[Federal Register Volume 62, Number 148 (Friday, August 1, 1997)]
[Rules and Regulations]
[Pages 41294-41311]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-20017]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Parts 54 and 69
[CC Docket No. 96-45; 97-21; FCC 97-253]
Changes to the Board of Directors of the National Exchange
Carrier Association, Inc. and Federal-State Board on Universal Service
AGENCY: Federal Communications Commission.
ACTION: Final rule.
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SUMMARY: The Report and Order released July 18, 1997, promulgates rules
directing the National Exchange Carrier Association, Inc. (NECA) to
create an independently functioning not-for-profit subsidiary through
which it will administer temporarily certain portions of the federal
universal service support mechanisms. We also direct that NECA create
an unaffiliated, not-for-profit corporation to manage the application
and other processes relating to administering the schools and libraries
program. We further direct that NECA create another unaffiliated, not-
for-profit corporation to manage specified portions of the rural health
care program. To ensure continuity in, and efficient administration of,
the schools and libraries and rural health care programs, we also
conclude that these corporations should continue to perform their
designated functions even after the date on which the permanent
administrator is appointed. We also direct NECA's independent
subsidiary to create a special committee of that subsidiary's Board of
Directors with the power and authority to make binding decisions on
designated issues relating to the universal service support mechanisms
for high cost areas and low-income consumers. Finally, in this Order we
establish requirements by which the temporary and permanent
administrators will calculate, and the Commission will approve, the
quarterly universal service contribution factors.
EFFECTIVE DATES: August 1, 1997 except for Secs. 54.709, 54.711,
54.713, and 69.614(c) which are effective September 2, 1997.
FOR FURTHER INFORMATION CONTACT: Valerie Yates, 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 July 17, 1997, and released July 18, 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 a Joint Board, Federal-State Board on Universal
Service, CC Docket 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)), 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, and a Notice of
Proposed Rulemaking, CC Docket 97-21, on January 10, 1997 (62 FR 2636
(January 17, 1997)). 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 local exchange carriers.
Summary of Report and Order:
A. Appointment of NECA as Temporary Administrator
1. Appointment of NECA as Temporary Administrator. In the Universal
Service Order, we adopted the Joint Board's recommendation to appoint
NECA the temporary administrator of the universal service support
mechanisms, subject to the condition that NECA make certain changes to
its governance that would make it more representative of non-ILEC
interests.
2. Adoption of the January 10th Proposal. We conclude that, as
modified below, NECA's January 10th proposal to establish a subsidiary
with a separate board of directors will satisfy the condition
established in the Universal Service Order that NECA must comply with
the Joint Board's directive to provide ``significant, meaningful
representation'' for non-ILEC interests in the temporary administration
of the new universal service support mechanisms. We direct NECA to
establish USAC in such a way that USAC will be permitted to advocate
positions before the Commission and its staff only on administrative
matters relating to the universal service support mechanisms. We
further conclude that, until January 1, 1998, NECA will continue to
administer the current universal service, Lifeline Assistance, and LTS
programs. USAC shall prepare for and administer the revised low-income
and high cost programs. We therefore direct NECA to establish USAC, in
accordance with the January 10 proposal as modified by the specific
requirements of this Order, to administer temporarily the universal
service support mechanisms for high cost areas and low-income
consumers, as well as to perform certain designated functions
pertaining to the universal service support mechanisms for schools and
libraries and rural health care providers. We direct that USAC be
[[Page 41295]]
incorporated under the laws of Delaware, as an independent, not-for-
profit subsidiary corporation of NECA. We further direct NECA to submit
to the Commission for approval proposed articles of incorporation,
bylaws, and any documents necessary to incorporate USAC, within 14
calendar days of release of this Order, in order to ensure prior to
USAC's incorporation that all requirements of this Order have been
satisfied. The Commission will approve or modify the proposed documents
in a Public Notice.
B. USAC Board of Directors
3. Size and Composition of USAC Board. We direct NECA to establish
the USAC Board with 17 directors that will represent a cross-section of
industry and beneficiary interests. The USAC Board shall be comprised
of: Three directors representing ILECs; two directors representing
IXCs; one director representing commercial mobile radio service (CMRS)
providers, which includes cellular, Personal Communications Services
(PCS), paging, and Specialized Mobile Radio (SMR) companies; one
director representing CLECs; one director representing cable operators;
one director representing information service providers; three
directors representing eligible schools; one director representing
eligible libraries; one director representing eligible rural health
care providers; one director representing low-income consumers; one
director representing state telecommunications regulators; and one
director representing state consumer advocates. The group of three ILEC
directors will consist of one director representing the BOCs and GTE,
one director representing other ILECs having annual operating revenues
in excess of $40 million, and one director representing small ILECs
having annual operating revenues of $40 million or less to ensure fair
representation of the diversity of ILEC interests. We conclude that any
individual, including a current member of NECA's Board of Directors,
who is nominated and appointed in accordance with the procedures set
forth below, should be entitled to serve on the USAC Board. Of the two
IXC directors, one director will represent IXCs with more than $3
billion in annual operating revenues, and one director will represent
IXCs with annual operating revenues of $3 billion or less.
4. Selection and Appointment of USAC Board Members. Members of the
industry or non-industry groups that will be represented on the Board
are directed to submit their nominees selected by consensus for USAC
directors to the Chairman of the Federal Communications Commission
within 14 calendar days of the publication of this Order in the Federal
Register. A copy of nominations also should be filed with the Secretary
of the Commission. In order for us to be able to confirm the identity
and credentials of the board member nominees, each nomination should be
accompanied by professional and biographical information, such as the
nominee's resume or professional biography. Only members of the
industry or non-industry groups that a Board member will represent may
submit a nomination for that position (e.g., only CMRS providers may
submit nominations for the CMRS position on the Board and only IXCs
with more than $3 billion in annual operating revenues may submit
nominations for the IXC Board member who will represent IXCs of that
size). In order to minimize controversy surrounding the selection and
appointment of Board members and to expedite the appointment process,
we strongly urge members of the industry and other groups represented
on the Board (e.g., IXCs, CMRS providers, schools) to nominate, by
consensus, a candidate for each position on the Board who possesses
substantial experience in, and knowledge of, telecommunications issues.
5. The Chairman of the Federal Communications Commission will
review the nominations submitted to the Commission by industry and non-
industry groups and select the members of the USAC Board of Directors.
If a group fails to reach consensus on a candidate to serve on the USAC
Board and instead submits the names of more than one nominee for a
single Board member position, the Chairman of the Federal
Communications Commission will select an individual or individuals who
will serve on the USAC Board. Similarly, if an industry or beneficiary
group fails to submit even a single nomination for a USAC Board member
position, the Chairman of the Federal Communications Commission will
select an individual from the appropriate industry or non-industry
group to serve on the USAC Board for the duration of the board member's
term.
6. We direct that, within 14 calendar days of the Chairman's
selection of USAC Board members, all USAC Board members be appointed to
the USAC Board, and the USAC Board hold its first meeting. Members of
the USAC Board will be appointed for two-year terms. Board members may
be re-appointed for subsequent terms pursuant to the initial nomination
and appointment process described above. In the event that a Board
member vacates his or her seat prior to the completion of his or her
term, USAC will notify the Chief, Common Carrier Bureau (Bureau) of
such vacancy and a successor will be chosen pursuant to the initial
nomination and appointment process described above.
C. Functions of USAC
7. In General. In connection with the temporary administration of
the universal service support mechanisms for schools and libraries and
rural health care providers, USAC will be directly responsible for
billing contributors, collecting contributions to the universal service
support mechanisms, and disbursing universal service support funds.
USAC also will be responsible for administering the universal service
support mechanisms for high cost areas and low-income consumers. In
addition, as discussed below, the High Cost and Low Income Committee of
the USAC Board will be responsible for implementing and overseeing
designated aspects of the support mechanisms for high cost areas and
low-income consumers. USAC, including members of the High Cost and Low
Income Committee, will be directly accountable to the Commission for
the performance of their respective responsiblities. Thus, the
Commission may take appropriate action including, for example,
directing the removal of one or more directors or recommending the
performance of an audit by an independent auditor, if the Commission
finds that USAC or the High Cost and Low Income Committee is not
performing its functions in accordance with Commission rules or if it
is determined that USAC's administrative expenses are unreasonable.
8. Billing and Collection. The billing and collection process, for
which USAC will be solely responsible, involves several steps: (1)
Collection of information regarding contributing entities' end-user
telecommunications revenues; (2) calculation of quarterly universal
service contribution factors; (3) calculation of individual entities'
contributions; (4) billing of contributors; and (5) receipt of
universal service contributions. USAC will perform these functions for
all of the universal service support programs (i.e., high cost, low-
income, schools and libraries, and rural health care providers).
9. For purposes of collecting information regarding contributing
entities' end-user telecommunications revenues, USAC will distribute,
receive, and process the Universal Service Worksheet (Worksheet), which
directs each contributing carrier or entity to
[[Page 41296]]
provide identification information and information regarding end-user
telecommunications revenues on a semi-annual basis. Following receipt
of the Worksheets, USAC will calculate the total of all of contributing
entities' interstate, intrastate, and international end-user
telecommunications revenues. This sum will represent the total
universal service contribution base and will be used to calculate the
quarterly contribution factors.
10. Consistent with our determinations in the Universal Service
Order, we conclude that during each funding year, there will be four
quarterly sets of universal service contribution factors. Universal
service contribution factors shall be based on the ratio of quarterly
projected costs of the support mechanisms, including administrative
expenses, to the applicable revenue base. USAC will adjust the
contribution factors for each quarter based on quarterly demand for
services and administrative costs, subject to any funding caps
established in the Universal Service Order.
11. Based on historic demand, the High Cost and Low Income
Committee will determine quarterly projected demand for support for the
high cost and low-income programs and submit those projections, as well
as the underlying data used to calculate the projections, to the
Commission for review at least 60 days before the start of each
quarter. Once these figures are approved by the Commission, USAC shall
use these projections to calculate the interstate and international
end-user telecommunications revenues contribution factor. Similarly,
the Schools and Libraries and Rural Health Care Corporations shall
submit all quarterly projections of demand for their respective
programs, including the underlying data used to calculate the
projections, to the Commission for review at least 60 days before the
start of each quarter. Once these figures are approved by the
Commission, USAC shall use these projections to calculate the quarterly
interstate, intrastate, and international end-user telecommunications
revenues contribution factor.
12. At least 60 days before the start of each quarter, USAC also
will project its administrative costs and submit those projected costs
to the Commission for review for reasonableness. USAC shall not
allocate all of its administrative costs to the high cost and low-
income programs' quarterly cost projections. USAC's costs that can be
directly attributed to the schools and libraries or rural health care
programs should be identified so that they can be included in the
projected administrative expenses of the relevant programs. USAC's
joint and common costs associated with billing and collection of
contributions or disbursement of funds also should be identified. One-
fourth of USAC's joint and common costs should be included in the
projected administrative expenses of the high cost, low-income, schools
and libraries, and rural health care programs, respectively. Once these
figures are approved by the Commission, USAC shall use the projections
of its costs to administer the high cost and low-income programs along
with the approved High Cost and Low Income Committee's projections of
demand to calculate the interstate and international end-user
telecommunications revenues contribution factor. Similarly, at least 60
days before the start of each quarter, the Schools and Libraries and
Rural Health Care Corporations will project their quarterly
administrative costs for the respective Corporations and submit those
projected costs to the Commission for review. Once these figures are
approved by the Commission, USAC shall use these projections, USAC's
projected administrative costs allocated to the schools and libraries
and to rural health care programs, and the Corporations' approved
projections of demand to calculate the quarterly interstate,
intrastate, and international end-user telecommunications revenues
contribution factor for the schools and libraries and rural health care
support programs. In addition to the actual projections of
administrative expenses, USAC and the Corporations must submit to the
Commission and the Common Carrier Bureau the underlying data used to
calculate their projections. By receiving USAC's and the Corporations'
projections of administrative expenses and the data supporting those
projections, the Commission will be able to determine whether USAC's
and the Corporations' administrative expenses are reasonable and take
appropriate action if it is determined that their projected expenses
are unreasonable. In addition, USAC will submit the latest total
revenue base information that it has collected from the Worksheets to
the Commission at least 60 days before the start of each quarter.
13. USAC must obtain Commission approval of all projections of
demand and administrative expenses before using them to calculate the
contribution factors and before applying the factors to calculate
individual contributions. The quarterly projections of demand and
administrative expenses, total revenue base information submitted by
USAC, the Committee, and the Corporations, and the proposed quarterly
contribution factors will be announced by the Commission in a Public
Notice and will be made available on the Commission's website. If the
Commission takes no action within 14 days of the date of the Public
Notice announcing the projections of demand and administrative expenses
and the contribution factors, then the projections and contribution
factors will be deemed approved by the Commission. The Commission
reserves the right to set projections of demand or administrative
expenses at amounts that the Commission determines will serve the
public interest at any time within the 14-day period following release
of the Commission's Public Notice.
14. After the Commission approves the projections of demand by the
Schools and Libraries and Rural Health Care Corporations and the High
Cost and Low Income Committee and the projected administrative expenses
of the Schools and Libraries and Rural Health Care Corporations and
USAC, USAC will calculate and apply the quarterly contribution factors
to determine each entity's contribution and bill and collect
contributions from contributors. To calculate an individual entity's
quarterly contribution, USAC will multiply the entity's universal
service contribution base (i.e., its interstate, intrastate, and
international end-user telecommunications revenues or its interstate
and international end-user telecommunications revenues) by the relevant
universal service contribution factor. USAC then will bill each
contributor for the amount of its contribution. Contributors must remit
all contributions to USAC by the contribution due date. USAC will file
with the Commission and the Bureau periodic reports regarding the
status of contributors' payments and failure to make payments.
15. If, in any quarter, contributions exceed universal service
support payments and administrative costs, contributions for the
following quarter will be reduced by an amount that takes into account
the unused funds from the previous quarter. Similar to our rules
governing NECA's administration of the TRS fund, if contributions in
one quarter are inadequate to meet demand, USAC may request authority
from the Commission to borrow funds commercially subject to any
spending or collection caps, with such debt secured by future universal
service contributions. In such event, contributions for subsequent
quarters will be increased by an amount to cover
[[Page 41297]]
the added costs associated with borrowing funds.
16. Disbursements. In disbursing universal service support in
connection with the support mechanisms for high cost areas and low-
income consumers, USAC will review and process data submitted by
service providers and disburse payments to eligible service providers,
as directed by the High Cost and Low Income Committee. In disbursing
universal service support in connection with the support mechanisms for
schools, libraries, and rural health care providers, USAC will be
directed by the Schools and Libraries and Rural Health Care
Corporations to disburse payments to service providers. Eligible
schools, libraries, and rural health care providers will be instructed
to provide to USAC and the Schools and Libraries Corporation or Rural
Health Care Corporation copies of a form designating the services
provided to the school, library or health care provider and the support
amount due to the service provider. We direct the Schools and Libraries
and Rural Health Care Corporations to authorize USAC to disburse the
appropriate payment amounts as quickly as possible, but no later than
20 days following receipt of the forms. We direct USAC to distribute
universal service support to eligible service providers as quickly as
possible, but no later than 20 days following receipt by USAC of the
Corporations' authorization to disburse funds under the schools,
libraries and rural health care programs.
D. Creation and Functions of High Cost and Low Income Committee
17. Consistent with Delaware law, we direct the USAC Board to adopt
bylaws providing for the creation of a special committee of its Board
to be designated the High Cost and Low Income Committee, which will
have the power and authority to bind the USAC Board on issues relating
specifically to the universal service support mechanisms for high cost
areas and low-income consumers.
18. The Committee will consist of 10 USAC Board members, including
seven service provider representatives (i.e., the three representatives
of ILECs, two representatives of IXCs, one representative of CMRS
providers, and one representative of CLECs) and the low-income, state
consumer advocate, and state telecommunications regulator
representatives described above.
19. The High Cost and Low Income Committee will have the power and
authority to make binding decisions on issues related to the
administration of the high cost and low-income support mechanisms, as
specifically delineated in USAC's bylaws, except on issues related to
USAC's billing, collection, and disbursement functions discussed above.
For example, the Committee will have binding authority to make
decisions related to how USAC projects demand for the high cost and
low-income programs, any forms needed for the programs, and processing
of such forms. The Committee also will have binding authority to set
the amounts of high cost and low-income support that USAC will disburse
to eligible telecommunications carriers.
20. Based on the authority granted to the administrator under
Commission universal service rules to audit contributors and carriers
that report data to the administrator, we conclude that the Committee
should have the authority to recommend the performance of such audits
of telecommunications carriers receiving universal service support,
when its members find it necessary to do so. We note that the
Commission independently may direct the performance of audits of
telecommunications carriers receiving high cost or low-income universal
service support. In the event that a majority of the members of the
Committee is unable to reach a decision, the Chairman of the Committee
is authorized to cast an additional vote to resolve the deadlock.
E. Creation of Schools and Libraries and Rural Health Care Corporations
21. As noted above, we reconsider, on our own motion, our decision
to require the administrator to select a subcontractor to manage the
application process for eligible schools and libraries and instead
direct NECA to incorporate two not-for-profit, unaffiliated
corporations that will be responsible for administering the schools and
libraries and rural health care programs, except with regard to those
matters directly related to billing, collection, and disbursement of
funds. Accordingly, as soon as possible following release of this
Order, NECA shall incorporate the Corporations as unaffiliated, not-
for-profit corporations under the laws of Delaware. The Corporations
shall be designated the Schools and Libraries Corporation and Rural
Health Care Corporation. NECA initially shall establish the Schools and
Libraries and Rural Health Care Corporations and then take such steps
as are necessary and appropriate under Delaware and federal law to make
the Corporations independent of, and unaffiliated with, NECA and USAC.
We direct NECA to submit to the Commission for approval the proposed
articles of incorporation, bylaws, and any documents necessary to
incorporate the Corporations, by July 31, 1997, in order to permit us
to determine prior to NECA's establishing the Corporations whether the
requirements of this Order have been satisfied.
22. To ensure continuity in, and efficient administration of, the
schools and libraries and rural health care programs, we conclude that
the Corporations should continue to perform their designated functions
even after the date on which the permanent administrator is appointed.
In making this determination, we reconsider the scope of the functions
that will be performed by the temporary administrator and by the
permanent administrator, which will be selected pursuant to the FACA.
Specifically, we provide that both USAC and, subsequently, the
permanent administrator will share responsibility with the Corporations
for administering the schools and libraries and rural health care
programs as detailed in section G herein. As reflected in those
sections, we assign to the Corporations responsibility for
administering significant portions of the schools and libraries and
rural health care programs, respectively, and assign to both USAC and
the permanent administrator responsibility for collection and
disbursement functions associated with the schools and libraries and
rural health care programs.
23. To the extent that we are modifying the scope of the functions
to be performed by the temporary and permanent administrators in
connection with the administration of the schools and libraries and
rural health care programs in a manner that differs from the scope
defined in our Universal Service Order, we also modify our charge to
the federal advisory committee that will be recommending to the
Commission a permanent administrator. Its task will now be to identify
and recommend as permanent administrator the candidate that is best
suited to perform the functions that we have set out in section C
above. As a condition of the appointment of a permanent administrator,
we also require that the entity selected as the permanent administrator
take whatever steps as are necessary or ordered by the Commission to
maintain the relationship and division of responsibilities with the
Corporations as described in this Order.
F. Boards of Directors of Schools and Libraries and Rural Health Care
Corporations
24. The Board of Directors of the Schools and Libraries Corporation
will
[[Page 41298]]
consist of seven members, including three schools representatives, one
libraries representative, one service provider representative, one
independent director, and the CEO of the corporation. The three
directors representing schools and one director representing libraries
will be the same directors as those representing schools and libraries
on the USAC Board. The Chairman of the Federal Communications
Commission will select, simultaneously with selection of the USAC Board
members, an individual not affiliated with schools, libraries, or
service providers to serve as an independent director of the Schools
and Libraries Corporation Board. An individual not affiliated with
schools, libraries, or service providers is one who, for example, does
not have a direct financial interest in schools, libraries, or service
providers and/or who is not employed by one of these entities. The USAC
Board will select the service provider representative who will serve on
the Schools and Libraries Corporation Board from among the service
provider representatives on the USAC Board within seven calendar days
of the USAC Board's first meeting. Once the service provider
representative has been appointed to the Schools and Libraries
Corporation Board, those six Board members (including the independent
director and the schools and libraries representatives) will submit a
CEO candidate to the Chairman for approval. The chosen CEO also will
serve on the Board of the Schools and Libraries Corporation. We note
that, unlike the other directors on the Schools and Libraries
Corporation's Board, the independent director and CEO will not serve on
the USAC Board.
25. The Board of Directors of the Rural Health Care Corporation
will consist of five members, including two rural health care
representatives, one service provider representative, one independent
director, and a CEO. One of the rural health care provider
representatives also will be the director representing rural health
care providers on the USAC Board. In a forthcoming public notice
soliciting nominations for the USAC Board of Directors, interested
parties also will be instructed to nominate a second rural health care
provider representative to serve only on the Board of Directors of the
Rural Health Care Corporation. The Chairman of the Federal
Communications Commission will select the second representative of
rural health care providers who will serve only on the Board of the
Rural Health Care Corporation simultaneously with the selection of the
members of the USAC Board. The Chairman of the Federal Communications
Commission also will select, simultaneously with the selection of the
USAC Board members, an individual not affiliated with rural health care
providers or service providers to serve as an independent director of
the Rural Health Care Corporation Board. An individual not affiliated
with rural health care providers or service providers is one who, for
example, does not have a direct financial interest in rural health care
providers or service providers and/or who is not employed by one of
these entities. The USAC Board will select a service provider
representative to serve on the Rural Health Care Corporation's Board
from among the service provider representatives on the USAC Board
within seven calendar days of the USAC Board's first meeting. Once the
service provider representative has been appointed to the Rural Health
Care Corporation Board, the four Board members (including the
independent director and the rural health care provider
representatives) will submit a CEO candidate to the Chairman for
approval. The chosen CEO also will serve on the Board of the Rural
Health Care Corporation. We note that the independent director, CEO,
and one rural health care provider representative will not serve on the
USAC Board.
26. We conclude that, with the exceptions discussed above, the
Corporations' directors representing schools, libraries, health care
providers, and telecommunications service providers should be the same
directors as those on the USAC Board representing schools, libraries,
rural health care providers, and telecommunications service providers.
Therefore, the four USAC Board members representing schools and
libraries and the one USAC Board member representing rural health care
providers will be appointed to the Boards of Directors of the Schools
and Libraries and Rural Health Care Corporation, respectively,
contemporaneously with their appointment to the USAC Board.
27. Like the members of the USAC Board, all of the Corporations'
Board members shall be appointed for two-year terms. Board members may
be reappointed for subsequent terms pursuant to the appointment process
used initially to select the Corporations' Board members, as discussed
above. In the event that a Corporation's Board member vacates his or
her seat prior to the completion of his or her term, the Corporations
will notify the Bureau of such vacancy and a successor will be chosen
pursuant to the process used initially to select the Corporation's
Board members. Removal of members of the Corporations' Board must be
consistent with Delaware law and may only occur with the approval of
the Chairman of the Federal Communications Commission.
G. Functions of Schools and Libraries and Rural Health Care
Corporations
28. The Schools and Libraries and Rural Health Care Corporations
will perform all functions relating to administering the support
mechanisms for eligible schools and libraries and rural health care
providers, except those directly related to billing and collecting
contributions and disbursing support, as discussed above. In
administering the support mechanisms for eligible schools and libraries
and rural health care providers, the Corporations must comply with all
Commission rules. The Corporations' functions will include, but will
not be limited to: (1) administering the application process for
eligible schools, libraries, and rural health care providers, including
the dissemination, processing, and review of applications for service
from schools, libraries, and rural health care providers; (2) creating
and maintaining a website on which applications for services will be
posted on behalf of schools, libraries, and rural health care providers
seeking to attract the competitive bids of service providers; (3)
performing outreach and public education functions, by, for example,
communicating with interested parties about the availability of, and
requirements for receiving, universal service support for schools,
libraries, and rural health care providers; (4) reviewing bills for
services that are submitted by schools, libraries, and rural health
care providers on which service providers designate the amount of
universal service support they should receive for services rendered and
on which schools, libraries, and rural health care providers confirm
that they have received such services; (5) submitting all quarterly
projections of demand and their own administrative expenses to the
Commission; (6) informing USAC, based on the information contained in
the bills for services provided, of the amount of universal service
support to be disbursed to service providers; (7) authorizing the
performance of audits of schools and libraries and rural health care
provider beneficiaries of universal service support; (8) and any other
function relating to the administration of the schools and libraries
and rural health care programs that is not
[[Page 41299]]
specifically assigned to USAC. With regard to authorizing the
performance of audits of schools and libraries, we clarify our decision
in the Universal Service Order that the Commission, in consultation
with the Department of Education, should engage and direct an
independent auditor to conduct audits of schools and libraries. Because
it will assume many of the functions related to the administration of
schools and libraries program and will work closely with eligible
schools and libraries, we conclude that the Schools and Libraries
Corporation, rather than the Commission in consulation with Department
of Education, is better suited to determine when the performance of
audits of schools and libraries should occur. For this reason, we
conclude that the Schools and Libraries Corporation, rather than the
Department of Education, should be authorized, in consultation with us,
to engage and direct the individual audit of schools and libraries.
29. Furthermore, we clarify our provision in the Universal Service
Order that the administrator should project school, library, and rural
health care provider demand for funds for the purpose of calculating
the universal service contribution factors, and monitor such demand for
the purpose of determining when, in the case of the schools and
libraries program, the $2 billion trigger has been reached, and when,
in the case of the rural health care program, the $400 million annual
cap has been reached. We specify that the Corporations, rather than
USAC or the permanent administrator, will monitor demand for the
purpose of determining when the $2 billion trigger has been reached in
the case of the schools and libraries program and when the $400 million
cap has been reached in the case of the rural health care providers
program. Once the $2 billion trigger has been reached, the Schools and
Libraries Corporation will be responsible for implementing the rules of
priority under which it will determine, consistent with our Universal
Service rules, the procedures by which the remaining funds will be
disbursed under the schools and libraries program. In addition, we
clarify that the Schools and Libraries and Rural Health Care
Corporations' administrative expenses shall be applied to their
respective programs' annual funding caps.
30. We also conclude that the Schools and Libraries Corporation may
review and certify schools' and libraries' technology plans when a
state agency has indicated that it will be unable to review such plans
within a reasonable time. We anticipate that consistent with the
Universal Service Order, the Department of Education and the Institute
for Museum and Library Services will recommend to the Commission
alternative review measures. Upon receipt of such recommendations, the
Commission will determine whether to adopt alternative review measures.
Furthermore, we clarify our statement in the Universal Service Order
that the administrator should classify schools and libraries as urban
or rural and use the discount matrix adopted in the Universal Service
Order to set the discount rate that will be applied to eligible
interstate services purchased by schools and libraries.
H. Implementation Issues
31. Creation and Scope of Authority of USAC. As noted above, we
direct NECA to establish USAC as a separate subsidiary. This separate
subsidiary will have separate directors, pursuant to the requirements
set forth above, and will maintain separate books of account from those
of NECA's other operations. We direct that the appointment of NECA as
the temporary administrator will become effective coincident with
NECA's incorporation of the USAC subsidiary and the Corporations. We
direct USAC to develop the necessary database systems, hire and train
personnel, and discuss with contributors the assessment of universal
service support requirements. We emphasize that, in its role as the
temporary administrator, USAC may engage only in activities directly
related to administration of the universal service support mechanisms.
We further find that USAC Board and High Cost and Low Income Committee
meetings shall be open to the public and shall be held in Washington,
DC., because this city is easily accessible and also may be
particularly convenient for the many interested parties that have
offices or representatives in the Washington, DC. area. We also
conclude that USAC Board members shall be entitled to receive
reimbursement for expenses directly incurred as a result of their
participation on the USAC Board.
32. Creation and Scope of Authority of Schools and Libraries and
Rural Health Care Corporations. We direct NECA to incorporate the
Schools and Libraries and Rural Health Care Corporations and to take
such steps as are necessary to ensure that the Corporations are
unaffiliated with either NECA or USAC once the Corporations begin to
perform their universal service functions. We assign to the Schools and
Libraries Corporation and the Rural Health Care Corporation the
authority to perform the functions designated in section G. above. We
anticipate that the Corporations may need to engage in transactions
with either NECA or USAC to enable them to begin operations as quickly
as possible. Such transactions may include contracts for services of
NECA and/or USAC employees, loans for the administration of the
universal service support mechanisms, and transfers of assets. Start-up
funds for the Corporations may not come from the TRS Fund or from TRS
administrative accounts. We expect, however, that the Corporations will
hire individuals other than NECA or USAC employees to perform functions
unrelated to USAC's functions as described in section IV.H., such as
reviewing schools' and libraries' technology plans. We also anticipate
that the Corporations may seek to borrow start-up funds directly from
commercial lenders.
33. We emphasize that, in administering the schools and libraries
and rural heath care programs, the Corporations may engage only in
activities directly related to administration of the program for which
each was created. We further find that the Corporations' Board meetings
shall be open to the public and shall be held in Washington, DC,
because this city is easily accessible and also may be particularly
convenient for the many interested parties that have offices or
representatives in the Washington, DC area. We also conclude that the
Corporations' Board members shall be entitled to receive reimbursement
for expenses directly incurred as a result of their participation on
that Corporation's Board.
34. Intercorporate Transactions. As noted above, we anticipate that
USAC and the Corporations may engage in transactions with NECA. We
expect that NECA, USAC, and the Corporations will engage in such
transactions whenever doing so would minimize expenses. We direct NECA
and USAC to provide such services, including loaning start-up funds,
upon the request of the Corporations on reasonable terms. As with the
Corporations' start-up funds, mentioned above, start-up funds for USAC
may not come from the TRS fund or from TRS administrative expense
accounts. All transactions that occur between NECA and USAC must be
conducted on an arm's length basis. For transactions between NECA and
USAC, NECA will be subject to the Commission's affiliate transaction
rules. We also direct NECA to revise its cost allocation manual (CAM)
to reflect the formation of USAC.
35. Accounting and Auditing Requirements. Concerns about fraud,
[[Page 41300]]
waste, and abuse occurring in universal service support programs lead
us to impose specific accounting and auditing requirements for USAC and
the Schools and Libraries and Rural Health Care Corporations. Thus,
USAC will maintain books of account in accordance with generally
accepted accounting principles (GAAP) that are separate from NECA's
books of account. Similarly, the Corporations will maintain books of
account in accordance with GAAP that are separate from USAC's books of
account and separate from each other. We direct that an audit be
performed of USAC's and the Corporations' books on an annual basis by
an independent auditor. In our Accounting Safeguards Order, 62 FR 2918
(January 21, 1997), we established specific audit procedures applicable
to separate subsidiaries of the BOCs under section 272(d) of the Act.
Because we conclude that oversight of the administration of the
universal service support mechanisms is necessary to ensure the
integrity of the support mechanisms, we apply to USAC and the
Corporations audit requirements similar to those contained in
Sec. 53.209 et seq. of our rules. Before selecting the independent
auditor, USAC and the Corporations shall submit to the staff of the
Bureau preliminary audit requirements, including the proposed scope of
the audit and the extent of the compliance and substantive testing. The
Bureau will review the preliminary audit requirements to determine
whether they are adequate to meet the audit objectives. The Bureau will
make any modifications that it deems necessary to the audit
requirements. After the audit requirements have been approved by the
Bureau, USAC and the Corporations each shall engage an independent
auditor to conduct an agreed-upon procedures audit following the
procedures determined by the Bureau. In making its selection, neither
USAC nor the Corporations shall engage an independent auditor that has
been involved in designing the accounting or reporting systems under
review in the audit. In addition, USAC and the Corporations each shall
require the independent auditor selected to develop a detailed audit
program based on the final audit requirements and submit such audit
program to the Bureau staff, which will determine whether any
modifications are necessary for purposes of incorporating the proposed
audit program into the final audit program.
36. Because the audit program is an agreed-upon procedures audit
that will be conducted to assure that USAC's and the Corporations'
administration of the support mechanisms serves the public interest,
USAC and the Corporations each shall require the independent auditor it
selects to inform the Bureau, during the course of an audit, of any
revisions the auditor makes to the final audit program or scope of the
audit. USAC shall require the independent auditor to notify the Bureau
of any meetings with USAC or NECA in which audit findings are
discussed, so that the Bureau can be kept apprised of audit results and
can ensure that the audit program is conducted in accordance with
Commission rules. Similarly, the Corporations shall require the
independent auditor to notify the Bureau of any meetings with the
Corporations in which audit findings are discussed. In addition, USAC
and the Corporations each shall require the independent auditor
selected to submit to the Bureau any accounting or rule interpretations
that either USAC or the Corporations find necessary to make to complete
the audit. By receiving the above information, the Bureau will be able
to ensure that the auditor examines areas the Bureau has determined
require review and that the Commission's rules are being followed.
37. USAC and the Corporations each shall require the independent
auditor selected, within 60 days after the end of the audit period, but
prior to discussing the audit findings with USAC, NECA, or the
Corporations, to submit a draft of the audit report to the Bureau. We
conclude that submission of the audit report to the Bureau in this time
period will permit an orderly release of the report while also allowing
the Bureau to assess the validity of the report's findings and the
adequacy of the work product. The independent auditor may request
additional time to perform additional audit work as recommended by the
Bureau staff. USAC and the Corporations each shall require the
independent auditor selected to submit the audit to USAC and the
Corporations, respectively, for their response to the audit findings.
Within 30 days after receiving the audit report, USAC and the
Corporations each shall respond to the audit findings and send a copy
of their response to the Bureau staff. USAC and the Corporations also
shall submit to the Bureau staff any reply that the independent auditor
may provide relating to USAC's and the Corporations' response. In
addition to the annual audit, we direct that a close-out audit of
USAC's and the Corporations' operations should be performed within six
months of the permanent administrator's beginning operations.
38. Recovery of Administrative Expenses. The permanent
administrator's, USAC's, Schools and Libraries Corporation's, and Rural
Health Care Corporation's annual administrative expenses, which may
include, but are not limited to, salaries, equipment costs, costs
associated with borrowing funds, operating expenses, directors'
reimbursement for expenses, and costs associated with auditing
contributors or support recipients, should be commensurate with the
administrative expenses of programs of similar size. Once projections
of the next quarter's administrative expenses have been approved by the
Commission, USAC shall disburse funds to the Schools and Libraries and
Rural Health Care Corporations for administrative expenses for the next
quarter. The Corporations shall submit to the Commission projected
quarterly budgets at least 60 days prior to the start of every quarter.
The Corporations' first projected budgets will include administrative
expenses, including any interest, incurred prior to the first budget
filing deadline. USAC will disburse payments to the Corporations on a
quarterly basis. Each of the Corporations will receive such payments
from the permanent administrator under the same terms as payments will
be received from USAC pursuant to this Order.
39. Nondisclosure of Information. The Commission will have full
access to all data received by the permanent administrator, USAC, and
the Corporations. Requests for Commission nondisclosure can be made
under Sec. 0.459 of the Commission's rules at the time that the subject
data is submitted to USAC or the Corporations. As required by our
rules, such requests for nondisclosure must contain a statement of the
reasons for withholding the materials from disclosure (e.g.,
competitive harm) and the facts supporting that statement. In any
event, all decisions regarding disclosure of company-specific
information will be made by the Commission. Therefore, we will require
the administrator, USAC, and the Corporations to keep confidential all
data obtained from universal service contributors, not to use such data
except for purposes of administering the universal service support
mechanisms, and not to disclose such data in company-specific form
unless directed to do so by the Commission.
40. Universal Service Worksheet. The Universal Service Worksheet,
which directs each contributing carrier or
[[Page 41301]]
entity to provide, on a semi-annual basis, identification information
and information regarding end-user telecommunications revenues. After
the Worksheet has been approved by the Office of Management and Budget
pursuant to the Paperwork Reduction Act of 1995, copies of the
Worksheet may be obtained from USAC or the FCC website. Carriers and
contributing entities are required to provide on the Worksheet gross,
end-user interstate, intrastate, and international telecommunications
revenues information. An officer of the contributing carrier or entity
must certify to the truth and accuracy of the Worksheet. The Worksheet
will be subject to verification by the Commission, the permanent
administrator, or USAC at the discretion of the Commission. Failure to
file the Worksheet or to submit required contributions may subject the
contributor to the enforcement provisions of the Act and any other
applicable law. The permanent administrator or USAC will advise the
Commission of any enforcement issues that arise and provide any
suggested response.
41. Bureau Authority to Modify Reporting Requirements. Because it
is difficult to determine in advance precisely the information that
will be needed to administer the new universal service programs, the
Bureau will have delegated authority to waive, reduce, or eliminate
contributor reporting requirements that may prove unnecessary. The
Bureau also will have delegated authority to require any additional
contributor reporting requirements necessary to the sound and efficient
administration of the universal service programs.
42. Transition to Permanent Administrator. We emphasize that our
appointment of NECA as the temporary administrator of the universal
service support mechanisms subject to its establishment of USAC and the
Corporations does not suggest that NECA or USAC will be selected as the
permanent administrator, nor does it suggest that NECA or USAC will
receive special consideration in the selection of a permanent
administrator. We condition NECA's appointment as temporary
administrator on NECA's and USAC's agreeing to the requirements of this
Order, including making available, if NECA is not appointed permanent
administrator, any and all intellectual property, including, but not
limited to, all records and information generated by or resulting from
its performance as temporary administrator, to whomever the Commission
directs, free of charge. Similarly, although the Corporations will
continue to have the same role in administering the schools and
libraries and rural health care programs once a permanent administrator
has been appointed as they will have with the temporary administrator,
we nevertheless require the Corporations, as a condition of their role
in the administration process, to make available to whomever the
Commission may direct, free of charge, any and all intellectual
property, including, but not limited to, all records and information
generated by or resulting from their role in administering the
universal service support mechanisms if their participation in
administering the schools and libraries and rural health care programs
should discontinue at any time. NECA, USAC, and the Corporations must
specify any property they propose to exclude from the foregoing
category of property based on the existence of such property prior to
NECA's assumption of duties pursuant to this Order. We note that a
federal advisory committee will be established to recommend to the
Commission a permanent administrator of the universal service support
mechanisms. Under the circumstances just described, we also direct
NECA, USAC, and the Corporations to cooperate fully with the permanent
administrator's efforts to assume its duties.
Procedural Matters
I. Final Regulatory Flexibility Analyses
43. This Order achieves two main goals. First, we amend our rules
to direct NECA to establish an independently functioning subsidiary
(USAC) so that, as required by the Universal Service Order, non-ILEC
interests are represented in the administration of the universal
service support mechanisms. We further direct NECA to create two
unaffiliated corporations to administer specific aspects of the
universal service support mechanisms for schools and libraries and
rural health care providers, respectively. For purposes of the
Regulatory Flexibility Act (RFA), we certify, pursuant to 5 U.S.C.605
that these actions will not have a significant impact on a substantial
number of small entities. Second, in this Order, we set forth the
procedures that the permanent administrator and temporary administrator
will follow to determine the amount of required universal service
contributions and to collect such contributions from carriers and other
affected entities. For this part of the Order, we have prepared a Final
Regulatory Flexibility Analysis (FRFA), as required by 5 U.S.C. 603.
Certification
44. In the NECA NPRM, the Commission tentatively certified that the
rules it proposed to adopt in this proceeding would not have a
significant economic impact on a substantial number of small entities
because the proposed rules did not pertain to small entities. We did
not receive any comments concerning our proposed certification. For the
reasons stated below, we certify that the rules directing NECA to
create USAC to administer temporarily certain aspects of the universal
service support mechanisms and directing NECA to establish two
unaffiliated corporations to administer specific aspects of the schools
and libraries and rural health care programs, will not have a
significant economic impact on a substantial number of small entities.
This certification conforms to the RFA, as amended by the Small
Business Regulatory Fairness Act of 1996 (SBREFA).
45. The NECA NPRM certified that no regulatory flexibility analysis
was required because the proposed rule changes applied only to NECA,
and NECA is not a small organization within the meaning of the RFA.
NECA is a non-profit, quasi-governmental association created to
administer the Commission's interstate access tariff and revenue
distributions processes and is not dominant in its field. Furthermore,
we found that the amendments to our rules proposed in the NECA NPRM did
not apply to other ``small business concerns'' because they proposed to
modify the composition of NECA's Board of Directors.
46. In the NECA NPRM, we tentatively concluded that NECA's
governance structure needed to become more representative of the
industry as whole in order for NECA to be appointed the temporary
administrator. In the Universal Service Order, we appointed NECA
temporary administrator on the condition that NECA make changes in its
governance that would render it more representative of non-ILEC
interests. This Order adopts rules directing NECA to create an
independently functioning subsidiary (i.e.., USAC) to temporarily
administer certain aspects of the universal service support mechanisms
and directing NECA to create two unaffiliated corporations to
administer certain aspects of the schools and libraries and rural
health care programs. We have not received any comments requesting that
we modify our initial certification that this rule change will not have
a
[[Page 41302]]
significant economic impact on a substantial number of small entities.
We therefore certify pursuant to section 605(b) of the RFA that the
rules adopted in this Order directing NECA to create an independent
subsidiary to administer temporarily certain aspects of the universal
service support mechanisms and directing NECA to create two
unaffiliated corporations to administer certain aspects of the schools
and libraries and rural health care programs, will not have a
significant impact on a substantial number of small entities.
Final Regulatory Flexibility Analysis
47. As required by section 603 of the RFA, an Initial Regulatory
Flexibility Analysis (IRFA) was incorporated in the 254 NPRM. The
Commission also prepared an IRFA in conjunction with the Recommended
Decision, seeking written public comment on the proposals in the 254
NPRM and Recommended Decision and included a FRFA in the Universal
Service Order. In our NECA NPRM, we tentatively certified that the rule
amendments under consideration would not have a significant economic
impact on a substantial number of small entities. We did not receive
any comments concerning the proposed certification. The Commission's
FRFA in this Order conforms to the RFA, as amended.
Need for and Objectives of This Order and the Rules Adopted Herein.
48. 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. In
the Universal Service Order, we adopted rules whose principal goal is
to reform our system of universal service support mechanisms so that
universal service is preserved and advanced as markets move toward
competition. The rules adopted in this Order clarify the structure and
responsibilities of the temporary administrator and unaffiliated
corporations and describe the steps these three entities must undertake
in administering the universal service support mechanisms adopted in
the Commission's Universal Service Order.
Summary and Analysis of the Significant Issues Raised by Public
Comments in Response to the IRFA.
49. No comments in response to the IRFA in addition to those
described in the Universal Service Order were filed.
Description and Estimates of the Number of Small Entities to Which the
Rules Adopted in This Report and Order Will Apply.
50. In the FRFA to the Universal Service Order, we described and
estimated the number of small entities that would be affected by the
new universal service rules, including the rule requiring
telecommunications carriers and other entities to contribute to the
universal service support mechanisms. The rules adopted here, which set
forth the procedures by which contributions will be made to the
universal service support mechanisms, will apply to the same
telecommunications carriers and entities affected by the universal
service rules. We therefore incorporate by reference paragraphs 890-922
of the Universal Service Order, which describe and estimate the number
of affected telecommunications carriers and entities.
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
Summary of Projected Reporting, Recordkeeping and Other Compliance
Requirements. 51. 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. The Universal Service Order FRFA
describes the obligation of telecommunications carriers and other
providers of telecommunications services to contribute to the universal
service support mechanisms and the concomitant requirement that they
provide information regarding their end-user telecommunications
revenues. This Order establishes the specific procedures that
telecommunications carriers and other providers of telecommunications
services will follow in providing such information to the administrator
and temporary administrator. To compute carrier contributions,
contributors must submit a semi-annual universal service Worksheet. The
Worksheet will require all contributors to submit information relating
to revenues derived from end users for telecommunications or
telecommunications services to the administrator and temporary
administrator of the support mechanisms. Contributors also will be
required to submit a quarterly payment to the administrator or
temporary administrator of the support mechanisms. Contributors that
provide services to schools, libraries, and rural health care providers
may be eligible to receive a credit against their contributions.
Contributors seeking a credit must submit to the administrator or
temporary administrator additional information regarding the services
provided at less than their pre-discount price to receive the credit.
Approximately 5,000 telecommunications carriers and providers will be
required to submit revenue information and payments. We sought to limit
the information requirements to the minimum necessary for evaluating
and processing the application and to deter possible abuse of process.
These tasks may require some legal and accounting skills.
Significant Alternatives and Steps Taken to Minimize Significant
Economic Impact on a Substantial Number of Small Entities Consistent
with Stated Objectives. 52. Pursuant to section 254(d), we concluded in
the Universal Service Order that carriers with annual contributions of
less than $100 will be exempt from universal service contribution and
reporting requirements. Nothing in this proceeding leads us to alter
our conclusion in the FRFA of the Universal Service Order that the de
minimis exception in section 254(d) may not properly be interpreted to
except, on the basis of their size, small carriers and other
telecommunications providers from the obligation to contribute to the
universal service support mechanisms or to decrease the relative amount
that they must contribute.
Report to Congress
53. The Commission shall send a copy of the FRFA and certification,
along with the Report and Order, in a report to Congress pursuant to
the SBREFA, 5 U.S.C. 801(a)(1)(A). A copy of the certification also
will be sent to the Chief Counsel for Advocacy of the SBA. Finally, a
copy or a summary of this FRFA and certification also will be published
in the Federal Register.
J. Effective Date
54. With respect to the rules adopted herein that are not subject
to the PRA, we find good cause to depart from the general requirement
of 5 U.S.C. 553(d) that final rules take effect not less than 30 days
after their publication in the Federal Register. We find good cause to
make the rules effective upon
[[Page 41303]]
publication in the Federal Register for the reasons described below.
55. First, the speedy establishment of both the USAC subsidiary and
the Corporations, is crucial to the Commission's effort to implement
promptly and effectively the new universal service program mandated by
section 254 of the Act. The Commission's Universal Service Order
requires that the program begin by January 1, 1998. To initiate the
program, and most notably the schools and libraries program by that
date, the USAC subsidiary and the Corporations must complete quickly a
number of administrative functions. USAC and the Corporations may not
begin to perform these functions until certain preliminary tasks, some
of which may require substantial, time-consuming deliberations among
interested parties, are completed. Such preliminary tasks include the
incorporation of both USAC and the Corporations and the appointment of
these entities' Boards of Directors.
56. We also find good cause to make the rules governing
establishment of the USAC subsidiary and the Corporations and
appointment of these entities' Boards of Directors effective upon
publication in the Federal Register. We make this determination because
the rules adopted here are based, at least in part, on the reform
proposal that NECA filed with the Commission on January 10, 1997, in
which NECA expressed willingness to immediately begin establishing a
subsidiary corporation to administer temporarily the universal service
support mechanisms. Furthermore, NECA has had notice of its appointment
as temporary administrator since the release of the Universal Service
Order on May 8, 1997, designating NECA as the temporary administrator.
Under these circumstances, the purpose of 5 U.S.C. Sec. 553(d), to
ensure an adequate period in which regulated entities may prepare to
comply with new rules, can be met without affording the usual 30-day
period prior to the rules' effective date. For this and the other
reasons described above, we find good cause to make the rules regarding
the establishment of the USAC subsidiary and the appointment of its
Board members effective upon publication in the Federal Register.
Ordering Clauses
57. Accordingly, it is ordered that, pursuant to sections 1, 4(i),
218-220, 254 and 403 of the Communications Act of 1934, as amended, 47
U.S.C. 151, 154(i), 201-05, 218-20, 254 and 403, that parts 54 and 69
of the Commission's rules, 47 CFR parts 54 and 69, are amended, as
specified below. The collections of information contained within
sections are contingent upon approval by the Office of Management and
Budget.
58. It is further ordered that, pursuant to section 553(d)(3) of
the Administrative Procedures Act, 5 U.S.C. 553(d)(3), except for
Secs. 54.709, 54.711, 54.713, and 69.614(c) subject to the Paperwork
Reduction Act (PRA), the rules adopted in this order shall, for good
cause shown, become effective August 1, 1997.
59. 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 Chairman of the Commission to perform the following
functions: (1) To review nominations to the USAC Board and select USAC
Board members; (2) to review the nomination for the rural health care
representative and select the representative who will serve only on the
Rural Health Care Board; (3) to select the independent directors who
will serve on the Schools and Libraries and Rural Health Care
Corporation's Boards; and (4) to review and approve candidates for
Corporation CEO positions.
60. 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 waive, reduce, or eliminate any contributor
reporting requirements that prove to be unnecessary or to require
contributors to submit any additional reporting requirements that the
Bureau deems necessary to the efficient administration of the universal
service support mechanisms; and (2) to oversee and to modify, as
necessary, the annual audit of USAC and the Schools and Libraries and
Rural Health Care Corporations.
61. It is further ordered that, pursuant to sections 1 and 4(i) of
the Communications Act of 1934, as amended, 47 U.S.C. 151, 154(i), the
members of the industry or non-industry groups that will be represented
on the Board are directed to submit their nominees selected by
consensus for USAC directors to the Chairman of the Federal
Communications Commission within 14 calendar days of the publication of
this Order in the Federal Register.
List of Subjects
47 CFR Part 54
Universal service.
47 CFR Part 69
Communications common carriers.
Federal Communications Commission.
William F. Caton,
Acting Secretary.
Rule Changes
Parts 54 and 69 of title 47 of the Code of Federal Regulations
(CFR) are amended as follows:
PART 54--UNIVERSAL SERVICE
1. The authority citation for part 54 continues to read as follows:
Authority: 47 U.S.C. 1, 4(i), 201, 214, and 254 unless otherwise
noted.
2. Section 54.5 is amended by revising the definition of
``Administrator'' and adding the following new definitions in
alphabetical order to read as follows:
Sec. 54.5 Terms and Definitions.
* * * * *
Administrator. The term ``Administrator'' shall refer to the
National Exchange Carrier Association, Inc. until the date that an
independent subsidiary of the National Exchange Carrier Association,
Inc. is incorporated and has commenced the administration of the
universal service support mechanisms. On that date and until the
permanent Administrator has commenced the permanent administration of
the universal service support mechanisms, the term ``Administrator''
shall refer to the independent subsidiary established by the National
Exchange Carrier Association, Inc. for the purpose of temporarily
administering the portions of the universal service support mechanisms
described in Sec. 69.616. On the date that the entity selected to
permanently administer the universal service support mechanisms
commences operations and thereafter, the term ``Administrator'' shall
refer to such entity.
* * * * *
Contributor. The term ``contributor'' shall refer to an entity
required to contribute to the universal service support mechanisms
pursuant to Sec. 54.703.
* * * * *
High Cost and Low Income Committee. The term ``High Cost and Low
Income Committee'' shall refer to a committee of the Board of Directors
of the Administrator's independent subsidiary that will have the power
and authority to bind the independent subsidiary's Board of Directors
on issues relating to the administration of the high
[[Page 41304]]
cost and low-income support mechanisms, as described in Sec. 69.615.
* * * * *
Rural Health Care Corporation. The term ``Rural Health Care
Corporation'' shall refer to the corporation created pursuant to
Sec. 69.617 that shall administer specified portions of the universal
service support mechanisms, as described in Sec. 69.618.
* * * * *
Schools and Libraries Corporation. The term ``Schools and Libraries
Corporation'' shall refer to the corporation created pursuant to
Sec. 69.617 that shall administer specified portions of the universal
service support mechanisms, as described in Sec. 69.619.
* * * * *
3. Section 54.504 is amended by revising the first sentence of
paragraph (b)(1), revising paragraph (b)(2)(vii), and revising the
first sentence of paragraph (b)(3) to read as follows:
Sec. 54.504 Requests for service.
* * * * *
(b) * * *
(1) Schools, libraries, and consortia, including those entities
wishing to receive discounts for eligible services under this subpart,
shall submit requests for services to the Schools and Libraries
Corporation. * * *
(2) * * *
(vii) The school, library, or consortium including those entities
has a technology plan that has been certified by its state, the Schools
and Libraries Corporation, 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
Schools and Libraries Corporation shall send confirmation of the
posting to the entity requesting services. * * *
* * * * *
4. Section 54.505 is amended by revising introductory paragraphs
(b)(3) and (c) to read as follows:
Sec. 54.505 Discounts.
* * * * *
(b) * * *
(3) The Schools and Libraries Corporation shall classify schools
and libraries as ``urban'' or ``rural'' based on location in an urban
or rural area, according to the following designations.
* * * * *
(c) Matrix. The Schools and Libraries Corporation 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.
* * * * *
5. Section 54.507 is amended by revising the first sentence of
paragraph (a), the second sentence of paragraph (c), removing the word
``administrator'' and adding, in its place, the word ``Administrator''
in paragraph (e), and revising paragraphs (f)(1), and (f)(4) to read as
follows:
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, with two exceptions. * * *
* * * * *
(c) * * * The Schools and Libraries Corporation shall maintain a
running tally of the funds already committed for the existing funding
year on the school and library website.
* * * * *
(f) * * *
(1) The Schools and Libraries Corporation 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
available 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.
* * * * *
(4) The Administrator shall notify the Schools and Libraries
Corporation of any funds still remaining 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 Schools and
Libraries Corporation shall direct the Administrator to allocate the
remaining available funds to all other eligible schools and libraries
in the order in which their requests have been received by the Schools
and Libraries Corporation, until the $250 million is exhausted or the
funding year ends.
6. Section 54.509 is amended by removing the word ``administrator''
in paragraph (a) and adding, in its place, the word ``Administrator,''
and revising paragraphs (b) and (c) to read as follows:
Sec. 54.509 Adjustments to the discount matrix.
* * * * *
(b) Reduction in percentage discounts. If the estimates schools and
libraries make of their future funding needs lead the Schools and
Libraries Corporation to predict that total funding requests for a
funding year will exceed the available funding, the Schools and
Libraries Corporation 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.
(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 inform the Schools and
Libraries Corporation of such remaining funds. The Schools and
Libraries Corporation then shall consult with the Commission to
establish the best way to distribute those funds.
7. Section 54.516 is amended by revising paragraph (b) to read as
follows:
Sec. 54.516 Auditing.
* * * * *
(b) Production of records. Schools and libraries shall produce such
records at the request of any auditor appointed by a state education
department, the Schools and Libraries Corporation, or any state or
federal agency with jurisdiction.
* * * * *
8. Section 54.603 is amended by revising paragraph (b)(2), the
first sentence of paragraph (b)(3), paragraph (b)(4), and paragraph
(b)(5) to read as follows:
Sec. 54.603 Competitive bidding.
* * * * *
(b) * * *
(2) The Rural Health Care Corporation shall post each request for
eligible services that it receives from an eligible health care
provider on the corporation's website designated for this purpose.
(3) After posting a description of services from a health care
provider on the website, the Rural Health Care Corporation shall send
confirmation of the posting to the entity requesting services. * * *
(4) After selecting a telecommunications carrier, the health care
provider shall certify to the Rural Health Care Corporation that the
provider 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
[[Page 41305]]
health care provider deems relevant to choosing a method of providing
the required health care services. The health care provider shall
submit to the Rural Health Care Corporation paper copies of the
responses or bids received in response to the requested services.
(5) The confirmation from the Rural Health Care Corporation shall
include the date after which the requester may sign a contract with its
chosen telecommunications carrier(s).
9. Section 54.609 is amended by revising the second sentence of
paragraph (b) to read as follows:
Sec. 54.609 Calculating support.
* * * * *
(b) * * * Absent documentation justifying the amount of universal
service support requested for health care providers participating in a
consortium, the Rural Health Care Corporation shall not allow
telecommunications carriers to offset, or receive reimbursement for,
the amount eligible for universal service support.
Sec. 54.701 Administrator of universal service support mechanisms.
[Amended]
10. Section 54.701 is amended by removing the words ``Temporary
Administrator'' wherever they occur.
11. Sections 54.709, 54.711, 54.713, and 54.715 are added to
subpart H to read as follows:
Sec. 54.709 Computations of required contributions to universal
service support mechanisms.
(a) Contributions to the universal service support mechanisms shall
be based on contributors' end-user telecommunications revenues and
contribution factors determined quarterly by the Administrator.
(1) For funding the schools and libraries and rural health care
programs, the subject revenues will be contributors' interstate,
intrastate, and international revenues derived from domestic end users
for telecommunications or telecommunications services. For funding the
high cost and low-income programs, the subject revenues will be
contributors' interstate and international revenues derived from
domestic end users for telecommunications or telecommunications
services.
(2) The quarterly universal service contribution factors shall be
based on the ratio of total projected quarterly expenses of the
universal service support programs to total end-user telecommunications
revenues. The Commission shall determine two contribution factors, one
of which shall be applied to interstate and international end-user
telecommunications revenues and the other of which shall be applied to
interstate, intrastate, and international end-user telecommunications
revenues. The Commission shall approve the Administrator's, the Schools
and Libraries Corporation's, and the Rural Health Care Corporation's
quarterly projected costs of universal service support programs, taking
into account demand for support and administrative expenses. The total
subject revenues shall be compiled by the Administrator based on
information contained in the Universal Service Worksheets described in
Sec. 54.711(a)
(3) Total projected expenses for universal service support programs
for each quarter must be approved by the Commission before they are
used to calculate the quarterly contribution factors and individual
contributions. For each quarter, the High Cost and Low Income Committee
or the permanent Administrator once the permanent administrator is
chosen and the Schools and Libraries and Rural Health Care Corporations
must submit their projections of demand for the high cost and low-
income programs, the schools and libraries program, and rural health
care program, respectively, and the basis for those projections, to the
Commission and the Common Carrier Bureau at least 60 calendar days
prior to the start of that quarter. For each quarter, the Administrator
and the Schools and Libraries and Rural Health Care Corporations must
submit their projections of administrative expenses for the high cost
and low-income programs, the schools and libraries program and the
rural health care program, respectively, and the basis for those
projections to the Commission and the Common Carrier Bureau at least 60
calendar days prior to the start of that quarter. The projections of
demand and administrative expenses and the contribution factors shall
be announced by the Commission in a Public Notice published in the
Federal Register and shall be made available on the Commission's
website. The Commission reserves the right to set projections of demand
and administrative expenses at amounts that the Commission determines
will serve the public interest at any time within the 14-day period
following publication of the Commission's Public Notice. If the
Commission takes no action within 14 days of the date of the Public
Notice announcing the projections of demand and administrative
expenses, the projections of demand and administrative expenses, and
contribution factors shall be deemed approved by the Commission. Once
the projections are approved, the Administrator shall apply the
quarterly contribution factors to determine individual contributions.
(4) The Administrator shall bill contributors and collect
contributions on a quarterly basis.
(b) If the contributions received by the Administrator in a quarter
exceed the amount of universal service support program contributions
and administrative costs for that quarter, the excess payments will be
carried forward to the following quarter. The contribution factors for
the following quarter will take into consideration the projected costs
of the support mechanisms for that quarter and the excess contributions
carried over from the previous quarter.
(c) If the contributions received by the Administrator in a quarter
are inadequate to meet the amount of universal service support program
payments and administrative costs for that quarter, the Administrator
shall request authority from the Commission to borrow funds
commercially, with such debt secured by future contributions.
Subsequent contribution factors will take into consideration the
projected costs of the support mechanisms and the additional costs
associated with borrowing funds.
(d) If a contributor fails to file a Universal Service Worksheet by
the date on which it is due, the Administrator shall bill that
contributor based on whatever relevant data the Administrator has
available, including, but not limited to, the number of lines
presubscribed to the contributor and data from previous years, taking
into consideration any estimated changes in such data.
Sec. 54.711 Contributor reporting requirements.
(a) Contributions shall be calculated and filed in accordance with
the Universal Service Worksheet. The Universal Service Worksheet sets
forth information that the contributor must submit to the Administrator
on a semi-annual basis. The Commission shall announce by Public Notice
published in the Federal Register and on its website the manner of
payment and dates by which payments must be made. An officer of the
contributor must certify to the truth and accuracy of the Universal
Service Worksheet, and the Commission or the Administrator may verify
any information contained in the Universal Service Worksheet at the
discretion of the Commission. Inaccurate or untruthful information
contained in the Universal Service Worksheet may lead
[[Page 41306]]
to prosecution under the criminal provisions of Title 18 of the United
States Code. The Administrator shall advise the Commission of any
enforcement issues that arise and provide any suggested response.
(b) The Commission shall have access to all data reported to the
Administrator, Rural Health Care Corporation, and Schools and Libraries
Corporation. Contributors may make requests for Commission
nondisclosure of company-specific information under Sec. 0.459 of this
chapter at the time that the subject data are submitted to the
Administrator. The Commission shall make all decisions regarding
nondisclosure of company-specific information. The Administrator, Rural
Health Care Corporation, and Schools and Libraries Corporation shall
keep confidential all data obtained from contributors, shall not use
such data except for purposes of administering the universal service
support programs, and shall not disclose such data in company-specific
form unless directed to do so by the Commission.
(c) The Bureau may waive, reduce, or eliminate contributor
reporting requirements that prove unnecessary and require additional
reporting requirements that the Bureau deems necessary to the sound and
efficient administration of the universal service support mechanisms.
Sec. 54.713 Contributors' failure to report or to contribute.
A contributor that fails to file a Universal Service Worksheet and
subsequently is billed by the Administrator shall pay the amount for
which it is billed. The Administrator may bill a contributor a separate
assessment for reasonable costs incurred because of that contributor's
filing of an untruthful or inaccurate Universal Service Worksheet,
failure to file the Universal Service Worksheet, or late payment of
contributions. Failure to file the Universal Service Worksheet or to
submit required quarterly contributions may subject the contributor to
the enforcement provisions of the Act and any other applicable law. The
Administrator shall advise the Commission of any enforcement issues
that arise and provide any suggested response. Once a contributor
complies with the Universal Service Worksheet filing requirements, the
Administrator may refund any overpayments made by the contributor, less
any fees, interest, or costs.
Sec. 54.715 Administrator's functions.
The Administrator shall have the same functions as the independent
subsidiary set out in Sec. 69.616 of this chapter.
PART 69--ACCESS CHARGES
12. The authority citation for part 69 is revised to read as
follows:
Authority: 47 U.S.C. 154, 201, 202, 203, 205, 218, 220, 254,
403.
13. Section 69.600 is added to read as follows:
Sec. 69.600 Definitions.
High Cost and Low Income Committee. The term ``High Cost and Low
Income Committee'' shall refer to a committee of the Board of Directors
of the Administrator's independent subsidiary that will have the power
and authority to bind the independent subsidiary's Board of Directors
on issues relating to the administration of the high cost and low-
income support mechanisms, as described in Sec. 69.615.
Rural Health Care Corporation. The term ``Rural Health Care
Corporation'' shall refer to the corporation created pursuant to
Sec. 69.617 that shall administer specified portions of the universal
service support mechanisms, as described in Sec. 69.618.
Schools and Libraries Corporation. The term ``Schools and Libraries
Corporation'' shall refer to the corporation created pursuant to
Sec. 69.617 that shall administer specified portions of the universal
service support mechanisms, as described in Sec. 69.619.
14. Section 69.603 is amended by revising paragraphs (c), (d), and
(e), removing paragraph (f), and redsignating paragraphs (g), (h), and
(i) as (f), (g), and (h) to read as follows:
Sec. 69.603 Association functions.
* * * * *
(c) Upon the incorporation and commencement of operations by the
association's independent subsidiary that, pursuant to Sec. 69.613(a),
will administer temporarily specified portions of the universal service
support mechanisms, the association shall no longer administer the
Universal Service charge, including the direct billing to and
collection of associated revenues on a monthly basis from interexchange
carriers pursuant to Sec. 60.116 of this chapter and the distribution
of these revenues to qualified telephone companies based on their share
of expenses assigned to the Universal Service Factor portion of the
interstate allocation pursuant to Sec. 36.631 of this chapter. Such
functions shall be assumed by the independent subsidiary of the
association as provided in Sec. 69.613. Commencing on January 1, 1998,
the billing and collection of universal service support for high cost
areas shall be performed in a manner consistent with Sec. 54.709 of
this chapter.
(d) Upon the incorporation and commencement of operations by the
association's independent subsidiary that, pursuant to Sec. 69.613,
will administer temporarily specified portions of the universal service
support mechanisms, the association shall no longer administer the
Lifeline Assistance charge, including the direct billing to and
collection of associated revenues on a monthly basis from interexchange
carriers pursuant to Sec. 69.117, and the distribution of these
revenues to qualified telephone companies based on their share of
expenses assigned to the Lifeline Assistance Fund pursuant to
Sec. 36.741 of this chapter and of End User Common Line charges
associated with the operation of Sec. 69.104(j) through (l). Such
functions shall be assumed by the independent subsidiary of the
association as provided in Sec. 69.613. Commencing on January 1, 1998,
the billing and collection of Lifeline support shall be performed in a
manner consistent with Sec. 54.709 of this chapter.
(e) Upon the incorporation and commencement of operations by the
association's independent subsidiary that, pursuant to Sec. 69.613,
will administer temporarily specified portions of the universal service
support mechanisms, the association shall no longer compute, in
accordance with Secs. 69.105 and 69.612, the mandatory Long Term
Support payment of telephone companies that are not association Common
Line tariff participants, bill or collect the appropriate amounts on a
monthly basis from such telephone companies, or distribute Long Terms
Support revenue among association Carrier Common Line tariff
participants. Such functions shall be assumed by the independent
subsidiary of the association as provided in Sec. 69.613. Commencing on
January 1, 1998, the computation, billing, and collection of Long Term
Support shall be performed in a manner consistent with Sec. 54.303 of
this chapter.
* * * * *
15. Sections 69.613 through 69.622 are added to subpart G to read
as follows:
Sec. 69.613 Temporary administrator of universal service support
mechanisms.
(a) The association shall establish an independent subsidiary
through which the association shall administer temporarily the portions
of the universal service support mechanisms described in Sec. 69.616
until the permanent Administrator is established and ready
[[Page 41307]]
to commence operations. The independent subsidiary shall be
incorporated under the laws of Delaware and shall be designated the
Universal Service Administrative Company. The association shall submit
the independent subsidiary's proposed articles of incorporation,
bylaws, and any other documents necessary to incorporate the
independent subsidiary to the Commission by August 1, 1997 for review
prior to the independent subsidiary's incorporation.
(b) As a condition of its appointment as the temporary
Administrator of the universal service support mechanisms, the
association shall agree to make available, if the association or its
independent subsidiary is not appointed permanent Administrator, any
and all intellectual property, including, but not limited to, all
records and information generated by or resulting from the independent
subsidiary's temporary administration of the universal service support
mechanisms, and to make such property available to whomever the
Commission directs, free of charge. Such property includes, but is not
limited to, databases, processing systems, computer software programs,
lists, records, information, or equipment created or purchased and used
in the temporary administration of the universal service support
mechanisms. The association must specify any property it proposes to
exclude from the foregoing types of property based on the existence of
such property prior to the effective date of the association's
appointment as the temporary Administrator.
(c) As a further condition of its appointment as the temporary
Administrator of the universal service support mechanisms, the
association and the independent subsidiary must provide services to the
Corporations, such as contracting for the services of association or
independent subsidiary employees, loans or transfers of assets, upon
the request of the Corporations and on reasonable terms.
Sec. 69.614 Independent subsidiary Board of Directors.
(a) The independent subsidiary described in Sec. 69.613(a) shall
have a Board of Directors separate from the association's Board of
Directors. Except as expressly permitted, the association's Board of
Directors shall be prohibited from participating in the functions of
the independent subsidiary.
(b) The independent subsidiary's Board of Directors shall consist
of 17 directors:
(1) Three directors shall represent incumbent local exchange
carriers, with one director representing the Bell Operating Companies
and GTE, one director representing ILECs (other than the Bell Operating
Companies) with annual operating revenues in excess of $40 million, and
one director representing ILECs (other than the Bell Operating
Companies) with annual operating revenues of $40 million or less;
(2) Two directors shall represent interexchange carriers, with one
director representing interexchange carriers with more than $3 billion
in annual operating revenues and one director representing
interexchange carriers with annual operating revenues of $3 billion or
less;
(3) One director shall represent commercial mobile radio service
(CMRS) providers;
(4) One director shall represent competitive local exchange
carriers;
(5) One director shall represent cable operators;
(6) One director shall represent information service providers;
(7) Three directors shall represent schools that are eligible to
receive discounts pursuant to Sec. 54.501 of this chapter;
(8) One director shall represent libraries that are eligible to
receive discounts pursuant to Sec. 54.501 of this chapter;
(9) One director shall represent rural health care providers that
are eligible to receive supported services pursuant to Sec. 54.601 of
this chapter;
(10) One director shall represent low-income consumers;
(11) One director shall represent state telecommunications
regulators; and
(12) One director shall represent state consumer advocates.
(c) The industry and non-industry groups that will be represented
on the independent subsidiary's Board of Directors as specified in
Sec. 69.614(b)(1) through (12) shall nominate by consensus the
independent subsidiary's directors. Each of these industry and non-
industry groups shall submit the name of its nominee for a seat on the
independent subsidiary's Board of Directors, along with relevant
professional and biographical information about the nominee, to the
Chairman of the Federal Communications Commission within 14 calendar
days of the publication of these rules in the Federal Register. Only
members of the industry or non-industry group that a Board member will
represent may submit a nomination for that position.
(d) The Chairman of the Federal Communications Commission shall
review the nominations submitted by industry and non-industry groups
and shall select the independent subsidiary's Board of Directors. If an
industry or non-industry group does not reach consensus on a nominee or
fails to submit a nomination for a position on the independent
subsidiary's Board of Directors, the Chairman of the Federal
Communications Commission shall select an individual to represent such
group on the independent subsidiary's Board of Directors.
(e) The directors on the independent subsidiary's Board shall be
appointed for two-year terms and may be reappointed for subsequent
terms pursuant to the initial nomination and appointment process
described in paragraph (d) of this section. If a Board member vacates
his or her seat prior to the completion of his or her term, the
independent subsidiary will notify the Common Carrier Bureau of such
vacancy, and a successor will be chosen pursuant to the initial
nomination and appointment process described in paragraph (d) of this
section
(f) The independent subsidiary's Board of Directors shall convene
its first meeting within 14 calendar days of the appointment of the
directors to the independent subsidiary's Board.
(g) All meetings of the independent subsidiary's Board of Directors
shall be open to the public and held in Washington, D.C.
(h) Each member of the independent subsidiary's Board of Directors
shall be entitled to receive reimbursement for expenses directly
incurred as a result of his or her participation on the independent
subsidiary's Board of Directors.
Sec. 69.615 High Cost and Low Income Committee.
The independent subsidiary's Board of Directors shall require in
its bylaws the creation of a High Cost and Low Income Committee with
the power and authority to bind the independent subsidiary's Board of
Directors on issues relating to the administration of the high cost and
low-income support mechanisms, as specifically delineated in the
independent subsidiary's bylaws. The High Cost and Low-Income Committee
will consist of ten members: the seven service provider representatives
(i.e., the representatives listed in Sec. 69.614(b)(1) through (4)) and
the low-income, state consumer advocate, and state telecommunications
regulator representatives. In the event that a majority of the members
of the Committee is unable to reach a decision, the Chairman of the
Committee is authorized to cast an additional vote to resolve the
deadlock.
[[Page 41308]]
Sec. 69.616 Independent subsidiary functions.
(a) The independent subsidiary shall be solely responsible for
administering the universal service support mechanisms for high-cost
areas and low-income consumers, including billing contributors,
collecting contributions to the universal service support mechanisms,
and disbursing universal service support funds. The independent
subsidiary also shall be required to perform any other duties of the
Administrator that relate to the billing, collection, and disbursement
of funds that are specified elsewhere in the Commission's universal
service rules.
(b) With respect to the universal service support mechanisms for
schools, libraries, and rural health care providers, the independent
subsidiary shall be responsible for billing contributors to the
universal service support mechanisms, collecting contributions to the
universal service support mechanisms, and disbursing universal service
support funds within 20 days following receipt of authorization to
disburse such funds from the Schools and Libraries Corporation and
Rural Health Care Corporation.
(c) The independent subsidiary may advocate positions before the
Commission and its staff only on administrative matters relating to the
universal service support mechanisms.
(d) The independent subsidiary shall maintain books of account
separate from those of the association. The independent subsidiary's
books of account shall be maintained in accordance with generally
accepted accounting principles. The independent subsidiary may borrow
start-up funds from NECA. Such funds may not be drawn from the
Telecommunications Relay Services (TRS) fund or TRS administrative
expense accounts.
Sec. 69.617 Schools and Libraries Corporation and Rural Health Care
Corporation.
(a) Schools and Libraries and Rural Health Care Corporations. The
association shall incorporate two unaffiliated corporations. The two
corporations shall be not-for-profit, non-stock corporations
incorporated in the state of Delaware. The corporations shall be
designated the Schools and Libraries Corporation and the Rural Health
Care Corporation. After incorporating the Schools and Libraries
Corporation and the Rural Health Care Corporation, the association
shall take such steps as are necessary to make the Corporations
independent of, and unaffiliated with, the association and independent
subsidiary. The association shall submit to the Commission for approval
the proposed articles of incorporation, bylaws, and any documents
necessary to incorporate the Schools and Libraries Corporation and
Rural Health Care Corporation by August 1, 1997. The Schools and
Libraries Corporation and Rural Health Care Corporation should continue
to perform their designated functions, as described in Secs. 69.618 and
69.619, after the date on which the permanent Administrator is selected
and commences operations.
(b) Schools and Libraries Corporation's Board of Directors. The
Board of Directors of the Schools and Libraries Corporation shall
consist of seven directors and will be composed as follows:
(1) The three directors representing eligible schools on the
independent subsidiary's Board of Directors also shall serve on the
Board of Directors of the Schools and Libraries Corporation;
(2) The director representing eligible libraries on the independent
subsidiary's Board of Directors also shall serve on the Board of
Directors of the Schools and Libraries Corporation.
(3) One director representing one of the categories of
telecommunications service providers on the independent subsidiary's
Board of Directors also shall serve on the Schools and Libraries
Corporation's Board of Directors. The independent subsidiary's Board of
Directors shall select the telecommunications service provider
representative who will serve on the Schools and Libraries
Corporation's Board of Directors within seven calendar days of the
first meeting of the independent subsidiary's Board of Directors;
(4) One independent director who does not represent schools,
libraries, or service providers shall be selected by the Chairman of
the Federal Communications Commission to serve on the Schools and
Libraries Corporation's Board of Directors. The Chairman of the Federal
Communications Commission will select such an independent director
simultaneously with selection of the independent subsidiary's Board
members.
(5) The directors representing schools, libraries, and service
providers and the independent director on the Schools and Libraries
Corporation's Board of Directors shall submit to the Chairman of the
Federal Communications Commission a candidate to serve as the Chief
Executive Officer (CEO) of the Schools and Libraries Corporation. The
chosen CEO shall serve on the Schools and Libraries Corporation's Board
of Directors.
(c) Rural Health Care Corporation's Board of Directors. The Board
of Directors of the Rural Health Care Corporation shall consist of five
directors and will be composed as follows:
(1) The director representing rural health care providers on the
independent subsidiary's Board of Directors also shall serve on the
Rural Health Care Corporation's Board of Directors;
(2) An additional director representing rural health care providers
also shall serve on the Rural Health Care Corporation's Board of
Directors. Interested parties shall submit nominations for the
additional director representing rural health care providers
simultaneously with submitting nominations for the independent
subsidiary's Board of Directors, as described in Sec. 69.614(c). The
Chairman of the Federal Communications Commission will select the
additional rural health care provider representative simultaneously
with the selection of the members of the independent subsidiary's Board
of Directors.
(3) One director representing one of the categories of
telecommunications service providers on the independent subsidiary's
Board of Directors also shall serve on the Rural Health Care
Corporation's Board of Directors. The independent subsidiary's Board of
Directors shall select the telecommunications service provider
representative who will serve on the Rural Health Care Corporation's
Board within seven calendar days of the first meeting of the
independent subsidiary's Board of Directors;
(4) One independent director who does not represent rural health
care providers or service providers shall be selected by the Chairman
of the Federal Communications Commission to serve on the Rural Health
Care Corporation's Board of Directors. The Chairman will select,
simultaneously with selection of the independent subsidiary's Board of
Directors, the independent director to serve on the Rural Health Care
Corporation's Board of Directors;
(5) The directors representing rural health care providers and
service providers and the independent director on the Rural Health Care
Corporation's Board of Directors shall submit to the Chairman of the
Federal Communications Commission a candidate to serve as the chief
executive officer (CEO) of the Rural Health Care Corporation. The
chosen CEO shall serve on the Rural Health Care Corporation's Board of
Directors.
[[Page 41309]]
(d) All of the Board members of the Schools and Libraries
Corporation and Rural Health Care Corporation shall be appointed for
two-year terms. Directors may be reappointed for subsequent terms
pursuant to the appointment process used initially to select the
Corporations' Boards of Directors described in Sec. 69.617 (b) and (c).
In the event that a director vacates his or her seat prior to the
completion of his or her term, the Corporation will notify the Common
Carrier Bureau of such vacancy and a successor will be chosen pursuant
to the initial nomination and appointment process described in
Sec. 69.617(b) and (c). Removal of members from the Board of the
Schools and Libraries Corporation or Rural Health Care Corporation may
only occur with the approval of the Chairman of the Federal
Communications Commission.
(e) All Board of Directors meetings of the Rural Health Care
Corporation and the Schools and Libraries Corporation shall be open to
the public and held in Washington, D.C.
(f) Each member of the Board of Directors of the Rural Health Care
Corporation and Schools and Libraries Corporation shall be entitled to
receive reimbursement for expenses directly incurred as a result of his
or her participation on such Board of Directors.
Sec. 69.618 Rural Health Care Corporation functions.
(a) The Rural Health Care Corporation shall perform the following
functions as they relate to the support mechanisms for eligible rural
health care providers:
(1) Administering the application process for rural health care
providers, including the dissemination, processing, and review of
applications for service from rural health care providers;
(2) Creating and maintaining a website on which applications for
services will be posted on behalf of rural health care providers;
(3) Performing outreach and public education functions;
(4) Reviewing bills for services that are submitted by rural health
care providers on which service providers designate the amount of
universal service support they should receive for services rendered and
on which rural health care providers and confirm that they have
received such services;
(5) Monitoring demand for the purpose of determining when the $400
million cap has been reached in the case of the rural health care
providers program;
(6) Submitting to the Commission all quarterly projections of
demand and administrative expenses, as described in Sec. 54.709(a)(3)
of this chapter;
(7) Informing the independent subsidiary, as quickly as possible,
but no later than 20 days following the Rural Health Care Corporation's
receipt of the bills for services, of the amount of universal service
support to be disbursed to service providers;
(8) Authorizing the performance of audits of rural health care
provider beneficiaries of universal service support; and
(9) Any other function relating to the administration of the rural
health care program that is not specifically assigned to the
independent subsidiary.
(b) The Rural Health Care Corporation shall maintain books of
account separate from those of the association, the independent
subsidiary, and the Schools and Libraries Corporation. The Rural Health
Care Corporation's books of account shall be maintained in accordance
with generally accepted accounting principles.
(c) The Rural Health Care Corporation may borrow start-up funds
from the association or the independent subsidiary, but such funds may
not come from the Telecommunications Relay Services (TRS) fund or TRS
administrative expense accounts.
(d) The Rural Health Care Corporation shall make available to
whomever the Commission directs, free of charge, any and all
intellectual property, including, but not limited to, all records and
information generated by or resulting from its role in administering
the rural health care program, if its participation in administering
the rural health care program ends. The Rural Health Care Corporation
must specify any property it proposes to exclude from the foregoing
types of property based on the existence of such property prior to the
incorporation of the Rural Health Care Corporation.
Sec. 69.619 Schools and Libraries Corporation functions.
(a) The Schools and Libraries Corporation shall perform the
following functions as they relate to the support mechanisms for
eligible schools and libraries:
(1) administering the application process for schools and libraries
including the dissemination, processing, and review of applications for
service from schools and libraries;
(2) creating and maintaining a website on which applications for
services will be posted on behalf of schools and libraries;
(3) performing outreach and public education functions;
(4) reviewing bills for services that are submitted by schools and
libraries and on which service providers designate the amount of
universal service support they should receive for services rendered and
on which schools and libraries confirm that they have received such
services;
(5) monitoring demand for the purpose of determining when the $2
billion trigger has been reached in the case of the schools and
libraries program;
(6) submitting to the Commission all quarterly projections of
demand and administrative expenses, as described in Sec. 54.709(a)(3)
of this chapter;
(7) informing the independent subsidiary, as quickly as possible,
but no later than 20 days following the Schools and Libraries
Corporation's receipt of the bills for services, of the amount of
universal service support to be disbursed to service providers;
(8) authorizing the performance of audits of schools and libraries
beneficiaries of universal service support; and
(9) any other function relating to the administration of the
schools and libraries programs that is not specifically assigned to the
independent subsidiary.
(b) The Schools and Libraries Corporation shall implement the rules
of priority in accordance with Sec. 54.507(f) of this chapter.
(c) The Schools and Libraries Corporation may review and certify
schools' and libraries' technology plans when a state agency has
indicated that it will be unable to review such plans within a
reasonable time.
(d ) The Schools and Libraries Corporation shall classify schools
and libraries as urban or rural and use the discount matrix established
in Sec. 54.505(c) of this chapter to set the discount rate to be
applied to services purchased by eligible schools and libraries.
(e) The Schools and Libraries Corporation shall maintain books of
account separate from those of the association, the independent
subsidiary, and the Rural Health Care Corporation. The Schools and
Libraries Corporation's books of account shall be maintained in
accordance with generally accepted accounting principles.
(f ) The Schools and Libraries Corporation may borrow start-up
funds from the association or the independent subsidiary, but such
funds may not come from the Telecommunications Relay Services (TRS)
fund or TRS administrative expense accounts.
(g) The Schools and Libraries Corporation shall make available to
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whomever the Commission directs, free of charge, any and all
intellectual property, including, but not limited to, all records and
information generated by or resulting from its role in administering
the schools and libraries program, if its participation in
administering the schools and libraries program ends. The Schools and
Libraries Corporation must specify any property it proposes to exclude
from the foregoing types of property based on the existence of such
property prior to the incorporation of the Schools and Libraries
Corporation.
Sec. 69.620 Administrative expenses of independent subsidiary, Schools
and Libraries Corporation, and Rural Health Care Corporation.
(a) The annual administrative expenses of the independent
subsidiary, Schools and Libraries Corporation, and Rural Health Care
Corporation should be commensurate with the administrative expenses of
programs of similar size and may include, but are not limited to,
salaries of officers and operations personnel, the costs of borrowing
funds, equipment costs, operating expenses, directors' expenses, and
costs associated with auditing contributors or support recipients.
(b) The independent subsidiary, Schools and Libraries Corporation,
and Rural Health Care Corporation shall submit to the Commission
projected quarterly budgets at least 60 days prior to the start of
every quarter. The Commission must approve the projected quarterly
budgets before the independent subsidiary disburses funds for
administrative expenses to the Schools and Libraries Corporation and
Rural Health Care Corporation. The Schools and Libraries Corporation's
and Rural Health Care Corporation's administrative expenses shall be
paid from the universal support mechanisms. The administrative expenses
of the Schools and Libraries Corporation and Rural Health Care
Corporation shall be deducted from their respective programs' annual
funding, which is capped at $2.25 billion in the case of the schools
and libraries program, as established in Sec. 54.507 of this chapter,
and capped at $400 million in the case of the rural health care
providers program, as established in Sec. 54.623 of this chapter. The
Schools and Libraries Corporation and Rural Health Care Corporation
shall receive payments for administrative expenses from the permanent
Administrator under the same terms as they shall receive payments
pursuant to this paragraph.
Sec. 69.621 Audits of independent subsidiary, Schools and Libraries
Corporation, and Rural Health Care Corporation.
The independent subsidiary, the Schools and Libraries Corporation,
and the Rural Health Care Corporation shall obtain and pay for annual
audits conducted by independent auditors to examine their operations
and books of account to determine, among other things, whether they are
properly administering the universal service support mechanisms to
prevent fraud, waste, and abuse:
(a) Before selecting an independent auditor, the independent
subsidiary, Schools and Libraries Corporation, and Rural Health Care
Corporation shall submit preliminary audit requirements, including the
proposed scope of the audits and the extent of compliance and
substantive testing, to the Common Carrier Bureau Audit Staff;
(b) The Common Carrier Bureau Audit Staff shall review the
preliminary audit requirements to determine whether they are adequate
to meet the audit objectives. The Common Carrier Bureau Audit Staff
shall prescribe modifications that shall be incorporated into the final
audit requirements;
(c) After the audit requirements have been approved by the Common
Carrier Bureau Audit Staff, the independent subsidiary, Schools and
Libraries Corporation, and Rural Health Care Corporation each shall
engage within 30 calendar days an independent auditor to conduct the
annual audit required by this subsection. In making their selections,
the independent subsidiary, Schools and Libraries Corporation, and
Rural Health Care Corporation shall not engage any independent auditor
who has been involved in designing any of the accounting or reporting
systems under review in the audit;
(d) The independent auditors selected by the independent
subsidiary, Schools and Libraries Corporation, and Rural Health Care
Corporation to conduct the annual audits shall develop detailed audit
programs based on the final audit requirements and submit them to the
Common Carrier Bureau Audit Staff. The Common Carrier Bureau Audit
Staff shall review the audit programs and make modifications, as
needed, that shall be incorporated into the final audit programs.
During the course of the audits, the Common Carrier Bureau Audit Staff
may direct the independent auditors to take any actions necessary to
ensure compliance with the audit requirements;
(e) During the course of the audits, the independent auditors
shall:
(1) Inform the Common Carrier Bureau Audit Staff of any revisions
to the final audit programs or to the scope of the audits;
(2) Notify the Common Carrier Bureau Audit Staff of any meetings
with the independent subsidiary, the association, Schools and Libraries
Corporation, or Rural Health Care Corporation in which audit findings
are discussed;
(3) Submit to the Chief of the Common Carrier Bureau, any
accounting or rule interpretations necessary to complete the audit.
(f) Within 60 calendar days after the end of the audit period, but
prior to discussing the audit findings with the independent subsidiary,
the association, Schools and Libraries Corporation, or Rural Health
Care Corporation, the independent auditors shall be instructed to
submit drafts of the audit reports to the Common Carrier Bureau Audit
Staff;
(g) The Common Carrier Bureau Audit Staff shall review the audit
findings and audit workpapers and offer its recommendations concerning
the conduct of the audits or the audit findings to the independent
auditors. Exceptions of the Common Carrier Bureau Audit Staff to the
findings and conclusions of the independent auditors that remain
unresolved shall be included in the final audit reports;
(h) Within 15 calendar days after receiving the Common Carrier
Bureau Audit Staff's recommendations and making any revisions to the
audit reports, the independent auditors shall submit the audit reports
to the respective audit subjects for their responses to the audit
findings. At this time they must also send copies of their audit
findings to the Common Carrier Bureau Audit Staff. The independent
auditors shall be provided additional time to perform additional audit
work recommended by the Common Carrier Bureau Audit Staff;
(i) Within 30 calendar days after receiving the audit reports, the
audit subjects shall respond to the audit findings and send copies of
their responses to the Common Carrier Bureau Audit Staff. Any reply
that the independent auditors wish to make to the audit subjects'
responses shall be sent to the Common Carrier Bureau Audit Staff as
well as the audit subjects. The audit subjects' responses and the
independent auditors' replies shall be included in the final audit
reports;
(j) Within 10 calendar days after receiving the responses of the
audit subjects, the independent auditors shall file with the Commission
the final audit reports;
(k) Based on the final audit reports, the Chief of the Common
Carrier Bureau may take any action necessary to ensure that the
universal service support
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mechanisms operate in a manner consistent with the requirements of part
54 of this chapter, as well as such other action as is deemed necessary
and in the public interest.
Sec. 69.622 Transition to the permanent Administrator.
(a) If the association or the independent subsidiary is not
appointed the permanent Administrator, the association, independent
subsidiary, Schools and Libraries Corporation, and Rural Health Care
Corporation shall cooperate fully in making the permanent Administrator
operational.
(b) The association and independent subsidiary shall take all steps
necessary to maintain the division of responsibilities between the
association, independent subsidiary, Schools and Libraries Corporation,
and Rural Health Care Corporation as set forth in parts 54 and 69 of
this chapter or such other steps that the Commission may order.
[FR Doc. 97-20017 Filed 7-31-97; 8:45 am]
BILLING CODE 6712-01-U
