Universal Service

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 54

[CC Docket No. 96-45; FCC 97-380]

Universal Service

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: In this Order, we adopt a filing window period that begins on

the date that the Schools and Libraries Corporation and the Health Care

Corporation begin to receive applications for support. We also conclude

that the administrative corporations will determine the length of the

window and resolve other administrative issues necessary to implement

our decision to adopt a window filing period consistent with our

guidance set forth below. Therefore, we amend our rules to implement

this change. In addition, we delegate authority to the Chief, Common

Carrier Bureau to resolve unanticipated technical and operational

issues relating to the new universal service mechanisms that may arise

in the future.

EFFECTIVE DATE: All policies and rules adopted herein shall be

effective November 28, 1997.

FOR FURTHER INFORMATION CONTACT: Valerie Yates, Legal Counsel, Common

Carrier Bureau, (202) 418-1500, or Sheryl Todd, Common Carrier Bureau,

(202) 418-7400.

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

Report and Order adopted on October 10, 1997 and released on October

14, 1997, including changes made in an erratum released October 15,

1997. The full text of the Third Report and Order is available for

inspection and copying during normal business hours in the FCC

Reference Center (Room 239), 1919 M St., NW., Washington, DC. Pursuant

to the Telecommunications Act of 1996, the Commission released a Notice

of Proposed Rulemaking and Order Establishing Joint Board, Federal-

State Joint Board on Universal Service, CC Docket No. 96-45 on March 8,

1996 (61 FR 10499 (March 14, 1996)), a Recommended Decision on November

8, 1996 (61 FR 63778 (December 2, 1996)), a Public Notice on November

18, 1996 (61 FR 63778 (December 2, 1996)), and a Report and Order that

was adopted on May 7, 1997 and released on May 8, 1997 (62 FR 32862

(June 17, 1997)) implementing rules for Secs. 254 and 214(e) of the Act

relating to universal service. Also pursuant to the Telecommunications

Act of 1996, the Commission released a Report and Order in CC Docket

97-21 on July 18, 1997 (62 FR 41294 (August 1, 1997)). The Common

Carrier Bureau released a Public Notice seeking comment on additional

issues addressed in the Third Report and Order on September 10, 1997

(62 FR 48280 (September 15, 1997)).

Summary of the Third Report and Order

1. On March 8, 1996, as required by the Telecommunications Act of

1996 (1996 Act), the Commission released a Notice of Proposed

Rulemaking and Order Establishing a Joint Board on Universal Service.

As required by the RFA, the NPRM included an Initial Regulatory

Flexibility Analysis (IRFA). At that time, the Commission sought

written public comment on the proposals in the NPRM, including comment

on the IRFA. On May 8, 1997 the Commission released a Report and Order

that included a Final Regulatory Flexibility Analysis (FRFA). On

September 10, 1997, the Common Carrier Bureau issued a Public Notice

seeking comment on several issues with respect to the application

process and the distribution of federal universal service support funds

for schools, libraries, and rural health care providers. This FRFA

supplements the FRFA that was included in the First Report and Order

and incorporates the comments with respect to the proposal to adopt a

filing window that were received in response to the Bureau's September

10 Public Notice. This present FRFA conforms to the RFA.

2. In the Universal Service Order, we concluded that the

Administrator would commit funds to applicants on a first-come first-

served basis. We now conclude, based on the nearly unanimous comments

received in response to the September 10 Public Notice, that all

applications filed during the window will be treated as if

simultaneously received. For the reasons discussed below, we find that

adopting such a window period will best serve the needs of applicants

for universal service discounts, and will assist the administrative

corporations in processing these requests in a timely manner.

3. In response to commenters' requests, we clarify that an

applicant's ``place in line,'' or seniority, with respect to funds will

be determined by the date on which an applicant submits a contract to

the applicable administrative corporation. An applicant's submission of

its initial request for services, which one of the administrative

corporations will post on its website, does not determine the

applicant's seniority for the purposes of allocating funding. We

clarify that the Schools and Libraries Corporation, as administrator,

will allocate funds reasonably and in accordance with the rules of

priority set forth in Sec. 54.507(g) of our rules.

4. In light of our decision to adopt a window filing period, we

also conclude that the administrative corporations should determine the

length of the window and resolve other administrative matters necessary

to implement a window filing period. We conclude that this

responsibility entails ``administering the support mechanisms for

eligible schools and libraries and rural health care providers,'' a

function already within the scope of the corporations' general duties.

We find that the goals of the universal service mechanisms will best be

served if the administrative corporations are responsible for

implementing the window filing periods because they will be performing

the day-to-day functions of the schools, libraries, and rural health

care universal service mechanisms and thus are better able to determine

an appropriate window periods in light of their needs and resources. We

remain committed to the general principle that funds will be allocated

to applicants on a first-come first-served basis. Consistent with this

principle, we direct the corporations to adopt a reasonable window

period that is of sufficient duration to effectuate the administrative

purposes of the window, as set forth

[[Page 56119]]

above, but is short enough to ensure that funds are allocated without

unnecessary delay and to encourage applicants to file requests for

support without undue delay. In addition, to ensure that all applicants

will be informed of the window periods with sufficient time to adjust

their plans accordingly, we direct the administrative corporations to

make a determination with respect to the initial window filing periods

by October 31, 1997 and to publicize that decision promptly using

appropriate media and other avenues that will notify the educational,

library, and rural health care communities. In order to facilitate

notification to the public, we direct the Bureau to issue a public

notice announcing the administrative corporations' decisions.

5. We further find that unanticipated technical and operational

issues may arise that will require prompt attention, but will not

warrant Commission review. To the extent clarification of our rules are

necessary, however, we delegate to the Chief, Common Carrier Bureau the

authority to issue orders interpreting our rules as necessary to ensure

that support for services provided to schools and libraries and rural

health care providers operate to further our universal service goals.

We find that this action is ``necessary to the proper functioning of

the Commission and the prompt and orderly conduct of its business.'' 47

U.S.C. 155(c)(1). Any action taken pursuant to this delegation of

authority ``shall have the same force and effect and shall be made,

evidenced, and enforced in the same manner as actions of the

Commission.'' 47 CFR 0.203; see also 47 U.S.C. 155(c)(3).

Final Federal Regulatory Flexibility Analysis

6. On March 8, 1996, as required by the Telecommunications Act of

1996 (1996 Act), the Commission released a Notice of Proposed

Rulemaking and Order Establishing a Joint Board on Universal Service.

As required by the RFA, the NPRM included an Initial Regulatory

Flexibility Analysis (IRFA). At that time, the Commission sought

written public comment on the proposals in the NPRM, including comment

on the IRFA. On May 8, 1997 the Commission released a Report and Order

that included a Final Regulatory Flexibility Analysis (FRFA). On

September 10, 1997, the Common Carrier Bureau issued a Public Notice

seeking comment on several issues with respect to the application

process and the distribution of federal universal service support funds

for schools, libraries, and rural health care providers. This FRFA

supplements the FRFA that was included in the First Report and Order

and incorporates the comments with respect to the proposal to adopt a

filing window that were received in response to the Bureau's September

10 Public Notice. This present FRFA conforms to the RFA.

7. Need for, and Objectives of, this Third Report and Order. The

Commission is required by sections 254(a)(2) and 410(c) of the Act, as

amended by the 1996 Act, to promulgate these rules to implement

promptly the universal service provisions of section 254. The goal of

this Third Report and Order (Order) is to ease the burden on schools,

libraries, and rural health care providers that will submit requests

for funding to the universal service administrator by adopting a filing

window. All applications filed during the window will be treated as if

simultaneously received.

8. Summary of Significant Issues Raised by Public Comments.

Commenters overwhelmingly recommended adoption of a filing window in

order to ease the administrative burdens on schools, libraries, and

rural health care providers, particularly smaller entities with fewer

administrative resources. Some commenters urged the Commission to

ensure that applicants in all states would receive some opportunity to

receive funding.

9. Description and Estimates of the Number of Small Entities to

Which the Rules Adopted in This Report and Order will Apply. The RFA

generally defines ``small entity'' as having the same meaning as the

terms ``small business,'' ``small organization,'' and ``small

governmental jurisdiction.'' In addition, the term ``small business''

has the same meaning as the term ``small business concern'' under the

Small Business Act, 15 U.S.C. 632, unless the Commission has developed

one or more definitions that are appropriate to its activities. Under

the Small Business Act, a ``small business concern'' is one that: (1)

Is independently owned and operated; (2) is not dominant in its field

of operation; and (3) meets any additional criteria established by the

Small Business Administration (SBA). As noted, the RFA also applies to

nonprofit organizations and to governmental organizations such as

governments of cities, counties, towns, townships, villages, school

districts, or special districts with populations of less than 50,000.

As of 1992, the most recent figures available, there were 85,006

governmental entities in the United States.

10. For ``small business'' determinations in this context, the SBA

has established a definition of small elementary and secondary schools

and small libraries as those with under $5 million in annual revenues.

Other entities of this sort may be considered small under the other two

prongs of the RFA. The most reliable source of information regarding

the total number of kindergarten through 12th grade (K-12) schools and

libraries nationwide of which we are aware appears to be data collected

by the United States Department of Education and the National Center

for Educational Statistics. Based on that information, it appears that

there are approximately 86,221 public and 26,093 private K-12 schools

in the United States (SIC 8211). It further appears that there are

approximately 15,904 libraries, including branches, in the United

States (SIC 8231). Although it seems certain that not all of these

schools and libraries would qualify as small entities under the SBA's

determination, we are unable at this time to estimate with greater

precision the number of small schools and libraries that would qualify

as small entities under the definition. Consequently, we estimate that

there are fewer than 86,221 public and 26,093 private schools and fewer

than 15,904 libraries that may be affected by the decisions and rules

adopted in this Order.

11. Neither the Commission nor the SBA has developed a definition

of small, rural health care providers. Section 254(h)(5)(B) defines the

term ``health care provider'' and sets forth the seven categories of

health care providers eligible to receive universal service support. We

estimate that there are: (1) 625 ``post-secondary educational

institutions offering health care instruction, teaching hospitals, and

medical schools,'' including 403 rural community colleges, 124 medical

schools with rural programs, and 98 rural teaching hospitals; (2) 1,200

``community health centers or health centers providing health care to

migrants;'' (3) 3,093 ``local health departments or agencies''

including 1,271 local health departments and 1,822 local boards of

health; (4) 2,000 ``community mental health centers;'' (5) 2,049 ``not-

for-profit hospitals;'' and (6) 3,329 ``rural health clinics.'' We do

not have sufficient information to make an estimate of the number of

consortia of health care providers at this time. The total of these

categorical numbers is 12,296. Consequently, we estimate that there are

fewer than 12,296 health care providers potentially affected by the

rules in this Order. For the purposes of ``small business'' analysis,

we note that

[[Page 56120]]

according to the SBA definition, hospitals must have annual gross

receipts of $5 million or less to qualify as a small business concern.

There are approximately 3,856 hospital firms, of which 294 have gross

annual receipts of $5 million or less. Although some of these small

hospital firms may not qualify as rural health care providers, we are

unable at this time to estimate with greater precision the number of

small hospital firms which may be affected by this Order. Consequently,

we estimate that there are fewer than 294 hospital firms affected by

this Order.

12. Description of Projected Reporting, Recordkeeping, and Other

Compliance Requirements. This order will impose no additional

reporting, recordkeeping or other compliance requirements on small

entities.

13. Steps Taken to Minimize the Significant Economic Impact on

Small Entities and Significant Alternatives Considered. As explained in

the Order, based on the nearly unanimous comments received in response

to the September 10 Public Notice, the Commission concludes that all

applications filed during the window will be treated as if

simultaneously received. We find that adopting such a window period

will best serve the needs of applicants for universal service

discounts, and will assist the administrative corporations in

processing these requests in a timely manner. The Commission finds that

the window will reduce pressure on applicants to submit their contracts

at the earliest possible moment and, thus, will improve the accuracy

and care with which these contracts are negotiated and the accompanying

forms are completed. By providing additional time to complete contract

negotiations after the four-week competitive bid waiting period, a

window will allow schools to negotiate their contracts with greater

care. Further, this window will reduce disparities between applicants

with substantial administrative resources and applicants with fewer

resources, such as small schools, libraries, and health care providers.

We recognize, as noted by the commenters, that this window will not

eliminate all disparities among applicants. The Commission adopted

annual funding caps, $2.25 billion for schools and libraries and $400

million for health care providers, because it estimated that these

monies would be sufficient for all applicants during the funding year.

We emphasize that we have no reason to revise these estimates and have

no reason to believe that either of the caps will be reached during the

initial filing period, nor at any other point during the funding

period. We are adopting a window primarily to allow applicants

sufficient time to negotiate contracts properly and submit complete

filings.

14. The Commission will send a copy of the Order, including this

FRFA, in a report to be sent to Congress pursuant to the Small Business

Regulatory Enforcement Fairness Act of 1996. A copy of the Order and

this FRFA will also be published in the Federal Register and will be

sent to the Chief Counsel for Advocacy of the Small Business

Administration.

List of Subjects in 47 CFR Part 54

Libraries, Schools, Healthcare providers, Telecommunications,

Telephone.

Federal Communications Commission.

William F. Caton,

Acting Secretary.

Rule Changes

1. Part 54 of Title 47 of the Code of Federal Regulations (CFR) is

amended as follows:

PART 54--UNIVERSAL SERVICE

2. Section 54.507 is amended by adding the last three sentences to

paragraph (c) to read as follows:

Sec. 54.507 Cap.

* * * * *

(c) Requests. * * * The Schools and Libraries Corporation shall

implement an initial filing period that treats all schools and

libraries filing within that period as if they were simultaneously

received. The initial filing period shall begin on the date that the

Schools and Libraries Corporation begins to receive applications for

support, and shall conclude on a date to be determined by the Schools

and Libraries Corporation. The Schools and Libraries Corporation may

implement such additional filing periods as it deems necessary.

* * * * *

3. Section 54.623 is amended by adding the last three sentences to

paragraph (c) to read as follows:

Sec. 54.623 Cap.

* * * * *

(c) Requests. * * * The Rural Health Care Corporation shall

implement an initial filing period that treats all health care

providers filing within that period as if they were simultaneously

received. The initial filing period shall begin on the date that the

Rural Health Care Corporation begins to receive applications for

support, and shall conclude on a date to be determined by the Rural

Health Care Corporation. The Rural Health Care Corporation may

implement such additional filing periods as it deems necessary.

* * * * *

[FR Doc. 97-28612 Filed 10-28-97; 8:45 am]

BILLING CODE 6712-01-P