Proposed Revision of 1998 Collection Amounts for Schools and Libraries and Rural Health Care Universal Service Support Mechanisms

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 54

[CC Docket No. 96-45; DA 98-872]

Proposed Revision of 1998 Collection Amounts for Schools and

Libraries and Rural Health Care Universal Service Support Mechanisms

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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SUMMARY: The Common Carrier Bureau seeks comment on the proposed

revision of 1998 collection amounts for the schools and libraries and

rural health care universal service support mechanisms.

DATES: Comments in response to this proposed rule are due May 22, 1998.

ADDRESSES: One original and five copies of all comments responsive to

this Public Notice must be sent to Magalie Roman Salas, Secretary,

Federal Communications Commission, 1919 M Street, N.W., Washington,

D.C. 20554. Three copies also should be sent to Sheryl Todd, Accounting

Policy Division, Common Carrier Bureau, 2100 M Street, N.W., 8th Floor,

Washington, D.C. 20554.

FOR FURTHER INFORMATION CONTACT: Irene Flannery, Accounting Policy

Division, Common Carrier Bureau, (202) 418-7383.

SUPPLEMENTARY INFORMATION: The final rules providing for universal

service support for schools, libraries, and health care providers

appear in 47 CFR part 54, subparts F and G, which were originally

published on June 17, 1997 (62 FR 32862) and amended in rules published

on January 3, 1998 (63 FR 2094) and January 27, 1998 (63 FR 3830).

By the Common Carrier Bureau:

Consistent with section 254 of the Communications Act, as amended,

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 also remain committed to providing the

greatest level of support to the most economically disadvantaged

schools and libraries. At the same time, however, we strive to ensure a

smooth transition to the new universal service support mechanisms and

to minimize disruption to consumers. 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. We thus seek comment on a proposal to implement 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 and at the

same time will minimize disruption to consumers.

As of May 1, 1998, SLC projected that $2.02 billion in discounts

have been requested by applicants who have filed through April 28,

1998. RHCC projected that the rural health care support mechanism will

require $25 million for the third quarter. Although the local exchange

carriers will not file their access tariffs until June 16, 1998, based

on preliminary information provided by the local exchange carriers, we

estimate that the July 1, 1998 access charge reductions will be

approximately $700 million below current levels. Given projected access

charge reductions, we estimate that the quarterly collection rate for

schools and libraries could rise from $325 million (the second quarter

collection rate) to approximately $524 million (We reach this result in

the following manner: Long distance carriers pay direct contributions

to universal service and, through interstate access charges, indirectly

pay for most of the local exchange carrier contributions. Directly and

indirectly, long distance carriers are responsible for approximately

82.5 percent of schools and libraries and rural health care

contributions. Multiplying $700 million by 1/.825 yields $848 million.

We divide $848 million by 4 to find the incremental amount available

for each quarter, which is $212 million. We then add $212 million to

the average quarterly collection rate for the first half of 1998, $312

million (the average of $300 and 325 million). Accordingly, access

charge reductions of $700 million yield $524 million as a quarterly

collection rate for the third and fourth

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quarters of 1998 without increasing total access and universal service

payments by long distance carriers. Accordingly, schools and libraries

could be funded at approximately $1.67 billion for the 1998 calendar

year. Because the 75-day initial filing window period for the rural

health care support mechanism just opened on May 1, 1998, we propose

that the quarterly collection rate for the rural health care support

mechanism remain at $25 million for the third and fourth quarters of

1998. Accordingly, rural health care providers would be funded at $100

million for the 1998 calendar year.)

We do not seek comment on revising the annual caps adopted in the

Universal Service Order. Rather, we seek comment on adjusting the

maximum amounts that may be collected and spent during the initial year

of implementation in order to ensure that collection rates do not

exceed access charge reductions and to prevent rate churn for

subscribers. We emphasize that any adjustments should not impact the

level of support available to the most economically disadvantaged

schools and libraries, and seek comment on ways to ensure that those

entities receive adequate support.

We seek comment on directing the Universal Service Administrative

Company (``USAC'') to collect only as much money as is 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 $524 million per quarter

for the third and fourth quarters of 1998 to support the schools and

libraries universal service support mechanism. We also seek comment on

directing the administrative corporations to neither commit nor

disburse more than $100 million for the health care support mechanism

or more than $1.67 billion for the schools and libraries support

mechanism during the 1998 funding year.

While we have not had an opportunity to review fully the statement

of Commissioner Furchtgott-Roth, we do take this opportunity to note

that the 60-day congressional review period referenced in that

statement does not apply to ``any rule promulgated under the

Telecommunications Act of 1996 and the amendments made by that Act.''

Parties wishing to comment on these issues and the Initial

Regulatory Flexibility Analysis below are directed to file comments on

or before May 22, 1998, and to follow the following procedures. All

filings should reference: Proposed Revision of Maximum Collection

Amounts for Schools and Libraries and Rural Health Care Providers,

Public Notice, CC Docket No. 96-45, DA 98-872. All interested parties

should include the name of the filing party and the date of the filing

on each page of their comments. Parties should include a table of

contents in all documents regardless of length and should indicate

whether they are filing an electronic copy of a submission via the

Internet or via diskette. Pleadings must comply with Commission rules.

One original and five copies of all comments must be sent to Magalie

Roman Salas, Secretary, Federal Communications Commission, 1919 M

Street, N.W., Washington, D.C. 20554. Three copies also should be sent

to Sheryl Todd, Accounting Policy Division, Common Carrier Bureau, 2100

M Street, N.W., 8th Floor, Washington, D.C. 20554. Copies of documents

filed with the Commission may be obtained from the International

Transcription Service, 1231 20th Street, N.W., Washington, D.C. 20037,

(202) 857-3800. Such documents are also available for review and

copying at the FCC Reference Center, Room 239, 1919 M Street, N.W.,

Washington, D.C., from 9:00 a.m. to 4:30 p.m.

Parties may also file informal comments or an exact copy of formal

comments electronically via the Internet at: http://www.fcc.gov/e-

file/ecfs.html>. Only one copy of an electronic submission must be

submitted. A party must note whether an electronic submission is an

exact copy of formal comments on the subject line and should note in

its paper submission that an electronic copy of its comments is being

submitted via the Internet. A commenter also must include its full name

and Postal Service mailing address in its submission. Parties not

submitting an exact copy of their formal comments via the Internet are

also asked to submit their comments on diskette. Parties submitting

diskettes should submit them to Sheryl Todd, Accounting Policy

Division, Common Carrier Bureau, 2100 M Street, N.W., Room 8606,

Washington, D.C. 20554. Such a submission should be on a 3.5 inch

diskette formatted in an IBM compatible format using WordPerfect 5.1

for Windows or compatible software. The diskette should be accompanied

by a cover letter and should be submitted in ``read only'' mode. The

diskette should be clearly labelled with the party's name, proceeding,

type of pleading (comment), date of submission, and the name of the

electronic file on the diskette. Each diskette should contain only one

party's pleadings, preferably in a single electronic file. Electronic

submissions are in addition to and not a substitute for the formal

filing requirements addressed above.

Ex parte contact. Filing of this petition initiates a permit-but-

disclose proceeding under the Commission's rules.

Initial Regulatory Flexibility Analysis

1. The Regulatory Flexibility Act (RFA) 1 requires that

an initial regulatory flexibility analysis be prepared for notice-and-

comment rulemaking proceedings, unless the agency certifies that ``the

rule will not, if promulgated, have a significant economic impact on a

substantial number of small entities.'' 2

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\1\ The RFA, see 5 U.S.C. Sec. 601 et seq., has been amended by

the Contract With America Advancement Act of 1996, Pub. L. No. 104-

121, 110 Stat. 847 (1996) (CWAAA). Title II of the CWAAA is the

Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA).

\2\ 5 U.S.C. Sec. 605(b).

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2. Description of the Reasons Why Agency Action Is Being

Considered. This Notice requests comment on adjusting the maximum

amounts that may be collected and spent during the initial year of

implementation of the universal service support mechanisms for schools,

libraries, and rural health care providers in order to ensure that

collection rates do not exceed access charge reductions and to prevent

rate churn for subscribers. The notice emphasizes that any adjustments

should not impact the level of support available to the most

economically disadvantaged schools and libraries, and seeks comment on

ways to ensure that those entities receive adequate support. As the

notice indicates, some parties have already suggested ways to

prioritize the distribution of funds if necessary in response to a

prior public notice.

3. Objectives and Legal Basis for the Proposed Action. The proposed

action is supported by sections 1, 4(i) and (j), and 254, of the

Communications Act, as amended, 47 U.S.C. Secs. 151, 154(i) and (j),

and 254. The objective is 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.

4. Description and Estimate of the Number of Small Entities That

May Be Affected by this Notice. The RFA generally defines ``small

entity'' as having the same meaning as the terms ``small business,''

``small organization,'' and ``small governmental jurisdiction'' and the

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

Business Act, 15 U.S.C. Sec. 632,

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unless the Commission has developed one or more definitions that are

appropriate to its activities.3 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).4

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\3\ 5 U.S.C. Sec. 601(3) (incorporating by reference the

definition of ``small business concern'' in 15 U.S.C. Sec. 632).

\4\ Small Business Act, 15 U.S.C. Sec. 632 (1996).

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5. The SBA has defined a small business for Standard Industrial

Classification (SIC) categories 4812 (Radiotelephone Communications)

and 4813 (Telephone Communications, Except Radiotelephone) to be small

entities having fewer than 1,500 employees.5 Small incumbent

LECs subject to the universal service rules are either dominant in

their field of operation or are not independently owned and operated,

and consistent with our prior practice they are excluded from the

definition of ``small entity'' and small business concerns.

Accordingly, our use of the terms ``small entities'' and ``small

business'' does not encompass small incumbent LECs. Out of an abundance

of caution, however, for regulatory flexibility analysis purposes, we

will consider small incumbent LECs within this analysis and use the

term ``small incumbent LECS'' to refer to any incumbent LECs that

arguably might be defined by the SBA as ``small business concerns.''

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\5\ 13 C.F.R. Sec. 121.201.

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6. In the final regulatory flexibility analysis (FRFA) in the

Universal Service Order, the Commission described and estimated in

detail the number of small entities that would be affected by the new

universal service rules.6 These entities included various

types of telecommunications carriers and service providers, as well as

schools, libraries, rural health care providers and other beneficiaries

of the universal service mechanisms. The proposal in this notice would

apply to the same entities described in the FRFA. Therefore we

incorporate by reference the description and estimate of the number of

small entities affected included in the FRFA to the Order.7

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\6\ Order, 12 FCC Rcd at 9227-9243.

\7\ 12 FCC Rcd at 9227-9243.

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7. Description of Projected Reporting, Recordkeeping and Other

Compliance Requirements. The notice does not propose any new reporting

or recordkeeping requirements. It proposes to change the existing

compliance requirements for universal service by adjusting the amount

of support available to schools, libraries, and rural health care

providers in the first year of the new universal service support

mechanisms and to ensure that the most economically disadvantaged

schools and libraries receive adequate support.

8. Description of Significant Alternatives which could Minimize Any

Significant Economic Impact on Small Entities. The requirements

proposed could have a significant economic impact on small

telecommunications carriers and providers, including small LECs by

reducing the amount of their universal service contributions in the

first year of the support mechanisms for schools and libraries, and

rural health care providers. In addition the proposed requirements

could have a significant economic impact on small schools, libraries,

rural health care providers, and small government jurisdictions by

reducing the amount of support available during that year. The notice

seeks comments on alternative ways of ensuring adequate support for the

most economically disadvantaged schools and libraries. We invite

specific comment on the impact of the proposed requirements on small

entities.

9. Federal Rules that May Duplicate, Overlap, or Conflict With the

Notice. None.

Federal Communications Commission.

Magalie Roman Salas,

Secretary.

[FR Doc. 98-13336 Filed 5-15-98; 11:24 am]

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