# Federal-State Joint Board on Universal Service

> Briefs, arguments, decisions, and more.

URL: https://www.frixlaw.com/law-library/documents/fr%3A99-972

## Record

- **Collection:** Federal Register
- **Document type:** Rule
- **Published:** January 15, 1999
- **Citation:** 64 FR 2591

## Text

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 54

[CC Docket No. 96-45; FCC 98-346]

Federal-State Joint Board on Universal Service

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: In this document, we grant the Rural Health Care Corporation's
request to reconsider the Commission's decision regarding the funding
year for the rural health care universal service support mechanism. We
conclude that the public interest will be served by changing the
funding year for the rural health care universal service support
mechanism from a calendar year cycle (January 1-December 31) to a
fiscal year cycle (July 1-June 30), and extending the first funding
year by six months to June 30, 1999. Moreover, we conclude that the
transition to a fiscal year cycle should be implemented immediately.
The intended effect is to have the

[[Page 2592]]

applications submitted during the initial 75-day filing window and
approved for funding will be funded through June 30, 1999, within the
funding limitations adopted.

DATES: Effective January 15, 1999.

FOR FURTHER INFORMATION CONTACT: Jack Zinman, Attorney, Common Carrier
Bureau, Accounting Policy Division, (202) 418-7400.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's
document released on December 31, 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 Ninth Order on Reconsideration in CC Docket No. 96-45

I. Discussion

1. We find that the public interest will be served by changing the
funding year for the rural health care universal service support
mechanism from a calendar year cycle (January 1-December 31) to a
fiscal year cycle that will run from July 1-June 30, and extending the
first funding period by six months to June 30, 1999. We conclude that
the transition to a fiscal year should be implemented immediately. In
order to accommodate the transition to a fiscal year funding cycle, the
first funding period will be the 18-month period from January 1, 1998
through June 30, 1999. The second funding period will begin on July 1,
1999. Applications that were submitted during the initial 75-day filing
window and approved for funding by the rural health care support
mechanism will be funded through June 30, 1999, to the extent permitted
by funding constraints. We direct the Rural Health Care Corporation
(RHCC), in consultation with the Universal Service Administrative
Company (USAC) and the Common Carrier Bureau, to establish a filing
window for the next fiscal year, to open on March 1, 1999. Parties
seeking support for the second funding period may begin to file
applications on March 1, 1999. We also conclude that RHCC should
determine the length of that window, and resolve other administrative
matters necessary to implement a filing window in consultation with the
Common Carrier Bureau. Upon consummation of the merger, USAC shall
assume RHCC's role in implementing these directives.
2. We have decided to extend the initial funding period and
implement a fiscal year funding cycle for rural health care, and to
transition to this approach immediately, for several reasons. We agree
with RHCC that applicants will benefit from the six-month extension.
Although RHCC has received more than 2,500 applications for support,
very few rural health care providers (RHCPs) have completed the
application process. The transition to the fiscal year funding cycle
adopted herein will afford applicants an opportunity to conclude
negotiations with telecommunications service providers, and take
advantage of the resources that they have already invested in the
application process.
3. We also agree with RHCC that granting the extension will provide
an opportunity to implement changes that may be identified in the near
future to further enhance the operation of the rural health care
universal service support mechanism. Specifically, we recently directed
USAC to evaluate anticipated demand for 1999, and review the operations
of the rural health care support mechanism to improve the opportunities
for eligible rural health care providers to take advantage of the
support mechanism. We further directed that USAC submit the results of
such evaluation to the Commission by March 1, 1999. A six-month
extension of the initial funding period will provide RHCC, USAC, and
the Commission with additional time to implement any such changes prior
to the commencement of the second funding period.
4. In addition, our decision to adopt a fiscal year funding period
will synchronize the rural health care universal service support
mechanism with the budgetary and planning cycle of the schools and
libraries universal service support mechanism. This coordination of
support mechanisms will simplify USAC's tasks of tracking collections,
processing accumulated credits, and complying with financial reporting
requirements. USAC also believes that consistency of year end close of
books will provide the additional benefit of minimizing the frequency
of disruptions therefrom.
5. Moreover, we find that, as noted in the Fifth Order on
Reconsideration, 63 FR 143088 (August 12, 1998), using a fiscal year
funding cycle will ease the administrative burden on carriers by
aligning universal service contribution levels with the local exchange
carrier annual access tariff filing schedule. Under our rules, local
exchange carriers file their annual tariffs to be effective July 1 of
each year. One piece of information these companies require in order to
file their tariffs is the universal service contribution factors.
6. Additionally, we disagree with the U.S. Department of Health and
Human Services (HHS) concern that granting RHCC's request for a six-
month extension will result in less money being available for the
support mechanism. It is anticipated that the rural health care support
mechanism will have a balance of approximately $85.5 million at the end
of the fourth quarter of 1998. As discussed in the Contribution Factors
Public Notice, we directed that half of this amount be used to reduce
the amount of contributions collected during the first quarter of 1999.
We further directed that once USAC has completed its evaluation of
rural health care funding needs, the amount remaining in the account,
net of expected 1999 funding requirements, be used to reduce subsequent
contribution factors. In light of current estimates of demand for
support, as discussed in the Contribution Factors Public Notice, we
conclude that there is sufficient funding for the rural health care
support mechanism. HHS also believes that there may be confusion as to
whether additional providers may apply for support during the six-month
extension period, and if they are not permitted to do so, then the
extension may be perceived as a delay. We are moving the start date for
the second funding period, which should ameliorate the concerns of
additional providers who wish to apply for support. Moreover, we reject
the alternative ``grandfather'' approach suggested by HHS. As
previously explained, HHS suggests considering any pending initial
funding period applications in the second funding period, thus
eliminating the need for applicants to resubmit those applications.
Under such an approach, the rural health care mechanism's second
funding period would begin on January 1, 1999. We would therefore be
unable to convert the mechanism to a fiscal year cycle, and we would
forgo the administrative benefits of such a conversion. Thus, we
continue to believe that granting RHCC's request is in the public
interest.
7. To accomplish the changes requested by RHCC, we conclude that,
for applications filed within the initial 75-day filing window, the
Administrator shall make funding commitments effective for services
provided no earlier than January 1, 1998. These services will be funded
at the approved monthly level through June 30, 1999. We conclude that
this approach is reasonable because telecommunications services and
Internet access are generally provided at regular, monthly intervals
and are billed on a monthly, recurring basis.
8. The transition from a calendar year to a fiscal year also
requires that we amend our rules concerning the acceptance of funding
requests. The

[[Page 2593]]

universal service funding period for RHCPs presently runs from January
1 to December 31. Section 54.623(c) of the Commission's rules permits
RHCPs to begin to apply for support on July 1 prior to each funding
period. The 1998 funding period, which by this Order we extend to June
30, 1999, is the first funding period during which the universal
service mechanism designed to benefit RHCPs is in place. The RHCC, the
entity currently charged with administering the application process,
did not begin accepting applications from health care providers for the
first funding period until May 1, 1998, largely due to the challenges
of implementing a new universal service support mechanism. As a result
of this delay, RHCC was not able to accept applications for the second
funding period beginning on July 1, 1998, and to date, has not opened a
filing window for the second funding period nor received applications
for support for the second funding period. Thus, we need to establish a
new start date for the application process for the second funding
period.
9. We conclude that a start date of March 1, 1999, for the
application process for the second funding period will serve the public
interest. Moving the start date to March 1, 1999, will give applicants
sufficient time to complete their applications for the first funding
period before they are required to submit applications for the second
funding period. In addition, moving the start date to March 1, 1999,
will allow applicants an opportunity to assess the sufficiency of the
supported services they receive in the first funding period before they
are asked to declare which services they will require in the second
funding period. Accordingly, we find that the public interest will be
served by amending section 54.623(c) of the Commission's rules and
moving the commencement of the application process for the second
funding period from July 1, 1998, to March 1, 1999.
10. The transition to a fiscal year funding cycle adopted herein
further requires that we reconsider on our own motion the limitation on
the exemption from competitive bidding for voluntary extensions of
contracts. Our rules currently provide that voluntary extensions of
existing contracts are not exempt from the competitive bidding rules.
To accomplish an orderly transition to the fiscal year funding cycle,
however, we conclude that we must allow existing contracts that have a
termination date between December 31, 1998 and June 30, 1999 to be
voluntarily extended to a date no later than June 30, 1999. Although
voluntary extensions of contracts generally are not exempt from the
competitive bidding requirement, we adopt this limited exception for
voluntary extensions of contracts up to June 30, 1999. To hold
otherwise would result in RHCPs either having to participate in
competitive bidding for only a six-month service period, or not being
eligible for support for that six-month period. We conclude that either
result would be both administratively and financially unworkable for
RHCPs. Thus, we find that the public interest will be served by
amending the exemption from the competitive bidding requirements found
in section 54.603 of the commission's rules, to allow RHCPs that filed
applications within the 75-day initial filing window to extend
voluntarily, to a date no later than June 30, 1999, existing contracts
that otherwise would terminate between December 31, 1998 and June 30,
1999.
11. We conclude that the amendments to our rules adopted herein
shall be effective upon publication in the Federal Register. In this
Order, we adopt amendments that change the funding period for the rural
health care support mechanism from a calendar year cycle (January 1-
December 31) to a fiscal year cycle (July 1-June 30), and extend the
first funding year for the rural health care support mechanism by six
months to June 30, 1999. Thus, these amendments must take effect before
the rural health care support mechanism's first funding year expires on
December 31, 1998. Additionally, compliance with these amendments
requires preparation only by USAC and RHCC. These entities will have
actual notice of their obligations when the Commission adopts this
Order, and both entities will be able to comply with these amendments
in a short amount of time. Accordingly, pursuant to the Administrative
Procedure Act, we find good cause to depart from the general
requirement that final rules take effect not less than thirty days
after their publication in the Federal Register.

II. Supplemental Final Regulatory Flexibility Analysis

12. In compliance with the Regulatory Flexibility Act (RFA), this
Supplemental Final Regulatory Flexibility Analysis (SFRFA) supplements
the Final Regulatory Flexibility Analysis (FRFA) included in the
Universal Service Order, 62 FR 32862 (June 17, 1997), only to the
extent that changes to that Order adopted herein on reconsideration
require changes in the conclusions reached in the FRFA. As required by
section 603 RFA, 5 U.S.C. 603, the FRFA was preceded by an Initial
Regulatory Flexibility Analysis (IRFA) incorporated in the Notice of
Proposed Rulemaking and Order Establishing the Joint Board (NPRM), and
an IRFA, prepared in connection with the Recommended Decision, which
sought written public comment on the proposals in the NPRM and the
Recommended Decision.
A. Need for and Objectives of this Order
13. The Commission is required by section 254 of the Act to
promulgate rules to implement promptly the universal service provisions
of section 254. On May 8, 1997, the Commission adopted rules whose
principal 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. To give RHCPs an opportunity to complete the
application process during the first funding period, we grant the
request to reconsider the funding cycle for RHCPs. We conclude that the
public interest will be served by changing the funding year for the
rural health care universal service support mechanism from a calendar
year cycle to a fiscal year cycle running from July 1 to June 30, and
extending the first funding year by six months to June 30, 1999.
Moreover, this change to a fiscal year funding cycle will synchronize
the budgetary and planning cycles of the rural health care and schools
and libraries universal service support mechanisms, and will align
universal service contribution levels with projected reductions in
access charges.
B. Summary and Analysis of the Significant Issues Raised by Public
Comments in Response to the FRFA
14. Nine entities filed comments in response to the Public Notice
released on December 8, 1998. The overwhelming majority support RHCC's
request to extend its initial funding year to June 30, 1999. One
commenter, HHS, expressed concerns about the amount of funding
available and the ability of additional providers to apply for support
if the rural health care mechanism's funding year is extended through
June 30, 1999. As previously discussed and in the Contribution Factors
Public Notice, there is sufficient funding for the support mechanism,
and the Commission has taken steps to ensure that additional providers
will be able to apply for support. The Commission also rejected HHS's
suggestion of a ``grandfather'' approach because it would preclude
converting the rural health care support mechanism to a fiscal year
cycle and would prevent

[[Page 2594]]

USAC and RHCPs from realizing the administrative efficiencies
associated with a fiscal year cycle.
C. Description and Estimates of the Number of Small Entities to Which
the Rules Adopted in This Order Will Apply
15. In the FRFA at paragraphs 890-925 of the Universal Service
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 entities affected by the universal service
rules. We therefore incorporate by reference paragraphs 890-925 of the
Universal Service Order.
D. Summary Analysis of the Projected Reporting, Recordkeeping, and
Other Compliance Requirements and Significant Alternatives
16. In the FRFA to the Universal Service Order, we described the
projected reporting, recordkeeping, and other compliance requirements
and significant alternatives associated with the Schools and Libraries
section, the Rural Health Care Provider section, and the Administration
section of the Universal Service Order. Because the rules adopted
herein may only affect those requirements in a marginal way, we
incorporate by reference paragraphs 956-60, 968-71, and 980 of the
Universal Service Order, which describe those requirements and provide
the following analysis of the new requirements adopted herein.
17. Under the rules adopted herein, we revise the funding year for
the rural health care support mechanism from a calendar year cycle
(January 1-December 31) to a fiscal year cycle (July 1-June 30), and
extend the first funding year by six months to June 30, 1999. This
revision will benefit RHCPs in three ways: (1) it will give them an
opportunity to complete the application process for the initial funding
cycle; (2) it will synchronize the rural health care support mechanism
with the budgetary and planning cycles of schools and libraries support
mechanism, thereby resulting in administrative efficiencies for USAC;
and (3) it will align universal service contribution levels with
projected reductions in access charges. These changes will not have a
significant impact on the reporting, recordkeeping, and other
compliance requirements for the rural health care support mechanism.
E. Steps Taken To Minimize the Significant Economic Impact on a
Substantial Number of Small Entities Consistent with Stated Objectives
18. In the FRFA to the Universal Service Order, we described the
steps taken to minimize the significant economic impact on a
substantial number of small entities consistent with stated objectives
associated with the Schools and Libraries section, the Rural Health
Care Provider section, and the Administration section of the Universal
Service Order. Because the rules adopted herein may only affect those
requirements in a marginal way, we incorporate by reference paragraphs
961-67, 972-76, and 981-82 of the Universal Service Order, which
describe those requirements and provide the following analysis of the
new requirements adopted herein.
19. As previously described, our decision to change to a fiscal
year funding cycle, and extend the first funding year by six months,
will benefit RHCPs, as well as their chosen service providers, who may
be small entities, by ensuring that they have an opportunity to
complete the application process, and recoup their investment therein.
We also find that this approach strikes the best balance between
fulfilling the statutory mandate to enhance access to
telecommunications services for RHCPs, and fulfilling the statutory
principle of providing quality services at ``just, reasonable, and
affordable rates,'' without imposing unnecessary burdens on RHCPs or
service providers, including small entities.

III. Ordering Clauses

20. 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; 47 CFR 1.108, the Ninth Order
on Reconsideration is adopted, and 47 CFR Part 54, are amended as set
forth in the rule changes.
21. It is further ordered that the Commission's Office of Public
Affairs, Reference Operations Division, shall send a copy of this Ninth
Order on Reconsideration, including the Supplemental Final Regulatory
Flexibility Analysis, to the Chief Counsel for Advocacy of the Small
Business Administration.

List of Subjects in 47 CFR Part 54

Healthcare providers, Libraries, Reporting and recordkeeping
requirements, Schools, Telecommunications, Telephone.

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 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. Amend Sec. 54.604 by revising paragraph (d) to read as follows:

Sec. 54.604 Existing contracts.

* * * * *
(d) The exemption from the competitive bid requirements set forth
in paragraph (a) shall not apply to voluntary extensions of existing
contracts, with the exception that an eligible health care provider as
defined under Sec. 54.601 or consortium that includes an eligible
health care provider, that filed an application within the initial 75-
day filing window (May 1, 1998-July 14, 1998) may voluntarily extend,
to a date no later than June 30, 1999, an existing contract that
otherwise would terminate between December 31, 1998 and June 30, 1999.
3. Amend Sec. 54.623 by revising paragraphs (b) and (c) to read as
follows:

Sec. 54.623 Cap.

* * * * *
(b) Funding year. A funding year for purposes of the health care
providers cap shall be the period July 1 through June 30. For the
initiation of the mechanism only, the eighteen month period from
January 1, 1998 to June 30, 1999 shall be considered a funding year.
Eligible health care providers filing applications within the initial
75-day filing window shall receive funding for requested services
through June 30, 1999.
(c) Requests. Funds shall be available as follows:
(1) Generally, funds shall be available to eligible health care
providers on a first-come-first-served basis, with requests accepted
beginning on the first of January prior to each funding year.
(2) For the initial funding year, the Administrator 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 Administrator begins to
receive applications for support, and shall conclude on a date to be
determined by the Administrator.

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(3) For the second funding year, which will begin on July 1, 1999,
the Administrator shall implement a 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 Administrator begins to receive applications for support,
and shall conclude on a date to be determined by the Administrator.
(4) The Administrator may implement such additional filing periods
as it deems necessary.
* * * * *
[FR Doc. 99-972 Filed 1-14-99; 8:45 am]
BILLING CODE 6712-01-P

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A99-972. Public record. Not legal advice.