[Federal Register Volume 64, Number 220 (Tuesday, November 16, 1999)]
[Rules and Regulations]
[Pages 62120-62123]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-29978]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 54

[CC Docket No. 96-45; FCC 99-256]


Federal-State Joint Board on Universal Service

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: This document concerning the Federal-State Joint Board on 
Universal Service reconsider the Commission's conclusion in the 
Universal Service Order that only eligible telecommunications carriers 
may be credited by the Universal Service Administrative Company (USAC) 
for serving eligible rural health care providers pursuant to section 
254(h)(1)(A) of the Communications Act of 1934, amended. It concludes 
that all telecommunications carriers that provide supported services to 
eligible rural health care providers at a discount, pursuant to section 
254(h)(1)(A), are entitled to have the total amount of the discount 
treated as a contribution to the preservation and advancement of 
universal service.

DATES: Effective November 16, 1999.

FOR FURTHER INFORMATION CONTACT: Linda P. Armstrong, Assistant Division 
Chief, Common Carrier Bureau, Accounting Policy Division, (202) 418-
7400.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's 
Fourteenth Order on Reconsideration in CC Docket No. 96-45 released on 
November 3, 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, SW, Washington, DC, 20554.

I. Introduction

    1. In this Order, we reconsider the Commission's conclusion in the 
Universal Service Order, 62 FR 32862 (June 17, 1997), that only 
eligible telecommunications carriers (ETCs) may be credited by the 
Universal Service Administrative Company (USAC) for serving eligible 
rural health care providers pursuant to section 254(h)(1)(A) of the 
Communications Act of 1934 (Act), as amended. We find that the 
Commission's initial interpretation of section 254(h)(1)(A) was too 
narrow, and that the record compels us to reconsider our earlier 
interpretation. We conclude that all telecommunications carriers that 
provide supported services to eligible rural health care providers at a 
discount, pursuant to section 254(h)(1)(A), are entitled to have the 
total amount of the discount treated as a contribution to the 
preservation and advancement of universal service. Accordingly, we 
direct USAC to apply, as a credit against a carrier's universal service 
contribution obligation, the amount equal to the difference between the 
lower, urban rate that a carrier charges eligible health care providers 
for supported telecommunications services

[[Page 62121]]

and the higher, rural rates that would normally be charged to these 
customers. In addition, a telecommunications carrier may request 
reimbursement if its total universal service credit exceeds its 
contribution obligation.
    2. We emphasize that an entity must be a ``telecommunications 
carrier'' in order to be able to use discounted service to satisfy its 
obligation to contribute to universal service. We also reiterate that 
universal service support is available to reduce the cost of the 
distance-based component of services that are based on a unit of 
distance, such as mileage-based charges under section 254(h)(1)(A). We, 
therefore, direct USAC to treat the requests for support from eligible 
health care providers receiving telecommunications service from non-
ETCs, the same as it treats those from health care providers receiving 
telecommunications service from ETCs.

II. Telecommunications Carriers Providing Services Pursuant to 
Section 254(h)(1)(A)

A. Discussion

    3. In light of the record developed by USAC, OAT, and other parties 
regarding the impact of the Commission's interpretation of section 
254(h)(1)(A), and facts that were not apparent at the time the 
Commission adopted the Universal Service Order, we reconsider the 
Commission's initial interpretation of this section of the statute. Our 
initial interpretation of section 254(h)(1)(A) was based on the 
statutory language in the context of section 254 as a whole. After 
taking a fresh look at the statutory language, and considering the 
arguments set forth in the record, however, we conclude that the 
Commission read the statute too narrowly when it concluded that ETCs 
are the only class of telecommunications carriers that may receive any 
credit against their universal service contribution obligations in 
exchange for serving rural health care providers at discounted rates. 
The new interpretation we adopt in this Order fully comports with the 
language and the structure of the statute.
    4. Section 254(h)(1)(A) requires that ``a telecommunications 
carrier shall'' serve rural health care providers ``at rates that are 
reasonably comparable to rates charged for similar services in urban 
areas in that State.'' Thus, section 254(h)(1)(A) imposes a service 
obligation on all telecommunications carriers, not just ETCs. Our rules 
already reflect this statutory requirement. Section 254(h)(1)(A) 
further states that ``[a] telecommunications carrier providing service 
under this paragraph shall be entitled to have an amount equal to the 
difference, if any,'' between the urban and rural rates ``treated as a 
part of its obligation to participate in the mechanisms to preserve and 
advance universal service.'' The Commission initially believed that 
there is some tension between this statement, which seems to indicate 
that all carriers providing discounts to rural health care providers 
are entitled to be credited for those discounts pursuant to the 
mechanism established by section 254(h)(1)(A), and section 254(e), 
which limits the payment of specific federal universal service support 
to ETCs. In the Universal Service Order, the Commission read section 
254(e) as the overriding command, thus concluding that only ETCs should 
``be eligible to receive support'' for providing discounted services to 
rural health care providers. Upon reexamination, however, we now 
conclude that all carriers required to provide discounts are also 
entitled to have these ``in kind'' contributions recognized as 
contributions to universal service, and these ``in kind'' contributions 
may be used to reduce or otherwise satisfy a carrier's obligation to 
contribute to universal service. We also conclude that acknowledging a 
telecommunications carrier's contribution in this fashion is not the 
same as giving a carrier ``specific Federal universal service 
support,'' and, therefore, is not a violation of section 254(e).
    5. The statute is unambiguous in requiring that all carriers 
provide discounts to rural health care providers upon request. Some 
parties apparently believe that only ETCs are required to provide 
discounts to rural health care providers, but that view is contradicted 
by the clear requirement of section 254(h)(1)(A) that ``a 
telecommunications carrier shall'' provide such discounts. The 
Commission's original interpretation, we now realize, would lead to the 
untenable conclusion that, although all carriers must provide 
discounts, only some of them will have the full value of those 
discounts recognized as contributions to the preservation and 
advancement of universal service.
    6. The evidence in the record indicating that rural health care 
providers have had to rely upon non-ETCs for the services that they 
require highlights this problematic result. For example, OAT notes that 
in parts of Alaska, Arizona, and the Pacific Basin the carriers 
designated as ETCs are incapable of providing certain eligible 
telecommunications services that the health care providers need for the 
provision of health care services. Several commenters contend that, in 
some rural areas, only interexchange carriers, which will not generally 
be designated as ETCs, are capable of offering advanced services such 
as T-1 or fractional T-1 bandwidth connections. These comments 
emphasize that our existing rules create an anomaly: ETCs are the only 
carriers that can be credited for serving eligible health care 
providers at discounted rates, but these carriers often are incapable 
of providing the services that are ``necessary for the provision of 
health care.''
    7. We agree with the suggestion of the State of Alaska that the 
restriction in section 254(e) that limits the receipt of ``specific 
Federal universal service support'' to ETCs is distinguishable from the 
provision in section 254(h)(1)(A). Section 254(h)(1)(A) refers not to 
receipt of support, but to having the amount of the discount ``treated 
as a service obligation.'' We interpret ``treated as a service 
obligation'' to mean that the value of any discount given is treated in 
the same manner as a cash payment into the universal service fund. In 
other words, we believe that, pursuant to section 254(h)(1)(A), a 
carrier may contribute to universal service either in cash or in kind, 
with the in kind contribution being via the provision of 
telecommunications services at reduced rates. Accordingly, if a carrier 
satisfies its obligation to contribute to universal service by 
providing telecommunications service at the urban rate to a RHCP, 
crediting the carrier for the full amount of the discount it provides 
acknowledges this as a form of payment of the carrier's contribution 
obligation, consistent with section 254(h)(1)(A), as it is not 
reasonably viewed as giving the carrier ``specific Federal universal 
service support.'' Viewed in this way, section 254(e) does not prevent 
a non-ETC from receiving full credit for its compliance with the 
requirements of the statute.
    8. Section 254(h)(1)(A) provides that each carrier ``shall be 
entitled to have an amount Equal to the difference, if any,'' between 
the urban and rural rates ``treated as a part of its obligation to 
participate in the mechanisms to preserve and advance universal 
service.'' Thus, we believe we must ensure that every carrier providing 
discounted service to RHCPs is in some way given credit for the full 
value of this contribution to universal service. In order to do this, 
we conclude that each carrier should first be entitled to an offset 
against its assessed universal service contribution amount. In the 
event that the value of its ``service

[[Page 62122]]

obligation'' exceeds the amount of its required contribution, we 
conclude that we should refund the difference to the carrier. Such 
refunds, as noted, would satisfy the carrier's entitlement to have the 
value of the discount treated as a service obligation; it would not 
constitute the receipt of specific universal service support. Given the 
specific statutory obligation to provide discounts, coupled with the 
specific statutory entitlement to have the value of those discounts 
treated as universal service contributions, we believe that both 
offsets, and refunds where necessary, are required in order to satisfy 
the requirements of section 254(h)(1)(A).
    9. We recognize, as we did in our earlier order, that section 
254(h)(1)(B), which addresses discounts provided to schools and 
libraries, provides an explicit exemption from section 214(e), while 
section 254(h)(1)(A) does not. We nevertheless conclude, as discussed, 
that no such explicit exemption is necessary in order to implement the 
offsets and refunds, where necessary. As to offsets, we note that 
section 254(h)(1)(B) provides for offsets (which we have always 
interpreted as applying to all carriers) without providing an exemption 
from section 214(e), offering further evidence that offsets do not 
constitute the receipt of specific federal universal service support. 
As to reimbursement, the schools and libraries provision does provide 
an exemption from 214(e), which raises the issue of whether refunds to 
non-ETCs pursuant to the RHCP provisions would require a similar 
exemption. We conclude, however, that no such exemption is necessary.
    10. We note first that sections (A) and (B) differ in their 
description of how carriers will be credited for their contributions 
made in the form of discounts. Section (B) refers to reimbursement 
``utilizing the [universal service] mechanisms,'' but section (A) 
contains no parallel language, referring instead to the amount of the 
discount being ``treated as a service obligation.'' And given the 
directive that carriers ``shall be entitled'' to have the amount of 
discounts treated as a service obligation, we believe that it would 
contravene the language and intent of the statute to prohibit some non-
ETC carriers from receiving full credit for their participation. 
Refunds in such instances serve effectively as simply a return of 
overpayment of a carrier's universal service obligation, rather than as 
receipt of universal service support, making an exception to section 
254(e) unnecessary.
    11. The record supports the conclusion that the Commission's 
initial interpretation of section 254(h)(1)(A) produces results that 
are inconsistent with the statutory goals. It is a well-settled rule of 
statutory construction that the plain language of a statute must not be 
applied in a manner that produces results that are inconsistent with 
the clear intent of Congress. To the extent that a statutory provision 
is reasonably subject to more than one interpretation, we must choose 
the one that produces results most consistent with the underlying 
statutory purpose. We agree with the parties who argue that it is 
``counterproductive'' to the 1996 Act's goal of competition to permit 
only ETCs to receive support for serving health care providers. The 
Secretary of Health and Human Services previously observed that ``[i]f 
these additional [non-eligible] providers cannot provide discounted 
service, there will be no price competition in most rural areas.'' USAC 
and several of the commenters have since documented the lack of 
significant competition, and the negative impact that it has had on the 
competitive bidding process and the RHCPs' ability to select the most 
cost effective method of satisfying their telecommunications service 
needs. We concur with the State of Alaska that the effects of our 
original interpretation have been contrary to Congress's intent ``to 
expand the availability of telemedicine throughout the Nation.'' 
Accordingly, we conclude that any telecommunications carrier may take 
advantage of the mechanism found in section 254(h)(1)(A) when it 
provides telecommunications services at urban rates to health care 
providers located in rural areas. Our decision today will increase the 
effectiveness of the competitive bidding process, and assist RHCPs in 
getting affordable access to modern telecommunications services. As we 
noted, we are persuaded that the statutory interpretation is consistent 
with the language of the statute and achieves the statutory goals of 
section 254 more completely than did the Commission's initial 
interpretation. We simply find no sound policy basis to support an 
interpretation that would obligate all carriers to contribute, yet 
create arbitrary distinctions between ETCs and non-ETCs, and between 
those whose contributions are greater or lesser than their obligations, 
when it comes time to acknowledge those contributions.

III. Eligible Telecommunications Services

    12. It is important to note that we are not, in this Order, 
altering the scope of services that eligible rural health care 
providers will be able to purchase at urban rates. We reiterate that 
interLATA toll charges will not be supported by universal service 
support mechanisms, with the limited exception of the support available 
pursuant to section 254(h)(2) for toll charges incurred by accessing an 
Internet service provider. Although IXCs, which might not be ETCs, can 
benefit from the service obligation mechanism of section 254(h)(1)(A) 
when they serve eligible health care providers, we do not expand the 
category of supported services to include interLATA toll charges. The 
distance-based component of services that are supported must be based 
on a unit of distance, such as mileage-based charges; no per-minute, 
interLATA toll charges are supported under section 254(h)(1)(A). 
Because the rates charged for dedicated connections are generally 
mileage-based, dedicated connections, such as a dedicated T-1 
connection between a rural health care provider and an urban hospital, 
will be supported.

V. Supplemental Final Regulatory Flexibility Analysis

    13. 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, only to the extent that changes to that Order 
adopted here 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

    14. The Commission is required by section 254 of the Communications 
Act of 1934, as amended by the 1996 Act, to promulgate rules to 
implement properly the universal service provisions of section 254. On 
May 8, 1997, the Commission adopted rules whose principle 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. In 
order to permit all telecommunications carriers that provide 
telecommunications services to

[[Page 62123]]

health care providers pursuant to section 254(h)(1)(A) to have their 
contributions treated as part of their obligation to participate in the 
mechanisms to preserve and advance universal service, we reconsider our 
initial conclusion that only telecommunications carriers designated as 
``eligible'' pursuant to section 254(e) can receive a credit against 
their universal service contribution obligation for providing services 
at lower, urban rates to rural health care providers.

B. Summary and Analysis of the Significant Issues Raised by Public 
Comments in Response to the IRFA

    15. No party commented in response to either IRFA on the issues 
addressed in this Order.

C. Description and Estimates of the Number of Small Entities to Which 
the Rules Adopted in This Order will Apply

    16. In the FRFA at paragraphs 890 through 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 
through 925 of the Universal Service Order.

D. Summary Analysis of the Projected Reporting, Record keeping, and 
Other Compliance Requirements and Significant Alternatives

    17. In the FRFA to the Universal Service Order, we described the 
projected reporting, Record keeping, and other compliance requirements 
and significant alternatives associated with the Carrier Eligibility 
and Health Care Provider sections of the Universal Service Order. 
Because the rules adopted herein may only affect those requirements in 
a marginal way, we incorporate by reference paragraphs 938 through 942 
and 968 through 976 of the Universal Service Order, which describe 
those requirements and provide the following analysis of the new 
requirements adopted herein.
    18. Under the rules adopted herein, we eliminate the requirement 
that a telecommunications carrier must be an eligible 
telecommunications carrier under Sec. 54.201(a)(3) of the Commission's 
rules in order to receive a credit against its universal service 
contribution obligation for serving eligible health care providers. 
This revision will benefit health care providers by expanding the 
category of telecommunications carriers that can benefit from universal 
service support mechanisms, and, thus, promote competition among 
carriers serving eligible health care providers. As a result of this 
rule change, health care providers are likely to receive multiple bids 
for the supported services they request through the competitive bid 
process set forth in Sec. 54.603 of the Commission's rules.

E. Steps Taken to Minimize the Significant Economic Impact on a 
Substantial Number of Small Entities Consistent with Stated Objectives

    19. 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 Carrier Eligibility and Health Care Provider 
Sections of the Universal Service Order. Because the rules adopted 
herein may only affect those requirements in a marginal way, we 
incorporate by reference paragraphs 938 through 942 and 968 through 976 
of the Universal Service Order, which describe those requirements and 
provide the following analysis of the new rules adopted.
    20. As described, our decision to modify our rules to permit all 
telecommunications carriers that service eligible health care providers 
pursuant to section 254(h)(1)(A) of the Act and Secs. 54.601 through 
54.625 of the Commission's rules will promote competition among 
telecommunications carriers serving eligible health care providers and, 
thus, will offer health care providers, which are likely to be small 
entities, the services they require for the provision of health care 
services.

VI. Ordering Clauses

    21. The authority contained in sections 1-4, 10, 201-202, 214, 220, 
and 254 of the Communications Act of 1934, as amended, 47 U.S.C. 151-
154, 160, 201-202, 214, 220 and 254, and 47 CFR 1.3 and 1.103, this 
order is adopted and CFR part 54 is adopted. The requirements adopted 
in this order shall be effective immediately upon publication in the 
Federal Register. They shall be applied prospectively to all future 
commitments of support for the benefit of rural health care providers, 
including all pending applications.
    22. It is further ordered that the rule changes are effective 
immediately upon publication in the Federal Register. The rule changes 
adopted here will be applied prospectively to all future commitments of 
support for the benefit of rural health care providers, including all 
pending applications.

List of Subjects in 47 CFR Part 54

    Universal service.

Federal Communications Commission.
William F. Caton,
Deputy 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. 54.201(a) by revising paragraph (a)(3) to read as 
follows:


Sec. 54.201  Definition of eligible telecommunications carriers, 
generally.

    (a) * * *
    (3) This paragraph does not apply to offset or reimbursement 
support distributed pursuant to subpart G of this part.
* * * * *
    3. Revise Sec. 54.621 to read as follows:


Sec. 54.621  Access to advanced telecommunications and information 
services.

    Each eligible health care provider that cannot obtain toll-free 
access to an Internet service provider shall be entitled to receive the 
lesser of the toll charges incurred for 30 hours of access per month to 
an Internet service provider or $180 per month in toll charge credits 
for toll charges imposed for connecting to an Internet service 
provider.

[FR Doc. 99-29978 Filed 11-12-99; 12:49 pm]
BILLING CODE 6712-01-P