Changes to the Board of Directors of the National Exchange Carrier Association, Inc.

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 69

[CC Docket No. 97-21] [FCC 97-11]

Changes to the Board of Directors of the National Exchange

Carrier Association, Inc.

AGENCY: Federal Communications Commission.

ACTION: Notice of Proposed rulemaking and notice of inquiry.

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SUMMARY: On January 10, 1997, the Commission adopted a Notice of

Proposed Rulemaking (NPRM) and an accompanying Notice of Inquiry (NOI)

to amend the Commission's rules consistent with proposals to permit the

National Exchange Carrier Association (NECA) to change the size and

composition of its Board of Directors. In the NPRM, the Commission

tentatively concludes that the composition of NECA's Board of Directors

must be altered to make the Board more representative of all segments

of the telecommunications industry before NECA may be appointed as the

temporary administrator of the new universal service support

mechanisms, pursuant to the Universal Service proceeding in CC Docket

96-45. In the

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Notice of Inquiry (NOI), the Commission seeks comment on how the

Commission might amend its rules to remove any regulatory barriers that

otherwise may prevent NECA from satisfying the Joint Board's criteria

for a neutral third party permanent administrator for the new universal

service support mechanisms. The NOI also seeks comment as to what, if

any, additional reforms the Commission should adopt with respect to the

administration of the current access tariff and pool revenue

distribution programs and whether, in connection with any such proposed

reforms, interested parties, in addition to NECA, should be entitled to

participate in a selection process to serve as the administrator of

those programs. The Commission seeks comment on the NPRM and NOI.

DATES: NPRM comments should be filed on or before January 27, 1997 and

NPRM reply comments should be filed on or before February 3, 1997. NOI

comments should be filed on or before March 3, 1997 and NOI reply

comments should be filed on or before April 3, 1997.

ADDRESSES: Interested parties must file an original and four copies of

their comments with the Office of the Secretary, Federal Communications

Commission, Room 222, 1919 M Street, NW., Washington, DC 20554.

Comments should reference CC Docket No. 96-. Parties should send one

copy of their comments to the Commission's copy contractor,

International Transcription Service, Room 140, 2100 M Street, NW.,

Washington, DC 20037. After filing, comments will be available for

public inspection during regular business hours in the FCC Reference

Center, Room 239, 1919 M Street, NW., Washington, DC 20554.

Parties are also asked to submit comments on diskette. Diskette

submissions would be in addition to and not a substitute for the formal

filing requirements addressed above. Parties submitting diskettes

should submit them to Sheryl Todd, Common Carrier Bureau, 2100 M

Street, NW., Room 8611, Washington, DC 20554. Such a submission should

be on a 3.5 inch diskette in an IBM compatible format using WordPerfect

5.1 for Windows software in a ``read only'' mode. The diskette should

be clearly labelled with the party's name, proceeding, and date of

submission. The diskette should be accompanied by a cover letter.

FOR FURTHER INFORMATION CONTACT: Sheryl Todd at 202-530-6040.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Notice

of Proposed Rulemaking and Notice of Inquiry adopted and released on

January 10, 1997 (FCC 97-11). The full text of this NPRM and NOI is

available for inspection and copying during normal business hours in

the FCC Reference Center, Room 239, 1919 M Street, Washington, DC

20554.

Summary of Notice of Proposed Rulemaking

1. On October 18, 1996, NECA requested that the Commission amend

section 69.602 of the Commission's rules to permit NECA to modify the

size and composition of its Board of Directors to reflect the interests

of competitive local exchange carriers (LECs), interexchange carriers,

wireless carriers, and non-carriers such as schools, libraries, rural

healthcare providers, and the states.

2. On March 8, 1996, the Commission initiated a rulemaking in CC

Docket 96-45, pursuant to section 254 of the Communications Act of 1934

(Communications Act), as amended by the Telecommunications Act of 1996

(1996 Act), to reform our system of universal service support. On

November 8, 1996, the Federal-State Joint Board (Joint Board) on

Universal Service released a Recommended Decision regarding numerous

universal service issues. The Joint Board recommended that NECA be

appointed as the temporary fund administrator of the universal service

support mechanisms for schools, libraries and health care providers in

order to provide supported telecommunications services to these

entities as quickly as possible. The Joint Board also recommended that,

prior to appointing NECA as temporary administrator, the ``Commission

permit NECA to add significant, meaningful representation'' for non-

incumbent LEC interests to the NECA Board of Directors.

3. NECA is an association of incumbent LECs. Along with

administering the interstate access tariff and revenue distributions

processes, NECA currently administers the existing universal service

fund, the Lifeline Assistance program, the long term support (LTS)

program and the interstate Telecommunications Relay Services (TRS)

fund. The universal service fund, the Lifeline Assistance program, and

the LTS program were designed to promote affordable telephone service

throughout the nation. The TRS fund is the cost recovery mechanism that

reimburses eligible TRS providers for interstate TRS minutes of use.

NECA presently has a 15-member Board of Directors that consists of five

directors from outside of the LEC industry, two directors representing

Bell Operating Companies (BOCs), two directors representing other LECs

having operating revenues in excess of $40 million, and six directors

representing LECs having annual operating of less than $40 million.

4. Under NECA's proposal, three directors would represent carrier

participants such as interexchange carriers, wireless carriers, and

competitive LECs, and three would represent non-carriers, such as

schools, libraries, rural health care providers, and states. Under

NECA's proposal, the new Board members would participate in NECA's

administration of the current universal service, Lifeline Assistance,

and LTS programs, as well as Board oversight of auditing, finance, and

general corporate matters. Access tariffs and pool revenue

distribution, however, would continue to be the responsibility of the

access charge committees, consisting of current members of NECA's

Board. We find that for NECA to act on this proposal, Sec. 69.602 of

the Commission's rules would require amendment in order to create a

fourth category or subset of six new directors, with three of those

directors representing non-incumbent LEC participants, such as

interexchange carriers, wireless carriers, and competitive LECs, and

three directors representing support beneficiaries of universal service

policies or other non-carriers, potentially including schools,

libraries, rural health care providers, and states.

5. In this Notice of Proposed Rulemaking (NPRM), we address NECA's

request and the Joint Board's recommendations and seek comment on how

the Commission should amend its rules so that NECA can reform its Board

of Directors in a manner that will enable it to become eligible to

serve as the temporary administrator of the universal service support

mechanisms. We tentatively conclude that, in order to be eligible to

serve as the temporary administrator, NECA's Board of Directors must

become more representative of the telecommunications industry as a

whole. Accordingly, in order to meet the implementation schedule

recommended by the Joint Board in its Recommended Decision and

consistent with the recommendation that the Commission appoint NECA as

temporary administrator of the new universal service support

mechanisms, this NPRM proposes to amend Sec. 69.602 of the Commission's

rules so that NECA may modify the size and composition of its Board of

Directors to make the Board more representative of the

telecommunications industry. We also

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seek comment on whether other part 69 rule sections should be modified

in conjunction with the proposed rule changes to Sec. 69.602.

Notice of Inquiry

6. In the Recommended Decision released on November 8, 1996, the

Joint Board recommended that the permanent administrator of the new

universal service support mechanisms, including its Board of Directors:

(1) Be neutral and impartial; (2) not advocate specific positions to

the Commission in non-administration-related proceedings; (3) not be

aligned or associated with any particular industry segment; and (4) not

have a direct financial interest in the support mechanisms established

by the Commission. In declining to recommend NECA for the position of

permanent administrator, the Joint Board emphasized the importance of

the permanent administrator's ability to maintain an ``appearance of

impartiality'' and questioned NECA's ability to do this in light of its

current membership and governance. The Joint Board specifically cited

commenters' concerns that NECA's ability to appear to be a neutral

arbitrator among contributing carriers, its current membership of

incumbent LECs, and the advocacy role it has assumed in several

Commission proceedings created an appearance to non-LECs of NECA's bias

favoring incumbent LECs. The Joint Board further stated that ``[i]f

changes to its membership and governance render NECA a neutral, third-

party, NECA should be eligible to compete in the advisory board's

selection process'' for choosing a permanent administrator.

7. In this NOI, we seek comment as to how the Commission might

amend subpart G of its part 69 rules to remove any regulatory barriers

that otherwise may prevent NECA from making itself a neutral, third

party and satisfying the four criteria identified by the Joint Board.

We also seek comment on whether, and if so how, the Commission should

streamline its rules to enable NECA to change the composition of its

Board without unnecessary regulatory oversight. Alternatively, the

Commission could repeal the rules currently contained in part 69

constraining NECA's structure and functions so that NECA could make

whatever organizational changes it deems necessary without Commission

endorsement or sanction. If the Commission's oversight function of

NECA's structure and functions were diminished in this fashion, we seek

additional comment with respect to whether the interests of NECA's

current membership, as well as other carriers, could be adversely

affected by how NECA might administer tariffs and access charges.

8. In the Recommended Decision, the Joint Board also recommended

that the qualified applicant have the capacity to process large amounts

of data and bill large number of carriers. Accordingly, we seek comment

on whether existing Commission rules prevent NECA from satisfying these

criteria, and if so, how such rules should be amended.

9. Finally, we seek comment as to what, if any, additional reforms

the Commission should adopt with respect to the administration of the

current access tariff and pool revenue distribution programs and

whether, in connection with any such proposed reforms, interested

parties, in addition to NECA, should be entitled to participate in a

selection process to serve as the administrator of one or more of those

programs. As noted above, NECA currently administers the CL and TS

access tariff pools, the existing universal service fund, the Lifeline

Assistance program, the LTS program, and the TRS fund. Consistent with

the de-regulatory and pro-competitive spirit of the 1996 Act, we seek

comment regarding whether additional amendments to the Commission's

part 69 rules are needed with respect to the administration of these

programs and whether the administration of one or more of the programs

should be subject to a competitive bidding process. In light of the

Commission's recent reappointment of NECA to an additional four-year

term as administrator of the TRS fund and given that NECA's

reappointment to that fund was unopposed, we do not seek comment at

this time on NECA's role as TRS administrator. Accordingly, we seek

comment on whether administration of the CL and TS access tariff pools,

the Lifeline Assistance program, and the LTS program should remain the

exclusive province of NECA or whether other interested parties should

be entitled to participate in a selection process to serve as the

administrator of those programs. We request from those commenters

advocating other parties' participation in the selection process

suggestions on how such participation could be effectuated and what

changes to our rules would be necessary to effectuate these changes.

Procedural Matters

10. This is a non-restricted notice and comment rulemaking

proceeding. Ex parte presentations are permitted, except during the

Sunshine Agenda period, provided they are disclosed as provided in the

Commission's rules.

11. We invite comment on the proposals and tentative conclusions

set forth above. Pursuant to applicable procedures set forth in

Secs. 1.415 and 1.419 of the Commission's rules, interested parties may

file NPRM comments on or before January 27, 1997 and NPRM reply

comments on or before February 3, 1997. Interested parties may file NOI

comments on or before March 3, 1997 and NOI reply comments on or before

April 3, 1997. To file formally in this proceeding, you must file an

original and six copies of all comments, reply comments, and supporting

comments. If you want each Commissioner to receive a personal copy, you

must file an original plus eleven copies. You should send comments and

reply comments to Office of the Secretary, Federal Communications

Commission, 1919 M Street, NW., Room 222, Washington, DC 20554. Five

courtesy copies should also be sent to Tejal Mehta at 2100 M Street,

NW., Room 8611, Washington, DC 20554. Parties should also file one copy

of any document filed in this docket with the Commission's copy

contractor, International Transcription Services, Inc. (ITS), 2100 M

Street, NW., Suite 140, Washington, DC 20037. ITS's telephone number is

202-857-3800. Comments and reply comments will be available for public

inspection during regular business hours in the FCC Reference Center,

Room 239, 1919 M Street, NW., Washington, DC 20554. Comments and reply

comments must include a short and concise summary of the substantive

arguments raised in the pleading. For further information concerning

this proceeding, contact Sheryl Todd, Accounting and Audits Division,

Common Carrier Bureau at 202-530-6001.

Initial Regulatory Flexibility Analysis

12. Section 603 of the Regulatory Flexibility Act (RFA), as

amended, requires an Initial Regulatory Flexibility Analysis in notice

and comment rulemaking proceedings, unless the head of the agency

certifies that ``the rule will not, if promulgated, have a significant

economic impact on a substantial number of small entities.'' The NPRM

portion of this proceeding applies only to NECA and concerns the

proposal to amend the Commission's rules to modify the size and

composition of NECA's current Board of Directors to make the Board more

representative of the telecommunications industry as a whole.

13. For the purposes of this NPRM, the RFA defines a ``small

business'' to be the same as a ``small business

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concern'' under the Small Business Act, unless the Commission has

developed one or more definitions that are appropriate to its

activities. Under the Small Business Act, a ``small business concern''

includes a small organization, which is defined as a non-profit

enterprise that is not independently owned and operated and is not

dominant in its field. NECA is a non-profit, quasi-governmental

association that was initially created to administer the Commission's

interstate access tariff and revenue distribution processes. Therefore,

NECA is not a small organization within the meaning of the RFA.

Furthermore, these proposals do not apply to other ``small business

concerns'' since they propose to modify the composition of NECA's Board

of Directors. For this reason, we tentatively conclude that these

proposals would not have a significant economic impact on a substantial

number of small entities.

14. We therefore certify, pursuant to Section 605(b) of the RFA,

that these proposals would not have a significant economic impact on a

substantial number of small entities. We seek comment on this tentative

conclusion. The Commission shall publish this certification in the

Federal Register, and shall provide a copy of this NPRM, including this

certification, to the Chief Counsel for Advocacy of the Small Business

Administration.

Ordering Clauses

15. Accordingly, It is ordered that, pursuant to Secs. 1, 4(i),

201-205, 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, notice is

hereby given of proposed amendments to Part 69 of the Commission's

rules, 47 CFR part 69, as described in this notice of proposed

rulemaking.

16. Accordingly, it is ordered that, pursuant to sections 1, 4(i),

201-205, 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, notice is

hereby given of proposals described in this notice of inquiry.

Federal Communications Commission.

William F. Caton,

Acting Secretary.

[FR Doc. 97-1133 Filed 1-16-97; 8:45 am]

BILLING CODE 6712-01-M