[Federal Register Volume 64, Number 10 (Friday, January 15, 1999)]
[Rules and Regulations]
[Pages 2591-2595]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-972]


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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

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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

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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

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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.
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[FR Doc. 99-972 Filed 1-14-99; 8:45 am]
BILLING CODE 6712-01-P