[Federal Register Volume 66, Number 89 (Tuesday, May 8, 2001)]
[Proposed Rules]
[Pages 23204-23208]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-11514]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 54

[CC Docket No. 96-45, FCC 01-143]


Federal-State Joint Board on Universal Service

AGENCY: Federal Communications Commission.

ACTION: Notice of proposed rule.

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SUMMARY: In this document, the Commission proposes a revised method for 
allocating discounts to schools and libraries under the federal 
universal service mechanism when there is insufficient funding to 
support all requests for internal connections. The Commission also 
seeks comment on proposed administrative modifications to our rules to 
provide additional time for recipients under the schools and libraries 
universal service support mechanism to implement contracts or 
agreements with service providers for non-recurring services.

DATES: Comments are due on or before May 23, 2001. Reply comments are 
due on or before May 30, 2001.

ADDRESSES: All filings must be sent to the Commission's Secretary, 
Magalie Roman Salas, Office of the Secretary, Federal Communications 
Commission, 445 12th Street, S.W., Washington, D.C. 20554. Parties 
should also send three paper copies of their filings to Sheryl Todd, 
Accounting Policy Division, Common Carrier Bureau, Federal 
Communications Commission, 445 Twelfth Street, S.W., Room 5-B540, 
Washington, D.C. 20554. Parties who choose to file by paper should also 
submit their comments on diskette. These diskettes should be submitted 
to Sheryl Todd, Accounting Policy Division, Common Carrier Bureau, 
Federal Communications Commission, 445 Twelfth Street, S.W., Room 5-
B540, Washington, D.C. 20554. The diskette should be clearly labeled 
with the commenter's name, proceeding, including the lead docket number 
in the proceeding (CC Docket No. 96-45), type

[[Page 23205]]

of pleading (comment or reply comment), date of submission, and the 
name of the electronic file on diskette. In addition, commenters must 
send diskette copies to the Commission's copy contractor, International 
Transcription Services, Inc., 1231 20th Street, N.W., Washington, D.C. 
20037.

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

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's 
Further Notice of Proposed Rulemaking (FNPRM) in CC Docket No. 96-45 
released on April 30, 2001. 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. The Commission's rules require schools and libraries to 
implement services for which discounts have been committed by the 
Administrator within the funding year for which the discounts were 
sought. The Commission's May 8, 1997, Universal Service Order, 62 FR 
32862 (June 17, 1997), established a calendar funding year (January 1--
December 31) for schools and libraries receiving universal service 
support. On September 10, 1997, the Common Carrier Bureau released a 
Public Notice, 62 FR 48280, September 15, 1997, seeking comment on 
Universal Service Support Distribution Options for School, Libraries, 
and Rural Health Care Providers. The Commission subsequently issued its 
Fifth Reconsideration Order, 63 FR 38089, July 15, 1998, which changed 
the funding year for schools and libraries support to a fiscal year 
(July 1-June 30).
    2. In the Tenth Reconsideration Order, 64 FR 22806, April 28, 1999, 
the Commission extended the deadline for schools and libraries to use 
their discounts on non-recurring services from June 30, 1999 to 
September 30, 1999, which allowed schools and libraries to implement 
non-recurring services in the summer months, when schools were in 
recess. On May 4, 2000, the Common Carrier Bureau (Bureau) extended the 
Year 2 deadline for schools and libraries to use their discounts on 
non-recurring services from June 30, 2000 (the end of the funding 
period) to September 30, 2000.
    3. In this Further Notice of Proposed Rulemaking (FNPRM), we 
propose a revised method for allocating discounts to schools and 
libraries under the federal universal service mechanism when there is 
insufficient funding to support all requests for internal connections. 
Specifically, we seek comment on a proposed rule change to give funding 
priority to requests for internal connections made by individual 
schools and libraries that did not receive funding commitments for 
internal connections during the previous funding year. With many 
schools and libraries having already benefited from several years of 
discounts for internal connections under the existing mechanism, we 
conclude that it is appropriate to reconsider the rules of priority to 
ensure that discounts continue to go to those most in need.
    4. We also seek comment on proposed administrative modifications to 
our rules to provide additional time for recipients under the schools 
and libraries universal service support mechanism to implement 
contracts or agreements with service providers for non-recurring 
services. First, we propose to extend the deadline for receipt of non-
recurring services from June 30, to September 30 following the close of 
the funding year. Second, we propose to establish a deadline for the 
implementation of non-recurring services for certain qualified 
applicants who are unable to complete implementation by the September 
30 deadline. These minor administrative modifications should provide 
applicants with greater flexibility without compromising program 
integrity. Finally, on our own motion, we waive the June 30, 2001 
deadline for implementation of non-recurring services for all Funding 
Year 3 applicants and extend the deadline to September 30, 2001.

II. Discussion

A. Funding Priority for Internal Connections

    5. The Commission did not envision demand for the schools and 
libraries universal service support mechanism at the level we are 
currently experiencing. In the Fifth Order on Reconsideration, and the 
Eleventh Order on Reconsideration, 64 FR 33785, June 24, 1999, the 
Commission anticipated that the fund would provide full support for 
telecommunications services and Internet access, and would provide 
support for internal connections for the neediest applicants. In 
Funding Year 4, however, the Administrator estimates that there will 
not be enough funding for the neediest applicants, who are eligible for 
a 90 percent discount. The Commission is committed to ensuring that 
discounts under this support mechanism are targeted to the schools and 
libraries with the greatest need. Therefore, we believe it is 
appropriate to reconsider the Commission's rules of priority to ensure 
that support goes to the neediest applicants. The Commission seeks 
comments on two options, relating to the distribution of support for 
internal connections. The first option would be to maintain the 
Commission's rules as currently written, which direct that the 
remaining funds be prorated by discount band. The second option would 
be to give funding priority to requests for internal connections made 
by individual schools and libraries that did not receive funding 
commitments for internal connections during the previous funding year.
    6. Our current rules require that the Administrator allocate the 
available funds among applicants in the 90 percent discount level on a 
pro rata basis, so that each applicant would receive only a portion of 
the amount requested. The Commission has several concerns about the 
application of the current rules of priority. If applicants were to 
receive only a pro rata portion of the support they requested, schools 
and libraries might not receive sufficient funding to permit completion 
of a useful system of internal connections. As a result, schools and 
libraries would be in a position of hiring contractors to perform only 
a portion of an internal connection project. It is possible that some 
schools may be unable to complete even part of their internal 
connection project, because they are unable to finance the additional 
funding burden. The Commission is also concerned that applicants 
eligible for 90 percent discounts could receive funding commitments on 
internal connections for two years in a row, while other schools that 
are also economically disadvantaged, albeit not to the same degree, 
could receive no discounts at all. Therefore, some needy schools will 
get no support, while others receive support for several consecutive 
years. In light of these concerns, we seek comment on whether we should 
keep the funding priority rules without modification.
    7. The Commission proposes and seeks comment on a second option. 
For each funding year, starting with Funding Year 4, funding priority 
would be given to requests for internal connections made by individual 
schools and libraries that did not receive funding commitments for 
internal connections during the previous funding year in order of 
discount level. Specifically, for both shared services and site-
specific services, the

[[Page 23206]]

Administrator would examine each application to determine which 
individual sites within that application had not received funding for 
internal connections in the prior funding year. These individual sites 
would be funded in order of discount level. We seek comment on this 
proposal.
    8. By adopting the proposed rule change, we would be able to fund 
requests for internal connections from many needy schools and libraries 
that did not receive funding in the previous funding year. As a result, 
we would be able to better target discounts to schools and libraries 
that are more in need of discounts. We tentatively conclude that this 
approach would be more consistent with the Commission's commitment to 
ensuring that discounts under this support mechanism are targeted to 
the schools and libraries with the greatest need. While we recognize 
that some applicants' requests would not be funded during the current 
funding year, those applicants could apply for discounts for internal 
connections during the following funding year. We also note that the 
rule change could be implemented with relative ease, because little or 
no additional information would be necessary from the applicants. 
Currently, the necessary information relating to individual schools and 
libraries is collected as part of Item 22 of the applicant's FCC Form 
471.

B. Modification of Implementation Schedule for Non-Recurring Services

    9. We also propose to revise the Commission's rules relating to the 
implementation of non-recurring services. In doing so, we note that we 
have found it necessary to waive the implementation deadline for 
nonrecurring services for Funding Years 1 and 2. We again find it 
necessary to waive that rule for Funding Year 3. As noted by the Court 
of Appeals for the D.C. Circuit, agency rules are presumed valid. The 
Commission's rules, however, may be waived for good cause shown, where 
the particular facts make strict compliance inconsistent with the 
public interest. Waiver of the deadline for implementation of non-
recurring services is therefore appropriate only if special 
circumstances warrant a deviation from the general rule, and such a 
deviation would serve the public interest.
    10. Currently, the Commission's rules require schools and libraries 
to implement services for which discounts have been committed by the 
Administrator within the funding year the discounts were granted. In 
Funding Years 1 and 2, we found it necessary to extend this service 
implementation deadline from June 30 to September 30, thereby allowing 
schools and libraries to implement non-recurring services in the summer 
months, when schools were in recess. We find that many schools and 
libraries have been unable to meet the June 30 implementation deadline 
in previous years due to a variety of reasons, including delays in 
funding commitments and events beyond the service provider's control, 
such as manufacturing delays and natural disasters. For these reasons, 
we find good cause to waive, on our own motion, the June 30, 2001 
deadline for implementation of non-recurring services for all Funding 
Year 3 applicants and extend the deadline to September 30, 2001.
    11. We conclude that the public interest is best served if all 
schools and libraries receiving Funding Year 3 discounts on non-
recurring services have the benefit of an extension of the deadline. 
Similar to the Commission's actions in Funding Year 1 and Funding Year 
2, we also grant Funding Year 3 applicants a limited exemption from the 
Commission's competitive bidding requirements. Contracts for non-
recurring services approved for Funding Year 3 discounts may be 
voluntarily extended until September 30, 2001.
    12. Based on this record that has necessitated extensions during 
the last three funding years, we propose to modify our rules relating 
to the use of funds for non-recurring services. We tentatively conclude 
that it is appropriate for schools and libraries to have the 
flexibility of additional time to implement non-recurring services. We 
propose a rule change that would allow schools and libraries to 
implement non-recurring services by September 30, following the close 
of the funding year. We seek comment on this proposal.
    13. For certain qualified applicants who are unable to meet the 
September 30 deadline, we propose to extend the deadline for 
implementation of non-recurring services. Specifically, we propose to 
implement a rule to permit qualified applicants to extend the deadline 
for implementation of non-recurring services if they satisfy one of the 
following proposed criteria: applicants whose funding commitment 
decision letters were issued by the Administrator on or after March 1 
of the funding year; applicants who received service provider change 
authorizations or service substitution authorizations from the 
Administrator on or after March 1 of the funding year; applicants whose 
service providers were unable to complete implementation for reasons 
beyond the service provider's control; or applicants who have their 
funding disbursements delayed while the Administrator investigates 
their application for program compliance. Under the proposed rule, if 
one of the conditions was satisfied before March 1, they would have 
until the subsequent September 30 to complete implementation. If one of 
the conditions was satisfied after March 1, applicants would have until 
September 30 of the following year to complete implementation. We seek 
comment on this proposal.
    14. As noted, in each year of the program, the Commission has 
ordered a waiver of its rules and extended the deadline for receipt of 
non-recurring services. Changing the deadline would provide schools and 
libraries, as well as the Administrator, with the certainty of a 
deadline that experience has shown is more realistic, based on the 
needs of the various program participants. We tentatively conclude that 
the proposed rule change provides clarity to the Administrator and 
applicants by establishing a deadline for implementation of non-
recurring services for schools and libraries that are unable to meet 
the original deadline due to circumstances beyond their control. 
Implementation of this policy should ensure schools and libraries are 
not penalized when they are not responsible for missing the 
installation deadline. Ultimately, these administrative modifications 
to the rules should allow all schools and libraries to schedule 
implementation of non-recurring services over the summer months.
    15. In addition, we also propose to grant a limited extension of 
the Commission's competitive bidding rules for contracts for non-
recurring services. Under this proposal, contracts for non-recurring 
services could be voluntarily extended to coincide with the appropriate 
deadline for implementation. Parties would not, however, be able to 
extend other contractual provisions beyond the dates established by the 
Commission's rules without complying with the competitive bidding 
process. We seek comment on this proposal.

III. Procedural Matters

A. Initial Regulatory Flexibility Analysis

    16. As required by the Regulatory Flexibility Act (RFA), the 
Commission has prepared this Initial Regulatory Flexibility Analysis 
(IRFA) of the possible significant economic impact on small entities by 
the policies and rules proposed in this FNPRM. Written public comments 
are requested on this IRFA. Comments must be identified as

[[Page 23207]]

responses to the IRFA and must be filed by the deadlines for comments 
on the FNPRM provided. The Commission will send a copy of the FNPRM, 
including this IRFA, to the Chief Counsel for Advocacy of the Small 
Business Administration (SBA). In addition, the FNPRM and IRFA (or 
summaries thereof) will be published in the Federal Register.
1. Need for, and Objectives of, the Proposed Rules
    17. In this FNPRM, we propose a revised method for allocating 
discounts to schools and libraries under the federal universal service 
mechanism when there is insufficient funding to support all requests 
for internal connections. Specifically, we seek comment on a proposed 
rule change to give funding priority to requests for internal 
connections made by individual schools and libraries that did not 
receive funding commitments for internal connections during the 
previous funding year.
    18. We also seek comment on proposed administrative modifications 
to our rules to provide additional time for recipients under the 
schools and libraries universal service support mechanism to implement 
contracts or agreements with service providers for non-recurring 
services. First, we propose to extend the deadline for receipt of non-
recurring services from June 30, to September 30 following the close of 
the funding year. Second, we propose to establish a deadline for the 
implementation of non-recurring services for certain qualified 
applicants who are unable to complete implementation by the September 
30 deadline.
2. Legal Basis
    19. The legal basis for this FNPRM is contained in sections 1 
through 4, 201 through 205, 254, 303(r), and 403 of the Communications 
Act of 1934, as amended by the Telecommunications Act of 1996, and 
Sec. 1.411 of the Commission's rules.
3. Description and Estimate of the Number of Small Entities To Which 
Rules Will Apply
    20. 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 that: Is independently owned and 
operated; is not dominant in its field of operation; and 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 (96 percent) are small entities.
    21. Under the schools and libraries universal service support 
mechanism, which provides support for elementary and secondary schools 
and libraries, an elementary school is generally ``a non-profit 
institutional day or residential school that provides elementary 
education, as determined under state law.'' A secondary school is 
generally as ``a non-profit institutional day or residential school 
that provides secondary education, as determined under state law,'' and 
not offering education beyond grade 12. For-profit schools and 
libraries, and schools and libraries with endowments in excess of 
$50,000,000, are not eligible to receive discounts under the program, 
nor are libraries whose budgets are not completely separate from any 
schools. Certain other statutory definitions apply as well. The SBA has 
defined as small entities elementary and secondary schools and 
libraries having $5 million or less in annual receipts. In funding year 
2 (July 1, 1999 to June 20, 2000) approximately 83,700 schools and 
9,000 libraries received funding under the schools and libraries 
universal service mechanism. Although we are unable to estimate with 
precision the number of these entities that would qualify as small 
entities under SBA's definition, we estimate that fewer than 83,700 
schools and 9,000 libraries would be affected annually by the rules 
proposed in this FNPRM, under current operation of the program.
4. Description of Projected Reporting, Recordkeeping, and Other 
Compliance Requirements
    22. The measures under consideration in this FNPRM would, if 
adopted, result in no additional reporting.
5. Steps Taken To Minimize Significant Economic Impact on Small 
Entities, and Significant Alternatives Considered
    23. The RFA requires an agency to describe any significant 
alternatives that it has considered in reaching its proposed approach, 
which may include the following four alternatives (among others): The 
establishment of differing compliance and reporting requirements or 
timetables that take into account the resources available to small 
entities; the clarification, consolidation, or simplification of 
compliance or reporting requirements under the rule for small entities; 
the use of performance, rather than design, standards; and an exemption 
from coverage of the rule, or part thereof, for small entities.
    24. The Commission seeks comment on two alternatives relating to 
the allocation of discounts to schools and libraries under the federal 
universal service mechanism when there is insufficient funding to 
support all requests for internal connections. Under the Commission's 
current rules, the Administrator would allocate the available funds 
among applicants in the 90 percent discount level on a pro rata basis, 
so that each applicant would receive only a portion of the amount 
requested. If applicants were to receive only a pro rata portion of the 
support they requested, we are concerned that less affluent schools and 
libraries would be unable to finance the additional funding burden. We 
seek to minimize the impact on schools and libraries with less 
resources and propose to give funding priority to requests for internal 
connections made by individual schools and libraries that did not 
receive funding commitments for internal connections during the 
previous funding year.
    25. In addition, the Commission seeks comments on two proposals 
relating to the deadline for implementation of non-recurring services. 
First, the Commission proposes to extend the deadline for 
implementation of non-recurring services from June 30 of each funding 
year to September 30. Second, the Commission proposes to establish an 
extended deadline for certain qualified applicants who are unable to 
meet the September 30 deadline. Under these proposals, we aim to 
provide schools and libraries with additional

[[Page 23208]]

time to complete installation and minimize the harm that may affect 
small entities due to the shorter deadline.
6. Federal Rules That May Duplicate, Overlap, or Conflict With the 
Proposed Rules
    26. None.

B. Comment Due Dates and Filing Procedures

    27. We invite comment on the issues and questions set forth in the 
FNPRM of Proposed Rulemaking and Initial Regulatory Flexibility 
Analysis contained herein. Pursuant to applicable procedures set forth 
in Secs. 1.415 and 1.419 of the Commission's rules, interested parties 
may comment on or before May 23, 2001, and reply comment on or before 
May 30, 2001. Comments may be filed using the Commission's Electronic 
Comment Filing System (ECFS) or by filing paper copies. See Electronic 
Filing of Documents in Rulemaking Proceedings, 63 FR 24,121, May 1, 
1998.

V. Ordering Clauses

    28. Pursuant to the authority contained in sections 1-4, 201-205, 
254, 303(r), and 403 of the Communications Act of 1934, as amended, and 
Secs. 0.91, 0.291, 1.3, and 1.411 of the Commission's rules, this 
Further Notice of Proposed Rulemaking and Order is adopted.
    29. The deadline for the implementation of non-recurring services 
in Funding Year 3 of the schools and libraries universal support 
mechanism for all applicants is extended from June 30, 2001 to 
September 30, 2001.
    30. Applicants in Funding Year 3 may extend existing contracts for 
non-recurring services until September 30, 2001, without having to 
comply with the Commission's competitive bidding requirements.
    31. The Commission's Consumer Information Bureau, Reference 
Information Center, shall send a copy of this Further Notice of 
Proposed Rulemaking and Order, including the Initial Regulatory 
Flexibility Analysis, to the Chief Counsel for Advocacy of the Small 
Business Administration.

Federal Communications Commission
Magalie Roman Salas,
Secretary.
[FR Doc. 01-11514 Filed 5-7-01; 8:45 am]
BILLING CODE 6712-01-P