Universal Service Support Mechanisms

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 54

[CC Docket No. 96-45, CC 97-21; FCC 97-400]

Universal Service Support Mechanisms

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: The Commission authorized the Administrator of the universal

service support mechanisms to require payment of quarterly

contributions to universal service in equal monthly installments.

Allowing monthly payments will reduce the cash flow impact on

contributors because their payments will be smaller. It also will

better enable contributors to offset their contributions by payments

from the support mechanisms. It will not jeopardize the sufficiency of

the support mechanisms.

EFFECTIVE DATE: January 9, 1998.

FOR FURTHER INFORMATION CONTACT: Diane Law, (202) 418-7400.

SUPPLEMENTARY INFORMATION:

SECOND ORDER ON RECONSIDERATION in CC Docket No. 97-21

I. Background

1. In the Universal Service Order, the Commission created new

federal universal service support mechanisms and concluded that all

telecommunications carriers that provide interstate telecommunications

services, other providers of interstate telecommunications, and

payphone service providers will contribute to universal service. (See

Federal-State Joint Board on Universal Service, Report and Order, CC

Docket No. 96-45, FCC 97-157, 62 FR 32862 (June 17, 1997)). In the NECA

Report and Order, the Commission instructed the National Exchange

Carrier Association (NECA) to create an independent subsidiary, the

Universal Service Administrative Company (USAC or Administrator), to

administer temporarily portions of the universal service support

mechanisms. (See Changes to the Board of Directors of the National

Exchange Carriers Association, Inc., Federal-State Joint Board on

Universal Service, Report and Order and Second Order on

Reconsideration, CC Docket No. 97-21, CC Docket No. 96-45, FCC 97-253,

62 FR 41294 (August 1, 1997)). The Commission also instructed the

Administrator to bill contributors and collect contributions to the

federal universal service support mechanisms on a quarterly basis.

2. USAC requests that it be authorized to collect universal service

contributions on a monthly, as opposed to a quarterly, basis. USAC

states that collecting contributions on a quarterly basis may create

significant cash flow problems for contributors. USAC explains that,

because of the delay between funds collection and funds distribution,

monthly billing will not increase the likelihood that the Administrator

will be required to borrow money to fund early requests for discounts

by eligible schools and libraries. In addition, USAC notes that

collecting contributions on a monthly basis will generate some interest

income, albeit less than would be collected on a quarterly basis, that

can be applied to meet program demands. NECA supports USAC's request.

II. Discussion

3. Based on the Administrator's request, we reconsider, on our own

motion, our requirement that the Administrator collect contributions on

a quarterly basis. Allowing monthly payments would reduce the cash flow

impact on contributors because their payments would be smaller. It also

would better enable contributors to offset their contributions by

payments from the support mechanisms. We conclude that permitting

monthly as opposed to quarterly contributions will not jeopardize the

sufficiency of the support mechanisms. The Commission reduced the

estimated total contribution base by two percent when calculating the

universal service contribution factors to take account of the

possibility that contributions to the support mechanisms may fall short

of estimated levels due to, for example, uncollectibles or higher-than-

foreseen demand. In addition, since March 20, 1998 appears to be the

earliest date on which the Administrator could be required to make

distributions under the schools, libraries, and rural health care

programs,1 we anticipate that, under our

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revised billing schedule, the Administrator will have sufficient funds

to meet initial demand for support for these and all other service

programs. USAC has not requested that we revise the manner in which the

amount of each contributor's obligation is determined and we see no

reason to do so. Thus, as provided in Sec. 54.709 of the Commission's

current rules, the Administrator will apply the quarterly contribution

factors to determine the amount that contributors must remit to the

Administrator. We amend Sec. 54.709 of our rules to authorize the

Administrator to require payment of those quarterly contributions in

equal monthly installments.

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\1\ We calculate that March 20, 1998 reflects the earliest date

on which the Administrator will distribute funds under these

programs, by starting with November 24, 1997 and adding to it a 75-

day period and two 20-day periods, derived from the requirements

described below. The Schools and Libraries and Rural Health

Corporations must authorize USAC to disburse the appropriate payment

amounts as quickly as possible, but no later than 20 days following

receipt of the requisite forms. USAC must distribute payments as

quickly as possible, but no later than 20 days following receipt of

authorization to disburse funds. In addition, the Schools and

Libraries and Rural Health Care Corporations established 75-day

window filing periods in which all requests will be treated with

equal priority. The window period will begin to run when the Schools

and Libraries and Rural Health Care Corporations begin to receive

applications for support. Funds will not be committed until the

closing of the 75-day window filing period. Thus, even assuming the

window period were to begin on November 24, 1997, support would not

begin to be distributed before March 20, 1998.

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4. We understand that USAC intended to begin sending out bills in

December, 1997, which would require contributors to begin making

payments in January, 1998. We find that both USAC and contributors need

a reasonable opportunity to respond to the modification from a

quarterly to a monthly billing schedule. We therefore direct USAC not

to require contributors to make payments pursuant to the new universal

service mechanisms set forth in section 254 prior to February 1998.

This will provide USAC additional time to issue bills that are

consistent with the billing modification set forth herein. The

additional time will not delay disbursement of funds pursuant to the

new universal service mechanisms, because distribution of funds

pursuant to the schools and libraries and rural health care universal

service programs will not begin before March 20, 1998 and distributions

for the new high cost and low income universal service programs will

not begin until February 1998.

III. Supplemental Final Regulatory Flexibility Analysis

5. As required by Section 603 of the Regulatory Flexibility Act

(RFA), 5 U.S.C. 603, an Initial Regulatory Flexibility Analysis (IRFA)

was incorporated in the Notice of Proposed Rulemaking and Order

Establishing Joint Board (NPRM). In addition, the Commission prepared

an IRFA in connection with the Recommended Decision, seeking written

public comment on the proposals in the NPRM and Recommended Decision. A

Final Regulatory Flexibility Analysis (FRFA) was also included in the

Order. The Commission's Supplemental Final Regulatory Flexibility

Analysis (SFRFA) in this Order conforms to the RFA, as amended.

A. Need for and Objectives of This Report and Order and the Rules

Adopted Herein

6. The Commission is required by section 254 of the Act, as amended

by the 1996 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 one aspect of those rules. Our reconsideration was

prompted by ex parte letters filed by USAC and NECA suggesting that

contributions to the universal service support mechanisms be collected

on a monthly, rather than the quarterly basis currently specified in

our rules. In addition, on our own motion, we adopt a rule in order to

give contributors and USAC a reasonable opportunity to respond to the

billing modification.

B. Summary and Analysis of the Significant Issues Raised by Public

Comments in Response to the IRFA

7. Other than those described in the Order, no additional comments

were filed in response to the IRFAs described above. Nor were any

comments filed in response to the ex parte letters from the

Administrator and NECA.

C. Description and Estimates of the Number of Small Entities to Which

the Rules Adopted in This Report and Order Will Apply

8. In the FRFA at paragraphs 890-922 of the Order, we described and

estimated the number of small entities that would be affected by the

new universal service rules. The rule adopted here will apply to the

same telecommunications carriers and entities affected by the universal

service rules. We therefore adopt the provisions of paragraphs 890-922

of the Order.

D. Summary Analysis of the Projected Reporting, Recordkeeping, and

Other Compliance Requirements and Significant Alternatives and Steps

Taken to Minimize the Significant Economic Impact on a Substantial

Number of Small Entities Consistent with Stated Objectives

9. In the FRFA to the Order, we described the projected reporting,

recordkeeping, and other compliance requirements and significant

alternatives and steps taken to minimize significant economic impact on

a substantial number of small entities consistent with stated

objectives associated with the Administration section of the Order.

Because the rule adopted herein will only marginally affect those

requirements, we adopt the provisions of paragraphs 980-981 of the

Order, which describe those requirements and provide the following

analysis of the new requirements adopted herein. Under the rule adopted

herein, telecommunications carriers and providers must submit their

quarterly contributions on a monthly basis. Although monthly

contributions may slightly increase the paperwork burdens imposed on

small entities, this payment scheme may reduce their cash flow burdens

and thus provides an offsetting benefit. We also adopt a rule herein to

provide contributors, including small entities, a reasonable

opportunity to respond to the billing change.

IV. Ordering Clauses

10. Accordingly, It is ordered that, pursuant to the authority

contained in sections 1-4, 201-205, 254, and 405 of the Communications

Act of 1934, as amended, 47 U.S.C. 151-154, 201-205, 254, and 405,

Sec. 1.108 of the Commission's rules, 47 CFR 1.108, and section 553 of

the Administrative Procedure Act, 5 U.S.C. 553, this Order is adopted,

effective 30 days from publication of the text in the Federal Register.

11. It is further ordered that part 54 of the Commission's rules,

47 CFR 54.709, is amended, effective January 9, 1998.

List of Subjects in 47 CFR Part 54

Communications common carriers, Health facilities, Libraries,

Reporting and recordkeeping requirements, Schools, Telecommunications,

Telephone.

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Federal Communications Commission.

Magalie Roman Salas,

Secretary.

Rule Changes

Part 54 of title 47 of the Code of Federal Regulations is amended

as follows:

PART 54--UNIVERSAL SERVICE

1. The authority citation for part 54 continues to read as follows:

Authority: 47 U.S.C. 1, 4(i), 201, 205, 214, and 254 unless

otherwise noted.

2. Section 54.709 is amended by revising paragraph (a)(4) and

adding a new paragraph (a)(5) to read as follows:

Sec. 54.709 Computations of required contributions to universal

service support mechanisms.

(a) * * *

(4) For each quarter, the Administrator shall bill contributors

monthly and require payment of contributions in equal monthly

installments.

(5) The Administrator shall not require contributors to make

payments pursuant to the universal service mechanisms set forth in 47

U.S.C. 254 prior to February 1998.

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[FR Doc. 97-32178 Filed 12-9-97; 8:45 am]

BILLING CODE 6712-01-P