[Federal Register Volume 63, Number 233 (Friday, December 4, 1998)]
[Rules and Regulations]
[Pages 67006-67010]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-32303]


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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.

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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