[Federal Register Volume 67, Number 33 (Tuesday, February 19, 2002)]
[Proposed Rules]
[Pages 7327-7341]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-3883]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 54

[CC Docket No. 02-6, FCC 02-8]


Schools and Libraries Universal Service Support Mechanism

AGENCY: Federal Communications Commission.

ACTION: Notice of proposed rulemaking.

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SUMMARY: In this document, the Commission initiates a focused review of 
certain Commission rules governing the schools and libraries universal 
service support mechanism. The Commission initiates this review to 
ensure the continued efficient and effective implementation of 
Congress's goals as established in the statute, and to explore a 
variety of suggestions for improvement offered by schools and 
libraries, service providers, state and local governments, and other 
interested parties.

DATES: Comments are due on or before April 5, 2002. Reply comments are 
due on or before May 6, 2002. Written comments by the public on the 
proposed information collections are due April 5, 2002. Written 
comments must be submitted by the Office of Management and Budget (OMB) 
on the proposed information collection(s) on or before April 22, 2002.

ADDRESSES: All filings sent by U.S. regular, Express or Priority mail 
must be sent to the Commission's Acting Secretary, William F. Caton, 
Office of the Secretary, Federal Communications Commission, 445 12th 
Street, SW., Washington, DC 20554. Hand-delivered or messenger-
delivered paper filings for the Commission's Acting Secretary should be 
delivered to Vistronix at 236 Massachusetts Ave., NE., Suite 110, 
Washington, DC 20002 (8:00 a.m. to 5:30 p.m.). Other messenger-
delivered or overnight mail documents (other than USPS Express and 
Priority Mail) must be delivered to 9300 East Hampton Drive, Capitol 
Heights, MD 20743 (8:00 a.m. to 5:30 p.m.). In addition, 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, SW., Room 5-B540, Washington, DC 20554, or hand 
delivered to Sheryl Todd at 236 Massachusetts Ave., NE., Suite 110, 
Washington, DC 20002. The diskette should be clearly labeled with the 
commenter's name, proceeding, including the lead docket number in the 
proceeding (CC Docket No. 02-6), type 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, Qualex International, Portals II, 445 
12th Street, SW., Room CY-B402, Washington, DC 20554. In addition to 
filing comments with the Secretary, a copy of any comments on the 
information collections contained herein should be submitted to Judy 
Boley, Federal Communications Commission, Room 1-C804, 445 12th Street, 
SW., Washington, DC 20554, or via the Internet to [email protected], and 
to Jeanette Thornton, OMB Desk Officer, 10236 NEOB, 725 17th Street, 
NW., Washington, DC 20503 or via the Internet to [email protected].

FOR FURTHER INFORMATION CONTACT: Jonathan Secrest, Attorney, Common 
Carrier Bureau, Accounting Policy Division, (202) 418-7400. For 
additional information concerning the information collection(s) 
contained in this document, contact Judy Boley at 202-418-0214, or via 
the Internet at [email protected].

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Notice 
of Proposed Rulemaking (NPRM) in CC Docket No. 02-6 released on January 
25, 2002. The full text of this document is available on the 
Commission's Web site Electronic Comment Filing System and for public 
inspection during regular business hours in the FCC Reference Center, 
Room CY-A257, 445 Twelfth Street, SW., Washington, DC, 20554.
    This NPRM contains proposed information collection(s) subject to 
the Paperwork Reduction Act of 1995 (PRA). It has been submitted to the 
Office of Management and Budget (OMB) for review under the PRA. OMB, 
the general public, and other Federal agencies are invited to comment 
on the proposed information collections contained in this proceeding.

Paperwork Reduction Act

    This NPRM contains a proposed information collection. The 
Commission, as part of its continuing effort to reduce paperwork 
burdens, invites the general public and the Office of Management and 
Budget (OMB) to comment on the information collections(s) contained in 
this NPRM, as required by the Paperwork Reduction Act of 1995, Public 
Law 104-13. Public and agency comments are due at the same time as 
other comments on this NPRM; OMB notification of action is due 60 days 
from date of publication of this NPRM in the Federal Register. Comments 
should address: (a) Whether the proposed collection of information is 
necessary for the proper performance of the functions of the 
Commission, including whether the information shall have practical 
utility; (b) the accuracy of the Commission's burden estimates; (c) 
ways to enhance the quality, utility, and clarity of the information 
collected; and (d) ways to minimize the burden of collection of 
information on the respondents, including the use of automated 
collection techniques or other forms of information technology.
    OMB Control Number: None.
    Title: Schools and Libraries Universal Service Support Mechanism, 
CC Docket 02-6, NPRM, Proposed ADA Certification.
    Form No.: N/A.
    Type of Review: Proposed Collection.
    Respondents: Not for Profit Institutions: Business or other for 
Profit.

[[Page 7328]]



 
----------------------------------------------------------------------------------------------------------------
                                                                          Estimated time per       Total annual
                  Title                     Number of  respondents             response           burden (hours)
----------------------------------------------------------------------------------------------------------------
ADA Certification.......................  30,000....................  1 minute (.02)............             600
Computerized List of Eligible Products    30,000....................  1 minute (.02)............             600
 and Services.
----------------------------------------------------------------------------------------------------------------

    Total Annual Burden: 1,200 hours.
    Cost to Respondents: $0.
    Needs and Uses: In this NPRM, the Commission is seeking comment on 
certain rules governing the schools and libraries universal service 
support mechanism. The Commission goals in the proceeding are to: (1) 
Consider changes that would fine-tune its rules to improve program 
operation; (2) ensure that the benefits of the universal service 
support mechanism for schools and libraries are distributed in a manner 
that is fair and equitable; and (3) improve its oversight over the 
program. Among other things, affected respondents may be required to 
certify to compliance with the Americans with Disabilities Act and 
related statutes. The NPRM solicits comment on whether the Commission 
should establish a computerized list accessible online, whereby 
applicants could select specific project or service as part of their 
FCC Form 471 application. The information will be used to ensure that 
schools and libraries are eligible to receive discounted Internet 
access, telecommunications services, and internal connections and that 
they are in compliance with the requirements of the ADA and related 
statutes.

I. Introduction

    1. In this Notice of Proposed Rulemaking (NPRM), the Federal 
Communications Commission (Commission) initiates a focused review of 
certain rules governing the schools and libraries universal service 
support mechanism. The Commission initiates this review to ensure the 
continued efficient and effective implementation of Congress's goals as 
established in the statute, and to explore a variety of suggestions for 
improvement offered by schools and libraries, service providers, state 
and local governments, and other interested parties.
    2. The Commission implemented the schools and libraries universal 
service support mechanism based on the requirement in the 
Telecommunications Act of 1996 (1996 Act) that ``[a]ll 
telecommunications carriers serving a geographic area shall, upon a 
bona fide request for any of its services that are within the 
definition of universal service under subsection (c)(3), provide such 
services to elementary schools, secondary schools, and libraries for 
educational purposes at rates less than the amounts charged for similar 
services to other parties.'' The schools and libraries community and 
the participating service providers have now had four years of 
experience with the program. As of July 2001, the Universal Service 
Administrative Company (USAC or the Administrator) had committed over 
$5.958 billion in funds for the first three funding years. Over this 
period, the schools and libraries mechanism has provided discounts 
enabling millions of school children and library patrons, including 
those in many of the nation's poorest and most isolated communities, to 
obtain access to modern telecommunications and information services for 
educational purposes, consistent with the statute.
    3. During the last four years, numerous parties, including schools 
and libraries, service providers, and representatives of local and 
state governments, have approached the Commission with a variety of 
proposals that they believe will improve the program. In this 
proceeding, we present those ideas for public comment in order to 
explore whether these ideas, as well as any additional ideas presented 
by the public, will help to achieve our stated goals. The Commission 
continues to seek ways to ensure that the program funds are utilized in 
an efficient, effective, and fair manner, while preventing waste, 
fraud, and abuse. The Commission concludes that it is appropriate at 
this time to ask whether the various suggestions from the public will 
streamline and improve the program in a manner consistent with section 
254. We determine that it is appropriate to review the overall program 
by reaching out to the constituents of the program and other interested 
parties for their input. The Commission seeks comment from USAC on the 
operational and administrative impact of possible changes discussed in 
this NPRM. The Commission also encourages input from the State members 
of the Federal-State Joint Board on Universal Service (Joint Board), 
and commit to ongoing informal consultations with the Joint Board on 
these issues.
    4. Our goals in undertaking this proceeding, consistent with the 
statute, are three-fold: (1) To consider changes that would fine-tune 
our rules to improve program operation; (2) to ensure that the benefits 
of this universal service support mechanism for schools and libraries 
are distributed in a manner that is fair and equitable; and (3) to 
improve our oversight over this program to ensure that the goals of 
section 254 are met without waste, fraud, or abuse. The Commission 
intends to build on the solid foundation we have established.
    5. With these goals in mind, in this NPRM, the Commission seeks 
comment on several changes to the schools and libraries universal 
service support mechanism. First, with respect to the application 
process, we seek comment on (1) issues related to the process for 
determining eligible services, and the eligibility for schools and 
libraries universal service support of such services as Wide Area 
Networks, wireless services, and voice mail; (2) permitting schools and 
libraries to receive discounts for Internet access that may in certain 
limited cases contain content, as long as it is the most cost-effective 
form of Internet access; (3) the 30 percent processing benchmark for 
reviewing funding requests that include both eligible and ineligible 
services; (4) whether to require a certification by schools and 
libraries acknowledging their compliance with the requirements of the 
Americans With Disabilities Act and related statutes; and (5) modifying 
our rule governing when members of a consortium may receive service 
from a tariffed service provider at below-tariff rates.
    6. Second, the Commission also seeks comment on several issues that 
arise once discounts have been committed to applicants: (1) Providing 
schools and libraries the flexibility either to make up-front payments 
for services and receive reimbursement via the Billed Entity Applicant 
Reimbursement (BEAR) form process, or be charged only the non-
discounted cost by the service providers, and require that service 
providers remit BEAR reimbursements to applicants within twenty days; 
(2) limiting transferability of equipment

[[Page 7329]]

obtained with universal service discounts; and (3) allowing members of 
rural remote communities to use excess capacity from services obtained 
through the universal service support mechanism in certain limited 
situations.
    7. Third, with respect to the appeals process, the Commission seeks 
comment on increasing time limits for filing appeals to 60 days, and 
considering appeals filed as of the day they are post-marked, and on 
procedures for funding successful appeals. Fourth, we seek comment on 
measures to strengthen our existing enforcement tools, including 
adopting a rule explicitly authorizing independent audits, and barring 
from the program certain applicants, service providers, and others that 
engage in willful or repeated failure to comply with program rules. 
Fifth, on the issue of unused program funds, the Commission seeks 
comment on the reasons for unused funds, and on how the Commission 
should treat unused funds. We also deny certain petitions for 
reconsideration relating to unused funds, and seek comment on revising 
or eliminating outmoded administrative or procedural rules or policies 
relating to the schools and libraries universal service support 
mechanism.

II. Notice of Proposed Rule Making

    8. By initiating this inquiry, the Commission seeks to further 
three goals. First, the Commission seeks to streamline and improve the 
program. Second, we seek to ensure fair and equitable distribution of 
funds. Third, we seek to protect the schools and libraries mechanism 
against waste, fraud, and abuse consistent with our goals. In the 
discussion that follows, the Commission seeks comment on ways in which 
these goals may be achieved through specific changes to various stages 
of the application and funding process. The Commission frames the 
discussion in the context of the yearly program cycle to help 
commenters understand the changes to the program on which we seek 
comment. At each stage of the process, the Commission invites parties 
to address whether and how our specific goals can be met by the changes 
discussed and to suggest other ways to further these goals.

A. Application Process

1. Eligible Services
    9. Applicants under the universal service discount mechanism for 
schools and libraries may apply for discounts for eligible 
telecommunications services, Internet access, and internal connections. 
The Commission currently directs the Administrator to determine whether 
particular services fall within the eligibility criteria established 
under the 1996 Act and the Commission's rules and policies. The 
Administrator evaluates, on an on-going basis, particular services 
offered by service providers, and determines their eligibility. In 
order to provide applicants with general guidance, the Administrator 
makes available on its website a list of categories of service that are 
eligible or ineligible, though not specific brands or items. Applicants 
or service providers can appeal a determination by the Administrator 
that a given service is ineligible for discounts only after a requested 
service is rejected. Accordingly, in this section, the Commission seeks 
comment on changes in the application process that relate to eligible 
services and that will serve to improve program operation and our 
oversight of the program. The Commission emphasizes that, in this 
section of the NPRM, we seek comment on changes to eligible services 
only as they relate to applications under the universal service support 
mechanism for schools and libraries.
    10. Many parties, including schools and libraries as well as 
service providers, have recommended that the Commission seeks comment 
on the efficiency and fairness of this process for determining the 
eligibility of particular products and services. In response, we invite 
parties to submit proposals for changes that will improve the operation 
of the eligibility determination process in terms of efficiency, 
predictability, flexibility, and administrative cost. The Commission 
notes that GAO has recommended that the Administrator implement 
stronger measures to ensure that applicants receive funding only for 
eligible services, and that the Administrator has already implemented 
changes in response to that recommendation. One possible alternative 
approach that has been suggested would be to establish a computerized 
list accessible online, whereby applicants could select the specific 
product or service as part of their FCC Form 471 application. Because 
applicants would only select from pre-approved products and services, 
this presumably would decrease the number of instances in which 
applicants seek funding for ineligible services. It has also been 
suggested that such a process would considerably simplify the 
application review process. Further, by helping to avoid accidental 
funding of ineligible services, it would further the Commission's goal 
of preventing fraud and abuse. We seek comment on whether this approach 
is desired, consistent with our goals, and on the feasibility of such a 
system. We seek comment on how often such a list would be updated. We 
also seek comment on how we could ensure that maintaining such a list 
does not inadvertently limit applicants' ability to take advantage of 
products and services newly introduced to the marketplace. In addition, 
we seek comment on how interested parties could best provide input to 
the Administrator on an ongoing basis regarding what specific products 
and services should be eligible. Additionally, we seek comment on how 
to handle services and equipment that are eligible only if used in 
certain ways.
    11. The Commission seeks comment on whether we need to reconsider 
or modify the current selection of products and services eligible for 
support under the schools and libraries mechanism. In particular, the 
Commission seeks comment on whether the mechanism could be improved by 
changes in our current eligibility policies regarding (a) Wide Area 
Networks, (b) wireless services, and (c) voice mail.
    12. The Commission seeks comment on whether to change our current 
policy, as set forth in our rules and decisions, regarding Wide Area 
Networks (WANs). In the Commission's Fourth Order on Reconsideration, 
63 FR 2094 (December 30, 1997), the Commission concluded that the 
building and purchasing of WANs to provide telecommunications is not 
eligible for discounts. The Commission first concluded that the 
building and purchasing of WANs themselves does not constitute 
telecommunications services or internal connections. The Commission 
further found that WANs built and purchased by schools and libraries do 
not appear to fall within the narrow provision that allows support for 
access to the Internet because WANs provide broad-based 
telecommunications. The Commission noted, however, that schools and 
libraries may receive universal service discounts on WANs provided over 
leased telephone lines, because such an arrangement constitutes a 
telecommunications service.
    13. In the Commission's Tennessee Order, (not published in Federal 
Register) the Commission established that universal service funds may 
be used to fund equipment and infrastructure build-out associated with 
the provision of eligible services to eligible schools and libraries. 
The Commission subsequently affirmed this principle in the Brooklyn 
Order, (not

[[Page 7330]]

published in Federal Register) but expressed its concern that ``by 
authorizing unrestricted up-front payments for multiple years of 
telecommunications service when there is significant infrastructure 
build-out, [the Commission] could create a critical drain upon the 
universal service fund, and reach the annual spending caps quickly.'' 
In attempting to strike a fair and reasonable balance between the 
desire not to unnecessarily drain available universal service funds by 
committing large amounts annually to a limited number of applicants, 
and the desire to ensure that eligible schools and libraries receive 
supported services, the Commission determined that recipients may 
receive discounts on the non-recurring charges associated with capital 
investment in an amount equal to the investment prorated equally over a 
term of at least three years.
    14. Certain state government representatives have suggested that we 
reconsider whether our policies regarding WANs have resulted in an 
efficient use of program funds, and, in particular, whether providing 
discounts on the cost of telecommunications service utilizing WANs has 
indeed caused a ``critical drain'' on program resources. Leased WAN 
service is, under our rules, a Priority One service. The costs of 
leasing WANs therefore decreases funds available for other Priority One 
services. The Commission seeks comment on the effectiveness and 
fairness of our WAN policy, and on whether other policies could result 
in a more equitable distribution of discounts in the program.
    15. One possible approach would be to increase the three-year 
period of time over which WAN-related capital expenses must be 
recovered through telecommunications service charges, so that the 
annual burden on available program funds is reduced. The Commission 
seeks comment on this and other possible approaches.
    16. Similarly, the Commission seeks comment on whether our decision 
in the Tennessee Order to consider leased WANs as a Priority One 
service has led to a fair and equitable distribution of funds. Some 
parties have suggested that the marked increase in demand for Priority 
One services arises from applicants leasing equipment from 
telecommunications providers for which they are likely to receive 
discounts rather than purchasing the equipment as internal connections, 
which have a high likelihood of not being funded under the current 
priority rules. The Commission seeks comment on whether a change in our 
approach to WAN-related expenses is warranted by this increase in 
demand, and if so, what changes consistent with the statutory 
restrictions of section 254 of the Act should be adopted to meet the 
program's goals of improved operation, a fair and equitable 
distribution of funds, and effective oversight to prevent waste, fraud 
and abuse.
    17. As wireless service has become more commonplace, we have 
received numerous recommendations that we reconsider our policies 
regarding the eligibility of wireless services. Wireless telephone 
service, for example, is not currently eligible when used by school bus 
drivers or other non-teaching staff of a school, including security 
personnel, because we have interpreted the statutory requirement that 
universal service discounts be provided only for ``educational 
purposes'' to exclude use by such support staff. We seek comment on 
whether broadening eligibility for wireless services under the schools 
and libraries mechanism, consistent with the statute, would improve the 
application review process and whether it would increase opportunities 
for fraud and abuse. In addition, in light of changing wireless 
technologies, the Commission seeks comment on whether we need to modify 
any rules or policies regarding the eligibility of wireless services 
for support under the schools and libraries mechanism so that 
distribution of funds is consistent with our principle of competitive 
neutrality and does not favor wireline technology over wireless 
technology.
    18. Many parties have recommended that the Commission reconsider 
its initial determination regarding the eligibility of voice mail for 
support under the schools and libraries mechanism. In the Universal 
Service Order, 62 FR 32862 (June 17, 1997), the Commission determined 
that voice mail would not ``at [that] time'' be eligible, based, in 
part, on the recommendation of the Federal-State Joint Board on 
Universal Service that such information services not be eligible. The 
increasing need for, and prevalence of, voice mail as a way of 
communicating with school and library staff for educational purposes 
raises the issue of whether voice mail, which serves a similar purpose 
as email (which is eligible for support under the schools and libraries 
mechanism), should also be eligible. The Commission also notes that 
making voice mail eligible may streamline the application review 
process, by reducing administrative effort and costs associated with 
determining what portion of a school or library's telecommunications 
costs are related to voice mail, and ensuring that the school or 
library does not receive discounts for those costs. Accordingly, the 
Commission seeks comment on whether a change in voice mail eligibility 
would improve the operation of the program or otherwise further our 
goals of preventing fraud, waste and abuse and promoting the fair and 
equitable distribution of the program's benefits.
2. Discounts for Internet Access When Bundled With Content
    19. In the Universal Service Order, the Commission concluded that 
schools and libraries may receive discounts on access to the Internet, 
but not on separate charges for particular proprietary content or other 
information services. The Commission held that if it is more cost-
effective for a school or library to purchase Internet access provided 
by a telecommunications carrier that bundles a minimal amount of 
content with such Internet access, a school or library may obtain 
discounts on that bundled package. If the telecommunications carrier 
provides bundled Internet access with proprietary content to a school 
or library, and also offers content separate from Internet access, the 
school or library may only obtain discounts on the price of the 
Internet access, as determined by the price of the bundled access and 
content less the price of the separately-priced content. Thus, if the 
only Internet access a provider offers is bundled with content for a 
total of $50.00 per month, and that provider sells the content 
separately for $30.00 per month, a school or library purchasing the 
bundled package would currently be eligible for discounts on $20.00 per 
month.
    20. Various affected applicants have suggested, both to us and to 
the Administrator, that Internet access that includes content from one 
provider may provide more cost-effective access to the Internet than 
another provider's Internet access containing minimal or no content. 
For example, an applicant may receive bids for Internet access from two 
providers, each offering service at $50.00 a month. One provider offers 
access and content bundled together, and separately offers content 
alone for $30.00, while the second provider just offers Internet 
access. An applicant might find that the bundled access and content may 
provide more cost-effective Internet access when considering cost, 
reliability, and other factors than Internet access without content 
from the other provider. Under our current rules, a recipient would be 
eligible for discounts on only $20.00 per month for the package of 
access and content, but could obtain discounts on the full $50.00 for 
Internet access without

[[Page 7331]]

content from the second provider. In such a case, our rules may create 
undesirable incentives for an applicant to choose a provider with a 
similar price but poorer service and reliability.
    21. The Commission seeks comment on whether a modification of our 
rules governing funding of Internet content would improve program 
operation consistent with our other goals of ensuring a fair and 
equitable distribution of benefits and preventing waste, fraud and 
abuse. Specifically, we seek comment on whether, if the only Internet 
access a provider offers is bundled with content but the provider also 
offers the content separately without Internet access, an applicant may 
receive full discounts on that Internet access package (including 
content) if that package provides the most cost-effective Internet 
access. Such a modification to our rules may also increase 
administrative efficiencies, for both applicants and the Administrator, 
by eliminating effort and costs associated with ensuring that 
applicants receive no discounts for bundled content. The Commission 
seek input on the costs and benefits of such a change, including 
whether providers might take advantage of this approach by adding 
content to Internet access in order to maximize revenues. We also seek 
comment on whether, in keeping with our current rules, universal 
service discounts would continue to be available for a provider only 
for the cost of access without content, if a service provider offers 
Internet access to consumers both with and without content.
3. Review of Requests Including Eligible and Non-Eligible Services
    22. Currently, acting pursuant to Commission oversight, the 
Administrator utilizes a 30 percent processing benchmark when reviewing 
funding requests that include both eligible and ineligible services. If 
less than 30 percent of the request seeks funding of ineligible 
services, the Administrator normally will consider the request and 
issue a funding commitment for the eligible services, denying funding 
only of the ineligible part. If 30 percent or more of the request is 
for funding of ineligible services, the Administrator will deny the 
funding request in its entirety. The 30 percent policy allows the 
Administrator to efficiently process requests for funding that contain 
only a small amount of ineligible services without expending 
significant fund resources working with applicants to determine what 
part of the discounts requested is associated with eligible services. 
It also provides an incentive to applicants to eliminate ineligible 
services from their requests before submitting their applications, 
further reducing the Administrator's administrative costs. For example, 
without the procedure, an applicant who has contracted for the 
construction of a new school for a lump sum might submit a request for 
the entire amount knowing that the Administrator must then perform the 
necessary work to identify the costs of any eligible components, such 
as the telecommunications wiring. Because the Administrator's annual 
administrative costs are drawn from the same $2.25 billion that 
supports the award of discounts, an increase in the administrative 
costs of eligibility review would directly reduce the amount of funds 
available for actual discounts.
    23. The Commission seeks comment on the operational benefits and 
burdens of this procedure to applicants and to the Administrator. We 
specifically seek input on whether there are alternatives that would 
improve program operation or otherwise further the other two goals of 
preventing fraud, waste, and abuse and promoting the equitable 
distribution of the program's funds, while still providing appropriate 
incentives to applicants to seek discounts only for eligible services.
4. Compliance With the Americans With Disabilities Act
    24. The Americans With Disabilities Act (ADA) provides 
comprehensive civil rights protections to individuals with disabilities 
in the areas of employment, public accommodations, State and local 
government services, and telecommunications. Related statutes, which 
are referenced by the ADA, include the Rehabilitation Act of 1973, and 
the Individuals with Disabilities Education Act. The current FCC Form 
471, on which entities apply for universal service discounts, contains 
the following notice: ``The Americans with Disabilities Act (ADA), the 
Individuals with Disabilities Education Act, and the Rehabilitation Act 
may impose obligations on entities to make the services purchased with 
these discounts accessible to and usable by people with disabilities.'' 
The Commission does not, however, explicitly require compliance with 
these statutory requirements as a condition of receipt of universal 
service discounts.
    25. Some parties have suggested that the Commission require 
applicants to certify that the services for which they seek discounts 
will be used in compliance with these acts. The Commission seeks 
comment on whether we should adopt such a certification requirement. In 
commenting on such a change, parties should comment on the language of 
any ADA certification, and on the timing for the ADA certification in 
the application process. To the extent that we would adopt such a 
change, we also solicit comment on whether any rule changes are needed 
to ensure that applicants that fail to comply with the certification no 
longer receive discounts. The Commission further seeks comment on 
whether, and how, the Administrator and the Commission would verify and 
enforce compliance, and the extent that such actions promote our three 
goals of improving program operation, ensuring a fair and equitable 
distribution of benefits, and preventing waste, fraud, and abuse.
5. Consortia
    26. Section 54.501(d)(1) implements the Commission's determinations 
in the Universal Service Order as to when eligible entities seeking 
discounts as part of a consortium can obtain interstate 
telecommunications services at prices below tariffed rates. The 
Commission found that there was congressional support for allowing 
eligible schools and libraries to obtain services at pre-discount 
prices below tariffed rates. However, it concluded that where such 
eligible entities sought services as members of a consortium including 
private sector non-eligible members, allowing the private non-eligible 
businesses to obtain below-tariff rates would compromise federal and 
state policies of non-discriminatory pricing. The Commission therefore 
concluded that a consortium that included private sector ineligible 
members could obtain tariffed services only if ``the pre-discount 
prices of [the tariffed services] are generally tariffed rates.''
    27. The Commission seeks comment on whether a change to section 
54.501(d)(1), recommended by consortia members and service providers 
working with consortia, would improve program operation. We also invite 
comment on whether changes to other consortia rules might achieve a 
greater consistency or fairness in our approach to the participation of 
consortia in the program. The language in the current rule provides 
that ``[w]ith one exception, eligible schools and libraries 
participating in consortia with ineligible private sector members shall 
not be eligible for discounts for interstate services.'' Parties have 
argued that this language is unclear and could be construed to prohibit 
such consortia from obtaining services other than tariffed services. 
The Commission seeks comment on whether to clarify the rule

[[Page 7332]]

to establish clearly that only ineligible private sector members 
seeking services as part of a consortium with eligible members are 
prohibited from obtaining below-tariffed rates from providers that 
offer tariffed services (tariffed providers). The Commission 
specifically requests comment on the impact of this rule on program 
operation, whether administrative costs would result from the proposed 
change, what these costs would be, and whether these costs would 
outweigh the benefits of the change.
    28. The Commission also seeks comment on any proposals as to how we 
might clarify, change or reorganize the other rules and requirements 
relating to consortia, to help ensure that these rules and requirements 
reflect a fair and consistent approach to the role and obligations of 
consortia leaders and the consequences to consortia members of 
violations by leaders and other members. We seek comment on how we 
might improve program operation or otherwise further our interest in 
fairly distributing benefits of the program and limiting fraud, waste, 
and abuse, by making consortia application and participation 
requirements more transparent, so that it is clear what consortia may 
do and what their responsibilities are.

B. Post Commitment Program Administration

1. Choice of Payment Method
    29. Under existing law and Commission procedure, the Administrator 
of the universal service support mechanism does not provide funds 
directly to schools and libraries, but rather, provides funds to 
eligible service providers, who then offer discounted services to 
eligible schools and libraries. Under existing Administrator's 
procedures, service providers and applicants are advised to work 
together to determine whether the applicant will either (1) pay the 
service provider the full cost of services, and subsequently receive 
reimbursement from the provider for the discounted portion, after the 
provider receives reimbursement through the Billed Entity Applicant 
Reimbursement (BEAR) process, or (2) pay only the non-discounted 
portion of the cost of services, with the service provider seeking 
reimbursement from the Administrator for the discounted portion. 
Because it is not clear in our rules whether the provider or the 
applicant may make the final determination of which of the two payment 
processes to pursue, the potential exists for service providers to 
insist that applicants to whom they provide services use the first 
method of paying the up-front costs, and later seeking reimbursement. 
Indeed, some large providers require recipients to use the BEAR form.
    30. The Commission seeks comment on whether our rules should 
specify that service providers must offer applicants the option of 
either making up-front payments for the full cost of services and being 
reimbursed via the BEAR form process, or paying only the non-discounted 
portion up-front. We seek comment on the costs and benefits of our 
proposal to all affected parties and whether it would improve program 
operation overall.
    31. The Commission also seeks comment on whether, to further 
improve program operation and prevent fraud and abuse, we should 
incorporate enforcement measures regarding remittal of BEAR payments 
into our rules. Under current Administrator procedure, service 
providers reimbursing billed entities via the BEAR process must remit 
to the billed entity the discount amount authorized by the 
Administrator to the billed entity within ten days of receiving the 
reimbursement payment from the Administrator and prior to tendering or 
making use of the payment from the Administrator. The Administrator has 
implemented this procedure pursuant to ongoing Commission oversight of 
the program, but this procedure has not been formally codified in our 
rules. We have received reports from both the Administrator and from 
affected schools and libraries that, in certain cases, service 
providers have failed to remit these payments to applicants until well 
past the ten-day limit. In order to address this problem, we seek 
comment on whether service providers should be required to remit these 
payments to the applicants within twenty days of having received them, 
and that failure to do so will constitute a rule violation potentially 
subjecting the service provider to fines and forfeitures under section 
503 and/or other law enforcement action.
    32. The Commission seeks comment on whether this proposed twenty-
day period imposes a significant economic burden on small entity 
providers (as defined in paragraphs 88 through 98 of the Order). We 
welcome any suggestions as to how the remittance process might be 
modified to minimize such impact. We also seek comment on the extent to 
which a modification such as lengthening the remittance period would 
have a deleterious impact on eligible schools and libraries that is 
inconsistent with our three goals of improving program operation, 
ensuring that the benefits of the program are equitably distributed, 
and preventing fraud, waste, and abuse.
2. Equipment Transferability
    33. The Commissions rules provide that eligible services purchased 
at a discount ``shall not be sold, resold, or transferred in 
consideration for money or any other thing of value.'' Nothing in our 
rules, however, prevents transferring equipment obtained with universal 
service discounts from the eligible recipient to another entity without 
consideration for money or anything of value. We have received reports 
from state authorities, schools and libraries, and the Administrator 
that some recipients are replacing, on a yearly or almost-yearly basis, 
equipment obtained with universal service discounts, and transferring 
that equipment to other schools or libraries in the same district that 
may not have been eligible for such equipment.
    34. Although the Commission recognizes that schools and libraries 
may legitimately desire to upgrade their equipment frequently as a 
result of the rapid pace of technological change, we seek comment on 
whether it is appropriate to balance this desire against the impact of 
such action on other parties seeking discounts under the program. We 
seek comment on whether the program's goals would be improved by 
requiring that schools and libraries make significant use of the 
discounted equipment that they receive, before seeking to substitute 
new discounted equipment. In particular, we seek comment on whether 
there may be insufficient incentives in the schools and libraries 
mechanism to prevent wasteful or fraudulent behavior, without imposing 
restrictions on these transfers of equipment. The Commission 
specifically seeks comment on whether, as a condition of receipt of 
universal service discounts, we should adopt measures to ensure that 
discounted internal connections are used at the location and for the 
use specified in the application process for a certain period of time.
    35. One option could be to adopt a rule limiting transfers for 
three years from the date of delivery and installation of equipment for 
internal connections other than cabling, and ten years in the case of 
cabling. Under this option, an applicant could replace only ten percent 
of its old cabling per year with new discounted internal connections 
(such as upgrading from copper wire to fiber optics). Otherwise, an 
applicant seeking discounts on new equipment to replace universal 
service-funded equipment that has been in

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place for less than the specified time periods could do so only if it 
traded the existing equipment to its service provider for a credit 
toward the purchase of the cost of the new discounted equipment. The 
Commission seeks comment on whether this option would achieve the goals 
of efficient and equitable use of the mechanism's funds, and whether 
this approach would prevent both waste and fraud. We also seek comment 
on how this change might most effectively be implemented, and on 
attendant benefits and costs.
    36. An alternate approach could be to deny internal connections 
discounts to any entity that has already received discounts on internal 
connections within a specified period of years regardless of the 
intended use of the new internal connections. The Commission seeks 
comment on whether we should adopt such a rule, on the appropriate time 
frame for such a rule, and whether we should impose this limitation 
only in situations where the applicants have previously received 
discounts above a specified threshold in the relevant time period. We 
also seek comment on the administrative costs that would be incurred, 
both in the application process and in post-disbursement auditing, to 
ensure compliance with a rule prohibiting an entity from receiving 
discounts on internal connections if it previously had received such 
discounts. We seek comment on these and any other proposals to address 
this issue and thus give us further insight on how, with regard to 
equipment issues, we might further our goals of improving program 
operation, ensuring that the mechanism's benefits are fairly and 
equitably distributed, and eliminating fraud, waste, and abuse.
3. Use of Excess Services in Remote Areas
    37. The Act requires that discounts on services be provided for 
educational purposes to schools and libraries. In the Universal Service 
Order, the Commission implemented this provision by requiring schools 
and libraries to certify that the services obtained through discounts 
from the schools and libraries mechanism will be used solely for 
educational purposes. The Commission determined that the certification 
rules, including the educational purposes rule, were reasonable and not 
unnecessarily burdensome, especially in light of the Commission's goals 
to reduce fraud, waste, and abuse.
    38. In some instances, the discounted services received by schools 
and libraries through the schools and libraries program are provided on 
a non-usage sensitive basis and are used for educational purposes 
during hours when the schools and libraries are open, but remain unused 
during off-hours when the entities are closed. As a result, due to the 
non-usage sensitive nature of the services, services that could be used 
after the operating hours of schools and libraries presently go unused.
    39. The State of Alaska recently requested a waiver of the 
restriction in Sec. 54.504(b)(2)(ii) that requires applicants to 
certify that the services obtained from the schools and libraries 
mechanism would be used for solely educational purposes. In many 
communities in Alaska, services from the schools and libraries program 
have provided the only means to deliver Internet access to communities 
in rural remote areas. Specifically, the State of Alaska asked to use 
the telecommunications and Internet access services as an Internet 
``point of presence'' in rural remote communities. To the extent that a 
school or library will not be fully utilizing the services it ordered 
for educational purposes, and these services would otherwise be wasted, 
the State of Alaska requested that others in the community be allowed 
to use these services for non-educational purposes.
    40. On December 3, 2001, the Commission granted the State of Alaska 
a limited waiver of Sec. 54.504(b)(2)(ii) of the Commission's rules. In 
the Alaska Order, 66 FR 67112 (December 28, 2001), the Commission 
concluded that there is nothing in section 254(h)(1)(B) that prohibits 
the Commission from granting a waiver of Sec. 54.507(b)(2)(ii) of its 
rules to expand the use of such services, so long as in the first 
instance they are used for educational purposes. The Commission further 
determined that based on the special circumstances outlined in Alaska's 
petition, there was good cause to waive Sec. 54.504(b)(2)(ii) of the 
Commission's rules for rural remote communities in Alaska who lack 
local or toll-free dial-up access to the Internet.
    41. The Commission seeks comment more broadly on the types of 
situations that might warrant utilization of excess service obtained 
through the universal service mechanism for schools and libraries when 
services are not in use by the schools and libraries for educational 
purposes. Although we believe the Commission's current rule relating to 
educational purposes is appropriate in the overwhelming majority of 
circumstances, we seek comment on whether the Commission should revise 
its rules in order to expressly address such situations, and whether 
such revisions would further the goals of improving program operation, 
ensuring a fair and equitable distribution of benefits and preventing 
waste, fraud, and abuse.
    42. If the Commission were to modify it's rules expressly to 
address the use of excess services in limited circumstances, we seek 
comment on whether to consider conditioning such use on several 
criteria: (1) That the school or library request only as much discounts 
for services as are reasonably necessary for educational purposes; (2) 
the additional use would not impose any additional costs on the schools 
and libraries program; (3) services to be used by the community would 
be sold on the basis of a price that is not usage sensitive; (4) the 
use should be limited to times when the school or library is not using 
the services; and (5) the excess services are made available to all 
capable service providers in a neutral manner that does not require or 
take into account any commitments or promises from the service 
providers. With respect to the fifth condition, we previously found 
that such a condition was ``consistent with the Act, which prohibits 
any discounted services or network capacity from being sold, resold, or 
transferred by such user in consideration for money or any other thing 
of value.'' The Commission seeks comment on the legal, operational, and 
enforcement issues raised by this approach.
    43. The Commission believes that, to the extent we should adopt any 
such change, the resulting policy would need to be carefully 
circumscribed to prevent fraud, waste, and abuse. In light of these 
concerns, and our desire to ensure that the appropriate safeguards are 
in place, we also seek comment regarding how such an arrangement would 
function. In particular, we seek comment on how to ensure that any 
revised rule would not indirectly impose costs on the schools and 
libraries program or that applicants would not request more service 
than is necessary for educational purposes.

C. Appeals

1. Appeals Procedure
    44. In the Eighth Order on Reconsideration, (not in Federal 
Register), the Commission established a process by which aggrieved 
parties could seek review from the Commission of decisions of the 
Administrator. As of January 1, 2002, the Commission has reviewed 740 
appeals from the Administrator's decisions. Of these, 592 were denied 
or dismissed, 135 were granted, and 13 were granted in part. Of those 
appeals granted, a number involved situations where the Commission 
concluded that a close

[[Page 7334]]

examination of the rules and policies applicable to the underlying 
request was warranted. Our history to date thus leads us to conclude 
that the Administrator is applying existing rules and policies 
correctly in the vast majority of cases. Nevertheless, the opportunity 
for Commission review remains an important method by which we provide 
effective oversight of the Administrator's activities.
    45. Our current rules provide that any person aggrieved by a 
decision of any Division of the Administrator may file an appeal 
directly with the Commission within 30 days of the date of the issuance 
of the decision. Alternately, the person may appeal the decision of a 
Division within 30 days of the date of the decision to the relevant 
Committee governing that Division, in which case the time for filing an 
appeal with the Commission is tolled during the pendency of the appeal 
before the Committee. Once the Committee has issued a decision on the 
appeal, the person then has up to 30 days to appeal that decision to 
the Commission. In each case, an appeal is deemed filed on the date 
that it is received, not the date it is postmarked.
    46. Appeals to the Commission are decided by the Common Carrier 
Bureau, unless they raise novel issues of fact, law, or policy, in 
which case, they are decided by the full Commission. Whether an appeal 
is before the Common Carrier Bureau or the full Commission, the 
standard of review is de novo. This review process applies equally to 
decisions made by the three divisions of the Administrator defined in 
our regulations, the Schools and Libraries Division, the Rural 
Healthcare Division, and the High Cost and Low Income Division.
    47. Numerous parties have recommended that we increase the time 
limit for filing an appeal with the Committee of the Schools and 
Libraries Division and the time limit for filing an appeal with the 
Commission. As noted above, the time limit in both cases is 30 days, 
which commences on the date of the decision and runs until the filing 
of the appeal. The parties have proposed increasing this period to 60 
days. In the Eighth Order on Reconsideration, the Commission 
established the 30 day period partly in response to commenters' 
requests for a streamlined approach. Experience suggests, however, that 
this time period may be inadequate for parties wishing to appeal an 
adverse decision. To date, we have dismissed appeals as untimely 
approximately 22 percent of the time. Parties have suggested that some 
extension of time for filing appeals will provide aggrieved schools and 
libraries a greater opportunity to review the relevant decisions, and 
determine whether there are valid bases for appeal in light of the 
governing rules and Commission precedent. Moreover, they suggest, 
additional time would enable applicants to consult with the e-rate 
assistance offices that many States have now established to advise 
constituents who are seeking such funding. Nothing in this suggested 
change would prevent participants from filing appeals before the end of 
the appeals period.
    48. The Commission therefore invites comment on whether this 
modification to our rules would improve program operation. In addition, 
we seek comment on the suggestion that we should treat appeals to the 
Administrator or to the Commission as having been received on the date 
they are post-marked rather than the date they are filed. This would 
depart from the Commission practice for filings in general. Such a 
change, however, would make the appeal procedure consistent with the 
Administrator's practice of treating FCC Form 471 applications as 
having been filed as of the post-mark date. Further, it could better 
ensure that rural and remote applicants will not be disadvantaged if it 
takes longer to mail an appeal to the Commission. We therefore seek 
comment on whether we should adopt this modification. Finally, we seek 
comment on any other changes to our rules or policies concerning the 
appeals procedure of the Administrator or the Commission that might 
further the goals of improving program operation, ensuring a fair and 
equitable distribution of benefits and preventing waste, fraud, and 
abuse consistent with the 1996 Act.
2. Funding of Successful Appeals
    49. Each funding year, the Administrator sets aside a portion of 
the funds available that year for the schools and libraries universal 
service mechanism to ensure that sufficient funds will be available for 
any appeals that may be granted by the Administrator or the Commission. 
The Administrator calculates this amount in part by generating a 
prediction of the percentage of its decisions that will be reversed 
based on historical experience. Because the prediction may 
underestimate the actual number of reversed decisions, it is possible 
that the appeal reserve fund in a particular year will ultimately be 
inadequate to fund all successful appeals in that year.
    50. In the Eleventh Reconsideration Order and Further Notice, the 
Commission proposed certain rules establishing funding priorities for 
the Administrator to apply when distributing funds from the appeal 
reserve to schools and libraries that successfully appeal decisions of 
the Administrator. Specifically, the Commission proposed that the 
Administrator should first fund all Priority One appeals, and then 
allocate any remaining funds in the appeal reserve to Priority Two 
appeals in order of descending discount rate. The Commission further 
proposed that if funds were not available for all Priority One appeals, 
then all funding should be allocated to Priority One appeals on a pro-
rata basis. To ensure correct distribution of funds to Priority One 
appeals, the Commission proposed that the Administrator should wait 
until a final decision has been issued on all Priority One service 
appeals before allocating funds to such services on a pro-rata basis.
    51. In response to these proposals, several commenters suggest that 
it is inappropriate to limit appellants to those funds in the appeal 
reserve fund because it might result in successful appellants being 
treated differently from applicants who were awarded funding initially. 
In some circumstances, two schools or libraries of similar eligibility 
that file simultaneous applications for identical support might receive 
different funding merely because one was subject to an erroneous 
initial funding decision that was subsequently reversed on appeal. To 
avoid such a result, the Commission now seeks comment on whether, to 
ensure a fair and equitable distribution of funds, we should instead 
fully fund successful appeals to the same extent that they would have 
been funded in the initial application process had they not been 
initially denied funding.
    52. The Commission further seeks comment on what rules should 
govern if the new proposal were adopted, in the event that the funding 
year's appeal reserve is depleted. One option, for example, would be 
for the Administrator to rely on any other funds that remain from the 
current funding year first, including funds that had never been 
committed and funds that had been committed but were never used by the 
original recipients. If these sources are unavailable or insufficient, 
the Administrator could then use funds from the next funding year as 
soon as they become available, and reduce the level of discounts 
available in that next funding year by that amount. We seek comment on 
this and any other option consistent with our goals of improving 
program operation, ensuring a fair and equitable distribution of 
benefits, and

[[Page 7335]]

preventing waste, fraud, and abuse consistent with the 1996 Act.
    53. Under such an option, it may be unnecessary to withhold funding 
until all appeals have been decided. Some delay in funding may be 
unavoidable, however, because if the Administrator must fund successful 
appeals in one year by drawing funds from the succeeding Funding Year, 
those funds would not be available until the beginning of that future 
funding year. The Commission believes that delays in funding of 
Priority Two internal connections will generally be less burdensome 
than delays in funding of Priority One services, because the latter 
services must be purchased by the applicant during the funding year 
regardless of whether funding for discounts is awarded at that time or 
not. We therefore seek comment on whether the Administrator should fund 
successful appellants in the order that decisions on appeal are issued, 
except that the Administrator should not commit funds to successful 
applicants requesting support for Priority Two services until the 
Administrator is certain that sufficient funds remain to fund all 
successful appellants requesting discounts for Priority One services. 
We seek comment on all of our current proposals regarding the funding 
of successful appellants.

D. Enforcement Tools

1. Independent Audits
    54. In its December 2000 report, the General Accounting Office 
proposed strengthening application and invoice review procedures in 
order to reduce the amount of funds inadvertently spent on ineligible 
services. The Administrator has implemented a number of procedural 
changes suggested by the report, and has undertaken numerous measures 
on its own initiative. Working closely with the Commission's Office of 
the Inspector General (OIG), the Administrator has significantly 
stepped up its efforts aimed at detecting and resolving instances of 
waste, fraud, and abuse. For example, it has increased the number of 
audits, withheld suspect payments, withdrawn posted FCC Forms 470 from 
its website and rejected FCC Form 471 applications, and has 
increasingly coordinated its efforts with federal, state, and local law 
enforcement to combat fraud and other potentially criminal activity. 
We, in turn, have examined our rules to consider whether our existing 
enforcement tools should be strengthened in any way.
    55. We seek comment on whether, so as to improve our oversight 
capacity to guard against waste, fraud, and abuse, our rules should 
explicitly authorize the Administrator to require independent audits of 
recipients and service providers, at recipients' and service providers' 
expense, where the Administrator has reason to believe that potentially 
serious problems exist, or is directed by the Commission. We 
specifically seek comment on the impact of such a rule on small 
entities. We further seek comment on alternatives that might provide 
other assurances of program integrity consistent with the goals of 
improving program operation, ensuring a fair and equitable distribution 
of benefits, and preventing waste, fraud, and abuse.
2. Prohibitions on Participation
    56. The Act and our rules permit the Commission to initiate 
forfeiture proceedings against those that willfully or repeatedly fail 
to comply with statutory and regulatory requirements. There are no 
provisions in our current rules, however, to bar entities from 
participating in the program for periods of time.
    57. The Commission seeks comment on whether, so as to further 
improve our oversight, we can and should adopt rules barring 
applicants, service providers, and others (such as consultants) that 
engage in willful or repeated failure to comply with program rules from 
involvement with the program, for a period of years. Assuming we were 
to adopt such a rule, we seek input on what standards should apply for 
barring such entities, and on what an appropriate length of time would 
be for such a prohibition. We also seek comment on other questions 
regarding implementation of such a prohibition, including whether the 
prohibition might apply to individuals, so that those responsible for 
actions that led to the barring of a particular entity do not evade the 
purpose of the prohibition by joining or forming another eligible 
entity.
    58. The Commission seeks comment generally on whether to adopt 
additional measures to reduce potential waste, fraud, and abuse in the 
schools and libraries support mechanism. Consistent with our intent to 
continue strengthening program integrity, we seek input on further 
rules and procedures to address these matters.

E. Unused Funds

1. Overview
    59. In each funding year, a portion of the $2.25 billion available 
under the program cap has gone unused, largely because some applicants 
do not fully use the funds committed to them in a given year. Under the 
Administrator's procedures in effect in the first three funding years 
of the program, the Administrator engaged in various ongoing analyses 
throughout each funding year to ensure that it did not commit more than 
the $2.25 billion cap each year. Although this $2.25 billion limit on 
commitments ensured that the level of funds actually disbursed remained 
under the $2.25 billion cap, the result, given that applicants do not 
seek disbursement of all committed funds, has been that some of the 
$2.25 billion has gone unused by applicants each year.
    60. The Administrator issues funding commitment decision letters to 
applicants once their applications have been approved, but does not 
authorize payouts of committed funds until it receives valid invoices 
demonstrating that the applicants have obtained the requested products 
and services. The Administrator approves the disbursement of funds once 
it receives a certification from the recipient and invoices from the 
service provider or applicant, indicating that approved services have 
begun. In many cases, however, applicants and vendors do not submit the 
required documentation for all the funding, and therefore receive only 
partial funding, or none of the committed funds at all. As of June 30, 
2001, approximately $940 million of the $3.7 billion in program funds 
committed to applicants during the first and second funding years was 
not disbursed because of the failure of applicants and providers to 
submit the required documentation. In the first funding year, the 
Administrator disbursed approximately 82 percent of committed funds. In 
the second funding year through June 30, 2001, the Administrator 
disbursed approximately 71 percent of committed funds. The 
Administrator projects that a similar proportion of committed funds 
will be disbursed in Funding Year 3.
    61. The Commission seeks comment on whether there are any 
administrative modifications to the schools and libraries universal 
service support mechanism that we should implement to improve program 
operation, ensure a fair and equitable distribution of funds, or guard 
against waste, fraud, and abuse. We seek comment generally on whether 
there are modifications to the application and funding disbursement 
process that would serve our goals in this proceeding, that could be 
implemented immediately without need for a rule change.
    62. In addition, the existence of unused funds each year raises two

[[Page 7336]]

issues that we address in this NPRM. The first issue is how to reduce 
the level of funds that go unused. The second issue is what to do with 
undisbursed funds, to the extent that they remain despite our reduction 
efforts. In the sections that follow, we seek comment on these issues.
2. Reduction of Unused Funds
    63. The Commission anticipates that several recent administrative 
changes to the schools and libraries program should help to reduce the 
under-utilization of committed funds. Specifically, in May 2000, the 
Administrator released a new Form 500 that gives applicants a 
convenient tool to reduce or cancel commitments they will not use so 
that those funds can be made available for other applicants during the 
same funding year. Additionally, the Administrator developed new and 
more flexible procedures for service provider changes, consistent with 
governing precedent. The Administrator expects those procedures to 
permit approval of many pending service provider changes and the 
distribution of more funds each year. Furthermore, in order to address 
the under-utilization of program resources caused by this gap between 
committed and disbursed funds, the Administrator, in consultation with 
the Commission, will begin to base the overall amount of committed 
funds each year on a formula that takes into consideration past levels 
of disbursement. We believe that each of these changes will help 
prevent the likelihood of waste, fraud, and abuse by improving the 
disbursement of program funds.
    64. It is the Commission's goal to reduce the gap between funds 
that have been committed and those that have been disbursed, in order 
to most effectively implement the goals of section 254(h) by providing 
for discounts as close as possible to the level of the annual $2.25 
billion cap. We seek to develop a record on the reasons why applicants 
and providers may fail to fully use committed funds under the program. 
We also seek comment on whether any other program changes would likely 
result in an increased percentage of committed funds being disbursed 
each funding year, which will help to reduce the overall amount of 
unused funds from the schools and libraries mechanism. In the event we 
adopt additional measures to reduce the existence of unused funds, we 
seek comment on whether it is necessary to adopt procedures to address 
a situation in which more funds are committed and used than are 
available for disbursement.
3. Treatment of Unused Funds
    65. Section 54.507(a) of the Commission's rules codifies the annual 
$2.25 billion cap on the schools and libraries support mechanism. The 
rule also provides that ``all funding authority for a given funding 
year that is unused in that funding year shall be carried forward into 
subsequent funding years for use in accordance with demand.'' Although 
Sec. 54.507(a) addresses funding authority, it is silent as to the 
treatment of unused funds, i.e., funds that the Administrator had 
available for disbursement, but that were not disbursed in that funding 
year. As discussed infra, unused funds from Funding Year 1 have been 
used to reduce the contribution factor for Funding Years 2 and 3, 
consistent with Commission rules and policies. We believe, however, 
that we should consider what should be done with unused funds that may 
occur in future years.
    66. In accord with the Commission's efforts to reduce the amount of 
unused funds from the schools and libraries mechanism, we seek comment 
on revising the Commission's rules to clarify the appropriate treatment 
of such unused funds. As stated above, the Commission's rule adopted in 
accord with the Universal Service Order refers to unused funding 
authority, not unused funds. Thus, the Commission seeks comment on two 
options relating to the treatment of unused funds. The first option 
would be to modify the rule to require expressly that unused funds from 
the schools and libraries mechanism (beginning with Funding Year 2) 
should be credited back to contributors through reductions in the 
contribution factor. The second option would be to modify the rule to 
require expressly the distribution of the unused funds in subsequent 
years of the schools and libraries program, in excess of the annual 
cap. We seek comment on each of the alternatives. We believe that 
consumers may benefit from reducing the contribution factor with unused 
funds because it will decrease the contribution amounts that carriers 
recover from consumers. Alternatively, disbursing unused funds in 
subsequent funding years of the schools and libraries mechanism would 
provide additional resources for applicants, thereby assisting efforts 
to provide affordable telecommunications and information services to 
schools and libraries.

II. Revising or Eliminating Outmoded Rules

    67. The Commission seeks comment on any administrative or 
procedural rules or policies of the Commission or SLD, relating to the 
schools and libraries support mechanism, that should be revised or 
eliminated because they have become outmoded. In the four years since 
the implementation of the support mechanism, some such rules or 
policies may have become obsolete through changed circumstances or 
technologies, or may have been rendered unnecessary or redundant in 
light of changes made to the program. We therefore seek comment on such 
rules or policies in order to determine whether any are no longer 
necessary or in the public interest.

IV. Procedural Matters

A. Paperwork Reduction Act Analysis

    68. As part of our continuing effort to reduce paperwork burdens, 
the Commission invites the general public to take this opportunity to 
comment on the additional certification collections contained in this 
NPRM, as required by the Paperwork Reduction Act of 1995, Public Law 
104-13. Public and agency comments are due at the same time as other 
comments on this NPRM. Comments should address: (a) Whether the 
proposed collection of information is necessary for the proper 
performance of the functions of the Commission, including whether the 
information shall have practical utility; (b) the accuracy of the 
Commission's burden estimates; (c) ways to enhance the quality, 
utility, and clarity of the information collected; and (d) ways to 
minimize the burden of the collection of information on the 
respondents, including the use of automated collection techniques or 
other forms of information technology.

B. Initial Regulatory Flexibility Analysis

    69. 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 NPRM. Written public comments 
are requested on this IRFA. Comments must be identified as responses to 
the IRFA and must be filed by the deadlines for comments on the NPRM 
provided below in section VI.C. The Commission will send a copy of the 
NPRM, including this IRFA, to the Chief Counsel for Advocacy of the 
Small Business Administration (SBA). In addition, the Notice and IRFA 
(or

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summaries thereof) will be published in the Federal Register.
1. Need for, and Objectives of, the Proposed Rules
    70. The Commission is required by section 254 of the Act to 
promulgate rules to implement the universal service provisions of 
section 254. On May 8, 1997, the Commission adopted rules to reform our 
system of universal service support mechanisms so that universal 
service is preserved and advanced as markets move toward competition. 
In this NPRM, we seek comment on several changes to the schools and 
libraries universal service support mechanism. With respect to the 
application process, we seek comment on (1) issues related to the 
process for determining eligible services, and the eligibility for 
schools and libraries universal service support of such services as 
voice mail, wireless, and Wide Area Networks; (2) permitting schools 
and libraries to receive discounts for Internet access that may in 
certain limited cases contain content, as long as it is the most cost-
effective form of Internet access; (3) the 30 percent processing 
benchmark for reviewing funding requests that include both eligible and 
ineligible services; (4) whether to require a certification by schools 
and libraries acknowledging their compliance with the requirements of 
the Americans With Disabilities Act and related statutes; and (5) 
modifying our rule governing when members of a consortium may receive 
service from a tariffed service provider at below-tariff rates.
    71. Also seek comment on several issues that arise once discounts 
have been committed to applicants: (1) Providing schools and libraries 
the flexibility either to make up-front payments for services and 
receive reimbursement via the Billed Entity Applicant Reimbursement 
(BEAR) form process, or be charged only the non-discounted cost by the 
service providers, and require that service providers remit BEAR 
reimbursements to applicants within twenty days; (2) limiting 
transferability of equipment obtained with universal service discounts; 
and (3) allowing members of rural remote communities to use excess 
capacity from services obtained through the universal service support 
mechanism in certain limited situations.
    72. With respect to the appeals process, the Commission seeks 
comment on increasing time limits for filing appeals to 60 days, and 
considering appeals filed as of the day they are post-marked; and 
procedures for funding successful appeals. Fourth, we seek comment on 
measures to strengthen our existing enforcement tools, including 
adopting a rule explicitly authorizing independent audits; and barring 
from the program certain applicants, service providers, and others that 
engage in willful or repeated failure to comply with program rules. On 
the issue of unused program funds, we seek comment on the reasons for 
unused funds, and on how the Commission should treat unused funds. We 
also deny certain petitions for reconsideration relating to unused 
funds, and seek comment on revising or eliminating outmoded 
administrative or procedural rules or policies relating to the schools 
and libraries universal service support mechanism.
2. Legal Basis
    73. The legal basis for this NPRM 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, 47 
U.S.C. 151 through 154, 201 through 205, 254, 303(r), and 403, and 
Sec. 1.411 of the Commission's rules, 47 CFR 1.411.
3. Description and Estimate of the Number of Small Entities to Which 
Rules Will Apply
    74. 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: (1) Is independently owned 
and operated; (2) is not dominant in its field of operation; and (3) 
satisfies any additional criteria established by the 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.
    75. Small entities potentially affected by the proposals herein 
include eligible schools and libraries and the eligible service 
providers offering them discounted services, including 
telecommunications service providers, Internet Service Providers (ISPs) 
and vendors of internal connections.
a. Schools and Libraries
    76. 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 defined 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 NPRM, under current operation of the program.
b. Telecommunications Service Providers
    77. The Commission has included small incumbent local exchange 
carriers in this RFA analysis. A ``small business'' under the RFA is 
one that, inter alia, meets the pertinent small business size standard 
(e.g., a telephone communications business having 1,500 or fewer 
employees), and ``is not dominant in its field of operation.'' The 
SBA's Office of Advocacy contends that, for RFA purposes, small 
incumbent local exchange carriers are not dominant in their field of 
operation because any such dominance is not ``national'' in

[[Page 7338]]

scope. We have therefore included small incumbent carriers in this RFA 
analysis, although we emphasize that this RFA action has no effect on 
the Commission's analyses and determinations in other, non-RFA 
contexts.
    78. Local Exchange Carriers. Neither the Commission nor the SBA has 
developed a definition for small providers of local exchange services. 
The closest applicable definition under the SBA rules is for wired 
telecommunications carriers. This provides that a wired 
telecommunications carrier is a small entity if it employs no more than 
1,500 employees. According to the most recent Trends in Telephone 
Service report, 1,335 carriers classified themselves as incumbent local 
exchange carriers. We do not have data specifying the number of these 
carriers that are either dominant in their field of operations, are not 
independently owned and operated, or have more than 1,500 employees, 
and thus are unable at this time to estimate with greater precision the 
number of local exchange carriers that would qualify as small business 
concerns under the SBA's definition. Of the 1,335 incumbent carriers, 
13 entities are price cap carriers that are not subject to these rules. 
Consequently, we estimate that fewer than 1,322 providers of local 
exchange service are small entities or small incumbent local exchange 
carriers that may be affected.
    79. Interexchange Carriers. Neither the Commission nor the SBA has 
developed a definition of small entities specifically applicable to 
providers of interexchange services (IXCs). The closest applicable 
definition under the SBA rules is for wired telecommunications 
carriers. This provides that a wired telecommunications carrier is a 
small entity if it employs no more than 1,500 employees. According to 
the most recent Trends Report, 204 companies reported that they were 
engaged in the provision of interexchange services. As some of these 
carriers have more than 1,500 employees, we are unable at this time to 
estimate with greater precision the number of IXCs that would qualify 
as small business concerns under the SBA's definition. Consequently, we 
estimate that there are fewer than 204 small entity IXCs that may be 
affected by the proposals in this NPRM.
    80. Competitive Access Providers. Neither the Commission nor the 
SBA has developed a definition of small entities specifically 
applicable to competitive access services providers (CAPs). The closest 
applicable definition under the SBA rules is for wired 
telecommunications carriers. This provides that a wired 
telecommunications carrier is a small entity if it employs no more than 
1,500 employees. According to the most recent Trends Report, 496 
competitive service providers reported that they were engaged in the 
provision of competitive local exchange services. We do not have data 
specifying the number of these carriers that are not independently 
owned and operated, or have more than 1,500 employees, and thus are 
unable at this time to estimate with greater precision the number of 
CAPs that would qualify as small business concerns under the SBA's 
definition. Consequently, we estimate that there are less than 349 
small entity CAPs and 60 other local exchange carriers that may be 
affected.
    81. Cellular and Wireless Telephony. Neither the Commission nor the 
SBA has developed a definition of small entities specifically for 
wireless telephony. The closest definition is the SBA definition for 
cellular and other wireless telecommunications. Under this definition, 
a cellular licensee is a small entity if it employs no more than 1,500 
employees. According to the most recent Trends Report, 806 providers 
classified themselves as providers of wireless telephony, including 
cellular telecommunications, Personal Communications Service, and 
Specialized Mobile Radio (SMR) Telephony Carriers. We do not have data 
specifying the number of these carriers that are not independently 
owned and operated or have more than 1,500 employees, and thus are 
unable at this time to estimate with greater precision the number of 
cellular service carriers that would qualify as small business concerns 
under the SBA's definition. Consequently, we estimate that there are 
fewer than 806 wireless telephony carriers that may be affected.
    82. Other Wireless Services. Neither the Commission nor the SBA has 
developed a definition of small entities specifically applicable to 
wireless services other than wireless telephony. The closest applicable 
definition under the SBA rules is again that of cellular and other 
wireless telecommunications, under which a service provider is a small 
entity if it employs no more than 1,500 employees. According to the 
most recent Trends Report, 477 providers classified themselves as 
paging services, wireless data carriers or other mobile service 
providers. We do not have data specifying the number of these carriers 
that are not independently owned and operated or have more than 1,500 
employees, and thus are unable at this time to estimate with greater 
precision the number of wireless service providers that would qualify 
as small business concerns under the SBA's definition. Consequently, we 
estimate that there are fewer than 477 wireless service providers that 
may be affected.
c. Internet Service Providers
    83. Under the new NAICS codes, SBA has developed a small business 
size standard for ``On-line Information Services,'' NAICS Code 514191. 
According to SBA regulations, a small business under this category is 
one having annual receipts of $18 million or less. According to SBA's 
most recent data, there are a total of 2,829 firms with annual receipts 
of $9,999,999 or less, and an additional 111 firms with annual receipts 
of $10,000,000 or more. Thus, the number of On-line Information 
Services firms that are small under the SBA's $18 million size standard 
is between 2,829 and 2,940. Further, some of these Internet Service 
Providers (ISPs) might not be independently owned and operated. 
Consequently, we estimate that there are fewer than 2,940 small entity 
ISPs that may be affected by the decisions and rules of the present 
action.
d. Vendors of Internal Connections
    84. The Commission has not developed a definition of small entities 
applicable to the manufacturers of internal network connections. The 
most applicable definitions of a small entity are the definitions under 
the SBA rules applicable to manufacturers of ``Radio and Television 
Broadcasting and Communications Equipment'' (RTB) and ``Other 
Communications Equipment.'' According to the SBA's regulations, 
manufacturers of RTB or other communications equipment must have 750 or 
fewer employees in order to qualify as a small business. The most 
recent available Census Bureau data indicates that there are 1,187 
companies with fewer than 1,000 employees in the United States that 
manufacture radio and television broadcasting and communications 
equipment, and 271 companies with less than 1,000 employees that 
manufacture other communications equipment. Some of these manufacturers 
might not be independently owned and operated. Consequently, we 
estimate that there are fewer than 1,458 small entity internal 
connections manufacturers that may be affected by the decisions and 
rules of the present action.

[[Page 7339]]

4. Description of Projected Reporting, Recordkeeping, and Other 
Compliance Requirements
    85. The NPRM seeks comment on the proposal that all recipients of 
discounts be required to certify that they are in compliance with the 
ADA, but does not specify the language or at what point in the process 
applicants should be required to make this certification. We already 
require applicants to make several certifications, both when they apply 
for discounted services and after approval of discounts when they file 
an FCC Form 486 indicating their receipt of those services. The new 
certification will merely require them to check one additional box 
prior to signing the relevant form. Regardless of the precise language 
of the certification, we estimate that it will take no more than one 
minute to review and check the appropriate certification box. Aside 
from this requirement, the specific proposals under consideration in 
this NPRM would, if adopted, result in no additional reporting or 
recordkeeping requirements.
5. Steps Taken to Minimize Significant Economic Impact on Small 
Entities, and Significant Alternatives Considered
    86. 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): (1) 
The establishment of differing compliance and reporting requirements or 
timetables that take into account the resources available to small 
entities; (2) the clarification, consolidation, or simplification of 
compliance or reporting requirements under the rule for small entities; 
(3) the use of performance, rather than design, standards; and (4) an 
exemption from coverage of the rule, or part thereof, for small 
entities.
    87. The Commission finds that the following proposals will have no 
significant economic impact on small entities: allowing, under certain 
circumstances, full discounts on Internet service that includes 
content, the proposed modification to the appeals process, requiring 
certification of compliance with the ADA, a proposed alteration to the 
rules regarding application of tariff rates to consortia, the proposed 
rule establishing the right of funding for all successful appellants 
and the funding methodology, and possible rule changes affecting 
overcommitted funding requests.
    88. Requiring that recipients be allowed to choose their payment 
method could have a significant impact on service providers, including 
small entities, by depriving them of their full revenues for a period 
of time when the applicant chooses to pay only the discounted portion 
up-front. The Commission has considered the alternative of continuing 
to allow small service providers the discretion to mandate a particular 
payment method. However, as the Commission noted in Universal Service 
Order, ``requiring schools and libraries to pay [service providers] in 
full could create serious cash flow problems for many schools and 
libraries and would disproportionately affect the most disadvantaged 
schools and libraries.'' In order to comply with the goals of the Act, 
i.e., to ensure the delivery of affordable telecommunications service 
to schools and libraries, including small entities, we conclude that we 
can justify any additional economic impact that might occur to small 
service providers.
    89. However, in seeking to minimize the burdens imposed on small 
businesses where doing so does not compromise the goals of the 
universal service mechanism, the Commission has sought comment on 
whether to increase the current 10-day period for service providers to 
remit their payments to 20 days, and we invited comment on how the 
billing process might be made less burdensome for small entities. We 
further invited comment on whether, in the case of applicants that 
choose up-front payment of the full pre-discount cost followed by the 
provider's remittance of the discount fund through the BEAR process, 
some extension of the standard remittance period for small businesses 
may be appropriate. We again invite commenters to discuss the benefits 
of such changes on small businesses and whether these benefits are 
outweighed by resulting costs to schools and libraries that might also 
be small entities.
    90. The Commission has sought comment on a proposed rule 
restricting transferability of equipment, which may have an economic 
impact on small entity schools and libraries. However, we expect that 
the impact on small entities will be minimal because the overall effect 
of the proposed rule is to restrict an entity's ability to purchase 
redundant systems. Thus, it should reduce rather than increase the 
entity's costs.
    91. The Commission has sought comment on two options for the 
treatment of funds left unused at the end of a Funding Year. The first 
option, to use these funds to reduce the contribution factor used to 
calculate a carrier's contribution for universal service support, would 
temporarily reduce the burden of universal service support on 
telecommunications service providers, including many small businesses. 
In the alternative, we have sought comment on a proposal to distribute 
unused funds to schools and libraries in subsequent funding years, 
which would improve the opportunities of small entity schools and 
libraries but conversely would impose a greater burden on small 
businesses. It is therefore not clear which of these two alternatives 
would be more appropriate to minimizing the economic impact on small 
entities. In seeking comment on these two options, we invite commenters 
to discuss this question.
    92. The Commission has further sought comment on numerous other 
areas of the program, including the reduction of the percentage of 
unused funds, the eligibility determination process, the specific 
eligibility of WANs, wireless services, and voice mail, the use of 
excess capacity in rural areas for non-educational purposes, the rules 
governing consortia, and the appropriate method of enforcement of our 
rules in general. We do not seek comment on specific proposals on these 
issues at this time, and therefore, cannot at this time determine how 
changes in these areas will impact on small entities in relation to the 
current regime. We therefore request that commenters, in proposing 
possible alterations to our rules, discuss the economic impact that 
those changes will have on small entities.
6. Federal Rules That May Duplicate, Overlap, or Conflict With the 
Proposed Rules
    93. None.

C. Comment Due Dates and Filing Procedures

    94. We invite comment on the issues and questions set forth in the 
NPRM 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 file comments as 
follows: comments are due April 5, 2002 and reply comments are due May 
6, 2002. 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 (1998).
    95. Comments filed through the ECFS can be sent as an electronic 
file via the Internet to http://www.fcc.gov/e-file/ecfs.html. 
Generally, only one copy of an electronic submission must be filed. If 
multiple docket or rulemaking

[[Page 7340]]

numbers appear in the caption of this proceeding, however, commenters 
must transmit one electronic copy of the comments to each docket or 
rulemaking number referenced in the caption. In completing the 
transmittal screen, commenters should include their full name, Postal 
Service mailing address, and the applicable docket or rulemaking 
number. Parties may also submit electronic comments by Internet e-mail. 
To receive filing instructions for e-mail comments, commenters should 
send an e-mail to [email protected], and should include the following words 
in the body of the message, ``get form your e-mail address>.'' A sample 
form and directions will be sent in reply.
    96. Parties who choose to file by paper must file an original and 
four copies of each filing. If more than one docket or rulemaking 
number appears in the caption of this proceeding, commenters must 
submit two additional copies for each additional docket or rulemaking 
number. Parties who choose to file by paper are hereby notified that 
effective December 18, 2001, the Commission's contractor, Vistronix, 
Inc., will receive hand-delivered or messenger-delivered paper filings 
for the Commission's Secretary at a new location in downtown 
Washington, DC. The address is 236 Massachusetts Avenue, NE, Suite 110, 
Washington, DC 20002. The filing hours at this location will be 8:00 
a.m. to 7:00 p.m. All hand deliveries must be held together with rubber 
bands or fasteners. Any envelopes must be disposed of before entering 
the building. This facility is the only location where hand-delivered 
or messenger-delivered paper filings for the Commission's Secretary 
will be accepted. Accordingly, the Commission will no longer accept 
these filings at 9300 East Hampton Drive, Capitol Heights, MD 20743. 
Other messenger-delivered documents, including documents sent by 
overnight mail (other than United States Postal Service (USPS) Express 
Mail and Priority Mail), must be addressed to 9300 East Hampton Drive, 
Capitol Heights, MD 20743. This location will be open 8:00 a.m. to 5:30 
p.m. The USPS first-class mail, Express Mail, and Priority Mail should 
continue to be addressed to the Commission's headquarters at 445 12th 
Street, SW, Washington, DC 20554. The USPS mail addressed to the 
Commission's headquarters actually goes to our Capitol Heights facility 
for screening prior to delivery at the Commission.

------------------------------------------------------------------------
 If you are sending this type of document    It should be addressed for
    or using this delivery method . . .           delivery to . . .
------------------------------------------------------------------------
Hand-delivered or messenger-delivered       236 Massachusetts Avenue,
 paper filings for the Commission's          NE, Suite 110, Washington,
 Secretary.                                  DC 20002 (8:00 to 7:00
                                             p.m.)
Other messenger-delivered documents,        9300 East Hampton Drive,
 including documents sent by overnight       Capitol Heights, MD 20743
 mail (other than United States Postal       (8:00 a.m. to 5:30 p.m.)
 Service Express Mail and Priority Mail).
United States Postal Service first-class    445 12th Street, SW,
 mail, Express Mail, and Priority Mail.      Washington, DC 20554.
------------------------------------------------------------------------

All filings must be sent to the Commission's Acting Secretary: William 
F. Caton, Office of the Secretary, Federal Communications Commission, 
445 12th Street, SW., Suite TW-A325, Washington, DC 20554.
    97. Parties who choose to file by paper should also submit their 
comments on diskette to Sheryl Todd, Accounting Policy Division, Common 
Carrier Bureau, Federal Communications Commission, 445 Twelfth Street, 
SW., Room 5-B540, Washington, DC 20554. Such a submission should be on 
a 3.5 inch diskette formatted in an IBM-compatible format using 
Microsoft Word 97 for Windows or a compatible software. The diskette 
should be accompanied by a cover letter and should be submitted in 
``read-only'' mode. The diskette should be clearly labeled with the 
commenter's name, proceeding, including the lead docket number in the 
proceeding (CC Docket No. 02-6), type of pleading (comment or reply 
comment), date of submission, and the name of the electronic file on 
the diskette. The label should also include the following phrase 
(``Disk Copy Not an Original.'') Each diskette should contain only one 
party's pleadings, preferably in a single electronic file. In addition, 
commenters must send diskette copies to the Commission's copy 
contractor, Qualex International, Portals II, 445 12th Street, SW, Room 
CY-B402, Washington, DC, 20554, telephone 202-863-2893, facsimile 202-
863-2898, or via e-mail at [email protected].
    98. Written comments by the public on the proposed and/or modified 
information collections pursuant to the Paperwork Reduction Act of 
1995, Public Law No. 104-13, are due on or before April 5, 2002. 
Written comments must be submitted by the Office of Management and 
Budget (OMB) on the proposed and/or modified information collections on 
or before April 22, 2002. In addition to filing comments with the 
Secretary, a copy of any comments on the information collections 
contained herein should be submitted to Judy Boley, Federal 
Communications Commission, Room 1-C804, 445 12th Street, SW., 
Washington, DC 20554, or via the Internet to [email protected] and to 
Jeanette Thornton, OMB Desk Officer, 10236 NEOB, 725--17th Street, NW., 
Washington, DC 20503.
    99. Accessible formats (computer diskette, large print, audio 
recording and Braille) are available to persons with disabilities by 
contacting Brian Millin at (202) 418-7426, (202) 418-7365 TTY, or at 
[email protected].

VII. Ordering Clauses

    100. Pursuant to the authority contained in sections 1-4, 201-205, 
254, 303(r), and 403 of the Communications Act of 1934, as amended, 47 
U.S.C. 151-154, 201-205, 254, 303(r), 403, and Secs. 0.91, 0.291, 1.3, 
and 1.411 of the Commission's rules, 47 CFR 0.91, 0.291, 1.3, and 
1.411, this notice of proposed rule making is adopted, as described 
herein.
    101. The Commission's Consumer Information Bureau, Reference 
Information Center, shall send a copy of this Notice of Proposed Rule 
Making, including the Initial Regulatory Flexibility Analysis, to the 
Chief Counsel for Advocacy of the Small Business Administration.
    102. Pursuant to Sec. 1.106(j) of the Commission's rules, 47 CFR 
1.106(j), that the following Petitions for Reconsideration are denied: 
Petition for Reconsideration of Proposed First Quarter 2000 Universal 
Service Contribution Factor by Greg Weisiger, filed December 20, 1999; 
Petition for Reconsideration of Proposed Third Quarter 2000 Universal 
Service Contribution Factor by Greg Weisiger, filed June 12, 2000; 
Petition for Reconsideration of Proposed Fourth Quarter 2000 Universal 
Service Contribution Factor by Greg Weisiger, filed September 18, 2000.

List of Subjects in 47 CFR Part 54

    Reporting and recordkeeping requirements, Telecommunications, 
Telephone.


[[Page 7341]]


Federal Communications Commission.
William F. Caton,
Acting Secretary.

Rule Change

    For the reason set forth in the preamble, the Federal 
Communications Commission proposes to amend 47 CFR part 54 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. Revise Sec. 54.501 (d)(1) to read as follows:


Sec. 54.501  Eligibility for services provided by telecommunications 
carriers.

* * * * *
    (d) * * *
    (1) For purposes of seeking competitive bids for telecommunications 
services, Internet access and internal connections, schools and 
libraries eligible for support under this subpart may form consortia 
with other customers. When ordering telecommunications and other 
supported services under this subpart, the consortium may even seek to 
negotiate for pre-discount prices below tariffed interstate rates on 
behalf of members that are eligible schools or libraries, health care 
providers eligible under subpart G, or public sector (governmental) 
entities, including, but not limited to, state colleges and state 
universities, state educational broadcasters, counties and 
municipalities. However, eligible schools and libraries may only 
receive support for their share of services as part of a consortium 
that includes ineligible private sector entities if the pre-discount 
prices of any interstate tariffed services that such ineligible private 
sector members of the consortium receive are at the tariffed rates.
* * * * *
[FR Doc. 02-3883 Filed 2-15-02; 8:45 am]
BILLING CODE 6712-01-P