Universal Service Support Mechanisms

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 54

[CC Docket No. 96-45; FCC 97-411]

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. This

action was intended to ease contributor's cash flow problems.

EFFECTIVE DATE: February 26, 1998.

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

SUPPLEMENTARY INFORMATION:

I. Introduction

In this Third Order on Reconsideration (Order), we reconsider, on

our own motion, the Commission's decisions governing the amount of

money that may be collected during the first six months of 1998 for the

federal universal service support mechanisms for schools and libraries

and rural health care providers. We direct the administrator to collect

only as much as required by demand, but in no event more than $25

million per quarter for the first and second quarters of 1998 to

support the rural health care universal service support mechanism. We

direct the administrator to collect only as much as required by demand,

but in no event more than $625 million for the first six months of

1998, to support the schools and libraries universal service support

mechanism. These actions will reduce the financial burdens on universal

service contributors without jeopardizing the sufficiency of the

support mechanisms. The Commission may revise the collection caps if we

receive evidence of additional demand for services. The rules adopted

in this Order will become effective February 26, 1998.

II. Background

1. In the NECA Report and Order (62 FR 41294 (Aug. 1, 1997)), the

Commission established the administrative structure of the federal

universal service support mechanisms. The Commission directed the

National Exchange Carrier Association (NECA) to create an independent

subsidiary, the Universal Service Administrative Company (USAC), to

administer temporarily portions of the support mechanisms. The

Commission also directed NECA to create two independent corporations,

Schools and Libraries Corporation and Rural Health Care Corporation, to

administer portions of the schools and libraries and rural health

support mechanisms. USAC, Schools and Libraries Corporation, and Rural

Health Care Corporation are required to submit to the Commission

quarterly projections of demand and administrative expenses for their

respective support mechanisms.

2. The schools and libraries and rural health care support

mechanisms are newly created and have no historical data upon which to

estimate accurately the demand for services in the initial months of

the support mechanisms. The Commission specified that the administrator

should collect $100 million per month for the first three months of

1998 for the schools and libraries support mechanism and ``adjust

future contribution assessments quarterly based on its evaluation of

schools and library demand for funds, within the limits of the spending

caps. . . .'' The Commission further held that, between January 1, 1998

and June 30, 1998, the administrator ``will only collect as much as

required by demand, but in no case more than $1 billion.'' For the

rural health care support mechanism, the Commission directed the

administrator to collect $100 million for the first three months of

1998. In addition, the Commission instituted annual caps on both

support mechanisms, $2.25 billion for the schools and libraries support

mechanism and $400 million for the rural health care support mechanism.

In setting forth a collection schedule, the Commission sought to ensure

that ``funds will be available as needed while avoiding the potential

problems arising from the accumulation of large amounts of funds in a

federal universal service fund.''

III. Discussion

3. We conclude that we should adjust downward the rate of

collections for the schools and libraries and rural health care support

mechanisms during the first six months of 1998. We anticipate that this

action will not jeopardize the sufficiency of the support mechanisms.

The annual caps were designed to estimate the maximum, rather than the

actual, amount of demand for the schools and libraries and rural health

care universal service support mechanisms. Based on what we have

learned about the status of preparatory arrangements being made by

schools, libraries, and rural health care providers to obtain the

benefit of the universal service support mechanisms, we have no reason

to believe that demand will reach the maximum projection levels in the

initial implementation stages of these new support mechanisms. We do

not want to impose unnecessary financial burdens on service provider

contributors to universal service by requiring the administrator to

collect funds that exceed demand. We also wish to ensure the successful

implementation of the schools and libraries and rural health care

support mechanisms. Accordingly, we find that it better serves the

public interest to reduce the collection amounts specified in the Order

(62 FR 32862 (June 17, 1997)) for the first six months of 1998, as

described below.

4. Rural Health Care. The rural health care support mechanism

supports the

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difference, if any, between the urban and the rural rates for a

telecommunications service of a bandwidth up to and including 1.544

Mbps. The rural health care support mechanism also provides limited

support to health care providers that do not have toll-free access to

the Internet. In the initial stages of implementing the rural health

care support mechanism, we anticipate that demand will not exceed $25

million per quarter during the first six months of 1998. We therefore

amend our previous decision, and direct the administrator to collect

only as much as required by demand, but in no event more than $25

million per quarter for the first and second quarters of 1998 for the

rural health care universal service support mechanism.

5. Schools and Libraries. The schools and libraries support

mechanism provides discounts to eligible schools and libraries for

commercially available telecommunications services, internal

connections, and access to the Internet. Because many schools and

libraries will not begin the installation of internal connections until

the summer when students are not present in instructional buildings, we

anticipate that initial demand for the schools and libraries support

mechanism will not reach projected maximums. We therefore conclude that

demand from schools and libraries in the second quarter of 1998 is

unlikely to exceed substantially demand in the first quarter.

Accordingly, we direct the administrator to collect only as much as

required by demand, but in no event more than $625 million for the

first six months of 1998.

IV. Procedural Matters

6. According to the Administrative Procedure Act, substantive rules

shall not become effective until 30 days after their publication in the

Federal Register unless there is good cause to waive that requirement.

We find that good cause exists to waive the 30-day requirement because

the rules adopted herein are critical to the expeditious and efficient

implementation of the new federal universal service support mechanisms.

The Commission's regulations implementing section 254 will take effect

January 1, 1998. The rules adopted herein are necessary to calculate

the first quarter 1998 universal service contribution factors and

primarily affect the administrator of the support mechanisms. In order

to collect contributions in February 1998, the administrator must know

what the contribution factors will be before beginning the billing

process in January 1998. The rules, therefore, do not place additional

burdens on the administrator. They enable the administrator to carry

out its existing responsibilities. In addition, certain carriers must

file tariffs in December 1997 that reflect the contribution factors.

Moreover, the rules adopted herein reduce the financial burdens imposed

on universal service contributors by minimizing the amounts collected

in the first six months of 1998. Thus, we find that good cause exists

to make the rules adopted herein effective upon their publication in

the Federal Register.

V. Supplemental Final Regulatory Flexibility Analysis

7. 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.

(See 61 FR 63778, 63796). A Final Regulatory Flexibility Analysis

(FRFA) was 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

8. 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. 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 first six months of 1998 for the schools, libraries, and

rural health care support mechanisms.

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

Comments in Response to the IRFA

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

were filed in response to the IRFAs described above.

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

the Rules Adopted in This Report and Order will Apply

10. Because the rules adopted herein apply to the administrator of

the support mechanisms, the rules will not directly affect small

entities. It is possible, however, that small entities will indirectly

be affected by these rules. 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 rules adopted

herein may apply to the same telecommunications carriers and entities

affected by the universal service rules. We therefore incorporate by

reference 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

11. 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 rules adopted herein may only marginally affect those

requirements, we incorporate by reference paragraphs 980-981 of the

Order, which describe those requirements and provide the following

analysis of the new requirements adopted herein. Under the rules

adopted herein, the administrator is instructed to collect during the

first six months of 1998 no more than $625 million for the schools and

libraries support mechanism and $50 million for the rural health care

support mechanism.

VI. Ordering Clauses

12. 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 U.S.C. 151-154, 201-

205, 218-220, 254, 303(r), 403, and 405, section 1.108 of the

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

Procedure Act, 5 U.S.C. 553, part 54 of the Commission's rules, 47 CFR

part 54, is amended as set forth

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in the rule changes, effective February 26, 1998.

Federal Communications Commission.

Magalie Roman Salas,

Secretary.

Rule Changes

For the reasons set forth in the preamble, 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 USC Secs. 1, 4(i), 201, 205, 214, and 254 unless

otherwise noted.

Sec. 54.507 Cap.

2. Section 54.507 is amended by revising the second sentence of

paragraph (a) to read as follows:

(a) * * * First, no more than $625 million shall be collected or

spent for the funding period from January 1, 1998 through June 30,

1998. * * *

* * * * *

Sec. 54.623 Cap.

3. Section 54.623 is amended by adding a new sentence at the end of

paragraph (a) to read as follows:

(a) * * * No more than $50 million shall be collected or spent for

the funding period from January 1, 1998 through June 30, 1998.

* * * * *

[FR Doc. 98-1833 Filed 1-26-98; 8:45 am]

BILLING CODE 6712-01-P