[Federal Register Volume 64, Number 121 (Thursday, June 24, 1999)]
[Rules and Regulations]
[Pages 33785-33788]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-16181]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 54

[CC Docket Nos. 96-45 and 97-21; FCC 99-49]


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, we clarify certain portions of the 
Commission's funding priority rules for the schools and libraries 
universal service support mechanism to remove any ambiguity that may 
exist in the application of such rules. In this document, we also 
reconsider, on our own motion, the Commission's rule that prohibits the 
disbursement of funds during the pendency of an appeal of a decision 
issued by the Administrator.

DATES: June 24, 1999.

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

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's 
document released on May 28, 1999. The full text of this document is 
available for public inspection during regular business hours in the 
FCC Reference Center, Room CY-A257, 445 Twelfth Street, S.W., 
Washington, D.C., 20554.

I. Introduction

    1. In this Order, we clarify certain portions of the Commission's 
funding priority rules for the schools and libraries universal service 
support mechanism to remove any ambiguity that may exist in the 
application of such rules. Specifically, we clarify that, when a filing 
window is in effect, and demand exceeds total authorized support, the 
Administrator of the universal service support mechanisms (the 
Universal Service Administrative Company or USAC), shall allocate funds 
for discounts to schools and libraries for internal connections 
beginning with those applicants at the highest discount level, i.e., 
ninety percent, and to the extent funds remain, continue to allocate 
funds for discounts to applicants at each descending single discount 
percentage.
    2. In this Order, we also reconsider, on our own motion, the 
Commission's rule that prohibits the disbursement of funds during the 
pendency of an appeal of a decision issued by the Administrator. We 
find that, if the appeal relates to a request for additional support by 
the applicant or involves a challenge by a third party to only a 
portion of the approved support, and the application is not otherwise 
the subject of an appeal, the Administrator may disburse, during the 
pendency of the appeal, those funds that have been approved by the 
Administrator.

II. Rules of Funding Priority

    3. In the Fifth Reconsideration Order, 63 FR 43088 (August 12, 
1998), the Commission adopted new rules of funding priority that would 
apply when a filing window is in effect and demand exceeds total 
authorized support. In establishing these rules of priority, the 
Commission sought to ensure that funds are directed to the most 
economically disadvantaged schools and libraries and that every 
eligible school and library that filed within the window would receive 
some assistance. Consistent with these goals, the rules of priority 
provide that requests for telecommunications services and Internet 
access for all discount categories shall receive first priority for the 
available funding (priority one services). The remaining funds are 
allocated to requests for support for internal connections, beginning 
with the most economically disadvantaged schools and libraries, as 
determined by the schools and libraries discount matrix, i.e., schools 
and libraries eligible for a ninety percent discount. To the extent 
funds remain, the rules provide that the Administrator shall allocate 
funds to the requests for support for internal connections submitted by 
schools and libraries eligible for an eighty percent discount, then for 
a seventy percent discount, and shall continue committing funds for 
internal connections in the same manner to the applicants at each 
descending discount level until there are no funds remaining. The rules 
further provide that, if the remaining funds are not sufficient to 
support all funding requests within a particular discount level, the 
Administrator shall allocate the total amount of remaining support on a 
pro rata basis to that particular discount level.
    4. Although the Commission's rules prioritize funding requests on 
the basis of broad discount categories, e.g., ninety percent or eighty 
percent, the Commission's rules also specifically recognize that not 
all discounts calculated under the schools and libraries support 
mechanism will fall within these broad discount categories. In the 
Fourth Reconsideration Order, 63 FR 2093 (January 13, 1998), the 
Commission revised the rules regarding how to calculate the appropriate 
discount level when schools and libraries aggregate their demand with 
others to create a consortium. The Commission determined, inter alia, 
that, for services that are shared by two or more schools, libraries, 
or consortia members, i.e., ``shared services,'' the discount level 
should be calculated by averaging the applicable discounts of all 
member schools and libraries. As a result, the discount levels for 
``shared service'' requests, which typically are internal connection 
requests, are single discount level percentages, e.g., eighty-nine 
percent, eighty-eight percent, and so on.
    5. While the Commission's funding priority rules do not 
specifically address the single discount percentage levels associated 
with ``shared service'' requests, the rules on ``shared services'' and 
the funding priority rules must be read in concert. We clarify, 
therefore, that, when sufficient funds are not available to fund all 
internal connection requests, the Administrator shall allocate funds 
for discounts to schools and libraries beginning with those applicants 
at the ninety percent discount level and, to the extent funds remain, 
continue to allocate funds for discounts to applicants at each 
descending single discount percentage, e.g., eighty-nine percent, 
eighty-eight percent, and so on. We believe that this method of 
allocating funds is consistent with the Commission's goal of ensuring 
that support for internal connections is directed first toward the most 
economically disadvantaged schools. We also note that allocating funds 
at each descending discount level will enable the Administrator to 
distribute funds sooner than it could if it were required to determine 
the pro rata amount for the entire discount category before 
distributing support. We add a Note to section 54.507(g)(1)(iii) to 
reflect the clarification made in this Order. We also clarify that, to 
the extent sufficient funds do not exist to fund all requests within a 
single discount percentage, the Administrator shall allocate the

[[Page 33786]]

remaining support on a pro rata basis over that single discount 
percentage level, as provided in section 54.505(g)(1)(iv) of the 
Commission's rules.

III. Disbursement of Funding During Pendency of a Request for 
Review of an Administrator Decision

    6. The Commission's rules provide that, during the pendency of a 
request for review of a decision by the Administrator, a service 
provider shall not be reimbursed for the provision of discounted 
services under the schools and libraries or rural health care support 
mechanisms, or receive support under the high cost and low income 
support mechanism, until a final decision has been issued either by the 
Administrator or by the Commission. In adopting this rule, we reasoned 
that withholding support during the pendency of an appeal would reduce 
the likelihood that support is disbursed in error. We did not intend, 
however, to require that funds be withheld where an applicant claims on 
appeal that it was eligible for more support than that which was 
approved by the Administrator or where a third party challenges only a 
portion of the support approved by the Administrator. In such a case, 
assuming the application is not otherwise the subject of an appeal, 
there is no reason to withhold the disbursement of those funds that the 
Administrator has approved. Moreover, we believe that withholding funds 
under such circumstances might also have the unintended result of 
discouraging applicants from filing legitimate appeals. Such a result 
would undermine one function of our appeal procedures, which is to help 
ensure that the universal service support mechanisms are operating 
consistent with Commission rules and policies. Accordingly, we find 
that, where a pending appeal involves a request for additional support 
or a third party challenge to only a portion of the approved support, 
and the application is not otherwise the subject of an appeal, the 
Administrator may disburse, during the pendency of that appeal, the 
unchallenged portion of the approved support. Accordingly, section 
54.725 of the Commission's rules is revised.

IV. Effective Date of Rules

    7. In this Order, we revise section 54.725 of the Commission's 
rules to provide that, where an applicant seeks review of a decision of 
the Administrator on the grounds that the applicant was eligible for 
additional support or a third party challenges only a portion of the 
approved support, and the application is not otherwise the subject of 
an appeal, the Administrator may disburse the funds that it has 
approved. Some applicants already have filed appeals seeking additional 
support, but, under our current rules, they are unable to receive the 
support that the Administrator has approved. Receipt of support is 
particularly crucial with regard to internal connections in light of 
the Commission's requirement that applicants complete implementation of 
their internal connections by a date certain for this funding year. To 
ensure that the disbursement of support to these applicants is not 
further delayed, this revised rule must take effect upon publication in 
the Federal Register. We therefore find good cause to depart in the 
manner described above from the general requirement of 5 U.S.C. 553(d) 
that final rules take effect not less than thirty (30) days after their 
publication in the Federal Register. Accordingly, section 54.725 of the 
Commission's rules, as revised below, shall become effective upon 
release of this Order.

VI. Regulatory Flexibility Analysis

A. Supplemental Final Regulatory Flexibility Analysis

    8. 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), and the 
Supplemental Final Regulatory Flexibility Analyses in the Fifth 
Reconsideration Order and the Eighth Order on Reconsideration, 63 FR 
70564 (December 21, 1998), only to the extent that changes to the Order 
adopted here on reconsideration require changes in the conclusions 
reached in the FRFA in the Universal Service Order and the Supplemental 
Final Regulatory Flexibility Analyses in the Fifth Reconsideration 
Order and Eighth Order on Reconsideration. This FRFA was preceded by an 
Initial Regulatory Flexibility Analysis (IRFA) incorporated in the 
Notice of Proposed Rulemaking and Order Establishing the Joint Board 
(NPRM), prepared in connection with the Recommended Decision, which 
sought written public comment on the proposals in the NPRM and the 
Recommended Decision.
    9. To the extent that any statement contained in this Supplemental 
Final Regulatory Flexibility Analysis is perceived as creating 
ambiguity with respect to our rules or statements made in sections of 
this Order, the rules and statements set forth in those sections shall 
be controlling.
1. Need for and Objectives of This Report and Order
    10. 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 intended, 
inter alia, 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 clarify one aspect 
of those rules and reconsider another aspect of those rules. First, we 
clarify that, when a filing window is in effect, and demand exceeds 
total authorized support, the Administrator shall allocate funds for 
discounts to schools and libraries for internal connections beginning 
with those applicants at the highest discount level, i.e., ninety 
percent, and to the extent funds remain, continue to allocate funds for 
discounts to applicants at each descending single discount percentage. 
Second, we find that, if an appeal of a decision by the Administrator 
relates to a request for additional support by the applicant or 
involves a challenge by a third party to only a portion of the approved 
support, and the application is not otherwise the subject of an appeal, 
the Administrator may disburse, during the pendency of the appeal, 
those funds that have been approved by the Administrator.
2. Summary and Analysis of the Significant Issues Raised by Public 
Comments in Response to the IRFA
    11. In this Order, the Commission clarifies certain portions of the 
Commission's funding priority rules for the schools and libraries 
universal service support mechanism to remove any ambiguity that may 
exist in the application of such rules. In doing so, the Commission 
affirms similar guidance that was provided by the Common Carrier Bureau 
to the Schools and Libraries Division of USAC. In this Order, the 
Commission also reconsiders, on its own motion, the rule that prohibits 
the disbursement of funds during the pendency of an appeal from a 
decision of the Administrator. The Order modifies the rule to provide 
that, where a pending appeal involves a request for additional support 
or a third party challenge to only a portion of the approved support, 
and the application is not otherwise the subject of an appeal, the 
Administrator may disburse, during the pendency of that appeal, the 
funds that it has approved.

[[Page 33787]]

3. Description and Estimates of the Number of Small Entities to Which 
the Rules Adopted in This Order Will Apply
    12. The RFA directs agencies to provide a description of and, where 
feasible, an estimate of the number of small entities that may be 
affected by the proposed rules, if adopted. The RFA generally defines 
the term ``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). A small organization is generally ``any not-for-
profit enterprise which is independently owned and operated and is not 
dominant in its field.'' Nationwide, as of 1992, there were 
approximately 275,801 small organizations. ``Small governmental 
jurisdiction'' generally means ``governments of cities, counties, 
towns, townships, villages, school districts, or special districts, 
with a population of less than 50,000.'' As of 1992, there were 
approximately 85,006 such jurisdictions in the United States. This 
number includes 38,978 counties, cities, and towns; of these, 37,566, 
or 96 percent, have populations of fewer than 50,000. The Census Bureau 
estimates that this ratio is approximately accurate for all 
governmental entities. Thus, of the 85,006 governmental entities, we 
estimate that 81,600 (91 percent) are small entities.
    13. As noted in the FRFA at paragraphs 890-925 of the Universal 
Service Order, there are a number of small entities that would be 
affected by the new universal service rules. The rules adopted in this 
Order, however, would affect primarily schools and libraries. Moreover, 
because the rules would allow schools and libraries to benefit more 
fully from the schools and libraries universal service support 
mechanism, would not have a significant impact on these small entities. 
We further describe and estimate, however, the number of small 
governmental jurisdictions, small businesses, and small organizations 
that may potentially be affected by the rules adopted in this Order.
    14. The Commission specifically noted in the Universal Service 
Order that the SBA defined small elementary and secondary schools and 
small libraries as those with under $5 million in annual revenues. The 
Commission further estimated that there are fewer than 86,221 public 
and 26,093 private schools and fewer than 15,904 libraries that may be 
affected by the decisions and rules adopted in the Universal Service 
Order. We believe that these same small entities may be affected 
potentially by the rules adopted in this Order.
    15. In addition, the Commission noted in the Universal Service 
Order that neither the Commission nor the SBA has developed a 
definition of small, rural health care providers. Section 254(h)(5)(B) 
defines the term ``health care provider'' and sets forth the seven 
categories of health care providers eligible to receive universal 
service support. We estimated that there are fewer than 12,296 health 
care providers potentially affected by the rules in the Universal 
Service Order. We note that these small entities may potentially be 
affected by the rules adopted in this Order.
4. Description of the Projected Reporting, Recordkeeping, and Other 
Compliance Requirements.
    Both the clarification and modification to the Commission's rules 
that are set forth in this Order relate only to actions that need to be 
taken by the Administrator of the universal service support mechanisms. 
As a result, we do not anticipate any additional burdens or costs 
associated with these proposed rules on any entities, including on 
small entities.
    5. Steps Taken To Minimize Significant Economic Impact on Small 
Entities, and Significant Alternatives Considered.
    16. In the FRFA to the Universal Service Order, the Commission 
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. As described, our current action to amend our 
rules will benefit schools, libraries, and rural health care providers, 
by ensuring that funds are allocated first to the neediest schools and 
libraries and that schools, libraries, and rural health care providers 
will be able to receive any support approved by the Administrator that 
is not the subject of an appeal. We believe that these amended rules 
fulfill the statutory mandate to enhance access to telecommunications 
services for schools, libraries, and rural health care providers, and 
fulfill the statutory principle of providing quality services at 
``just, reasonable, and affordable rates,'' without imposing 
unnecessary burdens on schools, libraries, rural health care providers, 
or service providers, including small entities.
    17. Report to Congress. The Commission will send a copy of the 
Fifth Order on Reconsideration in CC Docket No. 97-21 and Eleventh 
Order on Reconsideration in CC Docket No. 96-45 including this FRFA, in 
a report to be sent to Congress pursuant to the Small Business 
Regulatory Enforcement Fairness Act of 1996, see 5 U.S.C. 801(a)(1)(A). 
In addition, the Commission will send a copy of the Fifth Order on 
Reconsideration in CC Docket No. 97-21 and Eleventh Order on 
Reconsideration in CC Docket No. 96-45 including FRFA, to the Chief 
Counsel for Advocacy of the Small Business Administration. A copy of 
the Fifth Order on Reconsideration in CC Docket No. 97-21 and Eleventh 
Order on Reconsideration in CC Docket No. 96-45 and FRFA (or summaries 
thereof) will also be published in the Federal Register. See 5 U.S.C. 
604(b).

VII. Ordering Clauses

    18. 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, section 553 of the 
Administrative Procedure Act, 5 U.S.C. 553, and 47 CFR 1.108, the Fifth 
Order on Reconsideration in CC Docket No. 97-21 and Eleventh Order on 
Reconsideration in CC Docket No. 96-45 are adopted.
    19. It is furthered 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, section 553 of the 
Administrative Procedure Act, 5 U.S.C. 553, and 47 CFR 1.108, Part 54 
of the Commission's rules, is amended.
    20. It is further ordered that, if the Administrator determines 
that sufficient funds are available to provide support for all priority 
one service appeals that may be granted for the first funding year, the 
Administrator may allocate support immediately to such appeals.
    21. It is furthered ordered that, to the extent funds remain after 
the Administrator has allocated support to all priority one services, 
and the Administrator has determined that sufficient funds are 
available to allocate

[[Page 33788]]

support to all internal connection appeals down to the seventy percent 
discount level, the Administrator may allocate support immediately to 
such internal connection appeals that may be granted.
    22. It is furthered ordered that, because the Commission has found 
good cause, this Order and 47 CFR 54.725, as amended, is effective June 
24, 1999.
    23. It is further ordered that the Commission's Office of Public 
Affairs, Reference Operations Division, shall send a copy of this Fifth 
Order on Reconsideration in CC Docket No. 97-21 and Eleventh Order on 
Reconsideration in CC Docket No. 96-45, including the Supplemental 
Final Regulatory Flexibility Analysis and Initial 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 
to read 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. Add a Note to paragraph (g)(1)(iii) to read as follows:


Sec. 54.507  Cap.

* * * * *
    (g) * * *
    Note to paragraph (g)(l)(iii): To the extent that there are 
single discount percentage levels associated with ``shared 
services'' under Sec. 54.505(b)(4), the Administrator shall allocate 
funds for internal connections beginning at the ninety percent 
discount level, then for the eighty-nine percent discount, then for 
the eighty-eight percent discount, and shall continue committing 
funds for internal connections in the same manner to the applicants 
at each descending discount level until there are no funds 
remaining.
* * * * *

    3. Revise Sec. 54.725 to read as follows:


Sec. 54.725  Universal service disbursements during pendency of a 
request for review and Administrator decision.

    (a) When a party has sought review of an Administrator decision 
under Sec. 54.719(a) through (c) in connection with the schools and 
libraries support mechanism or the rural health care support mechanism, 
the Administrator shall not reimburse a service provider for the 
provision of discounted services until a final decision has been issued 
either by the Administrator or by the Federal Communications 
Commission; provided, however, that the Administrator may disburse 
funds for any amount of support that is not the subject of an appeal.
    (b) When a party has sought review of an Administrator decision 
under Sec. 54.719(a) through (c) in connection with the high cost and 
low income support mechanisms, the Administrator shall not disburse 
support to a service provider until a final decision has been issued 
either by the Administrator or by the Federal Communications 
Commission; provided, however, that the Administrator may disburse 
funds for any amount of support that is not the subject of an appeal.

[FR Doc. 99-16181 Filed 6-23-99; 8:45 am]
BILLING CODE 6712-01-P