="" incurred.="" (b)="" if="" the="" total="" amount="" of="" support="" owed="" to="" a="" carrier,="" as="" set="" forth="" in="" paragraph="" (a)="" of="" this="" section,="" exceeds="" its="" universal="" service="" obligation,="" calculated="" on="" an="" annual="" basis,="" the="" carrier="" may="" receive="" a="" direct="" reimbursement="" in="" the="" amount="" of="" the="" difference.="" (c)="" any="" reimbursement="" due="" a="" carrier="" shall="" be="" made="" after="" the="" offset="" is="" credited="" against="" that="" carrier's="" universal="" service="" obligation.="" (d)="" any="" reimbursement="" due="" a="" carrier="" shall="" be="" submitted="" to="" that="" carrier="" no="" later="" than="" the="" end="" of="" the="" first="" quarter="" of="" the="" calendar="" year="" following="" the="" year="" in="" which="" the="" costs="" were="" incurred="" and="" the="" offset="" against="" the="" carrier's="" universal="" service="" obligation="" was="" applied.="" sec.="" 54.613="" limitations="" on="" supported="" services="" for="" rural="" health="" care="" providers.="" (a)="" upon="" submitting="" a="" bona="" fide="" request="" to="" a="" telecommunications="" carrier,="" each="" eligible="" rural="" health="" care="" provider="" is="" entitled="" to="" receive="" the="" most="" cost-effective,="" commercially-available="" telecommunications="" service="" using="" a="" bandwidth="" capacity="" of="" 1.544="" mbps,="" at="" a="" rate="" no="" higher="" than="" the="" highest="" urban="" rate,="" as="" defined="" in="" this="" subpart,="" at="" a="" distance="" not="" to="" exceed="" the="" distance="" between="" the="" eligible="" health="" care="" provider's="" site="" and="" the="" farthest="" point="" from="" that="" site="" that="" is="" on="" the="" jurisdictional="" boundary="" of="" the="" nearest="" large="" city,="" as="" defined="" in="" sec.="" 54.605(c).="" (b)="" the="" rural="" health="" care="" provider="" may="" substitute="" any="" other="" service="" or="" combination="" of="" services="" with="" transmission="" capacities="" of="" less="" than="" 1.544="" mbps="" transmitted="" over="" the="" same="" or="" a="" shorter="" distances,="" so="" long="" as="" the="" total="" annual="" support="" amount="" for="" all="" such="" services="" combined,="" calculated="" as="" provided="" in="" this="" subpart,="" does="" not="" exceed="" what="" the="" support="" amount="" would="" have="" been="" for="" the="" service="" described="" in="" paragraph="" (a)="" of="" this="" section.="" if="" the="" rural="" health="" care="" provider="" is="" located="" in="" an="" area="" where="" a="" service="" using="" a="" bandwidth="" [[page="" 32960]]="" capacity="" of="" 1.544="" mbps="" is="" not="" available,="" then="" the="" total="" annual="" support="" amount="" for="" that="" provider="" shall="" not="" exceed="" what="" the="" support="" amount="" would="" have="" been="" under="" paragraph="" (a)="" of="" this="" section,="" calculated="" using="" the="" rural="" rate="" for="" a="" service="" of="" that="" capacity="" in="" another="" area="" of="" the="" state.="" (c)="" this="" section="" shall="" not="" affect="" a="" rural="" health="" care="" provider's="" ability="" to="" obtain="" supported="" services="" under="" sec.="" 54.621.="" sec.="" 54.615="" obtaining="" services.="" (a)="" selecting="" a="" provider.="" in="" selecting="" a="" telecommunications="" carrier,="" a="" health="" care="" provider="" shall="" consider="" all="" bids="" submitted="" and="" select="" the="" most="" cost-effective="" alternative.="" (b)="" receiving="" supported="" rate.="" except="" with="" regard="" to="" services="" provided="" under="" sec.="" 54.621,="" upon="" receiving="" a="" bona="" fide="" request="" for="" an="" eligible="" service="" from="" an="" eligible="" health="" care="" provider,="" as="" set="" forth="" in="" paragraph="" (c)="" of="" this="" section,="" a="" telecommunications="" carrier="" shall="" provide="" the="" service="" at="" a="" rate="" no="" higher="" than="" the="" urban="" rate,="" as="" defined="" in="" sec.="" 54.605,="" subject="" to="" the="" limitations="" set="" forth="" in="" this="" subpart.="" (c)="" bona="" fide="" request.="" in="" order="" to="" receive="" services="" eligible="" for="" universal="" service="" support="" under="" this="" subpart,="" an="" eligible="" health="" care="" provider="" must="" submit="" a="" request="" for="" services="" to="" the="" telecommunications="" carrier,="" signed="" by="" an="" authorized="" officer="" of="" the="" health="" care="" provider,="" and="" shall="" include="" that="" person's="" certification="" under="" oath="" that:="" (1)="" the="" requester="" is="" a="" public="" or="" non-profit="" entity="" that="" falls="" within="" one="" of="" the="" seven="" categories="" set="" forth="" in="" the="" definition="" of="" health="" care="" provider,="" listed="" in="" sec.="" 54.601(a);="" (2)="" the="" requester="" is="" physically="" located="" in="" a="" rural="" area,="" unless="" the="" health="" care="" provider="" is="" requesting="" services="" provided="" under="" sec.="" 54.621;="" (3)="" if="" the="" health="" care="" provider="" is="" requesting="" services="" provided="" under="" sec.="" 54.621,="" that="" the="" requester="" cannot="" obtain="" toll-free="" access="" to="" an="" internet="" service="" provider;="" (4)="" the="" requested="" service="" or="" services="" will="" be="" used="" solely="" for="" purposes="" reasonably="" related="" to="" the="" provision="" of="" health="" care="" services="" or="" instruction="" that="" the="" health="" care="" provider="" is="" legally="" authorized="" to="" provide="" under="" the="" law="" in="" the="" state="" in="" which="" such="" health="" care="" services="" or="" instruction="" are="" provided;="" (5)="" the="" requested="" service="" or="" services="" will="" not="" be="" sold,="" resold="" or="" transferred="" in="" consideration="" of="" money="" or="" any="" other="" thing="" of="" value;="" (6)="" if="" the="" service="" or="" services="" are="" being="" purchased="" as="" part="" of="" an="" aggregated="" purchase="" with="" other="" entities="" or="" individuals,="" the="" full="" details="" of="" any="" such="" arrangement,="" including="" the="" identities="" of="" all="" co-="" purchasers="" and="" the="" portion="" of="" the="" service="" or="" services="" being="" purchased="" by="" the="" health="" care="" provider;="" and="" (7)="" the="" requester="" is="" selecting="" the="" most="" cost-effective="" method="" of="" providing="" the="" requested="" service="" or="" services,="" where="" the="" most="" cost-="" effective="" method="" of="" providing="" a="" service="" is="" defined="" as="" the="" method="" that="" costs="" the="" least="" after="" consideration="" of="" the="" features,="" quality="" of="" transmission,="" reliability,="" and="" other="" factors="" that="" the="" health="" care="" provider="" deems="" relevant="" to="" choosing="" a="" method="" of="" providing="" the="" required="" health="" care="" services.="" (d)="" annual="" renewal.="" the="" certification="" set="" forth="" in="" paragraph="" (c)="" of="" this="" section="" shall="" be="" renewed="" annually.="" sec.="" 54.617="" resale.="" (a)="" prohibition="" on="" resale.="" services="" purchased="" pursuant="" to="" universal="" service="" support="" mechanisms="" under="" this="" subpart="" shall="" not="" be="" sold,="" resold,="" or="" transferred="" in="" consideration="" for="" money="" or="" any="" other="" thing="" of="" value.="" (b)="" permissible="" fees.="" the="" prohibition="" on="" resale="" set="" forth="" in="" paragraph="" (a)="" of="" this="" section="" shall="" not="" prohibit="" a="" health="" care="" provider="" from="" charging="" normal="" fees="" for="" health="" care="" services,="" including="" instruction="" related="" to="" such="" services="" rendered="" via="" telecommunications="" services="" purchased="" under="" this="" subpart.="" sec.="" 54.619="" audit="" program.="" (a)="" recordkeeping="" requirements.="" health="" care="" providers="" shall="" maintain="" for="" their="" purchases="" of="" services="" supported="" under="" this="" subpart="" the="" same="" kind="" of="" procurement="" records="" that="" they="" maintain="" for="" other="" purchases.="" (b)="" production="" of="" records.="" health="" care="" providers="" shall="" produce="" such="" records="" at="" the="" request="" of="" any="" auditor="" appointed="" by="" the="" administrator="" or="" any="" other="" state="" or="" federal="" agency="" with="" jurisdiction.="" (c)="" random="" audits.="" health="" care="" providers="" shall="" be="" subject="" to="" random="" compliance="" audits="" to="" ensure="" that="" requesters="" are="" complying="" with="" the="" certification="" requirements="" set="" forth="" in="" sec.="" 54.615(c)="" and="" are="" otherwise="" eligible="" to="" receive="" universal="" service="" support="" and="" that="" rates="" charged="" comply="" with="" the="" statute="" and="" regulations.="" (d)="" annual="" report.="" the="" administrator="" shall="" use="" the="" information="" obtained="" under="" paragraph="" (a)="" of="" this="" section="" to="" evaluate="" the="" effects="" of="" the="" regulations="" adopted="" in="" this="" subpart="" and="" shall="" report="" its="" findings="" to="" the="" commission="" on="" the="" first="" business="" day="" in="" may="" of="" each="" year.="" sec.="" 54.621="" access="" to="" advanced="" telecommunications="" and="" information="" services.="" (a)="" each="" eligible="" health="" care="" provider="" that="" cannot="" obtain="" toll-free="" access="" to="" an="" internet="" service="" provider="" shall="" be="" entitled="" to="" receive="" the="" lesser="" of="" the="" toll="" charges="" incurred="" for="" 30="" hours="" of="" access="" per="" month="" to="" an="" internet="" service="" provider="" or="" $180="" per="" month="" in="" toll="" charge="" credits="" for="" toll="" charges="" imposed="" for="" connecting="" to="" an="" internet="" service="" provider.="" (b)="" both="" telecommunications="" carriers="" designated="" as="" eligible="" telecommunications="" carriers="" pursuant="" to="" sec.="" 54.201(d)="" and="" telecommunications="" carriers="" not="" so="" designated="" that="" provide="" services="" described="" in="" paragraph="" (a)="" of="" this="" section="" shall="" be="" eligible="" for="" universal="" service="" support="" under="" this="" section.="" sec.="" 54.623="" cap.="" (a)="" amount="" of="" the="" annual="" cap.="" the="" annual="" cap="" on="" federal="" universal="" service="" support="" for="" health="" care="" providers="" shall="" be="" $400="" million="" per="" funding="" year.="" (b)="" funding="" year.="" the="" funding="" year="" for="" purposes="" of="" the="" health="" care="" providers="" cap="" shall="" be="" the="" calendar="" year.="" (c)="" requests.="" funds="" shall="" be="" available="" to="" eligible="" health="" care="" providers="" on="" a="" first-come-first-served="" basis,="" with="" requests="" accepted="" beginning="" on="" the="" first="" of="" july="" prior="" to="" each="" funding="" year.="" (d)="" annual="" filing="" requirement.="" health="" care="" providers="" shall="" file="" new="" funding="" requests="" for="" each="" funding="" year.="" (e)="" long="" term="" contracts.="" if="" health="" care="" providers="" enter="" into="" long="" term="" contracts="" for="" eligible="" services,="" the="" administrator="" shall="" only="" commit="" funds="" to="" cover="" the="" portion="" of="" such="" a="" long="" term="" contract="" scheduled="" to="" be="" delivered="" during="" the="" funding="" year="" for="" which="" universal="" service="" support="" is="" sought.="" subpart="" h--administration="" sec.="" 54.701="" administrator="" of="" universal="" service="" support="" mechanisms.="" (a)="" a="" federal="" advisory="" committee="" (committee)="" shall="" recommend="" a="" neutral,="" third-party="" administrator="" of="" the="" universal="" service="" support="" programs="" to="" the="" commission="" within="" six="" months="" of="" the="" committee's="" first="" meeting.="" the="" commission="" shall="" act="" upon="" that="" recommendation="" within="" six="" months.="" the="" administrator="" must:="" (1)="" be="" neutral="" and="" impartial;="" (2)="" not="" advocate="" specific="" positions="" before="" the="" commission="" in="" non-="" universal="" service="" administration="" proceedings="" related="" to="" common="" carrier="" issues,="" except="" that="" membership="" in="" a="" trade="" association="" that="" advocates="" positions="" before="" the="" commission="" will="" not="" render="" it="" ineligible="" to="" serve="" as="" the="" administrator;="" (3)="" not="" be="" an="" affiliate="" of="" any="" provider="" of="" telecommunications="" services;="" and="" (4)="" not="" issue="" a="" majority="" of="" its="" debt="" to,="" nor="" derive="" a="" majority="" of="" its="" revenues="" from="" any="" provider(s)="" of="" [[page="" 32961]]="" telecommunications="" services.="" this="" prohibition="" also="" applies="" to="" any="" affiliates="" of="" the="" administrator.="" (b)="" if="" the="" administrator="" has="" a="" board="" of="" directors="" that="" includes="" members="" with="" direct="" financial="" interests="" in="" entities="" that="" contribute="" to="" or="" receive="" support="" from="" the="" universal="" service="" support="" programs,="" no="" more="" than="" a="" third="" of="" the="" board="" members="" may="" represent="" any="" one="" category="" (e.g.,="" local="" exchange="" carriers,="" interexchange="" carriers,="" wireless="" carriers,="" schools,="" libraries)="" of="" contributing="" carriers="" or="" support="" recipients,="" and="" the="" board's="" composition="" must="" reflect="" the="" broad="" base="" of="" contributors="" to="" and="" recipients="" of="" universal="" service.="" (1)="" an="" individual="" does="" not="" have="" a="" direct="" financial="" interest="" in="" entities="" that="" contribute="" to="" or="" receive="" support="" from="" the="" universal="" service="" support="" programs="" if="" he="" or="" she="" is="" not="" an="" employee="" of="" a="" telecommunications="" carrier="" or="" of="" a="" recipient="" of="" universal="" service="" support="" programs="" funds,="" does="" not="" own="" equity="" interests="" in="" bonds="" or="" equity="" instruments="" issued="" by="" any="" telecommunications="" carrier,="" and="" does="" not="" own="" mutual="" funds="" that="" specialize="" in="" the="" telecommunications="" industry.="" if="" a="" mutual="" fund="" invests="" more="" than="" 50="" percent="" of="" its="" money="" in="" telecommunications="" stocks="" and="" bonds,="" then="" it="" specializes="" in="" the="" telecommunications="" industry.="" (2)="" an="" individual's="" ownership="" interest="" in="" entities="" that="" contribute="" to="" or="" receive="" support="" from="" the="" universal="" service="" support="" programs="" is="" de="" minimis="" if="" in="" aggregate="" the="" individual,="" spouse,="" and="" minor="" children's="" impermissible="" interests="" do="" not="" exceed="" $5,000.="" (c)="" the="" administrator="" chosen="" by="" the="" committee="" shall="" begin="" administering="" the="" support="" programs="" within="" six="" months="" of="" its="" appointment.="" the="" administrator's="" performance="" shall="" be="" reviewed="" by="" the="" commission="" after="" two="" years.="" the="" administrator="" shall="" serve="" an="" initial="" term="" of="" five="" years.="" at="" any="" time="" prior="" to="" nine="" months="" before="" the="" end="" of="" the="" administrator's="" five-year="" term,="" the="" commission="" may="" re-appoint="" the="" administrator="" for="" another="" term="" of="" not="" more="" than="" five="" years.="" otherwise,="" nine="" months="" before="" the="" end="" of="" the="" administrator's="" term,="" the="" commission="" will="" create="" another="" federal="" advisory="" committee="" to="" recommend="" another="" neutral,="" third-party="" administrator.="" (d)="" the="" committee's,="" administrator's,="" and="" temporary="" administrator's="" reasonable="" administrative="" projected="" annual="" costs="" shall="" be="" included="" within="" the="" universal="" service="" support="" programs'="" projected="" expenses.="" (e)="" the="" administrator="" and="" temporary="" administrator="" shall="" keep="" the="" universal="" service="" support="" program="" funds="" separate="" from="" all="" other="" funds="" under="" the="" control="" of="" the="" administrator="" or="" temporary="" administrator.="" (f)="" the="" administrator="" and="" temporary="" administrator="" shall="" be="" subject="" to="" a="" yearly="" audit="" by="" an="" independent="" accounting="" firm="" and="" may="" be="" subject="" to="" an="" additional="" audit="" by="" the="" commission,="" if="" the="" commission="" so="" requests.="" (1)="" the="" administrator="" and="" the="" temporary="" administrator="" shall="" report="" annually="" to="" the="" commission="" an="" itemization="" of="" monthly="" administrative="" costs="" that="" shall="" include="" all="" expenses,="" receipts,="" and="" payments="" associated="" with="" the="" administration="" of="" the="" universal="" service="" support="" programs="" and="" shall="" provide="" the="" commission="" full="" access="" to="" the="" data="" collected="" pursuant="" to="" the="" administration="" of="" the="" universal="" service="" support="" programs.="" (2)="" pursuant="" to="" sec.="" 64.903="" of="" this="" chapter,="" the="" administrator="" shall="" file="" with="" the="" commission="" a="" cost="" allocation="" manual="" (cam),="" that="" describes="" the="" accounts="" and="" procedures="" the="" administrator="" will="" use="" to="" allocate="" the="" shared="" costs="" of="" administering="" the="" universal="" service="" support="" programs="" and="" its="" other="" operations.="" (3)="" information="" based="" on="" the="" administrator's="" and="" temporary="" administrator's="" reports="" will="" be="" made="" public="" at="" least="" once="" a="" year="" as="" part="" of="" a="" monitoring="" report.="" (g)="" the="" administrator="" and="" temporary="" administrator="" shall="" report="" quarterly="" to="" the="" commission="" on="" the="" disbursement="" of="" universal="" service="" support="" program="" funds.="" the="" administrator="" and="" temporary="" administrator="" shall="" keep="" separate="" accounts="" for="" the="" amounts="" of="" money="" collected="" and="" disbursed="" for="" eligible="" schools="" and="" libraries,="" rural="" health="" care="" providers,="" low-income="" consumers,="" and="" high="" cost="" and="" insular="" areas.="" (h)="" the="" administrator="" and="" temporary="" administrator="" shall="" be="" subject="" to="" close-out="" audits="" at="" the="" end="" of="" their="" terms.="" sec.="" 54.703="" contributions.="" (a)="" entities="" that="" provide="" interstate="" telecommunications="" to="" the="" public,="" or="" to="" such="" classes="" of="" users="" as="" to="" be="" effectively="" available="" to="" the="" public,="" for="" a="" fee="" will="" be="" considered="" telecommunications="" carriers="" providing="" interstate="" telecommunications="" services="" and="" must="" contribute="" to="" the="" universal="" service="" support="" programs.="" interstate="" telecommunications="" include,="" but="" are="" not="" limited="" to:="" (1)="" cellular="" telephone="" and="" paging="" services;="" (2)="" mobile="" radio="" services;="" (3)="" operator="" services;="" (4)="" personal="" communications="" services="" (pcs);="" (5)="" access="" to="" interexchange="" service;="" (6)="" special="" access="" service;="" (7)="" wats;="" (8)="" toll-free="" service;="" (9)="" 900="" service;="" (10)="" message="" telephone="" service="" (mts);="" (11)="" private="" line="" service;="" (12)="" telex;="" (13)="" telegraph;="" (14)="" video="" services;="" (15)="" satellite="" service;="" (16)="" resale="" of="" interstate="" services;="" and="" (17)="" payphone="" services.="" (b)="" every="" telecommunications="" carrier="" that="" provides="" interstate="" telecommunications="" services,="" every="" provider="" of="" interstate="" telecommunications="" that="" offers="" telecommunications="" for="" a="" fee="" on="" a="" non-="" common="" carrier="" basis,="" and="" payphone="" providers="" that="" are="" aggregators="" shall="" contribute="" to="" the="" programs="" for="" eligible="" schools,="" libraries,="" and="" health="" care="" providers="" on="" the="" basis="" of="" its="" interstate,="" intrastate,="" and="" international="" end-user="" telecommunications="" revenues.="" entities="" providing="" open="" video="" systems="" (ovs),="" cable="" leased="" access,="" or="" direct="" broadcast="" satellite="" (dbs)="" services="" are="" not="" required="" to="" contribute="" on="" the="" basis="" of="" revenues="" derived="" from="" those="" services.="" (c)="" every="" telecommunications="" carrier="" that="" provides="" interstate="" telecommunications="" services,="" every="" provider="" of="" interstate="" telecommunications="" that="" offers="" telecommunications="" for="" a="" fee="" on="" a="" non-="" common="" carrier="" basis,="" and="" payphone="" providers="" that="" are="" aggregators="" shall="" contribute="" to="" the="" programs="" for="" high="" cost,="" rural="" and="" insular="" areas,="" and="" low-income="" consumers="" on="" the="" basis="" of="" its="" interstate="" and="" international="" end-user="" telecommunications="" revenues.="" entities="" providing="" ovs,="" cable="" leased="" access,="" or="" dbs="" services="" are="" not="" required="" to="" contribute="" on="" the="" basis="" of="" revenues="" derived="" from="" those="" services.="" sec.="" 54.705="" de="" minimis="" exemption.="" if="" a="" contributor's="" contribution="" to="" universal="" service="" in="" any="" given="" year="" is="" less="" than="" $100,="" that="" contributor="" will="" not="" be="" required="" to="" submit="" a="" contribution="" or="" universal="" service="" worksheet="" for="" that="" year.="" if="" a="" contributor="" improperly="" claims="" exemption="" from="" the="" contribution="" requirement,="" it="" will="" subject="" to="" the="" criminal="" provisions="" of="" sections="" 220="" (d)="" and="" (e)="" of="" the="" act="" regarding="" willful="" false="" submissions="" and="" will="" be="" required="" to="" pay="" the="" amounts="" withheld="" plus="" interest.="" sec.="" 54.707="" audit="" controls.="" the="" administrator="" shall="" have="" authority="" to="" audit="" contributors="" and="" carriers="" reporting="" data="" to="" the="" administrator.="" the="" administrator="" shall="" establish="" procedures="" to="" verify="" discounts,="" offsets,="" and="" support="" amounts="" provided="" [[page="" 32962]]="" by="" the="" universal="" service="" support="" programs,="" and="" may="" suspend="" or="" delay="" discounts,="" offsets,="" and="" support="" amounts="" provided="" to="" a="" carrier="" if="" the="" carrier="" fails="" to="" provide="" adequate="" verification="" of="" discounts,="" offsets,="" or="" support="" amounts="" provided="" upon="" reasonable="" request,="" or="" if="" directed="" by="" the="" commission="" to="" do="" so.="" the="" administrator="" shall="" not="" provide="" reimbursements,="" offsets="" or="" support="" amounts="" pursuant="" to="" part="" 36="" and="" sec.="" 69.116="" through="" 69.117="" of="" this="" chapter,="" and="" subparts="" d,="" e,="" and="" g="" of="" this="" part="" to="" a="" carrier="" until="" the="" carrier="" has="" provided="" to="" the="" administrator="" a="" true="" and="" correct="" copy="" of="" the="" decision="" of="" a="" state="" commission="" designating="" that="" carrier="" as="" an="" eligible="" telecommunications="" carrier="" in="" accordance="" with="" sec.="" 54.201.="" part="" 69--access="" charges="" 11.="" the="" authority="" citation="" for="" part="" 69="" is="" revised="" to="" read="" as="" follows:="" authority:="" 47="" u.s.c.="" secs.="" 154(i)="" and="" (j),="" 201,="" 202,="" 203,="" 205,="" 18,="" 254,="" and="" 403.="" 12.="" section="" 69.2(y)="" is="" revised="" to="" read="" as="" follows:="" sec.="" 69.2="" definitions.="" *="" *="" *="" *="" *="" (y)="" long="" term="" support="" (lts)="" means="" funds="" that="" are="" provided="" pursuant="" to="" sec.="" 54.303="" of="" part="" 54.="" *="" *="" *="" *="" *="" 13.="" section="" 69.104="" is="" amended="" by="" revising="" paragraphs="" (j),="" (k),="" and="" (l)="" to="" read="" as="" follows:="" sec.="" 69.104="" end="" user="" common="" line.="" *="" *="" *="" *="" *="" (j)="" until="" december="" 31,="" 1997,="" the="" end="" user="" common="" line="" charge="" for="" a="" residential="" subscriber="" shall="" be="" 50%="" of="" the="" charge="" specified="" in="" sec.="" 69.104(c)="" and="" (d)="" if="" the="" residential="" local="" exchange="" service="" rate="" for="" such="" subscribers="" is="" reduced="" by="" an="" equivalent="" amount,="" provided,="" that="" such="" local="" exchange="" service="" rate="" reduction="" is="" based="" upon="" a="" means="" test="" that="" is="" subject="" to="" verification.="" (k)="" paragraphs="" (k)(1)="" through="" (2)="" of="" this="" section="" are="" effective="" until="" december="" 31,="" 1997.="" *="" *="" *="" (l)="" until="" december="" 31,="" 1997,="" in="" connection="" with="" the="" filing="" of="" access="" tariffs="" pursuant="" to="" sec.="" 69.3(a),="" telephone="" companies="" shall="" calculate="" for="" the="" association="" their="" projected="" revenue="" requirements="" attributable="" to="" the="" operation="" of="" paragraphs="" (j)="" through="" (k)="" of="" this="" section.="" the="" projected="" amount="" will="" be="" adjusted="" by="" the="" association="" to="" reflect="" the="" actual="" lifeline="" assistance="" benefits="" paid="" in="" the="" previous="" period.="" if="" the="" actual="" benefits="" exceeded="" the="" projected="" amount="" of="" that="" period,="" the="" differential="" will="" be="" added="" to="" the="" projection="" for="" the="" ensuing="" period.="" if="" the="" actual="" benefits="" were="" less="" than="" the="" projected="" amount="" for="" that="" period,="" the="" differential="" will="" be="" subtracted="" from="" the="" projection="" for="" the="" ensuing="" period.="" until="" december="" 31,="" 1997,="" the="" association="" shall="" so="" adjustamounts="" to="" the="" lifeline="" assistance="" revenue="" requirement,="" bill="" and="" collect="" such="" amounts="" from="" interexchange="" carriers="" pursuant="" to="" sec.="" 69.117="" and="" distribute="" the="" funds="" to="" qualifying="" telephone="" companies="" pursuant="" to="" sec.="" 69.603(d).="" *="" *="" *="" *="" *="" 14.="" section="" 69.116="" is="" amended="" by="" revising="" the="" introductory="" text="" to="" read="" as="" follows:="" sec.="" 69.116="" universal="" service="" fund.="" effective="" august="" 1,="" 1988="" through="" december="" 31,="" 1997:="" *="" *="" *="" *="" *="" 15.="" section="" 69.117="" is="" amended="" by="" revising="" the="" introductory="" text="" to="" read="" as="" follows:="" sec.="" 69.117="" lifeline="" assistance.="" effective="" august="" 1,="" 1988="" through="" december="" 31,="" 1997:="" *="" *="" *="" *="" *="" 16.="" section="" 69.203="" is="" amended="" by="" revising="" paragraph="" (f)="" and="" adding="" a="" sentence="" before="" the="" first="" sentence="" of="" paragraph="" (g)(l)="" to="" read="" as="" follows:="" sec.="" 69.203="" transitional="" end="" user="" common="" line="" charges.="" *="" *="" *="" *="" *="" (f)="" until="" december="" 31,="" 1997,="" the="" end="" user="" common="" line="" charge="" for="" a="" residential="" subscriber="" shall="" be="" 50%="" of="" the="" charge="" specified="" in="" paragraphs="" (d)="" and="" (e)="" if="" the="" residential="" local="" exchange="" rate="" for="" such="" subscribers="" is="" reduced="" by="" an="" equivalent="" amount,="" provided="" that="" such="" local="" exchange="" service="" rate="" reduction="" is="" based="" upon="" a="" means="" test="" that="" is="" subject="" to="" verification.="" (g)(1)="" paragraphs="" (g)(1)="" and="" (g)(2)="" are="" effective="" until="" december="" 31,="" 1997.*="" *="" *="" *="" *="" *="" *="" *="" 17.="" section="" 69.612="" is="" amended="" by="" revising="" the="" introductory="" text="" and="" paragraph="" (a)="" to="" read="" as="" follows:="" sec.="" 69.612="" long="" term="" and="" transitional="" support.="" a="" telephone="" company="" that="" does="" not="" participate="" in="" the="" association="" common="" line="" tariff="" shall="" have="" computed="" by="" the="" association:="" (a)="" long="" term="" support="" obligation.="" (1)="" beginning="" july="" 1,="" 1994="" and="" until="" december="" 31,="" 1997,="" the="" long="" term="" support="" payment="" obligation="" of="" telephone="" companies="" that="" do="" not="" participate="" in="" the="" neca="" common="" line="" tariff="" shall="" equal="" the="" difference="" between="" the="" projected="" carrier="" common="" line="" revenue="" requirement="" of="" association="" common="" line="" tariff="" participants="" and="" the="" projected="" revenue="" recovered="" by="" the="" association="" carrier="" common="" line="" charge="" as="" calculated="" pursuant="" to="" sec.="" 69.105(b)(1).="" (2)="" for="" the="" period="" from="" april="" 1,="" 1989="" through="" june="" 30,="" 1994,="" the="" long="" term="" support="" payment="" obligation="" shall="" be="" funded="" by="" all="" telephone="" companies="" that="" are="" not="" association="" common="" line="" tariff="" participants="" and="" do="" not="" receive="" transitional="" support="" pursuant="" to="" sec.="" 69.612(b).="" the="" percentage="" of="" the="" total="" annual="" long="" term="" support="" requirement="" paid="" by="" each="" telephone="" company="" in="" this="" group="" that="" is="" not="" a="" level="" i="" or="" level="" ii="" contributor="" shall="" equal="" the="" number="" of="" its="" common="" lines="" divided="" by="" the="" total="" number="" of="" common="" lines="" of="" all="" telephone="" companies="" paying="" long="" term="" support.="" the="" remaining="" amount="" of="" long="" term="" support="" requirement="" shall="" be="" allocated="" among="" level="" i="" and="" level="" ii="" contributors="" based="" upon="" the="" amount="" of="" each="" level="" i="" and="" level="" ii="" contributor's="" 1988="" contributions="" to="" the="" association="" common="" line="" pool="" in="" relation="" to="" the="" total="" amount="" of="" 1988="" common="" line="" pool="" contributions="" of="" all="" other="" level="" i="" and="" level="" ii="" contributors.="" the="" association="" shall="" inform="" each="" telephone="" company="" about="" its="" mandatory="" long="" term="" support="" obligations="" within="" a="" reasonable="" time="" prior="" to="" the="" filing="" of="" each="" telephone="" company's="" annual="" common="" line="" tariff="" revisions="" or="" other="" similar="" filing="" ordered="" by="" the="" commission.="" such="" amounts="" shall="" represent="" a="" negative="" net="" balance="" due="" to="" the="" association="" that="" it="" shall="" bill,="" collect,="" and="" distribute="" pursuant="" to="" sec.="" 69.603(e).="" (3)="" beginning="" july="" 1,="" 1994,="" and="" thereafter,="" the="" long="" term="" support="" payment="" obligation="" shall="" be="" funded="" by="" each="" telephone="" company="" that="" files="" its="" own="" carrier="" common="" line="" tariff="" does="" not="" receive="" transitional="" support.="" the="" percentage="" of="" the="" total="" annual="" long="" term="" support="" requirement="" paid="" by="" each="" of="" these="" companies="" shall="" equal="" the="" number="" of="" its="" common="" lines="" divided="" by="" the="" total="" number="" of="" common="" lines="" of="" all="" telephone="" companies="" paying="" long="" term="" support.="" the="" association="" shall="" inform="" each="" telephone="" company="" about="" its="" long="" term="" support="" obligation="" within="" a="" reasonable="" time="" prior="" to="" the="" filing="" of="" each="" telephone="" company's="" annual="" common="" line="" tariff="" revisions="" or="" other="" similar="" filing="" ordered="" by="" the="" commission.="" such="" amounts="" shall="" represent="" a="" negative="" net="" balance="" due="" to="" the="" association="" that="" it="" shall="" bill,="" collect,="" and="" distribute="" pursuant="" to="" sec.="" 69.603(f).="" *="" *="" *="" *="" *="" [fr="" doc.="" 97-15081="" filed="" 6-16-97;="" 8:45="" am]="" billing="" code="" 6712-01-p="">