Short title

This Act may be cited as the

Universal Service Reform, Accountability, and Efficiency Act of 2008

Universal service principles, supported services, contribution mechanism, and support

(a)

In general

Section 254 of the Communications Act of 1934 (47 U.S.C. 254) is amended by striking subsections (b) through (e) and inserting the following:

(b)

Universal Service Principles

The Commission and the Joint Board shall base policies to advance the goal of universal service while reforming the universal service support and contribution mechanisms on all of the following principles: (1)

Affordability

Voice communications service shall be available to low-income households and households in high cost areas at rates that are affordable to such households. (2)

Efficiency

Universal service support and contribution mechanisms for the provision of services described in subsection (c) shall impose the lowest possible costs on telecommunications service subscribers and users. (3)

Contribution and distribution requirements

Neither the provision of universal service support nor the contribution mechanisms for the provision of universal service shall favor any particular provider of voice communications service or any particular technology used to provide voice communications service. (4)

Transparency

The rules governing both the provision of and contribution to universal service support shall— (A)be clear and enforceable; and (B)clearly define, and require the annual measurement of, the goals and outcomes of universal service, including the performance measures developed under section 4 of the Universal Service Reform, Accountability, and Efficiency Act of 2008. (5)

Consumer Focused

The paramount goal of the universal service program shall be to support the availability of affordable voice communications service for consumers in low-income households and households in high cost areas throughout the United States, rather than to provide financial support to any new or existing carrier, service provider, or vendor. (6)

Access to advanced telecommunications services for schools, libraries, and rural health care providers

Elementary and secondary schools, libraries, and rural health care providers should have access to advanced telecommunications and information services as described in subsection (h). (c)

Definition of services supported

(1)

Voice communications service support

(A)

In general

Except as provided in paragraph (2), universal service support is to be used solely to provide voice communications service to consumers in households in high cost areas throughout the United States and to consumers in low-income households. (B)

Definitions

For purposes of this section, the following definitions apply: (i)

High Cost area

The Commission shall define the meaning of the term high cost area. (ii)

Voice Communications Service

The term voice communications service includes any service using any technology that provides real-time interactive communications by voice utilizing the public switched telephone network, including IP-enabled voice service. (iii)

IP-enabled voice service

The term IP-enabled voice service means the provision of real-time voice communications offered to the public, or such classes of users as to be effectively available to the public, transmitted through customer premises equipment using Internet protocol, or a successor protocol, with interconnection capability such that the service can originate traffic to, or terminate traffic from, the public switched telephone network. (2)

Special services

In addition to the services supported under paragraph (1), the Commission may designate additional services to receive universal service support for use by schools, libraries, and health care providers in accordance with subsection (h). (d)

Contributions

(1)

Basis for contributions

In establishing under the principles set forth in subsection (b) the contribution mechanism for the support of universal service, the Commission shall evaluate its current contribution mechanism and consider alternative mechanisms. The Commission shall have the authority to select any contribution mechanism that is consistent with the principles set forth in subsection (b), but such mechanism— (A)shall be based exclusively upon the provision of voice communications service; (B)shall not assess broadband transmission or internet access services; and (C)shall include an exemption from universal service contributions for low-income households. (2)

Cap on contributions

In establishing under the principles set forth in subsection (b) the level for the contribution for the support of universal service, the Commission shall require that the total amount of universal service support for all universal service support mechanisms shall not exceed the total amount that was collected from all sources for all universal service support mechanisms in the last year prior to the date of enactment of the Universal Service Reform, Accountability, and Efficiency Act of 2008 and shall decline over time. (3)

Anti-Deficiency Act compliance

(A)

In general

In designing the contribution mechanism for the support of universal service, the Commission shall take such steps as are necessary to reform such contribution mechanism so that compliance with the requirements of section 3679 of the Revised Statutes (31 U.S.C. 1341; commonly known as the Anti-Deficiency Act) will not cause a disruption in the administration of universal service support. (B)

Report to Congressional Committees

The Commission shall determine the earliest time that complying with such section will not cause a disruption in the administration of universal service support, and the Commission shall report that determination promptly to the Committee on Energy and Commerce of the House of Representatives and the Committee on Commerce, Science, and Transportation of the Senate. (e)

Universal Service Support

(1)

In general

(A)After the date specified in subparagraph (B), only an eligible telecommunications provider designated under section 214(e), as such section is amended by the Universal Service Reform, Accountability, and Efficiency Act of 2008, shall be eligible to receive specific Federal universal service support for the provision of voice communications service in high cost areas. (B)The date specified in this subparagraph is the date on which the first set of auctions required under subsection (m) is completed. (2)

Exception to universal service support

The Commission shall develop a mechanism to prohibit the receipt of universal service support for the provision of voice communications services to consumers in households in high cost areas where the Commission determines, based on publicly available information, that a service area has a substantially high percentage of households with income at or above the 95th percentile of national household income levels or develops an equivalent measurement.

(b)

Implementation of Reform Measures

Section 254(a) of such Act (47 U.S.C. 254(a)) is amended by adding at the end the following new paragraph:

(3)

Procedures to Reform Universal Service Support System

Notwithstanding paragraphs (1) and (2), within 9 months after the date of enactment of the Universal Service Reform, Accountability, and Efficiency Act of 2008, the Commission shall implement reform of the universal service system in accordance with this section, as amended by such Act, and section 4 of such Act. The Federal-State Joint Board may submit comments in any proceeding carried out by the Commission pursuant to this section.

(c)

State universal service programs not preempted

(1)

In general

Nothing in this Act, or in any of the amendments made by this Act, shall preempt or be construed to preempt any State from adopting laws, rules, or regulations to ensure that voice communications service, as defined by section 254(c)(1)(B)(ii) of the Communications Act of 1934 (as amended by subsection (a) of this Act), are universally available to all low-income households and households in high cost areas at affordable rates, so long as such laws, rules, or regulations are consistent with, and not in violation of, the principles established under the applicable provisions of this Act and the amendments made by this Act. (2)

States are preempted from assessing interstate services

Notwithstanding paragraph (1), a State may not assess interstate services, including interstate telecommunications services, information services, or voice communications services, in order to fund a State’s universal service program.

Distribution mechanism reform for high cost support

(a)

In general

Section 254 of the Communications Act of 1934 (47 U.S.C. 254) is further amended by adding at the end the following:

(m)

Distribution mechanism for high cost support

(1)

Establishment of reverse auction design

(A)

In general

Not later than 9 months after the date of enactment of the Universal Service Reform, Accountability, and Efficiency Act of 2008, the Commission shall develop, and shall promulgate regulations to implement, a reverse auction plan to be used to distribute universal service support for voice communications service in high cost areas, in which each auction winner shall have the privileges and obligations of a provider-of-last-resort, as determined by the Commission. (B)

Auction design parameters

In carrying out the requirements of subparagraph (A), the Commission shall ensure that the auction design provides for— (i)the provision of quality voice communications service, as defined by the Commission by regulation prescribed after the date of enactment of the Universal Service Reform, Accountability, and Efficiency Act of 2008, consistent with clause (iv); (ii)cost-constraining benefits; (iii)competitive neutrality; (iv)technological neutrality; (v)incentives for providers of voice communications service to become more efficient; (vi)conducting the auctions at appropriately gauged intervals that take into account new information about changes in the marketplace, so that universal service support based on current technology does not become a barrier to entry for service providers using new technologies; (vii)in the first set of auctions, which shall be conducted not later than 15 months after the date of enactment of the Universal Service Reform, Accountability, and Efficiency Act of 2008, reserve prices that, in the aggregate, do not exceed the total amount of support for high cost areas provided in the year prior to the date of enactment of the Universal Service Reform, Accountability, and Efficiency Act of 2008 and which take into account that support shall not be provided to more than one entity per area; (viii)reserve prices for succeeding auctions (to be carried out periodically at the discretion of the Commission) that, in each service area, are no greater than the winning bid in the previous auction for each such service area; and (ix)avoiding, to the greatest extent practicable, conducting auctions in which only 1 firm participates. (C)

Establishing reserve prices

In any high cost area in which support is provided by a subsidy that is determined pursuant to this paragraph, the Commission— (i)shall ensure that the reserve price of the auction only takes into account the difference in the cost of providing voice communications service in a high cost area compared to a non-high cost area; (ii)shall take any action necessary to remove excessive support pursuant to the principle established in subsection (b)(2); (iii)shall only consider costs directly related to the provision of voice communications service; and (iv)shall not consider the costs associated with any of the following: (I)Artwork. (II)Cafeterias, lunch rooms, and vending facilities. (III)Patent rights. (IV)Government franchises. (V)Charitable contributions. (VI)Penalties or fines for violations of statutes. (VII)Membership fees and dues in social, political, service, recreational, or athletic clubs or organizations. (VIII)Lobbying or public relations. (IX)Performing personnel administration activities. (X)Legal services. (XI)Janitorial service, cleaning supplies, or guard service. (XII)Sewage or water utilities or services. (D)

Service areas

(i)

In general

In carrying out the requirements of subparagraph (A), the Commission, within 9 months after the date of enactment of the Universal Service Reform, Accountability, and Efficiency Act of 2008, shall define service areas at the smallest geographic level practicable based on a new study, conducted at the smallest geographic level practicable, of those high cost areas throughout the United States that require universal service support to comply with the principles of universal service in subsection (b). The Commission shall not define service areas based on study areas in existence as of the date of enactment of the Universal Service Reform, Accountability, and Efficiency Act of 2008. (ii)

Subsequent auctions

(I)

Re-evaluation of need for universal service support

In advance of each subsequent auction of a service area, the Commission shall evaluate whether such service area still meets the criteria under clause (i) to determine whether universal service support should be provided. (II)

Prohibition

The Commission shall not provide support in a subsequent auction to a service area in which, in the absence of a subsidized provider-of-last-resort, consumers would have access to affordable voice communications service by 1 or more unsubsidized providers. (III)

Vouchers

The Commission shall have the authority to issue vouchers to consumers if needed to complete the transition away from subsidizing a provider-of-last-resort. (E)

Characteristics of Auctioned Authority

(i)

In general

Before conducting each auction, the Commission shall prescribe the obligations and privileges of the winner of each auction as the provider-of-last-resort for each service area (defined pursuant to paragraph (1)(D)(i)). In prescribing such obligations and privileges, the Commission shall describe the minimum quality of voice communications service to be provided (as defined by the Commission pursuant to paragraph (1)(B)(i)) and shall take into consideration the principles of universal service in subsection (b). (ii)

Bonding requirement

The Commission shall require all auction winners to be bonded (or to provide other assurance as deemed appropriate by the Commission) prior to being designated as the eligible telecommunications provider for a service area to ensure that such provider complies with the obligations established under clause (i) for the period covered by the auction. (iii)

State Preemption

Any eligible telecommunications carrier that is designated as the carrier-of-last-resort by a State and that does not win an auction for a service area shall be released from all obligations imposed as a carrier-of-last-resort by such State. (2)

Duplicate subsidies prohibited

The Commission shall designate only 1 eligible telecommunications provider per service area to receive universal service support for providing the services described in subsection (c)(1).

(b)

Conforming amendments

(1)

Eligible Telecommunications providers

(A)

In general

Section 214 of the Communications Act of 1934 (47 U.S.C. 214(e)) is amended by striking subsection (e) and inserting the following new subsection:

(e)

Universal service support via eligible telecommunications providers

The Commission shall deem the winner of an auction under section 254(m)(1)(A) as the eligible telecommunications provider for a service area, defined in accordance with section 254(m)(1)(C). Such provider shall, throughout the service area for which the designation is received— (1)offer the voice communications service that is supported by Federal universal service support mechanisms under section 254(c)(1), either using its own facilities or a combination of its own facilities and resale of another provider’s services; (2)meet or exceed the service quality standards developed by the Commission pursuant to section 254(m)(1)(E); and (3)advertise the availability of such service and the charges therefor using media of general distribution.

(B)

Effective date

The amendment made by subparagraph (A) shall take effect 15 months after the date of enactment of this Act. (2)

Rural telephone exemption conforming amendment

Section 251(f)(1)(A) of the Communications Act of 1934 (47 U.S.C. 251(f)(1)(A)) is amended by striking section 254 and all that follows and inserting section 254. (3)

Additional conforming amendment

Section 254(h)(1)(B) of such Act (47 U.S.C. 254(h)(1)(B)) is amended by striking subsection (c)(3) and inserting subsection (c)(2).

Accountability

(a)

In general

The Federal Communications Commission (in this Act referred to as the Commission) shall take such steps as are necessary to make the reforms described in this section. (b)

Federal-State Joint Board on Universal Service Reform

(1)

Economic Analysis Required

Not later than 180 days after the date of enactment of this Act, the Commission shall require that the Federal-State Joint Board on Universal Service (in this Act referred to as the Joint Board) include an economic analysis in all of its decisions and recommendations that explains how such decisions and recommendations comply with the principles in section 254(b) of the Communications Act of 1934, as amended by this Act. (2)

Divestiture of financial interests before serving

Not later than 60 days after the date of enactment of this Act and within 60 days after the appointment of each new member of the Joint Board, the Commission shall review any financial interests of any member of the Joint Board and shall take necessary actions to eliminate any conflicts of interest. (c)

Universal Service Administrator’s Board of Directors

(1)

New Requirements for Service

The Commission shall reconstitute the board of directors of the Commission’s designated administrator of the universal service fund to ensure that all board members have professional training and expertise in public administration and no financial interest or affiliation with any organization or company that may receive universal service support. (2)

Advisory Board

The Commission, at its discretion, may establish a non-voting advisory board that includes individuals who do not meet the requirements of paragraph (1). (d)

Performance Measures

(1)

In general

The Commission shall design and implement performance measures, which shall include specific goals, outcome measures, and efficiency measures, to determine whether the goals of advancing universal service are being achieved in an economically efficient way. (2)

Principles

In developing performance measures under paragraph (1), the Commission shall consider independent research on the consequences and effectiveness of universal service programs. The following principles shall govern the development of these performance measures: (A)Outcome measures shall reflect both proposed progress and actual benefits to the public produced by universal service support. (B)Efficiency measures shall identify the cost per unit of a successful outcome, rather than the cost per unit of output. (C)The relevant measure of costs shall include the full economic effect, including any economic inefficiencies, of the universal service program’s expenditures. (3)

Minimum Requirements for Performance Measures

(A)

High cost areas and low income program

In order to ensure the existence of an affordably priced service option for voice communications service for consumers in high cost areas and consumers in low-income households, the Commission shall monitor availability, price, and subscription rates for such consumers. The Commission shall measure, per million dollars spent, the change in penetration rate or number of subscribers and the availability of voice communications service. (B)

Schools and Libraries

In order to ensure that the program carried out under section 254(h)(1)(B) of the Communications Act of 1934 (47 U.S.C. 254(h)(1)(B)) has led to an increase in access to the Internet by schools and libraries and that improved educational outcomes are directly attributable to such increased access, the Commission shall measure, per million dollars spent, the improvement in educational outcomes attributable to increased Internet access. (C)

Rural Health

In order to ensure that increased access to advanced services by rural health care providers under section 254(h)(1)(A) of the Communications Act of 1934 (47 U.S.C. 254(h)(1)(A)) has directly contributed to improved health outcomes and the reduced cost of maintaining a healthy population, the Commission— (i)shall ascertain the extent to which universal service support increases the use of various communications services by health care providers serving rural areas, compared to such use in the absence of universal service support; and (ii)shall measure, per million dollars spent, whether, and by how much, the increased use of various communications services has improved health outcomes or reduced health care costs. (e)

Report to Congress

The Commission shall publish annually a report on whether, and to what extent, the goals of advancing universal service are being achieved in an economically efficient way, including an analysis of the performance measures implemented. (f)

Annual Report Requirement

The Commission shall require each eligible telecommunications provider, school, library, and rural health care provider who received universal service support in the previous fiscal year to file an annual report with the Commission about how such support funds were used during such year. (g)

Audits

The Commission shall strengthen the oversight structure of the universal service program and shall provide the Commission’s Inspector General with appropriate resources to conduct regular and thorough audits and investigations. (h)

Penalties

The Commission shall permanently bar anyone who commits fraud related to the universal service program from receiving any future universal service support subsidies. The Commission shall also develop increased penalties for wrongdoing associated with the universal service fund.