Changes to the Board of Directors of the National Exchange Carrier Association, Inc., Federal-State Joint Board on Universal Service

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 54, 64 and 69

[CC Docket Nos. 97-21 and 96-45; FCC 98-206]

Changes to the Board of Directors of the National Exchange

Carrier Association, Inc., Federal-State Joint Board on Universal

Service

AGENCY: Federal Communications Commission.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: In this document, the Commission reconsiders its July 18, 1997

order to the extent that the Universal Service Worksheet (Worksheet)

attached to that order required universal service contributors to

report as end-user telecommunications revenues those revenues derived

from the provision of inside wiring maintenance. The Commission amends

of its rules to permit the Administrator of the federal universal

service support mechanisms to utilize Telecommunications Relay Services

Fund data to verify the accuracy of revenue information provided on the

Worksheet. The Commission also amends its rules to clarify that a

telecommunications carrier seeking reimbursement from the Administrator

may request that the amount of the discount afforded to that school or

library be applied either as an offset to the carrier's universal

service contribution obligation or reimbursed to the carrier from the

universal service support mechanisms.

EFFECTIVE DATE: January 4, 1999.

FOR FURTHER INFORMATION CONTACT: Lisa Boehley, Attorney, Common Carrier

Bureau, Accounting Policy Division, (202) 418-7400.

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

document released on November 17, 1998. The full text of this document

is available for public inspection during regular business hours in the

FCC Reference Center, Room 239, 1919 M Street, N.W., Washington, D.C.

20554.

Summary of Second Report and Order in CC Docket No. 97-21, Third

Order on Reconsideration in CC Docket No. 97-21 and Sixth Order on

Reconsideration in CC Docket No. 96-45

I. Introduction

1. In this Order, we reconsider the Commission's July 18, 1997

order to the extent that the Universal Service Worksheet attached as an

appendix to that order required universal service contributors to

report as end-user telecommunications revenues those revenues derived

from the provision of inside wiring maintenance. We also adopt

amendments to the Commission's Part 54 and Part 64 rules to permit the

Administrator of the federal universal service support mechanisms to

utilize Telecommunications Relay Services (TRS) Fund data to verify the

accuracy of revenue information provided on the Universal Service

Worksheet by contributors to the universal service support mechanisms.

In addition, we amend Secs. 54.515 of our rules to clarify that a

telecommunications carrier seeking reimbursement from the Administrator

for the provision of services to a school or library may request that

the amount of the discount afforded to that school or library be

applied either as an offset to the carrier's universal service

contribution obligation or reimbursed to the carrier from the universal

service support mechanisms. We find, however, that a carrier that fails

to remit its monthly universal service obligation is not entitled to

choose direct reimbursement under the universal service support

mechanism for schools and libraries. Rather, any support amounts owed

to such a carrier under the support mechanism for schools and libraries

must first be applied as an offset to the carrier's contribution

obligation.

II. Inside Wiring Maintenance

2. We reconsider the NECA Order, 62 FR 41294 (August 1, 1997), to

the extent that the Worksheet attached as an appendix to that order

required universal service contributors to include as end-user

telecommunications revenues those revenues derived from the provision

of inside wiring maintenance. We are persuaded by petitioners that the

provision of inside wiring maintenance does not constitute

``telecommunications'' or a ``telecommunications service'' and we

therefore conclude that revenues derived from this activity should not

be included as end-user telecommunications revenues on the Worksheet.

As the Commission stated in the Inside Wiring Order, 51 FR 44479

(December 10, 1986), inside wiring is severable from underlying common

carrier transmission services and includes all telephone plant located

on the customer's side of the demarcation point marking the end of the

telephone network.

3. We conclude that inside wiring maintenance--the maintenance of

telephone plant--does not constitute telecommunications or a

telecommunications service because it

[[Page 67007]]

does not involve the ``transmission'' of information. MCI, the only

party asking us to include in the universal service contribution base

revenues derived from the provision of inside wiring maintenance,

correctly points out that internal connections make possible the

transmission of information. Consistent with the rationale set forth in

the Inside Wiring Order, however, we note that inside wiring

maintenance does not itself constitute ``telecommunications'' as that

term is statutorily defined. MCI references language in paragraph 451

of the Universal Service Order, 62 FR 32862 (June 17, 1997), as support

for its proposition that the Commission has concluded, in the context

of defining eligible services for schools and libraries, that the

installation and maintenance of internal connections constitute

telecommunications services. Paragraph 451 and the surrounding

discussion make clear, however, that the Commission determined only

that the installation and maintenance of internal connections are among

the additional non-telecommunications services for which eligible

schools and libraries may receive discounts under section 254 of the

Act. Neither this paragraph, nor the surrounding discussion, support

MCI's assertion that the provision of inside wire maintenance

constitutes telecommunications as that term is defined by the statute.

4. This change relieving contributors of their obligation to report

as end-user telecommunications revenues those revenues derived from the

provision of inside wiring maintenance will become effective 30 days

after publication of this Order in the Federal Register. We note,

however, that contributors are not required to file another Worksheet

until March 31, 1999. Accordingly, we direct carriers to adjust the

1998 full-year data that they will report on the March 31, 1999

Worksheet to reflect this change starting from the effective date of

this Order.

III. The Use of TRS Data by the Universal Service Administrator

5. We amend Sec. 64.604(c)(4)(iii)(I) as proposed in the NECA II

Further Notice, 62 FR 47369 (September 9, 1997), to permit the use of

TRS data by the Administrator for purposes of verifying the accuracy of

information reported by contributors on the Universal Service

Worksheet. We conclude that authorizing the Administrator to use TRS

data for this purpose may assist the Administrator in monitoring

contributors' compliance with the universal service contribution

requirements by revealing potential inconsistencies between revenue

data reported on the TRS Fund Worksheet and revenue data reported on

the Universal Service Worksheet. As noted by NECA, the use of TRS data

for this purpose will provide a more efficient method of monitoring

contributors' compliance with the contribution requirements than if the

universal service Administrator were forced to rely on audits alone.

MCI, BellSouth, and NECA support the Commission's proposal to authorize

the use of TRS data for this purpose. No parties filed comments

opposing the Commission's proposal. We also amend Sec. 54.711(a) to

direct the TRS administrator to provide to the Administrator TRS data

so that the Administrator may verify the accuracy of information

reported by contributors on the Universal Service Worksheet. As an

outgrowth of our decision to authorize the Administrator to use TRS

data, we also amend Sec. 69.616 to ensure that the Administrator

exercises this authority in an equitable and non-discriminatory manner.

We direct the Administrator, in comparing the revenue data filed by

universal service contributors with that filed by TRS Fund

contributors, to undertake company-by-company comparisons for all

entities filing Universal Service Worksheets and TRS Fund Worksheets.

6. We also amend Sec. 54.711(b) as proposed in the NECA II Further

Notice to require the Administrator to keep confidential all TRS data

obtained from the Administrator of the TRS Fund, prohibit the

Administrator from using TRS data for purposes other than the

administration of federal universal service support mechanisms, and

prohibit the disclosure of TRS data in company-specific form unless

directed to do so by the Commission. We direct the Bureau to make

decisions regarding disclosure of company-specific information.

7. We agree with NECA that Sec. 54.711(b)'s prohibition on the

disclosure of company-specific information does not prohibit the

Administrator from releasing aggregate, non-company specific data. In

order to ensure that any report or document containing aggregate, non-

company-specific data does not, by virtue of the manner in which

particular data are organized, inadvertently reveal company-specific

information, we require the Administrator to obtain the approval of the

Bureau prior to release of such a report or document to persons outside

of the Commission.

8. BellSouth requests that the Commission declare all commercial

mobile radio service (CMRS) subscriber and financial data reported on

TRS and Universal Service Worksheets confidential data subject to

Exemption 4 of the Freedom of Information Act (FOIA). BellSouth asserts

that requiring each CMRS provider to request confidential treatment for

such data creates unnecessary paperwork for contributors and the

Commission. On March 4, 1998 and July 31, 1998, the Bureau announced

revisions to the Universal Service Worksheet. The revised Worksheet

provides a space for contributors to indicate that they wish to request

confidential treatment of the data contained on the Worksheet.

Contributors making such an election must certify that the information

contained on the Worksheet is privileged or confidential commercial or

financial information and that disclosure of such information would

likely cause substantial harm to the competitive position of the

company filing the Worksheet. If the Commission receives a request for,

or proposes disclosure of, the information contained on the Worksheet,

the carrier will be required to make the full showing required by our

rules. We anticipate that this revision will ease significantly the

paperwork burden on all contributors, not just CMRS providers.

Contributors to the TRS Fund shall continue to comply with Secs. 0.459

and 0.461 of the Commission's rules in order to request confidential

treatment of the revenue data reported on the TRS Worksheet. We do not

believe that this poses a substantial burden on TRS contributors,

because the TRS Worksheet, unlike the Universal Service Worksheet, is

filed only annually, rather than semi-annually.

9. The Bureau will make the initial decision regarding disclosure

of company-specific information derived from the Universal Service

Worksheet or from the TRS Administrator. In the event that it directs

disclosure of data for which confidential treatment was requested by

the contributor, the Bureau will follow the procedures specified in

Secs. 0.459 and 0.461 of the Commission's rules. Accordingly, the

company will be given an opportunity to file an application for review

by the Commission of any decision to release assertedly confidential

data and, if it is denied, to seek a judicial stay before any

assertedly confidential information is released. Consequently, we do

not find it necessary to conclude that all CMRS subscriber and

financial data reported on the Worksheets are confidential.

10. BellSouth also asserts that the release of company-specific

CMRS subscriber and revenue data should be prohibited under any

circumstances and maintains that the Commission should be precluded

from releasing such

[[Page 67008]]

information. Although we recognize the competitively sensitive nature

of the CMRS data in question, we decline to foreclose altogether the

Commission's or the Bureau's ability to disclose or direct the

disclosure of company-specific subscriber or revenue data reported for

purposes of determining TRS or universal service contributions. The

Commission has no present intention to disclose company-specific

subscriber or revenue data and, absent substantial justification, does

not anticipate disclosing or directing the disclosure of such data. In

view of the possibility, however, that an occasion may arise in which

the Commission or the Bureau determines that disclosure would be in the

public interest (e.g., in the context of an action brought against a

contributor to enforce the contribution requirements, or after a long

delay so that financial information would no longer be competitively

sensitive), and the safeguards provided by Secs. 0.459 and 0.461 of our

rules, we decline to amend our rules to preclude the disclosure of

company-specific subscriber or revenue data under any circumstances.

IV. Offset Versus Reimbursement

11. In light of the inconsistency that USAC has brought to our

attention between paragraph 586 of the Universal Service Order and

Sec. 54.515 of the Commission's rules, we conform Sec. 54.515 to the

text of paragraph 586 of the Universal Service Order by adopting the

amendments reflected below. As amended, a telecommunications carrier

applying for support under Sec. 54.515 for services provided to an

eligible school or library either may apply the amount of the discount

afforded to a school or library as an offset to its universal service

contribution obligation or be reimbursed for that amount from the

universal service support mechanisms. We further find, however, that

the statute does not provide carriers participating in the support

mechanism for schools and libraries with an unconditional right to

select between offset and direct reimbursement. As USAC explains in its

September 16, 1998 letter, it may be costly and administratively

burdensome if USAC is asked to alter on a frequent basis the method by

which a carrier is reimbursed. We therefore require carriers that are

owed support under the universal service support mechanism for schools

and libraries to elect on an annual basis the method by which they will

receive payment. Such carriers shall elect a payment method in January

of each year and shall remain subject to that method for the duration

of the calendar year.

12. Additionally, consistent with USAC's July 31, 1998 letter, we

find that any support amount that is owed to a carrier participating in

the support mechanism for schools and libraries that fails to remit its

monthly universal service obligation must first be applied as an offset

to that carrier's contribution obligation. Thus, a carrier

participating in the support mechanism for schools and libraries that

has failed to make its required contribution to universal service in a

given month is entitled to receive direct reimbursement from the

universal service support mechanisms only to the extent that the amount

owed the carrier under the schools and libraries support mechanism

exceeds the amount of the carrier's total universal service obligation.

We find that this decision is reasonable because, to the extent that a

carrier is in arrears on its universal service obligations, it has

already effectively chosen an offset method of compensation. We are

persuaded that requiring the use of an offsetting procedure as

described above for a carrier that fails to make timely contributions

serves the public interest by ensuring an appropriate universal service

fund and minimizing the need for costly and time-consuming enforcement

actions. Consistent with USAC's recommendation in its September 16,

1998 letter, carriers that are in arrears on their universal service

contribution obligations will remain subject to the offsetting method

for the remainder of the calendar year in which they failed to remit

their monthly universal service obligation. A carrier with an

outstanding balance at the end of a calendar year shall remain subject

to the offsetting method for the next calendar year. A carrier that has

been subject to this mandatory offsetting procedure by USAC but that

disputes its contribution obligation may bring this matter to the

attention of the Commission through a request for declaratory ruling.

V. Final Regulatory Flexibility Certification

13. The Regulatory Flexibility Act (RFA) requires that a 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.'' 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. A small business

concern is one which: (1) is independently owned and operated; (2) is

not dominant in its field of operation; and (3) satisfies any

additional criteria established by the Small Business Administration

(SBA).

14. In the NECA II Further Notice, the Commission certified,

pursuant to Sec. 605(b) of the RFA, that the proposed rule amendments

attached thereto, which would permit the Administrator to use TRS data

to verify the accuracy of data provided on the Universal Service

Worksheet, would not have a significant economic impact on a

substantial number of small entities. The Commission did not receive

any comments on this tentative conclusion. The rules adopted in this

order permit the Administrator to use TRS data to verify the accuracy

of data provided by universal service contributors on the Worksheet.

This Order therefore permits the transfer of already collected data.

This exchange of information will enable the Administrator to verify

the accuracy of universal service data, thus ensuring the sufficiency

of the universal service support mechanisms. We conclude that the rules

adopted in this order regarding the use of TRS data will not have a

significant economic impact on small entities.

15. We find that our amendment to Sec. 54.515, which clarifies that

telecommunications carriers seeking reimbursement for the provision of

services to a school or library may request either that the

reimbursement amount be applied as an offset to the carrier's universal

service contribution obligation or that it receive direct reimbursement

from the universal service support mechanisms, will not have a

significant economic impact on small entities. This amendment will

provide telecommunications carriers providing services to schools and

libraries with flexibility in structuring the manner in which they will

be reimbursed. Additionally, we do not believe that small entities will

experience a significant economic impact due to our determination that

any support amount owed to a carrier that fails to remit its monthly

universal service obligation should first be applied as an offset

against that carrier's contribution obligation. We find that, to the

extent that a carrier is in arrears on its universal service

obligations, it has already effectively chosen an offset method of

compensation. We also find that requiring carriers to select a

reimbursement method on an annual basis, or be subject to mandatory

offset for the remainder of the year during which they failed to pay

their universal

[[Page 67009]]

service contribution obligation, will not have a significant economic

impact on small entities. Rather, we find that allowing carriers to

elect annually the method by which they will be reimbursed provides

carriers with a reasonable degree of flexibility in structuring their

operations. Furthermore, we find that requiring nonpaying carriers to

accept the offsetting procedure for the remainder of the calendar year

in which they failed to pay their universal service contributions is

reasonable in light of the need to establish a reliable payment history

on the part of such carriers and to maintain the certainty and

sufficiency of the universal service support mechanisms.

16. We also conclude that our determination in this Order to

eliminate the requirement that contributors report as end-user

telecommunications revenues those revenues derived from the provision

of inside wiring maintenance will not have a significant economic

impact on small entities. In fact, this determination will lessen

contributors' reporting requirements and may lessen the contribution

amount of some contributors.

VI. Ordering Clauses

17. Accordingly, it is ordered that, pursuant to the authority

contained in Sec. 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 and

Sec. 553 of the Administrative Procedure Act, 5 U.S.C. 553, the

adoption of this Second Report and Order, Third Order on

Reconsideration, and Sixth Order on Reconsideration is effective

January 4, 1999.

18. It is further ordered that the amendments to parts 54, 64, and

69 of the Commission's rules are effective January 4, 1999.

List of Subjects

47 CFR Part 54

Healthcare providers, Libraries, Reporting and recordkeeping

requirements, Schools, Telecommunications, Telephone.

47 CFR Part 64

Communications common carriers.

47 CFR Part 69

Communications common carriers, Reporting and recordkeeping

requirements, Telephone.

Federal Communications Commission.

Magalie Roman Salas,

Secretary.

Rule Changes

Parts 54, 64, and 69 of Title 47 of the Code of Federal Regulations

are 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 54.515 is amended by revising paragraphs (a) and (b) and

removing paragraphs (c) and (d).

Sec. 54.515 Distributing support.

(a) A telecommunications carrier providing services eligible for

support under this subpart to eligible schools and libraries may, at

the election of the carrier, treat the amount eligible for support

under this subpart as an offset against the carrier's universal service

contribution obligation for the year in which the costs for providing

eligible services were incurred or receive a direct reimbursement from

the Administrator for that amount. Carriers shall elect in January of

each year the method by which they will be reimbursed and shall remain

subject to that method for the duration of the calendar year. Any

support amount that is owed a carrier that fails to remit its monthly

universal service contribution obligation, however, shall first be

applied as an offset to that carrier's contribution obligation. Such a

carrier shall remain subject to the offsetting method for the remainder

of the calendar year in which it failed to remit their monthly

universal service obligation. A carrier that continues to be in arrears

on its universal service contribution obligations at the end of a

calendar year shall remain subject to the offsetting method for the

next calendar year.

(b) If a telecommunications carrier elects to treat the amount

eligible for support under this subpart as an offset against the

carrier's universal service contribution obligation and the total

amount of support owed to the carrier exceeds its universal service

obligation, calculated on an annual basis, the carrier shall receive a

direct reimbursement in the amount of the difference. Any such

reimbursement due a carrier shall be submitted to that carrier no later

than the end of the first quarter of the calendar year following the

year in which the costs were incurred and the offset against the

carrier's universal service obligation was applied.

3. Section 54.711 is amended by revising paragraphs (a) and (b) to

read as follows:

Sec. 54.711 Contributor reporting requirements.

(a) Contributions shall be calculated and filed in accordance with

the Universal Service Worksheet. The Universal Service Worksheet sets

forth information that the contributor must submit to the Administrator

on a semi-annual basis. The Commission shall announce by Public Notice

published in the Federal Register and on its website the manner of

payment and dates by which payments must be made. An officer of the

contributor must certify to the truth and accuracy of the Universal

Service Worksheet, and the Commission or the Administrator may verify

any information contained in the Universal Service Worksheet at the

discretion of the Commission. The administrator of the

Telecommunications Relay Service Fund shall provide data reported on

the Telecommunications Relay Service Worksheet to the Administrator so

that the Administrator may verify information contained in the

Universal Service Worksheet. Inaccurate or untruthful information

contained in the Universal Service Worksheet may lead to prosecution

under the criminal provisions of Title 18 of the United States Code.

The Administrator shall advise the Commission of any enforcement issues

that arise and provide any suggested response.

(b) The Commission shall have access to all data reported to the

Administrator, Rural Health Care Corporation, and Schools and Libraries

Corporation. Contributors may make requests for Commission

nondisclosure of company-specific information by so indicating on the

Universal Service Worksheet. The Commission shall make all decisions

regarding nondisclosure of company-specific information. The

Administrator, Rural Health Care Corporation, and Schools and Libraries

Corporation shall keep confidential all data obtained from

contributors, including all data obtained from the administrator of the

Telecommunications Relay Service Fund, shall not use such data except

for purposes of administering the universal service support programs,

and shall not disclose such data in company-specific form unless

directed to do so by the Commission.

* * * * *

[[Page 67010]]

PART 64--MISCELLANEOUS RULES RELATING TO COMMON CARRIERS

4. The authority citation for part 64 continues to read as follows:

Authority: 47 U.S.C. 154, 201, 202, 203, 205, 218, 220, 254, and

403 unless otherwise noted.

5. Section 64.604 is amended by revising paragraph (c)(4)(iii)(I)

to read as follows:

Sec. 64.604 Mandatory minimum standards.

* * * * *

(c) * * *

(4) * * *

(iii) * * *

(I) Information filed with the administrator. The administrator

shall keep all data obtained from contributors and TRS providers

confidential and shall not disclose such data in company-specific form

unless directed to do so by the Commission. The administrator shall not

use such data except for purposes of administering the TRS Fund,

enabling the universal service Administrator to verify revenue

information provided by contributors to those mechanisms, calculating

the regulatory fees of interstate common carriers, and aggregating such

fee payments for submission to the Commission. The Commission shall

have access to all data reported to the administrator, and shall have

the authority to audit TRS providers.

* * * * *

PART 69--ACCESS CHARGES

6. Section 69.616 is amended by adding paragraph (e) as follows:

Sec. 69.616 Independent subsidiary functions.

* * * * *

(e) Pursuant to its responsibility for billing and collecting

contributions, the independent subsidiary shall compare periodically

information collected by the Administrator of the TRS Fund from TRS

Fund Worksheets with information submitted by contributors on Universal

Service Worksheets in order to verify the accuracy of information

submitted on Universal Service Worksheets. When performing a comparison

of contributor information as provided by this subsection, the

independent subsidiary must undertake company-by-company comparisons

for all entities filing Universal Service and TRS Fund Worksheets.

[FR Doc. 98-32303 Filed 12-3-98; 8:45 am]

BILLING CODE 6712-01-P