[Federal Register Volume 63, Number 155 (Wednesday, August 12, 1998)]
[Rules and Regulations]
[Pages 43088-43098]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-21588]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Parts 54 and 69
[CC Docket No. 96-45; FCC 98-120]
Federal-State Joint Board on Universal Service
AGENCY: Federal Communications Commission.
ACTION: Final rule.
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SUMMARY: This Order changes the funding year for the schools and
libraries universal service support mechanism from a calendar year
cycle to a fiscal year cycle. This Order also adjusts the amount of
money available for schools and libraries, and rural health care
providers for the period from January 1, 1998 through June 30, 1999. In
addition, this Order establishes rules of priority when a filing window
is in effect.
EFFECTIVE DATE: August 12, 1998.
FOR FURTHER INFORMATION CONTACT: Irene Flannery, Common Carrier Bureau,
(202) 418-7400 or Adrian Wright, Common Carrier Bureau, (202) 418-7400.
SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Fifth
Order on Reconsideration and Fourth Report and Order in CC Docket No.
96-45, adopted June 12, 1998 and released June 22, 1998. The full text
is available for inspection and copying during normal business hours in
the FCC Reference Center (Room 239), 1919 M St., N.W., Washington, D.C.
I. Summary of Fifth Order on Reconsideration and Fourth Report and
Order in CC Docket No. 96-45
A. Adjustment in Funding Year for Schools and Libraries Support
Mechanism
1. Upon reconsideration on our own motion, we find that it is in
the public interest to change the funding year for the schools and
libraries universal service support mechanism from a calendar year
cycle (January 1-December 31) to a fiscal year cycle that will run from
July 1-June 30. Moreover, we conclude that the transition to a fiscal
year should be implemented immediately. In order to accommodate the
transition to a fiscal year funding cycle, the first funding period
will be the 18-month period that runs from January 1, 1998 through June
30, 1999. The second funding cycle, therefore, will begin on July 1,
1999. Applications submitted during the initial 75-day filing window
and approved for funding by Schools and Libraries Corporation (SLC),
therefore, will be funded through June 30, 1999, to the extent
permitted by funding constraints. Parties seeking support for the
following fiscal year may begin to file applications on October 1,
1998. We direct SLC, in consultation with the Common Carrier Bureau, to
establish a filing window for the next fiscal year, to open no later
than October 1, 1998. We also conclude that SLC should determine the
length of that window and resolve other administrative matters
necessary to implement a filing window.
[[Page 43089]]
2. We decide to implement a fiscal year funding cycle for schools
and libraries, and to transition to this approach immediately, for
several reasons. The immediate transition to a fiscal year approach
will ameliorate the concerns of applicants seeking support for internal
connections that they will be unable to complete installation before
December 31, 1998, which marks the end of the funding year if
determined on a calendar year basis. We recognize that, because of the
delay in issuing funding commitments to schools and libraries, many
applicants may not be able to complete by this date the internal
connections for which they have sought universal service support. The
delay may be attributed to a variety of factors, including the
Commission's decision to implement an initial filing window, and the
Chairman's request to SLC to conduct an independent audit before
disbursing any funds, in order to protect against waste, fraud, and
abuse. In short, the schools and libraries support mechanism is being
implemented for the first time, and the Commission was not fully aware
of the amount of time necessary to establish administrative systems
that ensure program integrity and fair and orderly administration.
Applicants could not have anticipated these delays at the time they
conducted their technology needs assessments. Moreover, applicants
understandably have been reluctant to begin service or initiate the
installation of internal connections before receipt of a funding
commitment. Nevertheless, schools and libraries that have worked
diligently to comply with the Commission's requirements should not be
burdened unnecessarily by this delay. To further accommodate schools
and libraries affected by the delay in implementation, we note that
discounts will be available on eligible services effective January 1,
1998 or the date services begin pursuant to the contract, whichever is
later. Moreover, the transition to the fiscal year funding cycle
adopted herein will afford applicants that will receive support for
internal connections the flexibility to complete the installation of
internal connections through June of 1999.
3. Furthermore, adopting a fiscal year funding cycle will
synchronize the schools and libraries universal service support
mechanism with the budgetary and planning cycles of most schools and
libraries. This coordination of the support mechanism with the
applicants' internal administrative processes will enable schools and
libraries to plan their technology needs in a more efficient and
organized manner. In addition, using a fiscal year funding cycle will
align universal service contribution levels with the local exchange
carrier annual access tariff filing schedule. Under our rules, local
exchange carriers file their annual tariffs to be effective July 1 of
each year. One piece of information these companies require in order to
file their tariffs is the universal service contribution factors.
4. We recognize that, under the approach adopted herein, some
schools and libraries that did not file within the initial window in
1998 will not be eligible to receive funding until July 1999, rather
than January 1999. We find, however, that on balance, the benefits that
will be conferred on the approximately 30,000 applicants that filed
within the initial window outweigh the hardship caused by the potential
six-month delay in funding for some applicants. We also find that this
approach strikes the best balance between fulfilling the statutory
mandate to enhance access to advanced telecommunications and
information services for schools and libraries, and fulfilling the
statutory principle that ``[q]uality services should be available at
just, reasonable, and affordable rates.''
5. To accomplish this change, we conclude that the following
revisions in the funding cycle must be implemented. First, for
applications filed within the initial 75-day filing window seeking
discounts on telecommunications services and Internet access, the
Administrator shall make funding commitments effective for services
provided no earlier than January 1, 1998. These services will be funded
at the approved monthly level, consistent with the information included
on the school's or library's application, through June 30, 1999. We
conclude that this approach is reasonable because telecommunications
services and Internet access are generally provided at regular, monthly
intervals and are billed on a monthly, recurring basis.
6. Second, for applications filed within the initial 75-day filing
window seeking discounts on internal connections, the Administrator
shall commit the approved amount of support, but these funds may be
utilized during the remainder of 1998 as well as during the transition
period through June 30, 1999. We conclude that this approach is
reasonable because, unlike telecommunications services and Internet
access, internal connections generally entail nonrecurring rather than
recurring costs. Moreover, installation of internal connections
frequently requires that the projects be timed to occur during periods
when school is out of session and students are not present in
instructional buildings. Thus, the installation of internal wiring
might be completed in stages during winter and summer vacation periods.
Accordingly, we amend Sec. 54.507(b) of our rules.
7. The transition to a fiscal year funding cycle adopted herein
requires that we reconsider on our own motion the limitation on the
exemption from competitive bidding for voluntary extensions of
contracts. Our rules currently provide that voluntary extensions of
existing contracts are not exempt from the competitive bidding rules.
In order to accomplish an orderly transition to the fiscal year funding
cycle, however, we conclude that we must allow existing contracts that
have a termination date between December 31, 1998 and June 30, 1999 to
be voluntarily extended to a date no later than June 30, 1999. Although
voluntary extensions of contracts generally are not exempt from the
competitive bidding requirement, we adopt this limited exception for
voluntary extensions of contracts up to June 30, 1999. To hold
otherwise would result in schools and libraries either having to
participate in competitive bidding for only a six month service period
or not being eligible for support for that six month period. We
conclude that either result would be both administratively and
financially unworkable for schools and libraries. We find, therefore,
that it is in the public interest to amend the exemption (in
Sec. 54.511 of our rules) from the competitive bidding requirements, to
allow schools and libraries that filed applications within the 75-day
initial filing window to extend voluntarily, to a date no later than
June 30, 1999, existing contracts that otherwise would terminate
between December 31, 1998 and June 30, 1999.
B. Collections During 1998 and the First Six Months of 1999
8. Consistent with section 254 of the Act, and the recommendations
of the Federal-State Joint Board on Universal Service, we remain
committed to providing support to eligible schools and libraries for
telecommunications services, Internet access, and internal connections.
We share the concerns of commenters that curtailing collections may
have adverse impacts on schools and libraries, particularly the
neediest of those entities. We, therefore, remain dedicated to
providing support in a manner that targets the most economically
disadvantaged schools and libraries. At the same time, we are cognizant
of the concerns of many legislators that we must balance the need to
provide support for schools and
[[Page 43090]]
libraries against the need to continue to provide support for high cost
carriers, and to keep telephone rates affordable throughout the
country. We note that, pursuant to the 1996 Act, the Commission has
taken significant action to implement the universal service provisions
of the Act. At the present time, the rural, insular, and high cost
telephone subscribers continue to receive high cost support at the same
level that they have received for years. In addition, one of the first
steps in universal service reform was to make existing high cost
support explicit. Moreover, we have expanded the Commission's low-
income programs, Lifeline Assistance (Lifeline) and Lifeline Connection
Assistance (Link Up). For example, we adopted the Joint Board's
recommendation that Lifeline service should be provided to low-income
consumers nationwide, even in states that had not previously
participated in Lifeline, and that all eligible telecommunications
carriers should be required to provide Lifeline service. The Commission
remains committed, pursuant to section 254, to implementing all parts
of universal service.
9. We find, therefore, that it is prudent to begin funding
collections for a new mechanism at a reduced level, and allow for the
possibility of increased collections in the future. We note that this
phase-in approach to funding is consistent with the decision in the
Universal Service Order, 62 FR 32862 (June 17, 1997), and with the
initial funding for high cost support when the National Exchange
Carrier Association (NECA) began its high cost collection and
distribution efforts in 1986. In providing support for schools,
libraries, and rural health care providers, we strive to ensure a
smooth transition to the new universal service support mechanisms and
to minimize disruption to consumers. We find that our decision to
adjust the maximum amounts that may be collected or spent in 1998 is
consistent with these goals.
10. We therefore find that we should not increase the quarterly
collection amounts at this time with respect to the schools and
libraries and rural health care support mechanisms. We therefore
conclude that establishing quarterly collection rates for the schools
and libraries support mechanism of $325 million for each of the third
and fourth quarters of 1998 and the first and second quarters of 1999
will preserve the dual statutory mandates to maintain affordable rates
throughout the country and to ``enhance * * * access to advanced
telecommunications and information services for all public and non-
profit elementary and secondary school classrooms * * * and
libraries.'' These collection rates maintain current collection rate
levels and will not increase interstate telecommunications carriers'
costs of providing service. Moreover, these collection rate levels
should ensure that long distance rates, overall, will continue to
decline. On June 16, 1998, incumbent local exchange carriers will file
new access tariffs with rates to become effective on July 1, 1998.
Based on preliminary information filed by these carriers on April 2,
1998, we estimate their total access charge revenues to decline by
approximately $720 million below current levels, measured on an
annualized basis at current demand levels. The Third Quarter
Contribution Factors Public Notice, released by the Common Carrier
Bureau upon adoption of this Order, will produce a reduction in total
interexchange carrier payments of approximately $85 million. Based on
this, total interexchange carrier payments for access services and
universal service contributions should decrease by approximately $800
million on July 1, 1998. At the same time, based on the estimated
demand for support by schools and libraries that filed applications
during the initial 75-day filing window, these collection rates will be
sufficient to fully fund requests for support for telecommunications
services, and Internet access, and to fully fund requests by the
neediest schools and libraries for support for internal connections.
11. We further conclude that we should establish maximum collection
rates for the rural health care support mechanism at $25 million for
each of the third and fourth quarters of 1998. These collection rates
are consistent with projected demand and there is no evidence that
eligible health care providers will require additional funding this
year. Consistent with the Universal Service Order, we do not want the
Universal Service Administrative Company (USAC) to collect funds that
exceed demand. Because the rural health care support mechanism will
continue to be funded on a calendar, rather than a fiscal, year basis,
and because the mechanism is still in the very early stages, we find
that we should not adopt maximum collection rates beyond 1998. Instead,
we will evaluate the 1999 collection rates for the rural health care
support mechanism in the future.
12. The universal service support mechanisms will provide
substantial support to schools, libraries, and health care providers
without imposing unnecessary burdens on consumers, and the most
economically disadvantaged schools and libraries will receive the
greatest share of support, consistent with the discount matrix
contained in the Universal Service Order. We seek to provide support to
schools, libraries, and rural health care providers in a manner that
does not require consumers' rates to rise and without causing rate
churn. Some commenters assert that a certain amount of rate churn is to
be expected in a competitive marketplace. That may be true, but we
remain committed to ensuring that universal service does not exacerbate
any rate churn that may already exist in the marketplace. Excessive and
unnecessary rate churn would be disruptive to consumers, a result we
wish to avoid.
13. Numerous commenters take issue with the Commission's proposal
to revise collections for the schools and libraries and rural health
care universal service support mechanisms consistent with anticipated
reductions in access charges. We agree with the Alaska Commission that
funding for the new universal service support mechanisms ``must be
balanced against potential impact on rates and universal service,'' and
that is precisely the approach we are adopting. We conclude, therefore,
that a gradual phase-in of the schools, libraries, and rural health
care universal service support mechanisms that takes advantage, and
reflects the timing, of access charge reductions will provide
substantial support for eligible services ordered by eligible schools,
libraries and rural health care providers, and at the same time will
avoid disruption to consumers.
14. Many commenters note that schools and libraries have expended
substantial resources, in terms of both time and money, in applying for
discounted services, all with the expectation that a maximum of $2.25
billion in funding would be available. We share the concern of the U.S.
Department of Education and other commenters that schools and libraries
require predictability of funding to facilitate long-range technology
planning, and that our actions here should not discourage schools and
libraries from seeking universal service support. We agree that the
submission of over 30,000 applications demonstrates substantial demand
for universal service support for schools and libraries, and we applaud
the entities that have worked diligently to comply with our rules. We
are troubled by the disruption imposed on schools and libraries and we
hope to avoid this situation in the future. At the same time, we must
be mindful of the effects of the
[[Page 43091]]
schools and libraries and rural health care support mechanisms on
consumers. If we were to fund these support mechanisms to the full
amount of the caps adopted in the Universal Service Order, there would
be negative consequences for consumers. Congress mandated that
universal service has many components, including support for schools,
libraries, and rural health care providers, as well as the directive to
maintain rates at an affordable level. We conclude, therefore, that
reducing the collection rates for the schools and libraries and rural
health care support mechanisms during the initial implementation is
consistent with the Act and is the most prudent course to take at this
time.
15. Several commenters maintain that revising collections levels
for the schools and libraries and rural health care support mechanisms
to match projected reductions in access charges would impose an
unreasonable and disproportionate burden on CMRS and other wireless
providers that do not pay access charges, and that such an approach
would not be competitively neutral. One of the dissenting statements
similarly suggests that wireless carriers are being disproportionately
burdened because they do not pay access charges. We note first that we
are not here adopting our proposal in the Collection Public Notice, 63
FR 27542 (May 19, 1998), to increase schools and libraries funding to
levels that match projected reductions in access charges paid by long-
distance carriers. We are instead freezing for the next four quarters
the contribution levels in place during the second quarter of 1998.
Thus, no carrier will experience increased universal service
obligations as a result of an increase in funding for the schools and
libraries support mechanism. Second, we find that CMRS and other
wireless carriers are not disproportionately burdened because they pay
universal service obligations even though they do not benefit from
access charge reductions. Before passage of the 1996 Act, only
interstate long-distance carriers paid for universal service in the
interstate jurisdiction, either directly or through access charges. The
1996 Act, however changed that by requiring universal service to be
supported by all interstate telecommunications carriers, whether or not
they had previously paid access charges. The point of the 1996 Act in
this respect was to end the existing discriminatory treatment of long-
distance carriers, and impose universal service obligations as well on
other interstate carriers, including CMRS carriers. The 1996 Act also
established that universal service be funded in a competitively neutral
manner. To implement that, we have required that all interstate
telecommunications carriers contribute to universal service based on
end-user revenues. We continue to believe that to be a reasonable
approach to implementing the competitive neutrality requirements of the
Act. Finally, to the extent that the Collection Public Notice noted the
relation between universal service obligations and access charge
reductions, it was simply to note that overall the Commission's actions
have reduced the cost of providing long distance service--an issue of
significant public interest. We note similarly here that, since passage
of the 1996 Act, competition and changes in reciprocal compensation
arrangements between CMRS providers and local exchange carriers (LECs)
have helped provide for the lowest wireless prices for consumers in
history, despite wireless carriers' contributions to universal service.
16. The contention in one of the dissents that universal service
contributions, at least to the extent used to provide support for non-
telecommunications services, constitute an unlawful tax is neither new
nor correct. As the Commission has found previously, contributions to
the universal service mechanisms do not represent taxes enacted under
Congress's taxing authority. Rather, they constitute fees enacted
pursuant to Congress's Commerce power. We noted previously that the
contribution requirements do not violate the Origination Clause of the
Constitution because ``universal service contributions are not
commingled with government revenues raised through taxes,'' and
universal service support mechanisms therefore are not a ``general
welfare scheme'' of the type found by courts to be taxes. In United
States v. Munoz-Flores and elsewhere, the Supreme Court has held that
Congress does not exercise its taxing powers when funds are raised for
a specific government program. Universal service contributions are
deposited into a specific fund established as part of the universal
service mechanisms to provide money support for those mechanisms and
therefore do not constitute taxes.
17. Our conclusion that universal service contributions are not a
tax is not changed by the citation to Thomas v. Network Solutions, Inc.
There, the court found that part of the charge made by the National
Science Foundation's contractor for the registration of internet domain
names was a tax rather than a fee because it provided ``revenue for the
government for projects that did not directly benefit the payees or
otherwise apply to the purposes furthered by the [agreement between the
NSF and its contractor].'' Here, by contrast, universal service
contributions are not intended to raise general revenue as they are
placed in a segregated fund dedicated for a specific regulatory
purpose, and, as we have noted previously, all telecommunications
carriers required to contribute benefit from the ubiquitous
telecommunications network that universal service makes possible. Even
if this were not the case, Munoz-Flores rejects the proposition that a
charge is a tax unless the payees benefit from its payment.
18. Finally, we note that the argument that universal service
contributions for the schools and libraries mechanisms constitutes an
unlawful tax can be and has been made with respect to the entire
universal service program. This argument proves too much. If that
interpretation were correct, the entire universal service program,
including support for service to rural and high cost areas, would
constitute an unlawful tax. This interpretation is incorrect because,
as noted above, Congress need not exercise its taxing powers to fund a
specific government program through fees. This is precisely what
Congress has done with respect to universal service.
19. We find, therefore, that it serves the public interest to
adjust the amounts that the Commission directed the Administrator to
collect and spend for the second six months of 1998, as described
herein. We amend our previous decision, and direct USAC to collect only
as much as required by demand, but in no event more than $25 million
per quarter for the third and fourth quarters of 1998 for the rural
health care universal service support mechanism. We direct USAC to
collect only as much as required by demand, but in no event more than
$325 million per quarter for the third and fourth quarters of 1998 and
the first and second quarters of 1999 to support the schools and
libraries universal service support mechanism. We also direct the Rural
Health Care Corporation (RHCC) to commit to applicants no more than
$100 million for disbursement during 1998, and direct SLC to commit to
applicants no more than $1.925 billion for disbursement during 1998 and
the first half of 1999. The adoption of these limits on disbursements
supersedes any prior restrictions on expenditures during 1998.
20. Furthermore, we conclude that the carryover of unused funding
authority
[[Page 43092]]
will not apply for the funding period January 1, 1998 through June 30,
1999. That is, to the extent that the amounts collected in the funding
period January 1, 1998 through June 30, 1999 are less than $2.25
billion, the difference will not be carried over to subsequent funding
years. Consistent with the phased-in approach to funding for the
schools and libraries and rural health care support mechanisms that we
have adopted herein, we find it unnecessary to carry over unused
funding authority. To the extent that funds are collected but not
disbursed in the funding period January 1, 1998 through June 30, 1999,
however, those collected funds would be carried over to the next
funding period. Accordingly, we amend Secs. 54.507(a) and 54.623(a) of
our rules.
C. Rules of Priority for the Schools and Libraries and Rural Health
Care Support Mechanisms
21. Schools and Libraries Support Mechanism. Upon further
consideration, we find that we must adopt additional new rules of
priority to ensure that, when a filing window period is in effect,
support is directed toward the most economically disadvantaged schools
and libraries, as well as toward those located in rural areas.
Consistent with the statute and the recommendations of the Joint Board,
we have consistently focused on ensuring that the services eligible for
universal service support are affordable for all eligible schools and
libraries. Under the discount matrix, the most economically
disadvantaged schools and libraries are eligible for the greatest
levels of discount. For example, schools with between 75 and 100
percent of their students eligible for the national school lunch
program are eligible for 90 percent discounts on all eligible services.
In the Universal Service Order, we established a priority system under
which the most economically disadvantaged schools and libraries, those
with over 50 percent of their student populations eligible for the
national school lunch program, would have priority when only $250
million is available to be committed in a given funding year. The rules
of priority adopted in the Universal Service Order, however, were
premised on the assumption that support would be distributed on a first
come, first served basis. That is, the $250 million trigger was
established before the Commission adopted a window filing period. We
conclude that we must adopt additional new rules of priority premised
on the existence of a filing window period during which all
applications received within the window are treated as if filed
simultaneously. We also conclude that new rules of priority are
necessary to account for the fact that the support requested by schools
and libraries during the initial filing window exceeds the total
authorized support available for the funding period January 1, 1998
through June 30, 1999. Moreover, there is the possibility that support
requested by schools and libraries during subsequent filing windows may
exceed the total authorized support available in subsequent funding
years. Therefore, we adopt new rules of priority that will operate when
a filing window is in effect. We do not, however, alter the rules of
priority for applicants that request support when a filing window is
not in effect. Although, in this initial 18-month funding period, only
the applications filed during the initial 75-day filing window will
receive support, it is possible that in future funding years support
could be provided for applications filed outside of a filing window
period.
22. The additional new rules of priority described below will
equitably provide the greatest assurance of support to the schools and
libraries with the greatest levels of economic disadvantage while
ensuring that all applicants filing during a window receive at least
some support in the event that the amounts requested for support
submitted during the filing window exceed the total support available
in a funding year. Because these rules of priority utilize the discount
matrix, which provides higher discounts for schools and libraries in
rural areas, they also equitably provide greater support to schools and
libraries in rural areas. These rules, therefore, further implement the
Commission's prior decisions to allocate support for schools and
libraries in a manner that provides higher levels of support for rural
areas and areas with greater economic disadvantage, while recognizing
that every eligible school and library should receive some assistance.
Further, these rules of priority are consistent with the suggestions of
several commenters. Upon further consideration, we conclude that these
new rules of priority will best promote the universal service goals of
the Communications Act. Accordingly, we amend Sec. 54.507(g) of our
rules.
23. The additional new rules of priority for the schools and
libraries universal service support mechanism shall operate as
described herein for applicants that submit a request for support
within an established filing window. When the filing window closes, SLC
shall calculate the total demand for support submitted by applicants
during the filing window. If total demand exceeds the total support
available in that funding year, SLC shall take the following steps. SLC
shall first calculate the demand for telecommunications services and
Internet access for all discount categories. These services shall
receive first priority for the available funding. SLC shall then
calculate the amount of available funding remaining after providing
support for all requests for telecommunications services and Internet
access. SLC shall allocate the remaining funds to the requests for
support for internal connections, beginning with the most economically
disadvantaged schools and libraries, as determined by the schools and
libraries discount matrix. That is, schools and libraries eligible for
a 90 percent discount shall receive first priority for the remaining
funds, and those funds will be applied to their requests for internal
connections. To the extent that funds remain, SLC shall next allocate
funds toward the requests for internal connections submitted by schools
and libraries eligible for an 80 percent discount, then for a 70
percent discount, and shall continue committing funds for internal
connections in the same manner to the applicants at each descending
discount level until there are no funds remaining.
24. If the remaining funds are not sufficient to support all of the
funding requests that comply with the Commission's rules and
eligibility requirements within a particular discount level, SLC shall
divide the total amount of remaining support available by the amount of
support requested within the particular discount level to produce a
pro-rata factor. Thus, for example, if all applicants eligible for
discounts of 90 percent may be fully funded, but there are not
sufficient funds remaining to fully fund internal connections for
applicants eligible for discounts of 80 percent, SLC shall reduce the
support level for each applicant that is eligible for an 80 percent
discount by multiplying the appropriate requested amount of support by
the pro-rata factor. SLC shall then allocate funds to each applicant
within the 80 percent discount category based on this reduced discount
level. SLC shall commit support to all applicants consistent with the
calculations described herein. We expect that, for the initial 18-month
funding period, the collection levels established in this Order will
enable all of the applicants eligible for discounts of 90 percent to
receive full support for
[[Page 43093]]
internal connections, and that at least a substantial portion, if not
all, of the support requested for internal connections by applicants
eligible for discounts of 80 percent will be provided.
25. In light of our decision to reduce the collection levels for
schools and libraries at this time, we find that our revised method of
prioritization is the best way to provide substantial and predictable
support for schools and libraries. We conclude that, to the extent that
we are unable at this time to fund demand fully, the best approach is
to provide full support for recurring services, and to direct support
for internal connections to the neediest schools and libraries. We
agree with commenters who state that it would be the most economically
disadvantaged schools and libraries that would suffer the most if
internal connections were not funded. The data received from the
applications submitted during the initial filing window also support
this revision in our rules of priority.
26. Rural Health Care Support Mechanism. The Commission concluded
in the Universal Service Order that support for health care providers
should be allocated on a first-come, first-served basis. Unlike the
schools and libraries support mechanism, however, the Commission did
not adopt rules that allocate support among health care providers on
the basis of their economic circumstances. We determine that we should
adopt rules that will take effect in the event that the support
requested by health care providers during a filing window exceeds the
total authorized support in a funding year. As with the schools and
libraries mechanism, our decisions to adjust the maximum collection
amounts during 1998 and to adopt a filing window for the rural health
care support mechanism lead us to conclude that we should establish
rules to allocate funds in the event that all of the available funds
will be requested before the window period closes. Several commenters
suggested various means by which to prioritize the need of health care
providers. We conclude, however, that the complexity of the proposals
outweighs their utility. We are not convinced that the administrative
burden and the costs associated with any of the proposals outweighs the
benefits that would accrue to health care providers.
27. We conclude, therefore, that we should not adopt, at this time,
a method by which to prioritize health care providers in the event that
demand requested during a filing window exceeds available support. We
conclude instead that we should adopt a pro-rata rule that will reduce
each applicant's level of support by an equal amount in the event that
demand exceeds the total fund allocated for a given funding year. This
approach will ensure fairness and equity to each health care provider
applying for universal service support and will not impose an undue
administrative burden upon either the applicants or the Administrator.
If, however, parties submit specific prioritization methods that can be
implemented without substantial expense, administrative burden, or
complexity, and that ensure equitable distribution of funds as well or
better than the pro-rata rule we adopt herein, we will consider
modifying this approach in the future.
28. When the filing window closes, RHCC shall calculate the total
demand for support submitted by all eligible applicants. If the total
demand submitted during the filing window exceeds the total funding
available for the funding year, RHCC shall take the following steps.
RHCC shall divide the total funds available for the funding year by the
total amount of support requested to produce a pro-rata factor. RHCC
shall multiply the pro-rata factor by the total amount of support
requested by each applicant that has filed during the filing window.
RHCC shall then commit funds to each applicant consistent with this
calculation. For example, if at the close of the filing window $125
million has been requested in 1998, RHCC would calculate the pro-rata
factor by dividing $100 million by $125 million to produce a factor of
four-fifths (.8). RHCC would then multiply the total dollar amount
requested by each applicant by .8 and would commit such reduced dollar
amount to each applicant. We, therefore, add section 54.623(f) to our
rules.
29. We conclude that the amendments to our rules adopted herein
shall be effective upon publication in the Federal Register. Prior to
their publication in the Federal Register, the Commission will submit a
report on the amended rules adopted herein to Congress and the GAO, as
required by the Contract with America Advancement Act (CWAAA). Pursuant
to the CWAAA, the amended rules may take effect following that
submission. Contrary to the suggestion in Commissioner Furchtgott-
Roth's dissent, the CWAAA does not require that the Commission wait 60
days after this submission is made for the rules to go into effect.
Such a delay in the effective date is required only for major rules,
and by definition ``major rules'' do ``not include any rule promulgated
under the Telecommunications Act of 1996 and the amendments made by
that Act.'' We have confirmed with the Office of Management and Budget,
which is responsible for determining whether or not a rule is major,
that the amended rules adopted herein are promulgated under the
Telecommunications Act of 1996 because they are part of the
Commission's continuing implementation of section 254 as added by the
1996 Act and therefore are non-major rules. Despite the Order's
citation in the ordering paragraphs to other provisions of the
Communications Act as subsidiary sources of authority, it could not be
clearer that the amended rules adopted herein implement the 1996 Act
because explicit statutory authorization for the universal service
mechanism for schools and libraries did not exist prior to addition of
section 254 by the 1996 Act. We find that we have good cause to take
such action, pursuant to the Administrative Procedure Act, because
compliance with these amendments requires preparation only by USAC,
SLC, and RHCC, each of which is able to comply with these amendments in
a short amount of time. Compliance with these amendments does not
require preparation by other affected entities, such as schools,
libraries, or health care providers. To the extent that contributors
are affected, their burdens are lessened.
D. Level of Compensation for Officers and Employees of the
Administrative Corporations
30. We conclude that Congress's intent regarding the level of
compensation for officers and employees of SLC and RHCC was clearly
stated in both section 2005(c) of the Senate bill and in the Conference
Report. The Senate and the House-Senate conferees expressly stated that
there should be limits on the level of compensation afforded to the
officers and employees of the two independent corporations. We
conclude, therefore, consistent with the will of Congress, that,
effective July 1, 1998, the administrator must, as a condition of its
continued service, compensate all officers and employees of SLC and
RHCC at an annual rate of pay, including any non-regular payments,
bonuses, or other compensation, that does not exceed the rate of basic
pay in effect for Level I of the Executive Schedule under section 5312
of Title 5 of the United States Code. This level of compensation will
apply to all officers and employees of SLC and RHCC, as currently
organized, as well as to all such officers and employees in the
[[Page 43094]]
consolidated administrative corporation following reorganization on
July 1, 1998. Accordingly, we amend section 69.620(a) of our rules.
E. Publications of Quarterly Contribution Factors in the Federal
Register
31. The existing rule has caused some confusion because it requires
publication of the proposed contribution factors in the Federal
Register, but at the same time states that those proposed factors will
become effective within 14 days of the date on which the Public Notice
is released. Because an item is not published in the Federal Register
immediately upon release, and because it is not possible to predict
with certainty when an item will be published in the Federal Register,
the existing rule creates uncertainty about the date on which the
contribution factors are deemed approved.
32. We, therefore, amend our rule to clarify that the proposed
contribution factors will be deemed approved, in the absence of further
Commission action, 14 days after release of the Public Notice in which
they are announced. We conclude that the public is given adequate
notice of release of the proposed contribution factors because they are
posted on the Commission's website immediately upon release. Moreover,
this change will eliminate any ambiguity in the rules and will create
certainty about when the proposed contribution factors are deemed
approved. Accordingly, we amend section 54.709(a)(3) of our rules.
F. Conclusion
33. In conclusion, we note that our colleagues' statements
dissenting from this Order raise several issues that are well beyond
the scope of this Order. Although we believe it would be inappropriate
to include here a point-by-point analysis of issues that are not
presented in the matters before the Commission in this Order, we do not
wish our silence to be construed as acquiescence. We are, therefore,
compelled to note that several of the issues raised in dissent have
been addressed at length in the context of prior Commission orders,
after due consideration and based on complete records. For example,
although one of the dissenting statements questions the legal basis for
providing support to schools and libraries for internal connections,
the legal basis for that decision was thoroughly established in both
the Universal Service Order and the April 10, 1998 Report to Congress.
It was further addressed in the Joint Board's Recommended Decision in
which the Joint Board unanimously recommended that universal service
support be provided to schools and libraries for internal connections.
Similarly, as noted above, the Commission previously has established
that universal service contributions do not constitute an unlawful tax.
34. One of the dissenting statements also remarks on proposed
regulation of carriers' billing practices. We are indeed concerned
that, when the Commission takes action to reduce carriers' costs of
providing service, carriers' bills are creating the false impression
that the opposite is true. We note that these matters are not pending
before the Commission, and therefore we do not find it practical or
appropriate to comment in this context on specific proposals. We do
intend to issue in the near future a notice of proposed rulemaking
seeking comment on issues relating to the manner in which carriers
include billing statements regarding charges relating to universal
service support mechanisms. We intend to use that proceeding to develop
a complete record on all the relevant issues, including those raised by
our dissenting colleague. Only then, after full consideration, would
the Commission be able to determine whether it is necessary and
appropriate to take any action on these issues, and if so, what action
should be taken. Although we remain committed to ensure that carriers
include complete and truthful information regarding the contribution
amount, we await further consideration of these matters.
35. Finally, our dissenting colleagues suggest that the Commission
has not acted to fulfill the Act's requirements regarding support for
high cost carriers and low-income consumers. Pursuant to the 1996 Act,
the Commission has taken significant action to implement the universal
service provisions of the Act. As we noted earlier, rural, insular, and
high cost telephone subscribers continue to receive high cost support
at the same level that they have received for years. In addition, one
of the first steps in universal service reform was to make existing
high cost support explicit. With respect to low-income consumers, we
substantially expanded the reach of the Commission's Lifeline and Link
Up programs. We are considering petitions for reconsideration of some
aspects of our actions, as well as requests from the Joint Board that
we refer some issues to it, including the so-called ``25/75'' issue. We
believe that a second referral to the Joint Board, if clearly defined
in terms of issues and timing, could be extremely valuable. We are also
actively developing an economic model that will assist us in
determining the level of high cost support due to carriers in a way
that produces neither a windfall for carriers at the expense of
consumers nor a spike in local telephone rates. We are confident that
in this manner we will fulfill Congress's goals embodied in section
254. These actions demonstrate the Commission's firm commitment to
implementing all parts of universal service. We look forward to working
with Congress, the States, the industry, consumers, and our dissenting
colleagues, as we move forward in achieving this goal.
II. Supplemental Final Regulatory Flexibility Analysis
36. In compliance with the Regulatory Flexibility Act (RFA) and the
Initial Regulatory Flexibility Analysis (IRFA) that accompanied the
Collection Public Notice in the Federal Register, this Supplemental
Final Regulatory Flexibility Analysis (SFRFA) supplements the Final
Regulatory Flexibility Analysis (FRFA) included in the Universal
Service Order, only to the extent that changes to that Order adopted
here on reconsideration require changes in the conclusions reached in
the FRFA. As required by section 603 RFA, 5 USC 603, the FRFA was
preceded by an Initial Regulatory Flexibility Analysis (IRFA)
incorporated in the Notice of Proposed Rulemaking and Order
Establishing the Joint Board (NPRM), and an IRFA, prepared in
connection with the Recommended Decision, which sought written public
comment on the proposals in the NPRM and the Recommended Decision.
A. Need for and Objectives of This Report and Order and the Rules
Adopted Herein
37. The Commission is required by section 254 of the Act to
promulgate rules to implement promptly the universal service provisions
of section 254. On May 8, 1997, the Commission adopted rules whose
principle goal is to reform our system of universal service support
mechanisms so that universal service is preserved and advanced as
markets move toward competition. In this Order, we reconsider five
aspects of those rules. First, to ameliorate the concerns of applicants
seeking support for internal connections that they will be unable to
complete installation before December 31, 1998, we reconsider, on our
own motion, the funding cycle for schools and libraries. We conclude
that it is in the public interest to change the funding year for the
schools and libraries universal service support mechanism from a
[[Page 43095]]
calendar year cycle to a fiscal year cycle running from July 1 to June
30. Moreover, this change to a fiscal year funding cycle will
synchronize the schools and libraries universal service support
mechanism with the budgetary and planning cycles of most schools and
libraries and will align universal service contribution levels with
projected reductions in access charges. Second, in order to reduce
financial burdens on all contributors to universal service, we
reconsider, on our own motion, the amounts that will be collected
during the second six months of 1998 and the first six months of 1999
for the schools and libraries support mechanism, and the amounts that
will be collected during the second six months of 1998 for the rural
health care support mechanism. Third, we modify the rules of priority
for the schools and libraries mechanism to provide for the greatest
assurance of support to schools and libraries with the greatest levels
of economic disadvantage while ensuring that all applicants filing
during a filing window period receive at least some support in the
event that the amounts requested for support submitted during the
filing window exceed the total support available in a funding year. In
addition, we adopt a rule to pro-rate the distribution of support to
health care providers if demand by health care providers exceeds the
total support allocated for a given funding year. Fourth, we conclude,
consistent with the will of Congress, that the universal service
administrator must, as a condition of continued service, compensate all
officers and employees of SLC and RHCC at an annual rate of pay,
including any non-regular payments, bonuses, or other compensation,
that does not exceed the rate of basic pay in effect for Level I of the
Executive Schedule under section 5312 of Title 5 of the United States
Code, effective July 1, 1998. Fifth, we amend our rule regarding
publication of the proposed universal service contribution factors to
state that the proposed contribution factors will be deemed approved,
in the absence of further Commission action, 14 days after release of
the Public Notice in which they are announced. We conclude that this
rule change will eliminate ambiguity regarding publication requirements
currently existing in our rules.
B. Summary and Analysis of the Significant Issues Raised by Public
Comments in Response to the IRFA
38. No entities commented directly in response to either the
September 10 Public Notice or the Collection Public Notice, although
some commenters urged the Commission to modify the rules of priority to
ensure that applicants in all states, including small applicants, would
receive some opportunity to receive funding. In response to the
Collection Public Notice, some commenters urged the Commission to
ensure that schools and libraries that filed applications within the
initial 75-day filing window are fully funded, and to ensure that
schools and libraries have a predictable level of funding. Other
commenters disagreed with the Commission's proposal to link access
charge reductions with universal service funding for schools,
libraries, and rural health care providers.
C. Description and Estimates of the Number of Small Entities to Which
the Rules Adopted in This Report and Order Will Apply
39. In the FRFA at paragraphs 890-925 of the Universal Service
Order, we described and estimated the number of small entities that
would be affected by the new universal service rules. The rules adopted
herein may apply to the same entities affected by the universal service
rules. We therefore incorporate by reference paragraphs 890-925 of the
Universal Service Order.
D. Summary Analysis of the Projected Reporting, Recordkeeping, and
Other Compliance Requirements and Significant Alternatives
40. In the FRFA to the Universal Service Order, we described the
projected reporting, recordkeeping, and other compliance requirements
and significant alternatives associated with the Schools and Libraries
section, the Rural Health Care Provider section, and the Administration
section of the Universal Service Order. Because the rules adopted
herein may only affect those requirements in a marginal way, we
incorporate by reference paragraphs 956-60, 968-71, and 980 of the
Universal Service Order, which describe those requirements and provide
the following analysis of the new requirements adopted herein.
41. Under the rules adopted herein, we revise the funding year for
the schools and libraries support mechanism from a calendar year cycle
(January 1--December 31) to a fiscal year cycle (July 1--June 30). This
revision will benefit schools and libraries in three ways: (1) it will
ameliorate the concerns of applicants seeking support for internal
connections that they will be unable to complete installation before
December 31, 1998; (2) it will synchronize the schools and libraries
support mechanism with the budgetary and planning cycles of most
schools and libraries; and (3) it will align universal service
contribution levels with projected reductions in access charges. These
changes will not have a significant impact on the reporting,
recordkeeping, and other compliance requirements for the schools and
libraries and rural health care universal service support mechanisms.
42. In addition, we do not revise the annual caps adopted in the
Universal Service Order, but we do adjust the maximum amounts that may
be collected and spent during the initial eighteen months of
implementation for the schools and libraries support mechanism and
during the initial year of implementation for the rural health care
provider support mechanism. The Administrator is instructed to collect
only as much as required by demand, but in no event more than $25
million per quarter for the third and fourth quarters of 1998 to
support the rural health care universal service support mechanism and
no more than $325 million per quarter for the third and fourth quarters
of 1998 and the first and second quarters of 1999 to support the
schools and libraries universal service support mechanism. We also
direct the Administrator neither to commit nor disburse more than $100
million for the rural health care support mechanism for 1998 and no
more than $1.925 billion for the schools and libraries support
mechanism for the eighteen month period from January 1, 1998 through
June 30, 1999. These changes will not have a significant impact on the
reporting, recordkeeping, and other compliance requirements for the
schools and libraries and rural health care universal service support
mechanisms.
43. In addition, we modify the rules of priority for the schools
and libraries support mechanism to equitably provide the greatest
assurance of support to the schools and libraries with the greatest
level of economic disadvantage while ensuring that all applicants
filing during a filing window period receive at least some support in
the event that the amounts requested for support submitted during the
filing window exceed the total support available in a funding year. We
also adopt a rule to pro-rate the distribution of support to health
care providers if demand by health care providers exceeds the total
fund allocated for a given funding year. These changes will not have a
significant impact on the reporting, recordkeeping, and other
compliance requirements for the schools and libraries and rural health
care universal service support mechanisms.
[[Page 43096]]
44. Moreover, consistent with the will of Congress, we conclude
that the universal service Administrator must, as a condition of
continued service, compensate all officers and employees of SLC and
RHCC at an annual rate of pay, including any non-regular payments,
bonuses, or other compensation, that does not exceed the rate of basic
pay in effect for Level I of the Executive Schedule under section 5312
of Title 5 of the United States Code, effective July 1, 1998. We also
amend our rule regarding publication of the proposed universal service
contribution factors to state that the proposed contribution factors
will be deemed approved, in the absence of further Commission action,
14 days after release of the Public Notice in which they are announced.
Neither of these changes will have a significant impact on the
reporting, recordkeeping, and other compliance requirements for the
schools and libraries and rural health care universal service support
mechanisms.
E. Steps Taken to Minimize the Significant Economic Impact on a
Substantial Number of Small Entities, and Significant Alternatives
Considered
45. In the FRFA to the Universal Service Order, we described the
steps taken to minimize the significant economic impact on a
substantial number of small entities consistent with stated objectives
associated with the Schools and Libraries section, the Rural Health
Care Provider section, and the Administration section of the Universal
Service Order. Because the rules adopted herein may only affect those
requirements in a marginal way, we incorporate by reference paragraphs
961-67, 972-76, and 981-82 of the Universal Service Order, which
describe those requirements and provide the following analysis of the
new requirements adopted herein.
46. As described above, our decision to change to a fiscal year
funding cycle will benefit schools and libraries, as well as their
chosen service providers, who may be small entities, by equitably
providing the greatest assurance of support to the schools and
libraries with the greatest levels of economic disadvantage while
ensuring that all applicants filing during a window receive at least
some support in the event that the amounts requested for support
submitted during the filing window exceed the total support available
in a funding year. Some schools and libraries that did not file within
the initial window in 1998 will not be eligible to receive funding
until July 1999, rather than January 1999. We find, however, that on
balance, the benefits that will be conferred on the approximately
30,000 applicants that filed within the initial window outweigh this
potential six-month delay in funding for some applicants. We also find
that this approach strikes the best balance between fulfilling the
statutory mandate to enhance access to advanced telecommunications and
information services for schools and libraries, and fulfilling the
statutory principle of providing quality services at ``just,
reasonable, and affordable rates,'' without imposing unnecessary
burdens on schools and libraries or service providers, including small
entities.
47. As described above, we adopt the decision to adjust the amount
of money to be collected in 1998 and the first and second quarters of
1999 for the schools and libraries universal service support mechanism
and in 1998 for the rural health care support mechanism because we do
not want to impose unnecessary financial requirements on service
provider contributors to universal service, including contributors that
are small entities. We find that our decision to adjust the maximum
collectible amounts provides substantial support to schools, libraries,
and rural health care providers without imposing unnecessary burdens on
carriers or subscribers, including small entities.
48. Moreover, our conclusion that the universal service
Administrator must, as a condition of continued service, compensate all
officers and employees of SLC and RHCC at an annual rate of pay that
does not exceed the rate of basic pay in effect for Level I of the
Executive Schedule under section 5312 of Title 5 of the United States
Code, effective July 1, 1998 will not have a significant impact on the
reporting, recordkeeping, and other compliance requirements for the
schools and libraries and rural health care universal service support
mechanisms on any entities other than SLC and RHCC. For those entities,
compliance with the amended rule will have a significant impact on the
level of compensation afforded some of their employees, but we conclude
that this decision is consistent with the intent of Congress. Our
decision to amend our rule regarding publication of the proposed
universal service contribution factors will not have a significant
impact on the reporting, recordkeeping, and other compliance
requirements for the schools and libraries and rural health care
universal service support mechanisms.
III. Ordering Clauses
49. Accordingly, it is ordered that, pursuant to the authority
contained in sections 1-4, 201-205, 218-220, 254, 303(r), 403, and 405
of the Communications Act of 1934, as amended, 47 USC 151-154, 201-205,
218-220, 254, 303(r), 403, and 405, section 1.108 of the Commission's
rules, 47 CFR 1.108, the Fifth Order on Reconsideration in CC Docket
No. 96-45 is adopted.
50. It is further ordered that, pursuant to the authority contained
in sections 1-4, 201-205, 218-220, 254, 303(r), 403, and 405 of the
Communications Act of 1934, as amended, 47 USC 151-154, 201-205, 218-
220, 254, 303(r), 403, and 405, section 1.108 of the Commission's
rules, 47 CFR 1.108, the Fourth Report and Order in CC Docket No. 96-45
is adopted.
51. It is further ordered that, pursuant to the authority contained
in sections 1-4, 201-205, 218-220, 254, 303(r), 403, and 405 of the
Communications Act of 1934, as amended, 47 USC 151-154, 201-205, 218-
220, 254, 303(r), 403, and 405, section 1.108 of the Commission's
rules, 47 CFR 1.108, Part 54 of the Commission's rules, 47 CFR Part 54,
and Part 69 of the Commission's rules, 47 CFR Part 69, are amended.
52. It is further ordered that, pursuant to the authority contained
in sections 1-4, 201-205, 218-220, 254, 303(r), 403, and 405 of the
Communications Act of 1934, as amended, 47 USC 151-154, 201-205, 218-
220, 254, 303(r), 403, and 405, section 1.108 of the Commission's
rules, 47 CFR 1.108, effective July 1, 1998, Universal Service
Administrative Company shall compensate all officers and employees of
Schools and Libraries Corporation and Rural Health Care Corporation at
an annual rate of pay, including any non-regular payments, bonuses, or
other compensation, that does not exceed the rate of basic pay in
effect for Level I of the Executive Schedule under section 5312 of
title 5 of the United States Code.
53. It is further ordered that, because the Commission has found
good cause, the rule changes are effective August 12, 1998.
54. It is further ordered that the Commission's Office of Public
Affairs, Reference Operations Division, shall send a copy of this Fifth
Order on Reconsideration and Fourth Report and Order, including the
Final Regulatory Flexibility Analysis, to the Chief Counsel for
Advocacy of the Small Business Administration.
List of Subjects
47 CFR Part 54
Healthcare providers, Libraries, Reporting and recordkeeping
[[Page 43097]]
requirements, Schools, Telecommunications, Telephone.
47 CFR Part 69
Communications common carriers, Reporting and recordkeeping
requirements, Telephone.
Federal Communications Commission
Magalie Roman Salas,
Secretary.
Rule Changes
Parts 54 and 69 of Title 47 of the Code of Federal Regulations 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. Secs. 1, 4(i), 201, 205, 214, and 254
unless otherwise noted.
2. Section 54.507 is amended by revising paragraphs (a), (b) and
(g) 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 in that funding year shall be carried forward into subsequent
funding years for use in accordance with demand, with the following
exceptions:
(1) No more than $625 million shall be collected or spent for the
funding period from January 1, 1998 through June 30, 1998. No more than
$325 million shall be collected for the funding period from July 1,
1998 through September 30, 1998. No more than $325 million shall be
collected for the funding period from October 1, 1998 through December
31, 1998. No more than $325 million shall be collected for the funding
period from January 1, 1999 through March 31, 1999. No more than $325
million shall be collected for the funding period from April 1, 1999
through June 30, 1999. No more than $1.925 billion shall be collected
or disbursed during the eighteen month period from January 1, 1998
through June 30, 1999.
(2) The carryover of unused funding authority will not apply for
the funding period January 1, 1998 through June 30, 1999. To the extent
that the amounts collected in the funding period January 1, 1998
through June 30, 1999 are less than $2.25 billion, the difference will
not be carried over to subsequent funding years. Carryover of funds
will occur only to the extent that funds are collected but not
disbursed in the funding period January 1, 1998 through June 30, 1999.
(b) Funding year. A funding year for purposes of the schools and
libraries cap shall be the period July 1 through June 30. For the
initiation of the mechanism only, the eighteen month period from
January 1, 1998 to June 30, 1999 shall be considered a funding year.
Schools and libraries filing applications within the initial 75-day
filing window shall receive funding for requested services through June
30, 1999.
* * * * *
(g) Rules of priority. Schools and Libraries Corporation shall act
in accordance with paragraph (g)(1) of this section with respect to
applicants that file a Form 471, as described in Sec. 54.504(c) of this
part, when a filing period described in paragraph (c) of this section
is in effect. Schools and Libraries Corporation shall act in accordance
with paragraph (g)(2) of this section with respect to applicants that
file a Form 471, as described in Sec. 54.504(c) of this part, at all
times other than within a filing period described in paragraph (c) of
this section.
(1) When the filing period described in paragraph (c) of this
section closes, Schools and Libraries Corporation shall calculate the
total demand for support submitted by applicants during the filing
period. If total demand exceeds the total support available for that
funding year, Schools and Libraries Corporation shall take the
following steps:
(i) Schools and Libraries Corporation shall first calculate the
demand for telecommunications services and Internet access for all
discount categories, as determined by the schools and libraries
discount matrix in Sec. 54.505(c) of this part. These services shall
receive first priority for the available funding.
(ii) Schools and Libraries Corporation shall then calculate the
amount of available funding remaining after providing support for all
telecommunications services and Internet access for all discount
categories. Schools and Libraries Corporation shall allocate the
remaining funds to the requests for support for internal connections,
beginning with the most economically disadvantaged schools and
libraries, as determined by the schools and libraries discount matrix
in Sec. 54.505(c) of this part. Schools and libraries eligible for a 90
percent discount shall receive first priority for the remaining funds,
and those funds will be applied to their requests for internal
connections.
(iii) To the extent that funds remain after the allocation
described in Secs. 54.507(g)(1) (i) and (ii), Schools and Libraries
Corporation shall next allocate funds toward the requests for internal
connections submitted by schools and libraries eligible for an 80
percent discount, then for a 70 percent discount, and shall continue
committing funds for internal connections in the same manner to the
applicants at each descending discount level until there are no funds
remaining.
(iv) If the remaining funds are not sufficient to support all of
the funding requests within a particular discount level, Schools and
Libraries Corporation shall divide the total amount of remaining
support available by the amount of support requested within the
particular discount level to produce a pro-rata factor. Schools and
Libraries Corporation shall reduce the support level for each applicant
within the particular discount level, by multiplying each applicant's
requested amount of support by the pro-rata factor.
(v) Schools and Libraries Corporation shall commit funds to all
applicants consistent with the calculations described herein.
(2) When a filing period described in paragraph (c) of this section
is not in effect, and when expenditures in any funding year reach the
level where only $250 million remains before the cap will be reached,
funds shall be distributed in accordance with the following rules of
priority:
3. Section 54.511 is amended by revising paragraph (d) to read as
follows:
Sec. 54.511 Ordering services.
* * * * *
(d) The exemption from the competitive bid requirements set forth
in paragraph (c) of this section shall not apply to voluntary
extensions of existing contracts, with the exception that an eligible
school or library as defined under Sec. 54.501 or consortium that
includes an eligible school or library, that filed an application
within the 75-day initial filing window (January 30, 1998-April 15,
1998) may voluntarily extend, to a date no later than June 30, 1999, an
existing contract that otherwise would terminate between December 31,
1998 and June 30, 1999.
4. Section 54.623 is amended by revising paragraph (a) and adding
paragraph (f) to read as follows:
Sec. 54.623 Cap.
(a) Amount of the annual cap. The annual cap on federal universal
service support for health care providers shall be $400 million per
funding year, with the following exceptions. No more than $50 million
shall be collected for the
[[Page 43098]]
funding period from January 1, 1998 through June 30, 1998. No more than
$25 million shall be collected for the funding period from July 1, 1998
through September 30, 1998. No more than $25 million shall be collected
for the funding period from October 1, 1998 through December 31, 1998.
No more than $100 million shall be committed or disbursed for the 1998
funding year.
* * * * *
(f) Pro-rata reductions. Rural Health Care Corporation shall act in
accordance with this paragraph when a filing period described in
paragraph (c) of this section is in effect. When a filing period
described in paragraph (c) of this section closes, Rural Health Care
Corporation shall calculate the total demand for support submitted by
all applicants during the filing window. If the total demand exceeds
the total support available for the funding year, Rural Health Care
Corporation shall take the following steps:
(1) Rural Health Care Corporation shall divide the total funds
available for the funding year by the total amount of support requested
to produce a pro-rata factor.
(2) Rural Health Care Corporation shall calculate the amount of
support requested by each applicant that has filed during the filing
window.
(3) Rural Health Care Corporation shall multiply the pro-rata
factor by the total dollar amount requested by each applicant. Rural
Health Care Corporation shall then commit funds to each applicant
consistent with this calculation.
5. Section 54.709 is amended by revising paragraph (a)(3) to read
as follows:
Sec. 54.709 Computations of required contributions to universal
service support mechanisms.
(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
contribution. 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 school 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. Based on data
submitted to the Administrator on the Universal Service Worksheets, the
Administrator must submit the total contribution bases to the Common
Carrier Bureau at least 60 days before the start of each quarter. The
projections of demand and administrative expenses and the contribution
factors shall be announced by the Commission in a public notice 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 release
of the Commission's public notice. If the Commission takes no action
within 14 days of the date of release 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 and
contribution factors are approved, the Administrator shall apply the
quarterly contribution factors to determine individual contributions.
* * * * *
PART 69--ACCESS CHARGES
6. The authority citation for part 69 continues to read as follows:
Authority: 47 U.S.C. 154, 201, 202, 203, 205, 218, 220, 254, and
403 unless otherwise noted.
7. Section 69.620 is amended by revising paragraph (a) to read as
follows:
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, with the exception of the salary levels for
officers and employees of the corporations. The annual administrative
expenses 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 of support recipients.
(1) All officers and employees of the independent subsidiary,
Schools and Libraries Corporation and Rural Health Care Corporation,
may be compensated at an annual rate of pay, including any non-regular
payments, bonuses, or other compensation, in an amount not to exceed
the rate of basic pay in effect for Level I of the Executive Schedule
under section 5312 of title 5 of the United States Code.
(2) The level of compensation described in Sec. 69.620(a)(1) shall
be effective July 1, 1998.
* * * * *
[FR Doc. 98-21588 Filed 8-11-98; 8:45 am]
BILLING CODE 6712-01-P
