[Federal Register Volume 84, Number 198 (Friday, October 11, 2019)]
[Rules and Regulations]
[Pages 54952-54993]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-20173]



[[Page 54951]]

Vol. 84

Friday,

No. 198

October 11, 2019

Part II





 Federal Communications Commission





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47 CFR Part 54





 Promoting Telehealth in Rural America; Final Rule

  Federal Register / Vol. 84 , No. 198 / Friday, October 11, 2019 / 
Rules and Regulations  

[[Page 54952]]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 54

[WC Docket No. 17-310; FCC 19-78]


Promoting Telehealth in Rural America

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: In this document, the Federal Communications Commission 
(Commission) takes a variety of measures to promote transparency and 
predictability, and further the efficient allocation of limited Rural 
Health Care Program resources while guarding against waste, fraud and 
abuse.

DATES: Effective November 12, 2019, except for Sec. Sec.  54.622(d), 
54.622(e)(2), 54.622(e)(4), 54.622(e)(5), 54.623(a)(2), 54.623(a)(3), 
54.623(a)(4), 54.624, 54.626(b), 54.627(b), 54.631(d), which contain 
new or modified information collection requirements, as provided in the 
Report and Order, that will not be effective until approved by the 
Office of Management and Budget. The Federal Communications Commission 
will publish a document in the Federal Register announcing the 
effective date for those sections not yet effective.

FOR FURTHER INFORMATION CONTACT: Elizabeth Drogula, 
[email protected], Telecommunications Access Policy Division, 
Wireline Competition Bureau, (202) 418-1591 or TTY: (202) 418-0484.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Report 
and Order (R&O) in WC Docket No. 17-310; FCC 19-78, adopted on August 
1, 2019 and released on August 20, 2019. The full text of this document 
is available for public inspection during regular business hours in the 
FCC Reference Center, Room CY-A257, 445 12th Street SW, Washington, DC 
20554 or at the following internet address: https://docs.fcc.gov/public/attachments/FCC-19-78A1.pdf.

I. Introduction

    1. Nearly 60 million people--roughly 1 out of every 5 Americans--
live in a rural area. For these millions of Americans, affordable, 
quality health care at the local level can be scarce. Geographic 
isolation, combined with low population densities, make the provision 
of sustainable local health care in rural areas a challenge. Many rural 
areas also have witnessed an increasing number of local health care 
facilities closing in recent years. Inadequate local resources and 
difficulties in recruiting and retaining physicians further complicate 
local access to quality health care. As a result, millions of rural 
Americans are forced to travel long distances to obtain medical 
treatment, at significant time and expense not only for the patient but 
also for friends and family. Those unable to bear the expense may forgo 
treatment altogether and risk a personal health care crisis. Telehealth 
services are one important solution to the challenge of health care 
access in rural areas by connecting rural patients with general 
physicians and medical specialists located outside the patients' 
communities. The Commission promotes telehealth in rural areas through 
the Rural Health Care Program (RHC Program or Program), which provides 
financial support to help rural health care providers obtain broadband 
and other communications services at discounted rates. These services 
are in turn used by health care providers to offer telehealth to 
patients living in and around the communities they serve.
    2. As the demand for robust broadband has increased throughout the 
country, the RHC Program has witnessed a dramatic increase in health 
care provider participation. This increased demand and resulting 
administrative challenges required the Commission to take a closer look 
at whether the current rules and procedures are cost-effective and 
efficient and adequately protect the Universal Service Fund against 
waste, fraud, and abuse. Accordingly, in the R&O, the Commission 
adopted a number of the proposals made in the 2017 Promoting Telehealth 
Notice of Proposed Rulemaking and Order (2017 Promoting Telehealth NPRM 
& Order), 83 FR 303, January 3, 2018, to reform the RHC Program rules 
to promote transparency and predictability, and further the efficient 
allocation of limited RHC Program resources.

II. Discussion

    3. Improving Transparency, Predictability, and Efficiency for the 
Telecom Program. The Telecom Program is rooted in section 254(h)(1)(A) 
of the Communications Act, as amended by the Telecommunications Act of 
1996 (the Act). This statutory provision allows eligible health care 
providers to obtain telecommunications services in rural areas at rates 
comparable to the rates charged to customers in urban areas for similar 
services in a state. Section 254(h)(1)(A) is intended ``to ensure that 
health care providers for rural areas . . . have affordable access to 
modern telecommunications services that will enable them to provide . . 
. medical services to all parts of the Nation.'' The statute also 
limits the types of health care providers that can receive the services 
supported by the RHC Program. Health care providers eligible for 
discounts include: (1) Post-secondary educational institutions offering 
health care instruction, teaching hospitals, and medical schools; (2) 
community health centers or health centers providing health care to 
migrants; (3) local health departments or agencies; (4) community 
mental health centers; (5) not-for-profit hospitals; (6) rural health 
clinics; (7) skilled nursing facilities; and (8) consortia consisting 
of eligible health care providers.
    4. The Telecom Program provides eligible health care providers with 
a discount on telecommunications services so they can purchase services 
at rates reasonably comparable to the rates paid for similar services 
in urban areas as directed by the statute. The amount of the discount 
is the difference between the urban and rural rate calculated under the 
Commission's rules. The current system requires health care providers 
to identify the urban and rural rates for an eligible service and 
submit that information to the Universal Service Administrative Company 
(the Administrator) in their funding applications. To do this, health 
care providers often (and in some cases, must) rely on information 
obtained from carriers. Ultimately, the urban rate identified by the 
health care provider is what the health care provider pays for the 
service. Accordingly, the health care provider has an incentive to 
identify the lowest urban rate possible for the requested service in 
the state to minimize its out-of-pocket expense. The Telecom Program 
compensates carriers for the difference between the rural rate and 
corresponding urban rate for the service as identified under the 
Commission's rules. The carrier, therefore, also has an incentive to 
identify the highest rural rate it can justify to maximize the support 
received.
    5. Under existing Telecom Program rules, the process of determining 
the urban and rural rates is cumbersome, and the current system lacks 
transparency. Health care providers individually determine, according 
to the Commission's rules, the rates used to set the program discount. 
Health care providers are further required to submit documentation 
substantiating their requested urban and rural rates to the 
Administrator with their funding applications; however, the information 
submitted by a health care provider in support of a particular funding 
request

[[Page 54953]]

is not publicly available for review by other service or health care 
providers looking to compare and scrutinize the rates. Consequently, 
the Administrator must either accept the rate information submitted by 
the health care provider or conduct a burdensome investigation of the 
submitted rates. Conducting such investigations on a case-by-case basis 
for thousands of Telecom Program funding requests filed each year is a 
laborious, time-intensive task in a program where the speed of funding 
decisions may determine vital outcomes. Not conducting investigations, 
on the other hand, may favor those more willing to manipulate the 
Commission's current approach, and thus reduces funding otherwise 
available to other health care providers and thwarts the purpose of the 
RHC Program to support the delivery of critical health care services to 
rural America. In short, the current system of Telecom Program rate 
determinations results in wasteful spending, fraud, and abuse as 
reflected in recent enforcement actions; is not serving the statute as 
intended; and is causing a significant drain on the limited resources 
of the Telecom Program.
    6. The Commission took the following steps to reform the Telecom 
Program: (1) Clarified the scope of similar services for rate 
determination; (2) defined the geographic contours of urban and 
comparable rural areas for rate determination; (3) reassigned to the 
Universal Service Administrative Company (the Administrator) the task 
of determining urban and rural rates for similar services from health 
care and service providers; (4) reformed the determination of rates 
based on the median of all available rates for functionally similar 
services; (5) directed the Administrator to create a publicly available 
database for the posting of urban and rural rates; (6) eliminated the 
limitation on support for satellite services; and (7) eliminated 
distance-based support.
    7. Defining Similar Services for Determining Rates. The amount of 
the discount health care providers receive in the Telecom Program is 
the difference between the urban rate, which must be ``reasonably 
comparable to the rates charged for similar services in urban areas in 
that State,'' and the rural rate--i.e., ``the rates for similar 
services provided to other customers in comparable rural areas.'' As 
the Commission recognized, the currently outdated speed tiers ``ha[ve] 
led to significant variability in how the `similar services' analysis 
is conducted and is a potential source of waste.'' Thus, the 
Commission, in the R&O, placed the burden of identifying ``similar 
services'' for rate determination on the Administrator. This approach 
will reduce health care provider burdens and will also preclude 
manipulation of urban and rural rates through ad hoc assessments of 
service similarity by service and health care providers. It will also 
promote a more equitable distribution of program funding by ensuring 
that funding requests for Telecom Program support are consistently 
evaluated and based on the same parameters.
    8. The Commission retained the existing requirement that the 
similarity of services be determined from the perspective of the end 
user, rather than technical similarity of the services, and direct the 
Administrator to evaluate whether services are similar based on that. 
For purposes of determining functional similarity, the Administrator 
will consider other services with advertised speeds 30% above or below 
the speed of the requested service.
    9. The current designated speed tiers, in effect since 2003, have 
failed to keep pace with the rising demand for faster connectivity. A 
range based on the requested service speed eliminates the need to 
continually update the speed tiers to reflect advances in technology. 
Moreover, the Commission anticipates that a 30% range will provide a 
sufficiently large range of functionally similar services to enable 
reasonable rate comparisons. While the universe of functional 
equivalents may be larger in limited cases, depending on the 
telecommunications service, the Commission found a 30% range strikes 
the appropriate balance to furthering specific, predictable, and 
sufficient mechanisms to preserve and advance universal service while 
ensuring rural health care providers obtain telecommunications services 
at reasonable comparable rates for similar services.
    10. The Commission also found that factors other than bandwidth are 
relevant to whether a service is functionally similar. Rural health 
care providers may have mission critical needs requiring highly secure 
and reliable telecommunications services for which a dedicated service 
offering is necessary. In these instances, a best-efforts service may 
not be functionally similar. In future funding years, the Commission 
expects health care providers to indicate whether they require a 
dedicated service or other service level guarantees when they seek bids 
for eligible services. By doing so, the question of whether dedicated 
and best-efforts services are similar from the perspective of the end 
user will be in the hands of the end user (i.e., the health care 
provider requesting the service). If a health care provider does not 
indicate a need for dedicated services or is otherwise silent on the 
subject in its competitive bidding documentation, then the 
Administrator may reasonably conclude that best-efforts services are 
sufficient from the perspective of the health care provider. Where a 
health care provider specifies that it requires a dedicated service or 
other service level guarantees, the Commission instructed the 
Administrator to take that into account when identifying functionally 
similar services for rate comparisons. For the same reasons, the 
Commission also retained its earlier conclusion that the Administrator 
should consider whether the requested service is symmetrical or 
asymmetrical when assessing functional similarity of services for rate 
comparisons. Depending on the health care provider's identified needs, 
asymmetrical services would not be functionally similar to the 
requested service because they would not fulfill those needs. The 
Commission directed the Wireline Competition Bureau (the Bureau) and 
the Administrator to work on any appropriate revisions to the 
competitive bidding forms that will enable health care providers to 
provide the necessary information.
    11. Additionally, the Commission directed the Administrator not to 
limit the functionally similar inquiry to solely telecommunications 
services. The Telecom Program is statutorily limited to supporting 
telecommunications services but determining similarity of services is a 
technology-agnostic inquiry as to whether there are functionally 
equivalent substitutes from the end user's viewpoint. The end-user 
experience is not dictated by regulatory classification. Therefore, the 
Commission determined that it is appropriate to determine median rates 
for telecommunications services using non-telecommunications service 
rates and instructed the Administrator to expand the inquiry beyond 
telecommunications to other services, including functionally equivalent 
private carriage and information services.
    12. The Commission found that expanding the inquiry not only more 
closely aligns with the functionally similar standard but also with the 
statutory language directing the Commission to ensure access to 
telecommunications services by health care providers at rates 
``reasonably comparable'' to those charged for ``similar services in 
urban areas.'' For example, the Commission anticipated

[[Page 54954]]

that the inclusion of less expensive, information services that are 
nonetheless functional substitutes will result in lower urban rates 
than if only similar telecommunications services are considered. 
Accordingly, health care providers will likely pay less for 
telecommunications services supported by the Universal Service Fund, 
reflecting the availability of lower priced alternatives in urban 
areas. This result should place health care providers on a more equal 
footing with their urban counterparts, as intended by the statute, than 
if non-telecommunications services were excluded from the similar 
services inquiry.
    13. And as with urban rates, the Commission found that expanding 
the similar services inquiry could also serve to lower rural rates by 
increasing the pool of services to include similar information services 
when determining the rural rate. A lower rural rate determination, in 
turn, decreases the support ceiling and thus could further reduce 
demand on the Universal Service Fund. An expanded inquiry will also 
alleviate administrative burdens by eliminating the need for the 
Administrator to identify the regulatory classification of commercially 
available services when determining urban and rural rates. Lastly, the 
Commission determined that expanding the similar services inquiry to 
include other services will further serve the Commission's overall 
directive to act in a competitively neutral manner.
    14. Defining Geographic Contours for Determining Rates. Section 
254(h)(1)(A) of the Act requires carriers to provide rural health care 
providers, upon receiving a bona fide request, with telecommunications 
services at rates reasonably comparable to those charged in urban areas 
of the state. The provisioning carrier is then entitled to receive 
support in the amount of the difference between the urban rate charged 
and the ``rates for similar services provided to other customers in 
comparable rural areas in the state.'' To determine the urban rate, the 
Commission determined that it will use the ``urbanized areas'' as 
designated by the Census Bureau based on the most recent decennial 
Census to define the geographic contours of urban areas in a state. The 
Commission concluded that urbanized areas are appropriate because they 
include urban cores with at least 50,000 people ``along with adjacent 
territory containing non-residential urban land uses as well as 
territory with low population density included to link outlying densely 
settled territory with the densely settled core.'' For determining 
rural rates, the Commission established three tiers of rurality to 
determine the comparable rural areas in a state or territory: (1) 
Extremely Rural, areas entirely outside of a Core Based Statistical 
Area; (2) Rural, areas within a Core Based Statistical Area that does 
not have an Urban Area with a population of 25,000 or greater; and (3) 
Less Rural, areas in a Core Based Statistical Area that contains an 
Urban Area with a population of 25,000 or greater, but are within a 
specific census tract that itself does not contain any part of a Place 
or Urban Area with a population of greater than 25,000. In Alaska, 
however, given the vast number of communities without access to roads 
and the unique cost considerations they may face for obtaining service, 
the Commission further bifurcated the Extremely Rural tier into two 
sub-tiers. That is, areas in Alaska entirely outside of a Core Based 
Statistical Area that are inaccessible by road will be treated as 
Frontier areas for purposes of determining comparable rural rates. 
Communities outside of a Core Based Statistical Area and accessible by 
road will be in the Extremely Rural tier.
    15. Geographic Contours for Urban Areas. The Commission's rules do 
not explicitly define ``urban area'' with respect to determining the 
urban rate. Instead, the rules require the applicant to base the urban 
rate on rates for similar services charged to a commercial customer in 
``any city with a population of 50,000 or more'' in the state.
    16. In the R&O, the Commission retained the current population 
threshold of 50,000 in defining the geographic contours of urban areas 
for purposes of the determining the urban rate. Consistent with the 
Commission's conclusion in 1997, the Commission continued to believe 
that cities with populations of 50,000 or more are large enough so the 
rates for telecommunications services in these areas reflect cost 
reductions associated with high-volume, high-density factors. The 
Commission concluded, however, that defining urban areas by the 
jurisdictional boundaries of cities is unrealistic and unnecessarily 
restrictive because it fails to account for adjacent areas that are 
socioeconomically tied to the urban core. Failing to include a city's 
suburban areas runs counter to the goal of using urban rates that 
reflect the cost reductions associated with higher population density 
present in urban areas. Omitting such areas is also contrary to how 
urban areas are designated by the nation's top two Federal agencies on 
the subject, the Census Bureau and the Office of Management and Budget 
(OMB), both of which evaluate surrounding areas when considering urban 
designations regardless of a city's jurisdictional boundary. 
Accordingly, the Commission updated the contours of urban areas for 
determining urban rates to: (1) More accurately reflect the 
socioeconomic realities of metropolitan cities and (2) ensure rates 
relevant to the urban rate determination are not unnecessarily 
excluded.
    17. The Commission noted that urbanized areas are used by OMB to 
designate Metropolitan Statistical Areas which the Commission 
originally referenced when establishing the 50,000 population 
threshold. The Commission decided, however, to use urbanized area 
designations as opposed to the Metropolitan Statistical Areas to 
minimize the potential for the inadvertent inclusion of pocket rural 
areas. Because Metropolitan Statistical Areas are based on counties and 
urbanized areas designations consisting of census tracts and blocks, 
there is a greater likelihood of the less granular Metropolitan 
Statistical Area containing an area that is rural for purposes of 
reflecting the costs of deploying telecommunications services. Using 
urbanized areas thus allows for a more granular designation of high 
population density areas than attainable with the county-based 
Metropolitan Statistical Areas.
    18. The Commission clarified, however, that consistent with the 
statute, the Administrator will review public rates in all urbanized 
areas to the extent those urbanized areas fall within the boundaries of 
the state where the health care provider is located. For example, in 
urbanized areas like the Washington, DC-Virginia-Maryland urbanized 
area that cross multiple state boundaries, this means the Administrator 
could factor in available rates for determining an urban rate for a 
service delivered to a health care provider in Virginia from that 
portion of the urbanized area that falls within the Commonwealth of 
Virginia. For example, a public rate that is available throughout the 
urbanized area (i.e., the rate is the same irrespective of location 
within the urbanized area) could be part of the determination along 
with a local cable company rate that is only available in northern 
Virginia. The Administrator could not, however, factor in a local cable 
company rate that is only available in portions of the urbanized area 
outside of Virginia, like neighboring areas in Maryland and the 
District of Columbia.
    19. Geographic Contours for Comparable Rural Areas. Historically, 
the Commission has defined

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``comparable rural areas'' to mean the immediate rural area in which 
the health care provider is located. The Commission concluded, however, 
that the better, more inclusive interpretation of ``comparable rural 
areas'' includes not only rural areas in the health care provider's own 
immediate rural location but all similar rural areas, namely all those 
within the same rural tier in the health care provider's state. Two 
rationales support the Commission's shift in interpretation. First, the 
use of the plural ``comparable rural areas'' in the Act indicates an 
intent to encompass rates from more than a single area, including, by 
default, areas where the health care provider is not located. Second, 
consideration of available rates for services offered across the health 
care provider's state provides significantly more service rate data 
points and thus a more accurate measure of the actual costs of 
providing services to rural areas.
    20. The Commission noted that the existing definition of rural area 
used for Telecom Program eligibility naturally breaks down into degrees 
of rurality for the purpose of determining rates in comparable rural 
areas. Under the existing definition, a rural area is ``an area that is 
entirely outside of a Core Based Statistical Area; is within a Core 
Based Statistical Area that does not have any Urban Area with a 
population of 25,000 or greater; or is in a Core Based Statistical Area 
that contains an Urban Area with a population of 25,000 or greater, but 
is within a specific census tract that itself does not contain any part 
of a Place or Urban Area with a population of greater than 25,000.'' In 
the R&O, the Commission established three rural tiers--which it 
designated Extremely Rural, Rural, and Less Rural, respectively--based 
on this existing definition.
    21. The Commission concluded that using rural area tiers is a more 
precise means of determining rurality because it prevents rates in the 
most rural areas from being unfairly reduced by being combined with 
rates from less rural areas. The Commission based this conclusion on 
the reasonable assumption that the cost to provide telecommunications 
services increases as the density of an area decreases, as rates are 
generally a function of population density. The Commission also found 
that tying the new rural tiers to the existing three-part definition of 
``rural area'' used for eligibility purposes has the advantage of 
familiarity, and thus avoids a change that introduces a new concept 
that may be needlessly complicated. The approach also benefits from the 
ease with which the new rurality tiers can be employed to determine 
support.
    22. Additionally, the Commission will treat areas outside of a Core 
Based Statistical Area that are inaccessible by road as a separate 
tier, i.e., Frontier areas. Areas outside of a Core Based Statistical 
Area that are accessible by road will be treated as Extremely Rural for 
purposes of rate determination. To determine communities connected by 
roads, the Commission will use the data provided by the Alaska 
Department of Commerce Community and Economic Development; Division of 
Community and Regional Affairs. This data source will allow 
participants to determine the appropriate tier for the relevant health 
care provider and simplifies the administration of this aspect of the 
program. To ensure that the process used to establish rural tiers is 
objective, administratively feasible, transparent, and simple to apply, 
the Commission declined at this time to further sub-divide off-road 
communities for determining comparable rural areas.
    23. The Commission expects that by broadening the scope of 
comparable rural areas used to compute the rural rate, it will increase 
the likelihood of identifying available rates for the same or similar 
services within a state to determine rural rates, which addresses a 
concern raised by some commenters. Moreover, because the Commission now 
requires consideration of available rates outside the health care 
provider applicant's immediate rural area (but within similarly tiered 
rural areas within the health care provider's state), the approach 
reflects a more faithful interpretation of the statutory obligation to 
reimburse carriers using rates for similar services provided to other 
customers in ``comparable rural areas'' in the state.
    24. Ensuring Reasonable Comparable Urban Rates. Based on the record 
and the Commission's past experiences with the Telecom Program, the 
Commission found that the current process for determining urban rates 
does not adequately advance the goals of the statute and requires 
reform. The Commission thus revised its rules to require the 
Administrator to determine the urban rate based on a median of 
available rates for similar services across all urbanized areas in a 
state. The Commission also directed the Administrator to create a 
publicly available database to post the urban rates for each state for 
program participants. These changes will: (1) Eliminate incentives by 
health care and service providers to manipulate the urban rate 
determination; (2) promote rate determination transparency and 
consistency; (3) provide health care providers with predictability on 
the urban rates prior to choosing among service offerings; and (4) 
decrease administrative burdens for rural health care providers 
participating in the Telecom Program.
    25. The Commission's rules currently place a ceiling on the amount 
a health care provider is required to pay for a requested service, 
stating the urban rate ``shall be a rate no higher than the highest 
publicly-available rate charged to a commercial customer for a 
functionally similar service in any city with a population of 50,000 or 
more in that state.'' The current process for determining urban rates 
contributes to the inefficient increase in support demand. As the data 
shows, health care providers are increasingly paying less and less for 
eligible services. For example, the Telecom Program commitments 
increased in size by more than 80% from approximately $116 million in 
funding year 2012 to approximately $211 million in funding year 2016. 
Gross demand for Telecom Program requests respectively totaled 
approximately $272 million and $206 million for funding years 2017 and 
2018. The overall out-of-pocket expenses for health care providers, 
however, have decreased from approximately $23 million in funding year 
2012 to approximately $12 million in funding year 2017. The overall 
effective discount rate thus rose steadily during this period to 92% in 
funding year 2017, meaning health care providers were collectively 
paying only 8% of the total cost of the service. In many cases, 
individual health care providers paid as little as 1% or less for the 
services they received. In funding year 2016, 5% of participating 
health care providers in the Telecom Program received 62% of the 
committed funding, i.e., $131 million, with an effective discount rate 
of 99% and above. As a result, health care providers increasingly have 
less incentive, because they have increasingly less money invested, to 
cost-effectively obtain services to minimize strain on the Universal 
Service Fund.
    26. The Commission is also concerned that urban rates submitted on 
the Telecom Program's request for funding form (FCC Form 466) are being 
held artificially low and may not reflect the comparable urban rates 
charged for services in urban areas. For example, after comparing 
available information for the E-Rate Program, the median rates reported 
by rural health care providers are in many cases far less than the 
median rates paid by schools and

[[Page 54956]]

libraries in urbanized areas of the state for the same or similar 
services.
    27. Accurately determining the urban rate is imperative to the 
integrity of the Telecom Program. The urban rate is not only key to 
incentivizing health care providers to make service choices in a cost-
efficient manner but is also critical to determining the level of 
universal service support provided to participants. Based on review of 
the record and program data, the Commission found that the existing 
approach for determining urban rates is not producing reasonably 
comparable urban rates and required reform to reflect the rates 
actually being charged in urban areas of the state more accurately than 
the current methodology. The Commission also was concerned that the 
current methodology fails to provide adequate incentives for health 
care providers to act in the best interests of the Universal Service 
Fund and is susceptible to rate manipulation. Therefore, the Commission 
found that reforming the urban rate determination necessary to further 
the intent of Congress of ensuring that rural health care providers are 
placed on equal footing with their urban counterparts, and to preserve 
and advance the Universal Service Fund.
    28. To this end, in the R&O, the Commission changed course and now 
requires that the Administrator calculate urban rates based on the 
available rates, including data available from the E-Rate Open Data 
Platform, for functionally similar services offered across all 
urbanized areas of the state. The Commission found that this approach 
will more likely produce a reasonably comparable urban rate than the 
current approach by taking into account a wider range of urban rates. 
In addition, the Commission requires the Administrator to determine the 
urban rate by using the median of the available rates for functionally 
similar services. Having the Administrator conduct the rate 
determination, as opposed to the health care provider, will further 
eliminate any potential incentives to manipulate rates and will provide 
transparency and predictability to the rate determination process as 
well as ease burdens on health care providers.
    29. The Commission will no longer allow health care providers to 
determine the urban rate from the rates available in any particular 
city in the state. In 2003, the Commission expanded the geographical 
boundaries from which urban rates could be considered from the nearest 
city with a population of 50,000 or more to any such city in the state 
with the goal that rural health care providers ``benefit from the 
lowest rates for service in the State.'' The Commission reasoned the 
largest cities in a state likely have significantly lower rates and 
more service options than the city nearest to the rural health care 
provider with a population of least 50,000. The Commission now 
concludes that this approach goes beyond the intent of Congress of 
providing ``reasonably comparable'' urban rates to rural health care 
providers and leads to funding inefficiencies. This approach is no 
longer tenable given the growing demand for program funding.
    30. The median urban rate for a particular service will be the sole 
urban rate that a health care provider may use on its FCC Form 466 
application to request Telecom Program support. The Commission believes 
that using multiple price points to determine the urban rate will bring 
restraint and discipline to the Program and will minimize opportunities 
for rate manipulation. The Commission is concerned, however, with using 
an average because rates may be skewed by a very high or very low rate 
for that service in some location. For example, in Texas for funding 
year 2017, health care providers reported on the FCC Form 466 urban 
rates for voice grade business circuits ranging from about $938 to $9 
at the high and low ends but with a large majority of the urban rates 
falling in the $40 to $400 range. The high and low rates in this 
scenario could skew the average upwards or downwards depending on the 
other rates in the data set whereas a median mutes these potential 
outliers. The potential for intentionally manipulating the urban rate 
determination, by interjecting available outlier rates, is thus 
lessened.
    31. Eliminate ``No Higher Than'' Standard. In moving to a median 
urban rate determination conducted by the Administrator, the Commission 
eliminated the ``no higher than the highest publicly available rate'' 
restriction on the urban rate determination. In practice, the existing 
ceiling has no effect as a health care provider would be unlikely to 
ever determine and report an urban rate that is higher than the highest 
available rate in any city in the state. Moreover, the median urban 
rate adopted is by definition a rate that is no higher than the highest 
available rate. Accordingly, the Commission eliminated the ``no higher 
than'' restriction and instead requires health care providers to use 
the median urban rate identified by the Administrator for the relevant 
eligible service when submitting FCC Form 466 filings.
    32. Eliminate the Standard Urban Distance. The Commission 
eliminated the standard urban distance demarcation contained in the 
current urban rate rule. The current rule provides two methods for 
determining the urban rate depending on whether the requested service 
is provided over a distance that is either less than or equal to, or 
else greater than the ``standard urban distance.'' Based on the current 
rules, a rural health care provider's rate for services provided over a 
distance greater than the standard urban distance would be no greater 
than the urban rate for services provided over the standard urban 
distance, while the rate for services provided at a distance equal to 
or less than the standard urban distance would be equal to the urban 
rate for services provided over the actual distance to be covered. 
Because the urban rate adopted is determined using rate data from all 
urbanized areas in the state, the Commission believes it will reflect a 
reasonably comparable rate for the particular service regardless of the 
distance actually covered, and as a result, a distance measure is no 
longer relevant.
    33. Reforming the Determination of Rural Rates. To simplify rural 
rate determinations, encourage transparency and predictability, and 
minimize the risk of rate manipulation, the Commission revised the 
rules to establish a single method for determining the rural rate, 
which will be the median of all available rates charged for the same or 
functionally similar service in the rural tier where the health care 
provider is located within the state. The Commission also directed the 
Administrator to determine the rural rate for each eligible service and 
rural tier in each state and publish the rural rates in a publicly 
available database. The Commission further established a standard of 
review for carriers that wish to seek a waiver of a rural rate 
determined pursuant to these steps that requires a demonstration that 
the carrier will be unable to recover its economically reasonable costs 
of supplying service, as defined in the following, if it is limited to 
the rural rates determined by the Administrator.
    34. The Commission's rules currently permit three methods for 
calculating the rural rate depending on each health care provider's 
situation: (1) Averaging the rates that the carrier actually charges to 
non-health care provider commercial customers for the same or similar 
services provided in the rural area where the health care provider is 
located; (2) averaging publicly available rates charged by other 
service providers for the same or similar services over the

[[Page 54957]]

same distance in the rural area where the health care provider is 
located (applicable in cases where the service provider does not 
provide service to the health care provider's rural area); or (3) 
requesting approval of a cost-based rate from the Commission (for 
interstate services) or a state commission (for intrastate services) if 
there are no rates for same or similar services in that rural area or 
the carrier believes the calculated rural rate is unfair. Applicants 
must justify the rural rate calculation on which they rely when seeking 
Telecom Program support by using one of these three methods.
    35. Like the urban rate, the rural rate has proven to be difficult 
for health care and service providers to calculate and is susceptible 
to manipulation. The complexity of the rural rate rules has caused 
health care providers to frequently rely on consultants or their 
service providers to navigate the rules, which AT&T observes has ``made 
it easy for unscrupulous parties to create artificially high `rural 
rates,' and, in some cases, artificially low `urban rates' thus 
maximizing the alleged disparity between rural and urban rates.'' 
Indeed, the risk of artificially inflated rural rates is very real 
under the Commission's existing framework. When a carrier sets the 
rural rate by averaging the rates of identical or similar services, the 
service rates of other carriers are not considered by design (in cases 
where the carrier offers commercial service to the health care 
provider's rural location) or may not be considered by selective 
omission (in cases where the carrier does not offer commercial service 
to the health care provider's location). Either way, the lack of 
consideration of competitors' offerings can lead to a rural rate that 
does not reflect the true rate of service available at the health care 
provider's location and which can be manipulated upwards because the 
service provider is incentivized to do so. In each of the foregoing 
examples, health care providers have no countervailing incentive to 
check carrier pricing because they pay only the lower urban rate 
without regard to the rural rate.
    36. Additionally, it is a matter of record that rural rates are 
rising sharply, as reflected in the increasing combined levels of 
Telecom Program funding commitments over the past several years. The 
aggregate rural rate in 2004, for example, was $42 million. That 
aggregate figure climbed steadily over the next seven years to $142 
million by funding year 2011, and then increased again by $80 million 
over the next five years to $222 million. The rural rate is not only 
increasing in the aggregate, it is increasing on an individual basis as 
well. Between funding year 2011 and funding year 2016, as the rural 
rate increased in the aggregate by $80 million, the number of health 
care provider sites requesting support decreased by 30%. These numbers 
equate to an average rural rate (per individual health care provider 
site) that more than doubled from $37,755 in 2011 to $84,797 in 2016. 
Although some of the increase in the rural rate can be attributed to 
legitimate causes such as a health care provider's location, demand for 
and availability of higher speed services, and limited access to high 
speed middle-mile transport capacity, that appears to be only part of 
the story. Given the widely divergent rates for the same services the 
Commission has seen, it appears much of the increase results from the 
lack of adequate transparency, standardization, and enforceability in 
the existing method of determining rural rates, collectively opening 
the door to rate manipulation. The Administrator currently must examine 
each funding request individually to determine if the associated rural 
rate was properly calculated and substantiated, and whether the 
substantiated rate complies with the requirements under the 
Commission's rules. This task requires access either to all of the 
service providers' rates or to available rates for the applicable rural 
area. Because this information is not readily available to the 
Administrator in-house, it has come to rely on rate data provided by 
the very parties, namely carriers, with the greatest interest in 
keeping rural rates high. This can lead to rural rates inconsistently 
calculated, artificially inflated, and difficult to verify against 
public data sources. It also results in review process delays that 
understandably tax the patience of RHC Program participants waiting for 
final support determinations and funding commitments. Inefficiency and 
waste of this type is especially problematic now given the extreme 
demands on limited RHC Program funds. For these reasons, the Commission 
was compelled to make the programmatic changes to the rural rate rules.
    37. Modifying the Rural Rate Calculation. The Commission's rules 
require health care and service providers to justify the requested 
rural rate by using one of three methods that require, depending on the 
circumstances, either averaging rates offered by the service provider, 
averaging rates offered by carriers other than the service provider, or 
conducting a cost-based analysis. In the R&O, the Commission adopted a 
new method of calculating rural rates, applicable in all cases, to be 
applied and publicly maintained by the Administrator. The rural rate 
will be the median of available rates for the same or similar services 
offered within the health care provider's rural tier (i.e., Extremely 
Rural, Rural, or Less Rural) in the state. For example, the maximum 
rural rate for a particular service requested by a health care provider 
located in an Extremely Rural area would be the median rate charged for 
that same or similar service in all areas within the health care 
provider's state that are deemed Extremely Rural.
    38. As with the median urban rate, the relevant rates to be used 
when determining the median rural rate will be broadly inclusive and 
comprised of the service provider's own available rates to other non-
health care providers, as well as other available rates in the rural 
area, including rates posted on service providers' websites, rate 
cards, contracts such as state master contracts, undiscounted rates 
charged to E-Rate Program applicants, prior funding year RHC Program 
pricing data, and National Exchange Carrier Association (NECA) tariff 
rates. In the unlikely event that a health care provider's rural tier 
includes no available rates for a particular service, the Commission 
directed the Administrator to use the available rates for that service 
available from the tier next lowest in rurality in the health care 
provider's state (i.e., the Administrator will use the rates from the 
Rural tier if no rates are available in the Extremely Rural tier, and 
from the Less Rural tier if no rates are available in the Rural tier).
    39. The new standardized approach to determining the rural rate 
will eliminate the problem of rate inconsistency that results from the 
current method. For example, three rural health care providers in 
Alamosa, Colorado, requested support for T1 service for funding year 
2017. These health care providers, located within less than two miles 
of each other, included rural rates of $294.24, $827.00, and $2,077.65. 
Discrepancies such as these arise under the existing rate-setting 
framework because health care and service providers are left to their 
own devices to select the data required to make rate determinations for 
each funding request and would have to conduct exhaustive research on 
their own to ensure that the data is comprehensive. Indeed, because any 
number of variables can affect rates for the same service offering, 
health care and service providers have had to grapple with an 
inconsistent process that lacks the controls, transparency, and 
predictability necessary to ensure a fair and reliable allocation of 
scarce Telecom Program funds.

[[Page 54958]]

    40. The Commission adopted a median-based approach for rate 
determinations in lieu of rate averaging to account for the significant 
effect that a small number of outlier rates (i.e., those that are very 
high or very low in cost) can have on the average rural rate. If a 
rural tier within a state has few service providers offering a certain 
service, there may be incentives to publicize artificially high rates 
to influence the rural rate. This incentive is stronger if the average 
rural rate is used rather than the median rate because the average rate 
can be more easily manipulated. The median figure established by the 
Commission's new approach represents a rate ``ceiling,'' in that the 
Commission will not provide support in excess of the median rate. 
Health care providers may of course enter into contracts with carriers 
at a rate lower than the median rural rate. If the health care provider 
enters into a contract with a carrier at a rate that falls below the 
median rural rate determined pursuant to its new rules, the health care 
provider should enter the lower of the two rates into the FCC Form 466 
funding application that it submits to the Administrator. The 
Commission believes that this approach balances the pro-competitive 
advantages of market-based rates with protections against possible rate 
manipulation in circumstances where insufficient levels of competition 
exist.
    41. Several commenters favored using only competitive bidding to 
set a fair market rate. To these parties, reliance on market forces 
offers several benefits, including a check on outlier pricing that 
keeps prices low and no need to depend on rates that they assert are 
often unavailable. The Commission did not agree with these commenters 
that there are sufficient competing service alternatives in all rural 
areas to allow for the exclusive reliance on market-based methods of 
rate determination. Indeed, there is a striking lack of competition in 
the Telecom Program. In funding year 2017, of a total of 7,357 Telecom 
Program funding requests received by the Administrator, 6,699 requests 
included no bids, and 242 requests included only one bid, from 
carriers. In other words, nearly 95% of requests for Telecom Program 
support were submitted without an effective competitive bidding 
process. Given these numbers, competitive bidding alone cannot be 
expected to set efficient rural rates. Nor would the Commission expect 
carriers to compete on rural rates in their bids. After all, rural 
health care providers do not pay the rural rate--they pay the urban 
rate. So, while the Commission cannot discount some possibility that 
competition could lower rural rates, the far greater likelihood is that 
carriers compete (in those discrete instances where they do compete) on 
urban rates and the non-price characteristics of the service.
    42. The Commission believes that a uniformly applied standard for 
determining rural rates based on a state-wide pool of available rates 
significantly enhances the efficiency of the Telecom Program in several 
ways. First, a definitively determined rural rate will facilitate rate 
transparency, thereby reducing rural rate inconsistencies and 
simplifying the review process, thus expediting funding commitment 
determinations and encouraging more competition from service providers. 
Second, by limiting rate determinations to available rates, rural rates 
are more predictable and easily verifiable, and harder for service 
providers to artificially inflate or otherwise manipulate. Third, the 
ability to determine a rural rate using available rates from other 
parts of the health care provider's state (under conditions where 
sufficient data is not available in the provider's rural area) 
eliminates the need for resource-intensive cost-based rural rate 
reviews by the Commission.
    43. Allowing Cost-Based Rates Only Via Waiver. Under the current 
rules, carriers may request approval of a cost-based rate from the 
Commission (for interstate services) or a state commission (for 
intrastate services) if there are no rates for same or similar services 
in that rural area or the carrier reasonably determines that the 
calculated rural rate is unfair. The Commission adopted the cost-based 
mechanism when it created the Telecom Program in 1997, but the cost-
based rural rate mechanism was only invoked for the first time in 
funding year 2017, and since then, only a small number of carriers have 
attempted to use it.
    44. The Commission eliminated the cost-based support mechanism. To 
the extent the Commission created it in anticipation of rates for same 
or similar services not being available in some rural areas, the 
Commission found that such circumstances have not materialized on a 
significant scale, given how infrequently the cost-based mechanism has 
been invoked. Moreover, commenters generally disfavor the cost-based 
method for determining rural rates, which they view as challenging to 
calculate and difficult to obtain approval for due to the burdensome 
itemized cost summaries that the method requires. Further, the rural 
rate methodology that the Commission adopted in the R&O will include 
rates from a geographic range that is broader than a health care 
provider's immediate rural area, making it unlikely that the data 
necessary to determine a rural rate for a particular service will not 
be available.
    45. The Commission concluded that cost-based reviews should not be 
an alternative method of determining a rural rate under its rules but 
should be reserved for extreme cases where a carrier can demonstrate 
that determining Telecom Program support under the new rural rate rules 
adopted by the R&O would result in an objective, measurable economic 
injury. Parties that seek exemptions from the requirements of the 
Commission's rules for the other universal service support mechanisms 
do so through petitions for waiver. To that end, the Commission 
established specific evidentiary requirements for carriers that seek 
waivers of its new rural rate rules in order to use a cost-based rate.
    46. A petition seeking such a waiver will only be granted if, based 
on documentary evidence, the carrier demonstrates that application of 
the rural rate published by the Administrator would result in a 
projected rate of return on the net investment in the assets used to 
provide the rural health care service that is less than the Commission-
prescribed rate of return for incumbent rate of return local exchange 
carriers (LECs). This demonstration will constitute ``good cause'' to 
support a waiver of the rural rate rules.
    47. The Commission emphasized that this standard of review 
constitutes a specific application of the ``good cause'' standard that 
generally applies to petitions for waiver of its program rules. All 
such waiver requests must articulate the specific facts that 
demonstrate that the good cause waiver standard has been met, 
substantiated through documentary evidence as stated in the following, 
to demonstrate that granting the waiver would be in the public 
interest. Further, a petition for such a waiver will not be entertained 
if it does not also set forth a rural rate that the carrier 
demonstrates will permit it to obtain no more than the current 
Commission prescribed rate of return authorized for incumbent rate-of-
return LECs. The Commission concluded that the current prescribed rate 
of return authorized for incumbent rate-of-return LECs is compensatory 
for carriers in the Telecom Program, and the Commission will not 
approve a rural rate that yields a higher return through the waiver 
process.
    48. Evidentiary Requirements. All petitions seeking such a waiver 
must

[[Page 54959]]

include all financial data and other information to verify the service 
provider's assertions, including, at a minimum, the following 
information: (1) Company-wide and rural health care service gross 
investment, accumulated depreciation, deferred state and federal income 
taxes, and net investment; capital costs by category expressed as 
annual figures (e.g., depreciation expense, state and federal income 
tax expense, return on net investment); operating expenses by category 
(e.g., maintenance expense, administrative and other overhead expenses, 
and tax expense other than income tax expense); the applicable state 
and federal income tax rates; fixed charges (e.g., interest expense); 
and any income tax adjustments; (2) An explanation and a set of 
detailed spreadsheets showing the direct assignment of costs to the 
rural health care service and how company-wide common costs are 
allocated among the company's services, including the rural health care 
service, and the result of these direct assignments and allocations as 
necessary to develop a rate for the rural health care service; (3) The 
company-wide and rural health care service costs for the most recent 
calendar year for which full-time actual, historical cost data are 
available; (4) Projections of the company-wide and rural health care 
service costs for the funding year in question and an explanation of 
these projections; (5) Actual monthly demand data for the rural health 
care service for the most recent three calendar years (if applicable); 
(6) Projections of the monthly demand for the rural health care service 
for the funding year in question, and the data and details on the 
methodology used to make that projection; (7) The annual revenue 
requirement (capital costs and operating expenses expressed as an 
annual number plus a return on net investment) and the rate for the 
funded service (annual revenue requirement divided by annual demand 
divided by 12 equals the monthly rate for the service), assuming one 
rate element for the service, based on the projected rural health care 
service costs and demands; (8) Audited financial statements and notes 
to the financial statements, if available, and otherwise unaudited 
financial statements for the most recent three fiscal years, 
specifically, the cash flow statement, income statement, and balance 
sheets. Such statements shall include information regarding costs and 
revenues associated with, or used as a starting point to develop, the 
rural health care service rate; and (9) Density characteristics of the 
rural area or other relevant geographical areas including square miles, 
road miles, mountains, bodies of water, lack of roads, remoteness, 
challenges and costs associated with transporting fuel, satellite and 
backhaul availability, extreme weather conditions, challenging 
topography, short construction season, or any other characteristics 
that contribute to the high cost of servicing the health care 
providers.
    49. Failure to provide the listed information shall be grounds for 
dismissal without prejudice. The petitioner also shall respond and 
provide any additional information as requested by Commission staff. 
Such petitions will be placed on public notice for comment. The Bureau 
is directed to approve or deny all or part of requests for waiver of 
the rural rate rules adopted in the R&O.
    50. Establishing an Urban and Rural Rate Database. In the R&O, the 
Commission directed the Administrator to create a publicly available 
database that lists the eligible services in the Telecom Program, the 
median urban rate and rural rate for each such service in each state, 
and the underlying rate data used by the Administrator to determine the 
median rates. The urban and rural rates shall be based on available 
rates (e.g., rates posted on service providers' websites, rate cards, 
publicly available contracts (i.e., state master contracts), 
undiscounted E-Rate Program data, tariffs (i.e., intrastate tariffs 
filed with state commissions, FCC's Electronic Tariff Filing System), 
and prior funding year Telecom Program rate data). The Commission 
directed the Administrator to determine the median urban and rural rate 
for eligible services as described in the R&O. The Commission further 
directed the Administrator to establish the database and post its first 
set of median urban and rural rates on its website as soon as possible, 
but no later than July 1, 2020, and to update the rates periodically 
based on market and technology changes. Rural health care providers 
generally will be required to use the currently posted median rates as 
their urban and rural rates when requesting funding on FCC Form 466 
once the Administrator posts median urban and rural rates for the 
relevant services. In cases where a rural health care provider enters 
into a service agreement with a carrier featuring a rural rate lower 
than the rate posted by the Administrator, however, the health care 
provider should enter the lower rural rate.
    51. The new urban and rural rate database to be established by the 
Administrator will provide several benefits. By centralizing and 
categorizing rate information in one place and by providing rural 
health care providers with pre-determined median urban and rural rates 
based on the information, the process will increase transparency 
compared to the current RHC Program. The database will allow quick 
identification of the median rates for a particular service within any 
state and how these rates were determined, ensuring that urban and 
rural rates are applied consistently and fairly to similarly situated 
health care providers seeking Telecom Program support for the same or 
similar services. In addition, because the database is publicly 
available, it will also promote predictability in the rate-setting 
process. The new database approach should also lessen the risk of rate 
manipulation. Requiring rural health care providers to use the median 
rates as determined by the Administrator will prevent the health care 
provider and its carrier from using urban rates that are artificially 
low and rural rates that are artificially high, thereby safeguarding 
the integrity of the Telecom Program.
    52. The Commission also believes that having rates determined by 
the Administrator will greatly lessen the administrative burden that 
rural health care providers (and their carriers) currently experience. 
The Commission's new approach removes the onus of determining rates 
from Telecom Program participants and places this function in the hands 
of a single expert entity without a financial interest in the outcome. 
And while the Administrator will have to determine the median rates, it 
will not have to verify individually the rates on each funding request 
application other than to confirm that the rates match those on the 
website. This approach should ultimately result in and a more 
efficient, transparent, and timely funding decision process.
    53. Two Commissioners dissent from these decisions, contending that 
the Commission should defer from implementing the rules for determining 
urban and rural rates in the Telecom Program because the Commission 
does not ``describe,'' ``analyze,'' ``test[ ],'' ``model[ ],'' or 
``assess[ ]'' the impact of those rules on the rural health care 
facilities that rely on the program today. This contention is somewhat 
curious. For one, the Commission describes, analyzes, and assesses the 
impacts of the rules adopted. For example, the Commission finds that 
the rules adopted will provide more certain and transparent funding for 
rural health care providers across the board--more ``predictable,'' in 
the words of section 254 of the Act. To the extent that the

[[Page 54960]]

current rules subject rural health care providers to wildly varying 
urban rates for the same service (recall that urban rates in Texas for 
voice grade business circuits ranged from $9 to $938), the impact of 
using a statewide urban median will be to eliminate outliers and ensure 
that all rural health care providers pay what Congress mandated: 
``rates that are reasonably comparable to rates charged for similar 
services in urban areas in that State.'' And as discussed in the 
document, the Commission concludes that existing rules have led to 
widely divergent rural rates, thus imposing wasteful inefficiencies on 
the program and its administration. In contrast, the rules adopted by 
the Commission will eliminate divergent rural rates in similar areas, 
eliminating problematic incentives and the real costs this imposes on 
rural health care providers and the Universal Service Fund. Or to put 
it a different way (and as fully explained in the R&O), the Commission 
has exercised its predictive judgment to develop an approach to 
developing both urban and rural rates of the analysis suggestion is 
reasonable, that takes into account and balances the relevant 
considerations, and that fully satisfies the requirements of section 
254 while safeguarding the Universal Service Fund from wasteful 
spending.
    54. For another, these critiques ignore the real costs of delayed 
implementation. As described more fully in the R&O, current rules have 
enabled waste, fraud, and abuse in the Telecom Program and yielded 
results that appear contrary to Congress's mandate. After all, how 
could rates of $9 and $938 for the same service be considered 
``reasonably comparable'' to each other, let alone the urban rates in a 
single state? How could rural rates ranging from $420 to $4,308 for the 
same service in the same county (Tulare County, California) be a 
faithful implementation of Congress's command that the rural rate be 
based on ``rates for services provided to health care providers for 
rural areas in a State and the rates for similar services provided to 
other customers in comparable rural areas in that State''? These 
discrepancies threaten the ability of the Telecom Program to fund the 
telecommunications services that health care providers need to deliver 
critical health care services to their rural communities from the 
Program's limited resources. Program data establishes that commitments 
in the Telecom Program grew by more than 80% between funding year 2012 
and funding year 2016. And yet, as explained in the R&O, more and more 
of the program's limited resources are devoted to fewer health care 
providers. The dissenting Commissioners do not offer any defense of 
existing rules and the negative impact they have on rural health care 
facilities--and delay would only prolong these problems. By removing 
the problematic provisions of the Commission's existing rules, its 
approach will enable rural health care providers to continue to receive 
the services and support they need, with fewer administrative burdens 
and at lower cost to the Universal Service Fund. Or in other words, it 
is neither necessary nor desirable to delay the benefits of 
implementing the new urban and rural rate rules.
    55. For yet another, the Commission found that no modeling is 
necessary at this point to reject the suggestion of one Commissioner, 
without factual basis, that health care providers in the most remote 
locations might be forced to close as a result of the new rules. 
Ensuring that remote regions receive sufficient support is precisely 
why the Commission divided rural areas into differing tiers (with an 
additional subtier for the most remote regions of the country). More 
fundamentally, health care providers will continue to receive needed 
telecommunications services ``at rates that are reasonably comparable 
to rates charged for similar services in urban areas in that State,'' 
as provided by Congress, and carriers are obligated to provide them 
service at that rate. The Commission also noted that the waiver process 
helps ensure that any carrier outliers have an opportunity to receive 
sufficient support. Further, because of the prioritization rules 
adopted by the Commission, the most rural and remote locations actually 
will have more protection than they do today, because those locations 
will receive prioritized funding. What is more, health care providers 
will have a full year between the posting of the applicable urban rates 
and the first day they will begin to receive service at those rates, so 
they will have adequate time to adjust. Thus, participants in the 
Program will be protected from undue rate impacts under the 
Commission's new rules, and will receive support that is ``specific, 
predictable and sufficient,'' as required by Congress.
    56. In sum, the Commission adopted a process that eliminates 
largely subjective urban and rural rate determinations made by the 
applicants and service providers and substitutes objective 
determinations by the Administrator in full view of the public. The 
Commission expects that the result will be a more equitable and 
efficient use of limited available funding and a more predictable 
application process for Program participants.
    57. In its Second July 25, 2019 Ex Parte Letter, GCI contends that 
the Commission has engaged in unlawful delegation of functions to the 
Administrator. That is incorrect as both a legal and factual matter. 
Initially, GCI identifies no valid legal authority for its claim that 
the Commission is prohibited from delegating to the Administrator the 
administrative roles contemplated by the R&O. GCI argues, for example, 
that section 5(c)(1) of the Act blocks the Commission from assigning a 
role to the Administrator in administering the urban and rural rates 
for the program. But nothing in that section mentions section 254. 
Rather, that section provides only that the Commission cannot delegate 
its ratemaking hearing authority under section 204(a)(2) of the Act, 
which does not apply to the development of urban and rural rates under 
section 254. Nor does section 5(c)(1) even mention section 205, the 
other provision upon which GCI relies.
    58. In a contorted interpretation of the Act, GCI contends that 
section 205 of the Act applies to the Commission's establishment of 
rural and urban rates under section 254(h)(1)(A). GCI then argues that 
because the section 204(a)(2) hearing function cannot be delegated 
(citing Section 5(c)(1)), the Administrator can have no role in 
establishing the applicable urban and rural rates for the Telecom 
Program. But sections 205 and 204 simply do not apply to section 
254(h)(1)(A), which is structured as a universal service obligation, 
and which uses very different statutory terms to describe the rate 
determinations involved. Specifically, section 254(h)(1)(A) imposes a 
requirement on telecommunications carriers, as part of their universal 
service obligation, to provide service to eligible rural health care 
providers at rates ``reasonably comparable to rates charged for similar 
services in urban areas in that State.'' It then entitles those 
carriers to ``the difference, if any, between rates for services 
provided to health care providers for rural areas within a State and 
the rates for similar services provided to other customers in 
comparable rural areas in that State . . . .'' Had Congress intended 
for the Commission to conduct a section 204(a)(2) hearing in order to 
give effect to the universal service obligation, it would not have used 
such different language in section 254(h)(1)(A), and it would have 
presumably cross-referenced section 204. Nor is the mere compilation of 
available rates and

[[Page 54961]]

calculation of a median rate used to calculate universal service 
support amounts equivalent to a rate ``prescription'' under section 
205(a) that would require a hearing, as GCI contends. Indeed, although 
the Act and the Commission's rules discuss a rural ``rate,'' the Act 
and rules do not contemplate requiring or even allowing any carriers 
participating in the program to ever charge that rate (and hence it 
lies outside the scope of the ratemaking contemplated in sections 204 
and 205 of the Act). Instead the ``rural rate'' is a legal placeholder 
simply used to carry out the statutory requirement of calculating ``the 
difference, if any, between the rates for services provided to health 
care providers for rural areas in a State and the rates for similar 
services provided to other customers in comparable rural areas in that 
State.''
    59. In any event, the Commission has not delegated ratemaking 
authority to the Administrator. In the R&O, the Commission itself 
adopted rules dictating how urban and rural rates will be determined 
for the Telecom Program. Those rules and the R&O contain specific 
requirements to which the Administrator must adhere in developing these 
rates. For example, the Commission has delineated the geographic areas 
that are to be considered ``comparable'' rural areas under section 
254(h)(1)(A); it has determined which services are ``similar'' within 
the meaning of that statutory provision (including bandwidth tiers, 
service quality, etc.); and it has determined how the Administrator is 
to assemble the available rates that will form the basis for 
calculating the median urban and rural rates for relevant geographic 
areas. The Commission has also required the Administrator to make 
public not only the median rates but also all the rates that the 
Administrator used to calculate the median.
    60. GCI nevertheless contends that the Commission has delegated 
``ultimate authority over RHC Program rates'' to the Administrator. But 
the only change the Commission made in the R&O is to have the 
Administrator, rather than the service provider, make the initial 
determination of what the rural rate should be. The Commission has no 
more delegated the ``ultimate authority'' over RHC Program rates to the 
Administrator than it delegated such ``ultimate authority'' to service 
providers under the prior rules. As always, the authority to establish 
the appropriate urban and rural rates under section 254(h)(1)(A) 
remains squarely with the Commission. First, the Commission ultimately 
decides what the rates should be and how the rules should be applied 
and interpreted. Should a health care provider or service provider 
believe that the Administrator failed to follow the Commission's rules 
in determining the applicable urban or rural rates, or otherwise 
believe the Administrator erred, it may appeal that decision to the 
Commission, which will conduct de novo review. Second, the 
Administrator is expressly prohibited from making policy or 
interpreting Commission rules. Section 54.702(c) of the Commission's 
rules, which applies to the RHC Program, prohibits the Administrator 
from making policy or interpreting the statute or Commission rules and 
requires the Administrator to seek guidance from the Commission when 
the Act or rules are unclear.
    61. For these reasons, there is no merit to GCI's alternative 
contention that the Commission has impermissibly delegated an 
``inherently governmental function.'' If GCI were correct that the 
determination of initial rates under section 254(h)(1)(A) is an 
``inherently governmental function'' that cannot be delegated, then the 
Commission could not have lawfully permitted service providers to 
calculate initial rural rates, as it did under the prior rules. 
Determining the initial urban and rural rates under section 
254(h)(1)(A) is something the service providers and the Administrator 
have been doing for many years, always subject to the Commission's 
oversight and review, and it will be no different under the program 
rules adopted. Because the Administrator carries out this function only 
pursuant to the Commission's rules and guidance, and subject to its 
review, and because the Administrator is prohibited from making policy 
or interpreting rules or statutes, there is nothing ``inherently 
governmental'' in the Administrator's role--rather, the Commission 
continues to exercise that function.
    62. Eliminating the Limitation of Support for Satellite Services. 
The Commission eliminated, as no longer necessary, effective for 
funding year 2020, Sec.  54.609(d) of the rules, which allows rural 
health care providers to receive discounts for satellite service, up to 
the amount providers would have received if they purchased functionally 
similar terrestrial-based alternatives, even where terrestrial-based 
services are available. The Commission determined that the limitation 
on support for satellite services in Sec.  54.609(d) of the rules is 
unnecessary where the rural rates are constrained to an average, or in 
the case of the newly adopted approach a median, of available rates 
(including satellite service to the extent functionally similar to the 
service requested by the health care provider) as determined by the 
Administrator. The Commission previously adopted the cap on satellite 
service support because the prices of satellite services in rural areas 
were ``often significantly more expensive than terrestrial-based 
services.'' As acknowledged by USTelecom, however, and reflected in the 
data reported by health care providers in the FCC Form 466, rates for 
satellite services are in many instances comparable to, and in some 
instances less expensive than, the cost of terrestrial-based services. 
For example, in Alaska for funding year 2017, health care providers 
reported, on the FCC Form 466, rural rates ranging from $30,000 to 
$40,500 for a 10 Mbps satellite service per month. In comparison, rural 
rates for a terrestrial-based 10 Mbps MPLS service in Alaska, in many 
instances, were between $60,000 and $75,000 per month.
    63. The Commission believes the changes made in the R&O in 
determining the rural rate place a check on the service provider's 
ability to inflate the rural rate by requiring the rural rate to be 
determined by taking a median of available rates outside the health 
care provider's immediate rural area (but within similarly tiered rural 
areas within the health care provider's state). This method of using 
the median takes into account rates by all competitive service 
providers offering services, including terrestrial and satellite 
services, but eliminates outlier rates that would unduly influence the 
rural rate determination. The median approach will thus alleviate 
concerns that excessively high terrestrial-based rates skew the rural 
rate determination to the detriment of the Universal Service Fund. 
Treating both services equally when functionally similar also furthers 
the principle of technological neutrality and recognizes the role that 
both satellite and terrestrial services may play in delivering 
telehealth services in rural areas without placing significant demand 
on the Fund. Additionally, by strengthening the Commission's 
competitive bidding process and rules, it ensures that health care 
providers select the most cost-effective service offering based on 
their telehealth needs and do not purchase services that exceed their 
needs. The Commission therefore found that the need to cap support for 
satellite service at the lower of the satellite service rate or the 
terrestrial service rate, where both services are available, would 
serve no additional purpose. Accordingly, the Commission rejected ACS's 
proposal to

[[Page 54962]]

limit Telecom Program support to the lower of the rural rate for 
functionally similar satellite or terrestrial service, where both are 
available and eliminated Sec.  54.609(d) of its rules.
    64. Eliminating Distance-Based Support. The Commission eliminated 
distance-based support, which allows rural health care providers to 
obtain support for charges based on distance. With the reforms to the 
urban and rural rate calculations adopted in the R&O, the Commission 
found that distance-based support is no longer necessary. Moreover, the 
Administrator-created and maintained databases and median rates will 
provide rural health care providers with a mandatory median urban rate 
and a median rural rate to guide their determination of the rural rate. 
The Commission believes that the median rate determinations for urban 
and rural rates adopted in the R&O will provide a reliable proxy for 
reasonably comparable rates in a state. The Commission expects the 
dataset that the Administrator will compile will include sufficient 
rate information to allow the Administrator to determine meaningful 
median urban and rural rates for use by rural health providers. By 
providing a mechanism to determine urban and rural rates that is less 
complex and more straightforward, the Commission believes it will 
simplify the application process for the rural health care provider so 
that it can focus on its primary business of providing health care. 
Finally, by eliminating the distance-based support method, the 
Commission reduces the administrative burden on the Administrator by no 
longer requiring the Administrator to manage two separate rate 
methodologies in the Telecom Program. Although the distance-based 
approach was infrequently used by rural health care providers, the 
Administrator nonetheless was required to have in place the necessary 
procedures and processes to handle such requests.
    65. Supported Services in the Telecom Program. Section 254(h)(1)(A) 
of the Act ``explicitly limits supported services for [rural] health 
care providers to telecommunications services'' for the Telecom 
Program. Over time, as technology has evolved, the line between 
telecommunications services and other services is not always evident to 
some health care providers. Therefore, the Commission took the 
opportunity in the R&O to remind participants that the Telecom Program 
only supports telecommunications services and not private carriage 
services, network buildout expenses, equipment, or information 
services. Services and expenses not covered by the Telecom Program may 
be supported to the extent eligible under the Healthcare Connect Fund 
Program. Accordingly, rural health care providers needing services not 
covered by the Telecom Program should seek support to the extent 
eligible under the Healthcare Connect Fund Program.
    66. Prioritizing RHC Program Funding for Rural and Medically 
Underserved Areas. Under the Commission's rules, proration is required 
when funding requests submitted during a filing window exceed the 
amount of available funds. This process results in an across-the-board 
reduction of support by a pro-rata factor calculated by the 
Administrator. All eligible support requests are reduced by the same 
percentage amount regardless of the location and need of the health 
care provider applicant. Parties to the underlying contracts are 
responsible for any shortfall due to reduced support. Either health 
care providers have to shoulder a larger portion of the cost of the 
supported services, or service providers will offer price reductions to 
avoid curtailing service, or some combination thereof.
    67. In the R&O, the Commission changed course and replaced the 
proration rules with a new process that prioritizes funding based on 
the rurality of the site location and whether the area is considered 
medically underserved. This approach furthers the goals of section 
254(h) and is consistent with the universal service principles of 
section 254(b). First, health care providers in more rural areas have 
less access to telecommunications and advanced services than those in 
less rural areas, and those services tend to be more costly. 
Prioritizing limited funding for those areas fulfills the Commission's 
statutory mandate to preserve and advance universal service, including 
for ``low-income consumers and those in rural, insular, and high cost 
areas.'' Second, in areas in which medical care is less available, 
there is a greater need for and reliance on delivery of health care 
services via telehealth (which in turn requires access to 
telecommunications and advanced services). Prioritizing funding for 
those rural areas with the greatest medical need thus also serves the 
public interest. When demand exceeds the funds available, the 
Commission will first prioritize support based on rurality tiers, with 
extremely rural areas getting the highest priority over less rural 
areas. The Commission will further prioritize funding based on whether 
the area is a Medically Underserved Area/Population (MUA/P) as 
designated by the Health Resources and Services Administration (HRSA).
    68. Rural Prioritization Criteria. The Commission first bases rural 
prioritization criteria on the existing definition of rural area. The 
current definition lends itself well to prioritization because it 
includes gradations of rurality instead of having simply two 
categories, e.g., rural and non-rural. Accordingly, using the current 
definition of ``rural area'' contained in Sec.  54.600(b) of the 
Commission's rules, 47 CFR 54.600(b), the Commission will prioritize 
funding based on the following rurality tiers: Extremely rural--
counties entirely outside of a Core Based Statistical Area; Rural--
census tracts within a Core Based Statistical Area that does not have 
an urban area or urban cluster with a population equal to or greater 
than 25,000; Less Rural--census tracts within a Core Based Statistical 
Area with an urban area or urban cluster with a population equal to or 
greater than 25,000, but the census tract does not contain any part of 
an urban area or cluster with population equal to or greater than 
25,000; and Non-Rural--all other non-rural areas.
    69. The Commission considered and declined to use, as a proxy for 
rurality, the ``Highly Rural'' areas used by the Department of Veterans 
Affairs for its Highly Rural Transportation Grant program. Highly Rural 
areas are counties located in 25 states, primarily in the west and 
southwest United States, with a population density of fewer than seven 
people per square mile. The Commission found Highly Rural areas lack 
the necessary gradations of rurality and create an additional layer of 
complexity as to what is considered rural for purposes of 
prioritization. For example, using just a Highly Rural designation 
would prioritize only one category of rural areas for funding and would 
not allow the Commission to set subsequent prioritization levels among 
other areas that likely have varying degrees of rurality. In 
comparison, the current definition of rural area allows the Commission 
to designate multiple prioritization levels based on rurality. 
Moreover, creating a definition of rural just for prioritization that 
is separate and apart from the definition used for funding eligibility 
would further complicate the process for applicants and increase the 
burden for administering the program. With the rejection of using 
Highly Rural areas, the Commission likewise rejected GCI's alternative 
proposal to prioritize funding for such areas in exchange for

[[Page 54963]]

increased minimum payments by health care providers over a five-year 
period.
    70. Additionally, the Commission declined to base rurality on the 
number of patients in rural areas served rather than the location of 
the health care provider. Such an approach would not only increase the 
complexity of determining prioritization but would also potentially 
shift funding to health care facilities in urban areas. For example, 
the Commission would need to determine, and then update, the areas 
where patients served by each participating health care facility 
actually live to determine the facilities entitled to funding 
prioritization. Commenters supporting this approach fail to suggest how 
such a process is administratively feasible. In addition, the 
Commission recognized many rural Americans have limited local 
opportunities for health care access and must travel to more populated 
areas for quality care. Accordingly, urban health care facility sites, 
participating as part of a consortium under the Healthcare Connect Fund 
Program, and that serve patients living in rural areas could receive 
funding priority based on this approach. One of the major goals of the 
RHC Program is to help promote local access in rural areas for health 
care so patients do not have to travel as far to obtain care. 
Prioritizing based on how many rural patients a facility serves could 
act contrary to this goal by shifting the funding priority to more 
populated areas that likely already have greater quality health care 
delivery systems than more rural areas.
    71. Health Care Shortage Measure. The most commonly used Federal 
shortage designations are the Medically Underserved Areas and 
Populations (MUA/P) and the Health Professional Shortage Area (HPSA) 
designations. Both are administered by the Health Resources & Services 
Administration (HRSA) but are based in different statutory provisions 
for different Federal programs. The designation criteria for both rely 
on measures of physician supply relative to the size of the local 
population to assess geographically available care. MUA/Ps, however, 
also include weighted need-based variables for low-income, infant 
mortality, and population age. Designations are used to identify 
counties and census tracts not adequately served by available health 
care resources, and in the case of HPSAs, individual facilities that 
provide care to HPSA-designated areas or population groups. Both 
methods primarily rely on state governments, i.e., the state primary 
care office, to identify areas or populations for designation and to 
gather information to document satisfaction of the designation 
criteria. Designations are approved by HRSA. Once designated, MUA/Ps 
are not subject to any subsequent renewal or update requirement. The 
U.S. Department of Health & Human Services is required to conduct 
periodic reviews and revisions for HPSA designations.
    72. To determine whether an area is medically underserved, the 
Commission will use, with limited exception, the MUA/P as designated by 
HRSA. MUA/P designation relies on the Index of Medical Underservice 
(IMU), developed by the U.S. Department of Health & Human Services, 
which is calculated on a 1-100 scale (with 0 representing completely 
underserved and 100 representing best served or least underserved). An 
area or population with an IMU of 62.0 or below qualifies for 
designation as an MUA/P. The IMU is calculated by assigning a weighted 
value to an area or population's performance on four demographic and 
health indicators: (1) Provider per 1,000 population ratio; (2) percent 
population at 100% of the Federal Poverty Level; (3) percent of 
population age 65 and over; and (4) infant mortality rate. As of June 
10, 2019, MUA/P designated areas covered 41.6% of the 2010 U.S. 
population. The Commission recognized rural areas may experience 
shortages in other health care areas, e.g., mental health services and 
other specialty areas, but adding additional shortage designation types 
would significantly increase the complexity of the prioritization 
process. Accordingly, the Commission decided to measure shortages based 
on primary care at this time to facilitate predictability and to 
simplify the prioritization process.
    73. The Commission found that MUA/Ps have two distinct advantages 
over HPSAs for purposes of RHC Program prioritization. First and most 
importantly, the MUA/P designation criteria includes variables for 
poverty, infant mortality, and population age in addition to provider 
supply as compared to population. Use of the MUA/P ensures 
consideration of population indicators for health need in addition to 
the number of primary care physicians in the area. Second, the focus on 
primary care with counties, census tracts, block groups, and blocks 
designated as shortage areas makes administering MUA/Ps in the 
prioritization process relatively straight-forward as compared to 
HPSAs. By using MUA/Ps, however, loses some degree of accuracy as 
compared to HPSAs because there is no requirement for renewal or 
subsequent review of MUA/P designations. But other benefits of using 
MUA/Ps outweigh this concern at this time. That said, the Commission 
will monitor and plan to revisit the use of MUA/Ps in the future to 
determine whether this proxy is sufficient for identifying medically 
underserved areas.
    74. Application of Prioritization Factors. The Commission directed 
the Administrator in the R&O to fully fund all eligible requests 
falling in the first prioritization category before funding requests in 
the next lower prioritization category. The Administrator will continue 
to process all funding requests by prioritization category until there 
are no available funds. If there is insufficient funding to fully fund 
all requests in a particular prioritization category, then the 
Administrator will prorate the funding available among all eligible 
requests in that prioritization category only pursuant to the current 
proration process. The Administrator would then multiply the pro rata 
factor by the total dollar amount requested by each applicant in the 
prioritization category and then commit funds consistent with this 
calculation. While the Commission changed the overall prioritization 
process to minimize proration, the Commission found the limited use of 
proration prudent to equitably address instances where funding is 
insufficient for all applicants similarly situated within the same 
prioritization category. The Administrator will then deny requests 
falling within subsequent prioritization categories due to lack of 
available funds.
    75. The prioritization process applies equally when demand exceeds 
the $150 million Healthcare Connect Fund Program cap for upfront and 
multi-year commitments. The Commission clarified that if requests for 
support exceed both the overall RHC Program cap and the $150 million 
Healthcare Connect Fund Program cap, the Administrator will first apply 
the prioritization process adopted in the R&O to requests subject to 
the $150 million Healthcare Connect Fund Program cap as that may 
eliminate the need to prioritize funding for the RHC Program cap.
    76. The Commission recognized funding requests submitted by a 
consortium may contain multiple member sites falling in more than one 
prioritization categories, including member sites in non-rural areas. 
Nonetheless, the same prioritization process will apply, meaning those 
consortium sites in the highest prioritization category would receive 
funding commitments while other consortium sites in less rural and non-
rural areas may not, i.e., based on prioritization, the consortium may 
only

[[Page 54964]]

get a partial grant for some but not all of its sites. This potential 
outcome could dissuade future consortium participation but is necessary 
to better ensure support is directed to the most rural and medically 
underserved areas when demand exceeds the available support in a 
funding year. This outcome will also eliminate additional complexity in 
trying to prioritize consortia requests based on the percentage of 
member sites falling into particular prioritization categories as 
suggested in the 2017 Promoting Telehealth NPRM & Order.
    77. Under the approach adopted by the Commission, prioritization 
will not depend on whether the applicant seeks support under the 
Telecom or Healthcare Connect Fund Programs. Seeking to both ensure 
Telecom Program applicants have telecommunications services necessary 
to provide health care services and also support the deployment and 
adoption of advanced, next-generation broadband capabilities as 
promoted by the Healthcare Connect Fund Program. Accordingly, at this 
time, the Commission declined to prioritize funding based on program 
type and will treat both programs equally. The Commission disagreed 
with those commenters who state the language of section 254(h) requires 
the Commission to favor the Telecom Program over the Healthcare Connect 
Fund Program. The language of section 254(h) does not expressly require 
such prioritization; Congress did not express such an intent in the 
Joint Explanatory Statement accompanying the enactment of section 
254(h); and the Commission has never interpreted the statute in this 
manner. Further, section 254(h)(1)(A) does not by its terms or 
otherwise require the Commission to prioritize support under that 
section over support to health care providers under section 
254(h)(2)(A) or to other universal service programs under section 254. 
The Commission found that the goals of sections 254(b) and 254(h) are 
best served by prioritizing both RHC Programs according to degree of 
rurality and medical need, rather than arbitrarily prioritizing one 
program over another.
    78. The Commission also declined to prioritize funding based on the 
type of service, e.g., whether the support sought is for a monthly 
recurring service charge versus a one-time upfront payment, such as for 
infrastructure. Support of infrastructure and equipment costs are only 
available under the Healthcare Connect Fund Program so trying to 
prioritize by service raises the same issues as prioritizing one 
program over another. The Commission intends to treat both programs 
equally and to provide applicants the necessary flexibility to choose 
the services and infrastructure that best satisfy their needs in a 
given funding year without concern over losing funding priority. The 
Commission recognized that this approach deviates from that taken under 
the E-Rate Program, but found that this is the right approach for the 
RHC Program at this time.
    79. Retaining the Current Definition for Rural Area. In the R&O, 
the Commission found that a modification of its definition of ``rural 
area'' is unwarranted at this time and could cause uncertainty for 
program recipients. That said, the Commission indicated it would add to 
the definition as necessary to reflect the three different rurality 
tiers discussed in the R&O, which has relevance for not only 
prioritization but also for the determination of rates for comparable 
rural areas in a state. This change will not result in a substantive 
modification of the definition for rural area for eligibility purposes, 
however.
    80. Separately, with the 2020 decennial census approaching, the 
Commission reminded program participants of the procedures previously 
outlined to address revisions to the list of eligible rural areas 
(Rural Areas List). In addition, the Commission took the opportunity in 
the R&O to make one minor change to those procedures. Specifically, to 
simplify and minimize disruptions in between decennial data releases 
and the corresponding Core Based Statistical Area designation updates, 
the Commission instructed the Administrator to only refresh the Rural 
Areas List when the decennial census data and Core Based Statistical 
Area designations based on the new decennial census data are released. 
The Administrator should not update the Rural Areas List in between the 
decennial updates to reflect periodic data refreshes. For example, the 
Administrator should not update the list to reflect the ongoing 
American Community Survey that occurs in between decennial updates. 
While this means the Rural Areas List will not be based on the most up-
to-date data each year, it will simplify the process and minimize 
potential disruptions for program participants in between decennial 
releases.
    81. Funding Is Not without Limit. The Telecom Program is rooted in 
section 254(h)(1)(A). The Commission previously read this language to 
mean the ``amount of credit or reimbursement to carriers from the 
health care support mechanism is based on the difference between the 
price actually charged to eligible health care providers [i.e., the 
discounted urban rate] and the rates for similar, if not identical, 
services provided to `other customers' in rural areas in that State.'' 
Several commenters argue this statutory language requires the 
Commission to fully fund without limit all requests for commitments 
under the Telecom Program. The Commission disagrees.
    82. Section 254(h)(1)(A) does not expressly provide for the 
creation of a funding support mechanism for telecommunications services 
to rural health care providers, but the Commission has relied on this 
provision to create the Telecom Program. Prior to creation of the 
Telecom Program, the Joint Board recommended the Commission rely on 
offsets and ``disallow the option of direct reimbursement'' given the 
statutory language to treat the discounted amount ``as a service 
obligation as part of [the carrier's] obligation to participate in the 
mechanisms to preserve and advance universal service.'' The Commission 
instead allowed for direct compensation when and if the amount of 
discounted services provided exceeded the provider's Universal Service 
Fund contribution. In 2012, the Commission changed its rules to 
``permit USF contributors in the Telecommunications Program and the 
Healthcare Connect Fund to elect whether to treat the amount eligible 
for support as an offset against their universal service contribution 
obligation, or to receive direct reimbursement from USAC.''
    83. The Commission has never treated the section 254(h)(1)(A) 
provision as creating an unlimited right to Universal Service Fund 
support for telecommunication services provided to rural health care 
providers. As discussed in the R&O, the Commission adopted a $400 
million cap in 1997 on the Telecom Program in order to ``control the 
size of the support mechanism'' and ``to fulfill [its] statutory 
obligation to create specific, predictable, and sufficient universal 
service support mechanisms.'' The following year, the Commission 
adopted a proration mechanism should demand ever exceed the cap. The 
Commission would not have adopted a cap or a proration mechanism if it 
believed that it lacked statutory authority to set limits on the 
Telecom Program, which was implemented by section 254(h)(1)(A). The 
Commission has also placed other limitations on support provided under 
section 254(h)(1)(A). When creating the Telecom Program in 1997, the 
Commission also limited services eligible for support to services with 
a

[[Page 54965]]

bandwidth equal to or less than 1.544 Mbps per location, finding 
telecommunications services in excess of this threshold ``not necessary 
for the provision of health care services at th[at] time.'' Faced with 
tepid participation in the program, in 1999 the Commission eliminated 
the per-location limit and the limitation on service bandwidth finding 
such restrictions ``no longer necessary to ensure that demand for 
support remains below the . . . per year cap.''
    84. Congress intended section 254(h) ``to ensure that health care 
providers for rural areas . . . have affordable access to modern 
telecommunications services that will enable them to provide medical . 
. . services to all parts of the nation.'' The language of section 
254(h) provides the Commission with ample flexibility on how to 
structure a support mechanism to further this goal. As with any support 
mechanism, the Commission must base its decisions on the principles set 
forth in section 254(b), including having ``specific, predictable, and 
sufficient Federal and State mechanisms to preserve and advance 
universal service.'' The prioritization approach adopted in the R&O 
serves this principle. Allowing funding without any limit runs counter 
to fiscal responsibility. The Commission does not believe Congress 
intended such a result, and instead concludes that Congress has given 
the Commission the necessary tools to preserve and advance universal 
service, including the ability to place limits on the amount of funding 
available.
    85. Maintaining the Funding Cap on Multi-Year Commitments and 
Upfront Payments and Instituting an Inflation Adjustment. The 
Commission retained the $150 million cap on multi-year commitment and 
upfront payment requests in the Healthcare Connect Fund Program, but 
provided for the cap to be adjusted annually for inflation. The $150 
million funding cap on multi-year and upfront payment requests has only 
been exceeded once since its creation in 2012. In funding year 2018, 
gross demand for multi-year commitments and upfront payments was $237 
million, and demand for remaining Healthcare Connect Fund Program 
requests and Telecom Program requests was approximately $411 million. 
The overall program funding cap for funding year 2018 was approximately 
$581 million. If not for the $150 million cap on multi-year commitment 
and upfront payment requests, all funding year 2018 requests would have 
had to be prorated to bring the $648 million total gross demand for RHC 
Program funding below the $581 million funding cap, resulting in 
reductions of funding for all program participants. Because the $150 
million cap on multi-year and upfront requests was in place, the 
Administrator was able to process single-year funding year 2018 
requests at their full eligible amounts. Stated differently, the $150 
million cap did the job the Commission intended when it was 
established--to prevent multi-year and upfront payment requests from 
usurping the funding available for single-year requests for recurring 
services and safeguard against large fluctuations in demand for RHC 
Program funds. Absent additional data demonstrating the need to 
increase the $150 million cap (if it is exceeded in future funding 
years), providing an economic basis for a particular increase amount, 
and establishing that an increase would not have a detrimental impact 
on single-year requests, the Commission concluded that increasing the 
base amount of the $150 million cap on multi-year commitments and 
upfront payments would not be a fiscally responsible measure consistent 
with the obligation to be good stewards of the Universal Service Fund.
    86. That said, the Commission concluded that the $150 million 
funding cap on multi-year and upfront payment requests should be 
adjusted annually for inflation. In the 2018 Report and Order (2018 
R&O), FCC 18-82, the Commission found that health care providers 
purchasing services with RHC Program support should be able to maintain 
consistent purchasing power in the event of price inflation. To provide 
the flexibility necessary for that to occur, the Commission adopted a 
rule that annually adjusts the overall RHC Program cap for inflation, 
using the GDP-CPI inflation index. The Commission found that adjusting 
the $150 million funding cap on multi-year commitments and upfront 
payments within the Healthcare Connect Fund Program by the same index 
was a fiscally responsible means of preventing inflation from eroding 
the purchasing power of health care providers seeking such requests 
without overburdening the Universal Service Fund, unreasonably 
increasing contribution charges passed through to consumers, or risking 
an untenable depletion of funding available for single-year requests. 
In the R&O, the Commission directed the Bureau to compute the annual 
inflation adjustment pursuant to the same criteria established for 
adjusting the overall RHC Program funding cap in the 2018 R&O. Any 
increases to the $150 million funding cap will be accounted for within 
the overall RHC Program cap, i.e., an increase in the $150 million 
funding cap on multi-year commitments and upfront payments will not 
increase the overall RHC Program cap. The Commission also directed the 
Bureau to announce any inflation-adjusted increase in the $150 million 
funding cap on multi-years and upfront payments in the same Public 
Notice that announce the inflation adjustment of the overall cap, if 
any.
    87. The Commission appreciates that health care providers want 
certainty of funding approvals when applying for multi-year commitments 
and upfront payments. The reality of the RHC Program and other 
universal service mechanisms is that available funds are limited, 
however, and there is no guarantee that funding requests submitted to 
the Administrator in a particular funding year will be approved. The 
Commission noted that the inability to obtain a multi-year commitment 
from the RHC Program due to a lack of available funds in a particular 
funding year does not prevent health care providers from obtaining the 
benefits of a multi-year contract. Health care providers remain free to 
seek advantageous pricing through multi-year service arrangements and 
seek evergreen treatment of those contracts so that funding requests 
may be submitted to the Administrator for each year of the contract 
without rebidding the services. Indeed, multi-year commitments are not 
permitted in the E-Rate Program, but that does not prevent schools and 
libraries from benefitting from the cost-benefits of negotiating multi-
year contracts for services, including substantial broadband projects. 
Applicants that are concerned that a multi-year commitment may be 
denied in a particular funding year due to lack of funding should 
consider seeking annual funding for services provided under multi-year 
contracts.
    88. Clarifying the Carry-Forward Process for the RHC Program. In 
the 2018 R&O, the Commission adopted rules to address increasing demand 
in the RHC Program. Specifically, the Commission: (1) Increased the 
annual RHC Program funding cap to $571 million and applied it to 
funding year 2017; (2) provided for the annual RHC Program funding cap 
to be adjusted for inflation, beginning with funding year 2018; and (3) 
established a process to carry-forward unused funds from past funding 
years for use in future funding years. As part of that process, the 
Commission committed to announcing in the second quarter of each 
calendar year ``a specific amount of unused funds from prior funding 
years to be carried forward to increase available funding for

[[Page 54966]]

future funding years.'' The Commission indicated unused funds ``may be 
used to commit to eligible services in excess of the annual funding cap 
in the event demand in a given year exceeds the cap, or it may be used 
to reduce collection for the RHC Program in a year when demand is less 
than the cap.'' The Commission directed the Bureau to ``announce the 
availability and amount of carryover funds during the second quarter of 
the calendar year.''
    89. To provide additional clarity for the carry-forward process, 
the Commission, in the R&O, directed the Bureau, in consultation with 
the Office of the Managing Director, to determine the proportion of 
unused funding for use in the RHC Program in accordance with the public 
interest to either satisfy demand notwithstanding the annual cap, 
reduce collections for the RHC Program, or to hold in reserve to 
address contingencies for subsequent funding years. The Bureau has 
authority to direct the Administrator to carry out the necessary 
actions for the use of available funds consistent with the direction 
specified in the document. The Commission previously provided similar 
authority to the Bureau in the context of allocating unused funding 
between demand for Category 1 and 2 services for the E-Rate Program.
    90. Targeting Support to Tribal Health Care Providers. The 
Commission sought comments on targeting more support to health care 
providers located on Tribal lands and asked how the prioritization 
proposals would impact Tribal populations. The Commission received 
several comments on this issue, including comments from the Alaska 
Native Tribal Consortium and the Council of Athabascan Tribal 
Governments. Commenters generally emphasized the need for Tribal 
consultation and supported funding for health care providers on Tribal 
lands, specifically supporting prioritization based on the most rural 
areas. The Commission believes the prioritization approach adopted in 
the R&O, which prioritizes funding in those most rural areas with the 
greatest medical shortages, will help those living and seeking health 
care on Tribal lands as they are likely often the most remote and 
medically underserved areas of the country.
    91. Increasing Rural Participation in Healthcare Connect Fund 
Program Consortia. The Healthcare Connect Fund Program provides support 
for eligible non-rural health care providers in majority-rural 
consortia (``more than 50% rural health care providers).'' Consortia 
have three years from the filing date of their first funding request 
under the Healthcare Connect Fund Program to meet the majority-rural 
requirement. To ensure that eligible rural health care providers are 
benefiting from limited RHC Program dollars, the Commission eliminated 
the three-year grace period for consortia to come into compliance with 
the majority-rural rule. The Commission concluded that the prior 
rationale for a three-year grace period is no longer applicable to the 
RHC Program as it exists today. It was established at the time when 
there was significantly less demand for RHC Program funding and the 
Commission sought to encourage the formation of consortia within the 
Healthcare Connect Fund Program. Now, approximately seven years later, 
circumstances have changed. The Commission's focus now is to ensure 
that the limited RHC Program funding reaches the rural beneficiaries 
the RHC Program was created to support, and the Commission determined 
that requiring all Healthcare Connect Fund Program consortia to comply 
with the majority-rural requirement is an appropriate step toward 
achieving those ends.
    92. Eliminating the grace period (rather than shortening it) will 
also eliminate administrative burdens for the Commission and the 
Administrator in overseeing it--and eliminate an opportunity for 
regulatory arbitrage. No longer, for example, would the Administrator 
need to track how long a consortium had failed to meet the majority-
rural requirement. And no longer would the Commission potentially face 
thorny compliance questions, such as whether a ``new'' consortium 
consisting of non-rural health care providers that switched from other 
non-compliant consortia would receive a new grace period.
    93. The Commission now requires all consortia to comply with the 
majority-rural requirement by funding year 2020. Although the 
Commission recognized that some existing consortia may need a slight 
ramp-up period to negotiate and enter into contractual relationships 
amongst their participants and form a technology plan, almost two out 
of every three consortia have already demonstrated that achieving more 
than 50% rural participation is feasible--and 37% of consortia have 
reached at least 75% rural participation. For those that have not yet 
met the 50% threshold, the Commission found that allowing them until 
funding year 2020 to reach it strikes the appropriate balance between 
ensuring that RHC Program support reaches eligible non-rural health 
care providers during the transition to majority-rural status and the 
Commission's duty to ensure that RHC Program support is focused on the 
delivery of services to eligible health care providers in rural areas. 
For new consortia seeking to participate in the Healthcare Connect Fund 
Program, the majority-rural threshold must be met at the time that they 
apply for RHC Program funding. And while Kellogg & Sovereign, LLC 
asserts that, in some circumstances, it can take up to three years ``to 
establish the contracts'' to initiate the consortium and to add the 
eligible rural health care providers to ``ensure a proper balance''--
the Commission does not see that as a reason to steer scarce RHC 
Program funds to non-compliant consortia when so many rural health care 
providers as well as compliant consortia are in need.
    94. Given the Commission's elimination of the grace period, the 
Commission declined to increase the majority-rural threshold at this 
time. Rather, the Commission determined that increases to the majority-
rural threshold should be consistent with overall RHC Program demand 
and the need to prioritize funding to health care providers in rural 
areas. Accordingly, the Commission will increase the majority-rural 
consortia percentage requirement only when RHC Program demand exceeds 
the funding cap. Specifically, if the Commission must prioritize 
funding in one year because demand exceeds the cap, the majority-rural 
threshold will automatically increase by 5% for the following funding 
year (up to a maximum of 75%). Consistent with the statutory mandate, 
this will ensure, as demand increases, that more Healthcare Connect 
Fund Program funding is focused on eligible health care providers 
serving rural areas. The Commission found that the more incremental 
approach--making such increases only when further evidence of demand 
outstripping supply comes in--better accomplishes the goals of such 
commenters without preemptively limiting participation by currently 
compliant consortia.
    95. The Commission was not persuaded by commenters who oppose 
increasing the majority-rural health care provider requirement for 
Healthcare Connect Fund Program consortia. These commenters argue that: 
(1) The rural/non-rural composition of consortia is artificial; (2) 
increasing the majority-rural requirement may prevent small consortia 
from participating; (3) non-rural health care providers that deliver 
institutional knowledge, specialization, and expertise to rural 
communities may be disincentivized from participating; and (4) non-
rural participants help to offset the expense of middle- and last-mile 
costs. Based on RHC Program data,

[[Page 54967]]

the majority of consortia currently participating in the Healthcare 
Connect Fund Program exceed the current majority-rural participation 
requirement without any apparent degradation of benefits to the 
eligible rural health care participants. The Commission determined, 
based on the current make-up of participating consortia, and with no 
data to support the arguments of the commenters opposing an increase, 
that increasing the majority-rural requirement by an incremental 
percentage as demand exceeds the cap, focuses the limited RHC Program 
dollars on support for eligible rural health care providers while still 
encouraging the participation of eligible non-rural health care 
providers. Thus, the Commission requires all existing and new consortia 
to reach any increased threshold, as necessary, and in so doing ensure 
the focus of RHC Program support remains primarily on supporting 
eligible rural health care providers.
    96. Applicability to Grandfathered Pilot Program Consortia. The 
rule changes the Commission adopted in the R&O will apply equally to 
those consortia that participated in the prior Pilot Program and were 
grandfathered from complying with the majority-rural requirement in 
2012. These grandfathered consortia were allowed to participate in the 
Healthcare Connect Fund Program with limitations on adding eligible 
non-rural member sites. The Commission grandfathered these consortia in 
recognition of their ability to encourage eligible rural health care 
provider participation in the Healthcare Connect Fund Program, and to 
minimize potential disruption in rural health care as the Commission 
transitioned from a pilot to a permanent program. Currently, 32 
grandfathered Pilot Program consortia are participating in the 
Healthcare Connect Fund Program. All but three of these consortia now 
have more eligible rural than non-rural sites, i.e., a rural majority. 
Fourteen of the 32 grandfathered Pilot Program consortia consist of 75% 
or more eligible rural sites. Given the limited number of such 
consortia and the current percentage of eligible rural health care 
provider sites within each consortia, the Commission sees no 
detrimental impact from requiring the remaining three consortia to meet 
the majority-rural requirement in one year. As the Commission 
indicated, circumstances have changed significantly since the 
Commission decided to grandfather Pilot Program consortia in 2012. The 
Commission therefore found all these requirements should apply equally 
to those grandfathered Pilot Program consortia.
    97. Requiring Applicants to Seek Bids for Particular Services, Not 
Tasks Performed by a Service. Under the Commission's rules governing 
the Telecom Program and Healthcare Connect Fund Program, health care 
providers during the competitive bidding process are required to select 
the most ``cost-effective'' service offering. As the Commission 
explained in the 2017 Promoting Telehealth NPRM & Order, the definition 
of ``cost-effective'' applicable to both RHC Programs places virtually 
no limitation on how health care providers make their service 
selection. In addition, because the definition of ``cost-effective'' 
does not require health care providers to identify their specific 
service requirements when posting their requests for service, they can 
select carriers whose service offerings meet the current ``cost-
effective'' definition, but which exceed the needs of the health care 
providers irrespective of cost. The result is a procedure that can lead 
to wasteful inefficiency in the competitive bidding process.
    98. To increase the effectiveness of the competitive bidding 
process, the Commission implemented a new safeguard intended to reduce 
the risk of the type of inefficiency described in the R&O. 
Specifically, the Commission requires RHC Program applicants to list 
the requested services for which they seek bids (e.g., internet access, 
bandwidth) rather than merely listing what those services are intended 
to do (e.g., transmit x-rays), and requires applicants to provide 
sufficient information to enable bidders to reasonably determine the 
needs of the applicant and provide responsive bids. The Commission 
believes requiring applicants to describe with greater specificity the 
precise services that they need, rather than just more specific uses, 
will reduce the likelihood of funding being used for excessively 
expensive services that are not necessary. This in turn will ensure a 
more equitable distribution of limited RHC Program funding. This change 
will become effective for funding year 2020.
    99. Harmonizing Certification and Documentation Requirements 
Between the RHC Programs. To further promote the effectiveness of the 
competitive bidding process, the Commission harmonized the competitive 
bidding rules requiring Telecom Program applicants and Healthcare 
Connect Fund Program applicants to submit the same certifications and 
documentation (with limited exceptions) as part of their requests for 
service. The Commission first harmonized the certifications that RHC 
Program applicants must make when requesting service. Effective with 
funding year 2020, both Telecom Program and Healthcare Connect Fund 
Program applicants will be required to provide, contemporaneously with 
their requests for services, the following identical certifications 
that: (1) The health care provider seeking supported services is a 
public or nonprofit entity that falls within one of the seven 
categories set forth in the definition of health care provider listed 
in Sec.  54.600 of the Commission's rules; (2) the health care provider 
seeking supported services is physically located in a rural area as 
defined in Sec.  54.600 of the Commission's rules, or is a member of a 
Healthcare Connect Fund Program consortium which satisfies the rural 
health care provider composition requirements set forth in Sec.  54.607 
of the Commission's rules; (3) the person signing the application is 
authorized to submit the application on behalf of the applicant, has 
examined the form and attachments, and to the best of his or her 
knowledge, information, and belief, all statements contained therein 
are true; (4) the applicant has complied with any applicable state, 
Tribal, or local procurement rules; (5) RHC Program support will be 
used solely for purposes reasonably related to the provision of health 
care service or instruction that the health care provider is legally 
authorized to provide under the law of the state in which the services 
will be provided and will not be sold, resold, or transferred in 
consideration for money or any other thing of value; (6) the applicant 
satisfies all requirements under section 254 of the Act and applicable 
Commission rules; and (7) the applicant has reviewed and is compliant 
with all applicable RHC Program requirements. The Commission will also 
require applicants of both RHC Programs to provide full details of any 
arrangement involving the purchasing of service or services as part of 
an aggregated purchase with other entities or individuals.
    100. In addition to the foregoing, the Commission also harmonized 
and expanded two key competitive bidding documentation requirements. 
Applicants of both RHC Programs currently submit with their requests 
for service weighted evaluation criteria (e.g., a scoring matrix) that 
demonstrate how the applicant will choose the most cost-effective bid 
and a declaration of assistance identifying each paid or unpaid 
consultant, vendor, and other outside expert who aided in the 
preparation of their applications. There

[[Page 54968]]

are, however, no RHC Program-wide rules governing either type of 
documentation. Therefore, the Commission amended its rules to codify 
the requirement that both Telecom Program and Healthcare Connect Fund 
Program applicants submit weighted bid evaluation criteria as before, 
but also specify on their bid evaluation worksheet/scoring matrix their 
minimum requirements for each criteria and record on their worksheet/
matrix each service provider's proposed service levels for the 
established criteria. The Commission also required applicants of both 
programs to specify their disqualification factors, if any, that they 
will use to remove bids or bidders from further consideration.
    101. The Commission further amended its rules to codify the 
requirement that both Telecom Program applicants and Healthcare Connect 
Fund Program applicants submit a declaration of assistance identifying 
each paid or unpaid consultant, vendor, and other outside expert who 
aided in the preparation of their application. In addition, to better 
safeguard against the possibility of conflicts of interest, the 
Commission also required applicants to describe the nature of the 
relationship they have with any such outside entity identified in their 
declaration of assistance. While cognizant of the additional time that 
these new requirements may require of health care providers preparing 
their requests, the Commission concluded that any increased 
administrative burden will likely be minimal and offset by the increase 
in competitive bidding transparency and accountability. The new 
documentation requirements discussed in the R&O will become effective 
for funding year 2020.
    102. Extending Healthcare Connect Fund Program's ``Fair and Open'' 
Competitive Bidding Process to the Telecom Program. To improve RHC 
Program uniformity and transparency, the Commission aligned the ``fair 
and open'' competitive bidding standard applied in each program. While 
most Telecom Program participants already comply with this standard, 
and the Commission has long stated that an applicant must conduct a 
fair and open competitive bidding process, there is no rule codifying 
this standard in the Telecom Program as there is in the Healthcare 
Connect Fund Program. The Commission found that this standard should 
apply to all participants in the RHC Program as it ensures that they 
are accountable for engaging in improper conduct that undermines the 
competitive bidding process or otherwise violates the Commission's 
rules. The Commission therefore amended its rules to codify the 
requirement that the Telecom Program competitive bidding process be 
``fair and open.''
    103. The following actions are necessary to satisfy the ``fair and 
open'' competitive bidding standard in each RHC Program: (1) All 
potential bidders and service providers must have access to the same 
information and must be treated in the same manner throughout the 
procurement process; (2) vendors who intend to bid on supported 
services may not simultaneously help the applicant complete its request 
for proposal (RFP) or request for services form; and (3) vendors who 
intend to bid on supported services may not simultaneously help the 
applicant evaluate submitted bids or select the winning bid. The 
Commission also required applicants to respond to all service providers 
that have submitted questions or proposals during the procurement 
process. The Commission also reminded program participants that they 
also have an obligation to comply with any applicable state or local 
procurement laws, in addition to the Commission's competitive bidding 
requirements.
    104. Conversely, as in the past, the Commission will find that it 
is a violation of the Commission's ``fair and open'' competitive 
bidding standard if: (1) A vendor, or any individual that has a 
financial or ownership interest in such a vendor, submits a bid and 
also prepares, signs, or submits the applicant's request for services; 
(2) a vendor, or any individual that has a financial or ownership 
interest in such a vendor, submits a bid and also participates in the 
applicant's bid evaluation or vendor selection process in any way; (3) 
the applicant has a relationship with a vendor that would unfairly 
influence the outcome of a competition or would furnish the vendor with 
``inside'' information; (4) the applicant's RFP or request for services 
form does not describe the desired products and services with 
sufficient specificity to enable interested parties to submit 
responsive bids; (5) a vendor representative is listed as the contact 
person on the applicant's request for services and that vendor also 
participates in the competitive bidding process; or (6) the applicant's 
consultant is affiliated with the vendor selected to provide the 
requested services. Although some of these clarifications of the ``fair 
and open'' standard have yet to be applied to the RHC Program, the 
Commission believes that the RHC Program is equally at risk to the 
anti-competitive conduct that prompted the Commission to issue the 
clarifications in other Universal Service Fund contexts. The Commission 
also emphasized that this is not an exhaustive list of the types of 
conduct that violate the Commission's ``fair and open'' competitive 
bidding standard. Because the Commission cannot anticipate and address 
every possible action that parties may take in the RHC Program 
application and competitive bidding process, the Commission expects to 
continue to use the appeal process as necessary to address alleged 
competitive bidding violations.
    105. Extending the Healthcare Connect Fund Program Competitive 
Bidding Exemptions to the Telecom Program. The Commission aligned the 
Commission's rules exempting certain applicants from the competitive 
bidding requirements in the Telecom and Healthcare Connect Fund 
Programs. Under Healthcare Connect Fund Program rules, there are five 
exemptions to the competitive bidding process: (1) Applications seeking 
support for $10,000 or less of total undiscounted eligible expenses for 
a single year; (2) applicants who are purchasing services and/or 
equipment from master services agreements (MSAs) negotiated by federal, 
state, Tribal, or local government entities on behalf of such 
applicants; (3) applicants purchasing services and/or equipment from an 
MSA that was subject to the Healthcare Connect Fund and Pilot Programs 
competitive bidding requirements; (4) applicants seeking support under 
a contract that was deemed ``evergreen'' by the Administrator; and (5) 
applicants seeking support under an E-Rate contract that was 
competitively bid consistent with E-Rate Program rules. Only the 
``evergreen'' contract exemption applies to applicants in the Telecom 
Program, although that exception is not codified in the rules.
    106. In the R&O, the Commission harmonized its rules in both RHC 
Programs by codifying the following Healthcare Connect Fund Program 
competitive bidding exemptions in the Telecom Program: (1) Applicants 
who are purchasing services and/or equipment from MSAs negotiated by 
federal, state, Tribal, or local government entities on behalf of such 
applicants; (2) applicants purchasing services and/or equipment from an 
MSA that was subject to the Healthcare Connect Fund and Pilot Programs 
competitive bidding requirements; (3) applicants seeking support under 
a contract that was deemed ``evergreen'' by the Administrator; and (4) 
applicants seeking support under an E-Rate contract that was 
competitively bid

[[Page 54969]]

consistent with E-Rate Program rules. The Commission declined to apply 
the $10,000 or less exemption it to the Telecom Program because it runs 
counter to the Commission's efforts to strengthen the competitive 
bidding process under the Telecom Program. As the Commission has seen 
in the Healthcare Connect Fund Program, sufficient safeguards are 
already in place to protect against waste, fraud, and abuse in these 
situations because the contracts are the result of a competitive 
bidding process in which the most cost-effective service provider is 
identified and selected. These exemptions also remove unnecessary and 
duplicative competitive bidding requirements while still ensuring 
fiscal responsibility, and better serve health care providers by 
improving and streamlining the application process. Codifying these 
exemptions in the Telecom Program will likely yield the same benefits 
for Telecom Program applicants.
    107. Adopting the E-Rate Program Gift Rule. The Commission codified 
gift restrictions for the RHC Program that are similar to the gift 
rules applicable in the E-Rate Program. Specifically, the Commission 
adopted restrictions prohibiting an RHC Program applicant and/or its 
consultant, if applicable, from directly or indirectly soliciting or 
accepting a gift (i.e., anything of value, including meals, tickets to 
sporting events, or trips) from a service provider participating in or 
seeking to participate in the RHC Program. As part of this rule, the 
Commission also prohibited service providers participating in or 
seeking to participate in the RHC Program from offering or providing 
any such gifts, gratuity, favor, entertainment, loan, or any other 
thing of value to those personnel of eligible entities participating in 
the RHC Program. The prohibition on offering or providing gifts 
includes any on-site product demonstration where the cost of the 
product, if purchased, licensed, or leased by the eligible entity's 
personnel for the length of time of the demonstration, would exceed the 
de minimis gift exception discussed in the following.
    108. Like the E-Rate Program, the rules adopted by the Commission 
allows two exceptions for de minimis gifts: (1) Modest refreshments 
that are not offered as part of a meal (e.g., coffee and donuts 
provided at a meeting) and items with little intrinsic value solely for 
presentation (e.g., certificates and plaques); and (2) items that are 
worth $20 or less, as long as those items do not exceed $50 per 
employee from any one source per calendar year. In determining the 
amount of gifts from any one source, the Commission will consider the 
aggregate value of all gifts from any employees, officers, 
representatives, agents, independent contractors, or directors of the 
service provider in a given calendar year. These restrictions do not 
discourage companies from making charitable donations to RHC Program 
applicants, as long as such contributions are not directly or 
indirectly related to RHC Program procurement activities or decisions. 
If contributions have no relationship to the procurement of RHC 
Program-eligible services and are not given by service providers to 
circumvent any RHC Program rules, such contributions will not violate 
the prohibition against gift-giving. Similarly, gifts to family members 
and personal friends, when those gifts are made using personal funds of 
the donor (without reimbursement from an employer) and are not related 
to a business transaction or business relationship, will not violate 
the gift rules.
    109. The Commission emphasized that the restriction on gifts is 
always applicable and is not in effect or triggered only during the 
time period when competitive bidding is taking place. In the 
Commission's experience, solicitation, offering, or acceptance of 
improper gifts may take place outside of the competitive bidding 
period. Accordingly, the Commission required an RHC Program applicant 
and/or its consultant, if applicable, to certify that it has not 
solicited or accepted a gift or any other thing of value from a service 
provider participating in or seeking to participate in the RHC Program. 
The Commission also required service providers to certify that they 
have not offered or provided a gift or any other thing of value to the 
applicant (or to the applicant's personnel, including its consultant) 
for which it will provide services. To assist service providers to more 
easily identify those entities that are covered by the gift 
restrictions, the Commission recommended that service providers 
routinely search the Open Data platform maintained by the Administrator 
listing the entities participating in the RHC Program, as well as the 
locations receiving RHC Program support.
    110. The gift rules codified by the Commission offer a fair balance 
between prohibiting gifts that may have undue or improper influence on 
a procurement decision and acknowledging the realities of professional 
interactions, which may occasionally involve giving people modest 
refreshments or a token gift. The rules also are appropriate for ease 
of administration and provide clarity for applicants and service 
providers. The Commission also believes that they are a necessary step 
to eliminate fraud and abuse in the RHC Program. The Commission 
reminded applicants and service providers that they remain subject to 
applicable state and local gift restrictions. To the extent a state or 
local provision is more stringent than the federal requirements, 
violation of the state or local provision constitutes a violation of 
the Commission's rules adopted in the R&O. The new rules applicable to 
gifts will become effective for funding year 2020.
    111. Implementing Rules Governing Consultants. The RHC Program 
permits applicants to use a consultant or other third party to file FCC 
Forms and supporting documentation on their behalf. In the R&O, the 
Commission harmonized across both programs requirements regarding the 
use of consultants as well as adopted other specific requirements to 
ensure the integrity of the competitive bidding process and to prevent 
incidents of waste, fraud, and abuse. Specifically, the Commission 
required applicants to submit a declaration of assistance with their 
request for services identifying each and every consultant, vendor, or 
other outside expert, whether paid or unpaid, who aided in the 
preparation of their applications and, as part of this declaration, to 
describe the nature of their relationship with the consultant, vendor, 
or other outside expert providing the assistance. The Commission also 
required participating service providers (in each RHC Program) to 
disclose, on the appropriate RHC Program form, the names of any 
consultants or third parties who helped them identify the applicant's 
RFP or otherwise helped them to connect with the health care provider 
participating in the RHC Program. Applicants and service providers must 
certify, on the appropriate RHC Program form, that the consultants or 
other third parties they hire do not have an ownership interest, sales 
commission arrangement, or other financial stake in the vendor chosen 
to provide the requested services, and that they have otherwise 
complied with RHC Program rules, including the Commission's rules 
requiring fair and open competitive bidding. The Commission Emphasized 
that applicants and service providers are accountable for the actions 
of their consultants or outside experts should the Commission find that 
those consultants or experts have engaged in conduct that undermines 
fair and open competitive bidding. The new rules governing consultants 
and other third

[[Page 54970]]

parties will become effective for funding year 2020.
    112. To enable the Administrator and the Commission to identify 
individuals providing consultant services in the RHC Program, the 
Commission directed the Administrator to establish a consultant 
registration process that is similar to the process in place for the E-
Rate Program. Requiring unique registration numbers for consultants or 
outside experts is a simple and effective way of identifying those 
individuals and the firms that employ them. Under this registration 
process, an individual who has been identified as the applicant's 
consultant or other outside expert must provide to the Administrator 
his or her name and contact information, the name and contact 
information of the consulting firm or company that employs him or her, 
and a brief description of the role he or she will undertake in 
assisting the applicant. Once this information is provided, the 
Administrator will then issue a unique registration number to the 
consultant or outside expert and that number will be linked to the 
applicant's organization. These measures provide transparency for RHC 
Program participants regarding the roles and limitations of their 
consultants, while at the same time, facilitate the ability of the 
Administrator, the Commission, and law enforcement officials to 
identify and hold accountable those individuals who engage in illegal 
acts or otherwise damage the integrity of an applicant's competitive 
bidding process.
    113. Providing Additional Time for Competitive Bidding Process. The 
Commission revised the RHC Program procedures, effective funding year 
2021, to give applicants additional time to conduct their competitive 
bidding process prior to the start of the funding year rather than the 
current six months. This six-month period gives applicants very limited 
time within which to conduct competitive bidding prior to the opening 
of the application filing window for a given funding year. For example, 
for funding years 2018 and 2019, the application filing window opened 
on February 1, giving applicants, in practice, only one month to 
conduct a competitive bidding process prior to the start of the 
application filing window. While January 1 provides six months prior to 
the start of the funding year for competitive bidding, in practice, 
applicants need to complete bidding prior to the start of the 
application filing window, which opens months prior to the start of the 
funding year.
    114. In the R&O, the Commission recognized that this time period is 
insufficient for applicants to thoroughly conduct competitive bidding 
and select a service provider prior to submitting an application for 
RHC Program support. The Commission concluded that applicants merit 
additional time prior to the opening of the application filing window 
to submit their request for services along with a request for proposal, 
if necessary, so they can more thoroughly review bids received and 
complete contracts with a service provider prior to the application 
filing window. The Commission thus provided applicants with additional 
time beyond the current six months to initiate the competitive bidding 
process prior to the start of the funding year. Specifically, beginning 
in funding year 2021, applicants can initiate their competitive bidding 
processes as early as July 1 of the prior year. This will give 
applicants more time to complete the bidding process and finalize 
contracts prior to filing their applications. This timeframe is also 
consistent with the E-Rate Program in which applicants generally have 
one year before the start of the funding year. Additionally, it will 
help to ensure that applicants' requests for services are more detailed 
and better targeted to meet their telehealth needs.
    115. Establishing an Application Filing Window. The Commission 
revised its rules to require the Administrator to open an initial 
application filing window with an end date no later than 90 days prior 
to the start of the funding year (i.e., no later than April 1). Similar 
to the E-Rate Program, where the application filing window closes in 
advance of the funding year, these revisions will give the 
Administrator time to begin processing submitted RHC Program 
applications prior to the start of the funding year and, therefore, 
expedite the issuance of funding decisions. It will also provide more 
certainty to applicants by establishing an end date by which 
applications must be filed and provide sufficient time for the 
Administrator to publish a gross demand estimate prior to the start of 
the funding year. The Administrator will continue to treat all eligible 
health care providers filing within this initial window period as if 
their applications were simultaneously received. All funding requests 
submitted outside of a filing window will not be accepted unless and 
until the Administrator opens another filing window. Prior to 
announcing the initial opening and closing dates of the application 
filing window each year, the Administrator shall seek approval of the 
proposed dates from the Chief of the Bureau. This change will become 
effective for funding year 2021 to coincide with the Commission's 
change to the start date of the competitive bidding process for the RHC 
Program.
    116. In the R&O, the Commission recognized the value in 
establishing a set application filing window for applicants for 
planning purposes, given the potential for unforeseeable events and 
variables; the Commission also seeks, however, to ensure that the 
Administrator is prepared to open the application filing window (i.e., 
adequate staffing resources, information technology system is fully 
operational) prior to announcing it for a given funding year. The 
Commission believes that requiring the Administrator to establish an 
initial application filing window end date sufficiently far in advance 
of the start of the funding year provides applicants with a more 
predictable timeframe as they prepare their competitive bidding 
processes and applications. It also provides flexibility to the 
Administrator to take any steps necessary to prepare for the 
application filing window. Given that the Commission is providing 
applicants with a full year to conduct their competitive process and 
finalize contracts with their service providers prior to the start of 
the funding year, they should be in a better position to submit their 
funding requests upon the opening of the application filing window 
period.
    117. The Commission also believes that establishing an initial 
application filing window that treats all eligible health care 
providers filing within the window as if their applications were 
simultaneously received rather than issuing funding requests on a 
rolling basis, provides more certainty to the application and funding 
commitment process. Specifically, by establishing a filing window 
period, the Commission provides a mechanism for the Administrator to 
more efficiently administer the RHC Program and process requests while 
providing an incentive for applicants to timely submit their 
applications for support. The Administrator will immediately begin 
reviewing applications submitted within the initial application filing 
window and will not wait until the close of the application filing 
window to begin its review.
    118. If requests submitted during an established application filing 
window period exceed the RHC Program's cap, per the rules adopted, the 
Administrator shall prioritize support based on the prioritization 
categories until all available RHC Program funding is committed. If 
funding requests submitted during the initial application

[[Page 54971]]

filing window do not exceed the cap, the Administrator will determine, 
based on demand and available funding, and after consultation with 
Commission staff, whether to open additional application filing window 
periods and the duration of any such application filing window periods. 
To the extent the Administrator opens an additional application filing 
window period, it shall continue to provide notice and include either 
in that notice, or soon thereafter, the amount of remaining available 
funding. The Commission believes that these changes to the application 
filing window period will provide applicants with more certainty 
regarding the initial application filing window, thus making it easier 
for applicants to plan accordingly, and will allow the Administrator to 
start making commitments prior to the start of the funding year.
    119. Expanding the Administrator's Authorization to Extend Service 
Delivery Deadline. Health care providers are required to use the 
services for which support has been committed by the Administrator 
within the funding year for which the support was sought. Consistent 
with this requirement, the Administrator has routinely issued funding 
commitments to RHC Program applicants for recurring and non-recurring 
eligible services with a funding end date no later than June 30. The 
Commission has acknowledged that external circumstances beyond a health 
care provider's control can create situations where implementing non-
recurring services by the end of the applicable funding year is 
impractical. Further, the Commission realizes that many applicants 
understandably are hesitant to install services or begin construction 
before receipt of a funding commitment letter, particularly in 
instances where there is a significant financial obligation required. 
The Commission also recognizes that implementing non-recurring 
services, such as service installation, infrastructure and network 
construction, are significant undertakings, both in time and cost. If 
the Administrator does not issue funding commitments for a given 
funding year until the final quarter of that funding year, this then 
leaves insufficient time for applicants to complete their projects by 
the end of the applicable funding year. For those applicants where the 
Administrator has issued a funding commitment letter with a funding end 
date prior to June 30 to coincide with a contract end date, this 
further shortens the period of time an applicant that waits until the 
issuance of a funding commitment letter has to install services or 
complete a construction project to receive RHC Program support for 
eligible services. In these instances, applicants are precluded from 
maximizing the value of their funding commitments to cover the cost of 
eligible services for a given funding year.
    120. Unlike the E-Rate Program, there is no mechanism in the RHC 
Program to seek an extension of the non-recurring service delivery 
deadline from the Administrator, except in the limited context of dark 
fiber. An RHC Program applicant's only recourse, in instances where 
they are unable to meet the service delivery deadline, is to seek a 
waiver of the service delivery deadline from the Commission. Until the 
Commission addresses the waiver request, an applicant is uncertain 
whether any charges incurred after the end of the non-recurring service 
delivery deadline will be granted.
    121. To mitigate such uncertainty and reduce administrative 
burdens, in the R&O, the Commission took two actions to simplify the 
administration and resolution of service delivery deadline issues in 
the RHC Program. First, the Commission eliminated funding request-
specific service delivery deadlines based on individual contract end 
dates, and established June 30 of the funding year for which the 
program support was sought as the service delivery deadline for all 
services in the RHC Program. This creates a single implementation 
deadline for the RHC Program that is easy for the Administrator to 
track and allows applicants to pursue options for maximizing their 
approved funding commitments up to the end of the funding year should 
circumstances beyond their control prevent delivery by an earlier 
contract date. Applicants will still be required to submit their 
service contracts to the Administrator with their funding requests, and 
the support amount approved must be limited to charges incurred during 
the contract's term. Stated differently, by establishing a universal 
June 30 service delivery deadline, the Commission does not making 
additional funding available to applicants beyond their contract terms. 
Thus, applicants whose contract term ends prior to June 30 must obtain 
a contract extension and notify the Administrator of such extension in 
order to receive funding through the June 30 service delivery deadline.
    122. Second, the Commission adopted, with a few modifications, the 
E-Rate Program's rule authorizing the Administrator to grant a one-year 
extension of the service delivery deadline for non-recurring services. 
Specifically, effective funding year 2020, RHC Program applicants 
meeting the following criteria will qualify for a one-year extension of 
the service delivery deadline for non-recurring services: (1) 
Applicants whose funding commitment letters are issued by the 
Administrator on or after March 1 of the funding year for which 
discounts are authorized; (2) applicants that receive service provider 
change authorizations or site and service substitution authorizations 
from the Administrator on or after March 1 of the funding year for 
which discounts are authorized; (3) applicants whose service providers 
are unable to complete implementation for reasons beyond the service 
provider's control; or (4) applicants whose service providers are 
unwilling to complete delivery and installation because the applicant's 
funding request is under review by the Administrator for program 
compliance. The Administrator shall automatically extend the service 
delivery deadline in situations where criteria (1) or (2) are met. 
Applicants, however, must affirmatively request an extension on or 
before the June 30 deadline for criteria (3) and (4). The Commission 
directed the Administrator to create a mechanism for health care 
providers to submit such extension requests. The Commission also 
directed the Administrator to issue its decisions on service delivery 
deadline requests within two months.
    123. March 1 is the key date for determining whether to extend the 
deadline based on criteria (1) or (2). If one of the conditions is 
satisfied before March 1 (of any year), the deadline will not be 
extended, and the applicant will have until June 30 of that calendar 
year to complete implementation. If one of the conditions is satisfied 
on or after March 1, the applicant will have until June 30 of the 
following calendar year to complete implementation. The Commission 
found that applicants who satisfy the conditions prior to March 1 have 
sufficient time before the end of the funding year to install services 
or complete their construction projects.
    124. With regard to criterion (3)--applicants whose service 
providers are unable to complete implementation for reasons beyond the 
service provider's control--the Commission recognizes that there may be 
a wide range of situations in which an applicant, through no fault of 
its own, is unable to complete installation by June 30. Unable to 
anticipate every type of circumstance that may arise, the Commission 
directed the Administrator to address such situations on a case-by-case 
basis. Applicants must submit documentation to the Administrator 
requesting relief on

[[Page 54972]]

these grounds on or before June 30 of the relevant funding year. That 
documentation must include, at a minimum, an explanation regarding the 
circumstances that make it impossible for installation to be completed 
by June 30 and a certification by the applicant that, to the best of 
its knowledge, the request is truthful.
    125. Finally, with regard to criterion (4)--applicants whose 
service providers are unwilling to complete delivery and installation 
because the applicant's funding request is under review by the 
Administrator for program compliance--applicants must certify to the 
Administrator that their service provider was unwilling to deliver or 
install the non-recurring services before the end of the funding year. 
Applicants must make this certification on or before June 30 of the 
relevant funding year. The revised implementation date will be 
calculated based on the date the Administrator issues a funding 
commitment. For example, if the Administrator delays funding for 
funding year 2020 while reviewing an applicant's funding request for 
program compliance, the applicant will need to file a certification 
with the Administrator by June 30, 2021.
    126. The Commission found that this one-year extension for all non-
recurring services, including the existing one-year extension available 
for dark fiber, provides an appropriate timeframe within which to 
install services or complete construction, and is consistent with the 
Commission's existing extensions for non-recurring services and special 
construction under the E-Rate Program in order for the services to be 
eligible for support. Additionally, implementation of this policy will 
provide clarity to the Administrator and applicants by establishing a 
certain deadline for installation of services.
    127. Improving the Invoicing Process. Establishing a Uniform 
Invoicing Deadline. To alleviate inefficiencies with respect to the 
Telecom Program funding disbursement process and harmonize the filing 
deadlines for the Telecom and Healthcare Connect Fund Programs, the 
Commission established a uniform invoice filing deadline for the RHC 
Program beginning with funding year 2020. This rule adopted by the 
Commission requires all invoices under the RHC Program to be submitted 
to the Administrator within four months (120 days) after the later of: 
(1) The service delivery deadline; or (2) the date of a revised funding 
commitment letter issued pursuant to an approved post-commitment 
request made by the applicant or service provider or a successful 
appeal of a previously denied or reduced funding request. For example, 
for funding year 2020 funding commitments ending on June 30, 2021, the 
invoice deadline for submitting the invoice forms by the applicant to 
the Administrator, after approval by the service provider, is October 
31, 2021. If the service delivery deadline is extended until June 30, 
2022, then the invoice deadline would be October 31, 2022. Similarly, 
if the Administrator approves a post-commitment request for funding 
year 2020 (e.g., a SPIN change request to change service providers or 
correct a service provider's identification number or a service 
substitution) and the Administrator issues a revised funding commitment 
letter dated December 31, 2021, the invoice deadline would be April 30, 
2022.
    128. The Commission recognized that a deadline of 120 days reduces 
the current invoice deadline under the Healthcare Connect Fund Program 
for applicants by 60 days, but believes that 120 days coupled with the 
one-time 120-day invoice deadline extension adopted, will provide 
applicants with sufficient time to submit their invoices and seek 
reimbursement from the Administrator. As the Commission has explained, 
filing deadlines are necessary for the efficient administration of the 
RHC Program. The Commission previously found in the E-Rate context that 
a uniform 120-day invoice deadline provides the right balance between 
the need for efficient administration of the program and the need to 
ensure applicants and service providers have sufficient time to finish 
their own invoicing processes. Establishing a uniform invoicing 
deadline will also provide certainty to applicants and service 
providers. Providing certainty on invoicing deadlines will allow the 
Administrator to de-obligate committed funds immediately after the 
invoicing deadline has passed, providing increased certainty about how 
much funding is available to be carried forward in future funding 
years. This approach will result in a more efficient and effective 
administration of the RHC Program's disbursement process as well as 
providing applicants with faster funding timetables. The Commission 
emphasized, however, that it is incumbent on the applicant and the 
service provider in each RHC Program to complete and timely submit 
their invoices to the Administrator or to timely seek an extension of 
the invoice deadline.
    129. Establishing a One-Time Invoice Deadline Extension. The 
Commission also adopted a rule allowing service providers and billed 
entities to request and automatically receive a single one-time 120-day 
extension of the invoice deadline as is done in the E-Rate Program. The 
invoice deadline extension rule will be effective beginning in funding 
year 2020. The Commission recognized there may be circumstances beyond 
some applicants' or service providers' control that could prevent them 
from meeting the 120-day invoice filing deadline for the RHC Program. 
For example, an Administrator error, administrative process, or system 
issue may prevent or delay the timely submission of forms or invoices. 
In other instances, a pending appeal of a specific funding request may 
impact the applicant's ability to submit invoices before the invoicing 
deadline. Therefore, the Commission adopted a rule allowing service 
providers and billed entities to seek and receive from the 
Administrator a single one-time invoice extension for any given funding 
request, provided the extension request is made no later than the 
original invoice deadline.
    130. By adopting such a rule, the Commission eliminates the need 
for applicants and service providers to identify a reason for the 
requested extension and the need for the Administrator to determine 
whether such timely requests meet certain criteria, which will ease the 
administrative burden of invoice extension requests on the 
Administrator. Additionally, it will provide applicants additional time 
to receive the service provider certification and for the service 
provider to submit the invoice to the Administrator. The Commission 
directed the Administrator to create a mechanism for service providers 
and billed entities to submit such extension requests.
    131. Strengthening Service Provider Certifications. As part of the 
Commission's efforts to improve the invoicing process, the Commission 
also strengthened the certifications made by the service provider when 
submitting invoices under the Telecom and Healthcare Connect Fund 
Programs. Currently, the invoicing form for the Telecom Program 
requires the service provider to certify that ``the information 
contained in the invoice is correct and the health care providers and 
the Billed Account Numbers listed in the document have been credited 
with the amounts shown under Support Amount to be Paid by [the 
Administrator].'' The Commission took the opportunity in the R&O to 
strengthen the certifications under the Telecom Program and require the 
service provider, in addition to the current certification in the R&O, 
to certify that: (1) It has abided by all

[[Page 54973]]

program requirements, including all applicable Commission rules and 
orders; (2) it has received and reviewed the Health Care Provider 
Support Schedule (HSS), invoice form and accompanying documentation, 
and that the rates charged for the telecommunications services are 
accurate and comply with the Commission's rules; (3) the service 
provider's representative is authorized to submit the invoice on behalf 
of the service provider; (4) the health care provider paid the 
appropriate urban rate for the telecommunications services; and (5) it 
has charged the health care provider for only eligible services prior 
to submitting the form and accompanying documentation.
    132. While the invoice form for the Healthcare Connect Fund Program 
requires a service provider to certify to the accuracy of the form and 
attachments, that its representative is authorized to make the 
certifications, and that it will apply the amount paid by the 
Administrator to the billing account of the health care provider, it 
does not include any certifications regarding compliance with the 
rules. The Commission therefore also strengthened the certifications 
under the Healthcare Connect Fund Program requiring the service 
provider, in addition to the current certifications, to certify that it 
has: (1) Abided by all program requirements, including all applicable 
Commission rules and orders and (2) charged the health care provider 
for only eligible services prior to submitting the form. The inclusion 
of these additional certifications on the invoicing forms does not 
impose any further burdens on service providers because, as 
participants in the RHC Program, they are already required to abide by 
RHC Program rules. These additional certifications simply serve as a 
reminder to service providers of their responsibilities under the RHC 
Program and help to further ensure compliance with the Commission's 
rules and program requirements as part of the ongoing efforts to 
reduce, waste, fraud, and abuse in the RHC Program. These 
certifications will become effective for funding year 2020.
    133. Site and Service Substitutions. The Commission further aligned 
the RHC Programs by making the site and service substitution criteria 
under the Healthcare Connect Fund Program applicable to the Telecom 
Program. In 2012, the Commission adopted site and service substitution 
procedures for the Healthcare Connect Fund Program. Under these 
procedures, a consortium leader or health care provider may request a 
site and service substitution if: (1) The substitution is provided for 
in the contract, within the change clause, or constitutes a minor 
modification; (2) the site is an eligible health care provider and the 
service is an eligible service under the Healthcare Connect Fund 
Program; (3) the substitution does not violate any contract provision 
or state, Tribal or local procurement laws; and (4) the requested 
change is within the scope of the controlling request for services, 
including any applicable request for proposal used in the competitive 
bidding process. Additionally, support is restricted to qualifying site 
and service substitutions that do not increase the total amount of 
support under the applicable funding commitment.
    134. The Commission found that allowing site and service 
substitutions decreased burdens on program participants and increased 
administrative efficiencies by allowing applicants to request the 
Administrator to substitute or modify a site or service without 
modifying the actual funding commitment letter. Moreover, the 
Commission found that these procedures recognized the changing 
broadband needs of health care providers by providing them with the 
flexibility to substitute alternative services if they satisfied 
certain criteria. Despite these procedural and administrative benefits, 
the Commission never adopted, and the Administrator has never 
established, similar procedures for the Telecom Program. The 
Commission's new rules make the site and service substitution criteria 
under the Healthcare Connect Fund Program applicable to the Telecom 
Program. The Commission believes that making these criteria applicable 
to both RHC Programs will decrease burdens on all program participants 
and increase administrative efficiencies by enabling applicants to 
request the Administrator to substitute or modify a site or service 
without modifying their funding commitment letter. The new rule will 
become effective for the Telecom Program for funding year 2020.
    135. The Commission also requires applicants under both the 
Healthcare Connect Fund and Telecom Programs to file requests for site 
and service substitutions with the Administrator by no later the 
applicable service delivery deadline. Applicants and service providers 
seeking funding under the RHC Program are currently required to submit 
invoices for the services they are seeking funding for by the invoicing 
deadline. Applicants often file requests for site and service 
substitutions on or near the invoicing deadline, which increases 
administrative burdens on the Administrator and causes delays in the 
funding disbursement process. The Commission believes that requiring 
applicants under the RHC Program to submit requests for site and 
service substitution by no later than the applicable service delivery 
deadline will ensure that the Administrator has ample time to review 
such requests prior to the invoicing deadline or the extension thereof. 
This change will become effective funding year 2020 for all applicants 
under the RHC Program.
    136. Service Provider Identification Number (SPIN) Changes. To 
further improve the administration of the RHC Program and to establish 
consistency between the universal service programs, the Commission 
adopted rules, similar to those used in the E-Rate Program, governing 
requests for SPIN changes applicable to both the Telecom and the 
Healthcare Connect Fund Programs. A SPIN is a unique number that the 
Administrator assigns to an eligible service provider seeking to 
participate in the universal service support mechanisms. When 
requesting funding under the RHC Program, an applicant must use the 
SPIN to identify its chosen service provider when filing an FCC Form 
462 (Healthcare Connect Fund Program) or an FCC Form 466 (Telecom 
Program). An applicant may change the SPIN on its FCC Form 462 or FCC 
Form 466 by filing a written request with the Administrator. While the 
Administrator has general procedures for implementing SPIN changes, 
there are no established program-wide procedures for the RHC Program.
    137. To establish consistency between the universal service 
programs and provide guidance to RHC program participants, the SPIN 
change rules adopted by the Commission are modeled after the SPIN 
change procedures established under the E-Rate Program. As part of the 
rules, the Commission defined ``corrective'' SPIN changes as any 
``amendment to the SPIN associated with a Funding Request Number that 
does not involve a change to the service provider associated with that 
Funding Request Number.'' Similar to the E-Rate Program, an applicant 
may request a ``corrective'' SPIN change if the applicant is: (1) 
Correcting data entry errors (e.g., fixing clerical errors such naming 
the correct service provider in the funding request but providing the 
incorrect SPIN); (2) updating a service provider's SPIN that has 
changed due to the merger of companies or the acquisition of one 
company by another; or (3) effectuating a change that was not imitated 
by the applicant. The Commission also defined ``operational'' SPIN 
changes as ``any

[[Page 54974]]

change to the service provider associated with a specific Funding 
Request Number.'' Limiting ``operational'' SPIN changes to situations 
where: (1) The applicant has a legitimate reason to change providers 
(e.g., breach of contract or the service provider is unable to 
perform); and (2) and the applicant's newly selected service provider 
received the next highest point value in the original bid evaluation, 
assuming there were multiple bidders.
    138. Additionally, the Commission will require applicants to file 
requests for either a ``corrective'' or ``operational'' SPIN change in 
a manner prescribed by the Administrator by no later than the service 
delivery deadline as defined by the rules. Accordingly, the Commission 
directed the Administrator to implement procedures for requesting 
either a corrective or operational SPIN change consistent with the new 
rules and the R&O. The Commission believes that these rules will 
provide applicants with clarity on what is considered to be permissible 
SPIN changes under the RHC Program. Further, the Commission believes 
that requiring applicants to file their requests by no later than the 
service delivery date will help alleviate the administrative burdens on 
the Administrator and reduce the number of requests for waiver of the 
invoicing deadline filed with the Commission. These rules will become 
effective for funding year 2020.
    139. Consolidating and Simplifying RHC Program Rules. As part of 
the efforts to streamline the RHC Program, the Commission consolidated 
duplicative rules that exist between the Telecom and Healthcare Connect 
Fund Programs. For example, merging Sec.  54.619 (Telecom Program) and 
Sec.  54.648 (Healthcare Connect Fund Program) of the current rules 
into a single program-wide rule governing audits and recordkeeping. The 
Commission also created a single program-wide competitive bidding rule 
that combines the existing rules under the Telecom and Healthcare 
Connect Fund Programs, as amended and harmonized. Further, the 
Commission included some additional definitions in other sections of 
the current rules into the ``Definitions'' section. The Commission 
included those merged rules, and the new rules adopted by the R&O that 
apply, for the most part, to both the Telecom and Healthcare Connect 
Fund Programs, under the ``General Provisions'' section of the RHC 
Program rules. All rules specifically applicable to either the Telecom 
or Healthcare Connect Fund Program will remain under separate sections 
within the rules. The Commission, to the extent possible, in 
consolidating the rules, retained the language of the current rules.
    140. The Commission also reorganized and renumbered the RHC Program 
rules to reflect consolidation efforts. Where necessary, the Commission 
also simplified the language in the rules to use plain language so they 
are more easily understood by RHC Program stakeholders. Once these 
rules are published in the Federal Register, RHC Program participants 
are encouraged to familiarize themselves with the rules and the new 
format of the RHC Program rules. The Commission believes that these 
changes to the rules will reduce the administrative burdens on RHC 
Program stakeholders by making the rules easier to read and providing 
clarity on which rule requirements are program specific and which are 
program-wide. It will also help ensure that future amendments to 
program rules that apply to all RHC Program participants are 
implemented consistently in the Code of Federal Regulations.
    141. Given the complexities associated with reforming the RHC 
Program and modifying the rules, the Commission directed the Bureau to 
make any further ministerial rule revisions as necessary to ensure the 
changes to the RHC Program adopted in the R&O are properly codified. 
This includes correcting any technical or textual conflicts between new 
and/or revised rules and existing rules, as well as addressing any 
technical or textual omissions or oversights. If any such ministerial 
rule changes are warranted, the Bureau shall be responsible for such 
changes.
    142. Streamlining and Improving the RHC Program Forms and Data 
Collection. As part of the Commission's efforts to simplify and improve 
the efficiency of the application process for RHC Program participants, 
the Commission directed the Administrator to streamline the data 
collection requirements and consolidate the RHC Program online forms in 
order to reduce the administrative burden on RHC Program participants. 
The record strongly supports making procedural improvements to the 
process that will reduce the time it takes the Administrator to issue 
funding commitment decisions. Specifically, to the extent possible, the 
Commission directed the Bureau to work with the Administrator to 
streamline the data collection requirements and consolidate the program 
forms. The Commission also directed the Bureau to work with the 
Administrator to align the data collections between the Healthcare 
Connect Fund and Telecom Programs, to the extent possible, for ease of 
use and consistency between the Programs.
    143. The Commission recognizes, that in some instances, it may be 
necessary to include some additional data elements to certain online 
forms to harmonize the RHC Program and ensure compliance with the 
Commission's rules and procedures (e.g., requiring RHC Program 
applicants to list the requested services for which they seek bids, 
including service provider certifications on the invoice forms to 
ensure that the rates charged for services are accurate and that 
services are eligible). The Commission also realizes that some changes 
to the data collection requirements may be dependent upon the changes 
made to the RHC information technology systems. To the extent certain 
changes can be made to the data collection requirements within the 
existing RHC information technology systems, and do not require 
approval pursuant to the Paperwork Reduction Act, the Administrator 
will implement such changes so that they will become effective for 
funding year 2020. All other changes to the data collection 
requirements shall become effective no later than funding year 2021. 
Making this process easier for RHC Program applicants will reduce the 
administrative cost for health care providers by reducing the need for 
hiring skilled professionals to navigate the process and reducing the 
number of hours spent on completing the forms.
    144. Additionally, as part of the improving the application 
process, the Administrator shall provide RHC Program participants with 
direction on the proper use of all the forms by posting a guide for 
each form which includes screenshots and instructions for completing 
and submitting each form. This will help those applicants who are new 
to the RHC Program or only occasionally participate in the program with 
guidance on how to complete the forms and the ability view screenshots 
of various sections of the form in order to better understand in 
advance how each section relates to other sections within a form. 
Because the RHC Program includes both large and small stakeholders, the 
Administrator should be particularly careful to draft the form 
instructions, and all other correspondence from the Administrator to 
RHC Program participants, in a simple, direct, user-friendly, and 
helpful manner. The Commission believes that these improvements to the 
Administrator's application process and communications will reduce 
applicant

[[Page 54975]]

confusion, ensure parties have the information necessary to comply with 
the rules and the Administrator's procedures, and expedite the 
application process. These requirements will become effective for 
funding year 2020.
    145. Ensuring Effective Procedures for Program Administration. The 
Administrator enforces and implements the Commission's rules and 
performs its functions as the Administrator of the RHC Program, through 
various administrative procedures. In the E-Rate Program, the 
Administrator submits its administrative procedures for application 
review to the Bureau for approval on an annual basis, and submits its 
administrative procedures for other functions at the Bureau's request. 
This process enables the Bureau to assess whether the Administrator's 
procedures sufficiently address the requirements of the rules, and to 
better understand the demands that are being made of program 
participants to demonstrate compliance with the rules. Given the 
increasing demand for limited RHC Program funds, it is imperative that 
the Administrator carefully review funding applications to ensure that 
support is distributed in accordance with the rules, including the new 
measures adopted in the R&O. It is also critically important that the 
Administrator's post-commitment processes, including invoicing, 
appeals, and recovery actions, are implemented efficiently and in 
accord with the precedent. At the same time, the Commission is 
committed to making participation in the RHC Program as straight-
forward and predictable as possible. Health care providers and service 
providers should be required to demonstrate compliance with RHC Program 
rules to receive funding and should also understand the questions being 
asked, why they are being asked those questions, and what data and 
documents are required to answer those questions. There should also be 
a clear process for each potential step of a funding request's life 
cycle--from the filing of an application through disbursements or 
review of a decision by the Administrator--so that RHC Program 
participants can understand the status of their requests and advocate 
for them as necessary.
    146. To effectuate these ends and enable the Commission to perform 
its oversight role, the Commission directed the Administrator to 
document all of its administrative procedures for the RHC Program, 
including procedures for measures adopted by the R&O, and submit them 
to the Commission staff for review and approval. Specifically, the 
Commission directed the Administrator to submit to the Bureau within 90 
days from October 11, 2019, and annually thereafter, comprehensive, 
consolidated, written procedures for: (1) Application review; (2) post-
commitment reviews (e.g., SPIN changes); (3) recovery actions; (4) 
invoicing; (5) appeals; and (6) any other procedures as further 
directed by the Bureau. The Bureau will review the procedures to 
determine whether further action is needed and whether such procedures 
should be adopted. The Commission believes formalizing the annual 
review and approval process for RHC Program procedures will promote 
greater transparency, efficiency, and timeliness regarding review of 
RHC Program forms and appeals and will enable quicker decisions for RHC 
Program participants. The Commission directed the Bureau to oversee the 
format for the submission of these procedures and the timeline going 
forward for submitting the annual RHC Program procedures to the Bureau 
for review and approval.
    147. Outreach. The Commission recognizes that program participants 
will have questions about how the reforms adopted by the R&O will be 
implemented and how they can best prepare for the substantive and 
procedural changes. Although the Commission concluded that the 
effective dates established for the new rules provide sufficient time 
for health care and service providers to make any necessary 
adjustments, particularly given that the new rules reduce and 
streamline their procedural obligations, the Commission understands 
that they need clear information to successfully navigate the reformed 
RHC Program. Accordingly, the Commission directed the Administrator to 
prepare a series of outreach materials that set forth step-by-step 
requirements for health care and service providers under the new 
program rules. The outreach materials should include, at a minimum: (1) 
Filing guides setting forth the requirements of each form or online 
submission that health care and service providers are required to 
submit to the Administrator; (2) webinars separately addressing what 
health care and service providers must do to successfully participate 
in the Telecom Program and the Healthcare Connect Fund Program, from 
eligibility determinations through funding decisions and all post-
commitment activities; and (3) updates to the Administrator's website 
providing the aforementioned information and materials. The Commission 
further directed the Administrator to collect the questions that it 
receives about the implementation of the new rules, identify the most 
commonly asked questions, and prepare answers to those questions that 
can be posted on its website in a Questions and Answers section. The 
Commission believes that providing clear and easily accessible 
information to program participants about the implementation of the new 
rules will ease their concerns about transitioning to them and allow 
them to take full advantage of the more predictable, transparent, and 
streamlined processes.
    148. Promoting Data Quality and Transparency. As part of the 
Commission's efforts to improve transparency into the RHC Program, the 
Commission directed the Administrator to continue to timely publish 
through electronic means all non-confidential RHC data in open, 
standardized, electronic formats, consistent with the Open, Public, 
Electronic and Necessary (OPEN) Government Data Act. In doing so, the 
Commission recognized the efforts already made by the Administrator to 
publicize RHC Program data taken from the RHC FCC Forms in an open, 
electronic format. In July 2019, the Administrator released initial RHC 
Program data on its website, including information related to 
commitments and disbursements. The Commission directed the 
Administrator to provide a robust dataset that includes information on 
the type of services being requested and the rates charged by service 
providers for services provided to health care providers similar to the 
type of information provided for the E-Rate Program as part of the 
Administrator's Open Data. The Administrator shall continue to provide 
the public with the ability to easily view and download non-
confidential RHC Program data, for both individual datasets and 
aggregate data. The Administrator must also design open and accessible 
data solutions in a modular format to allow extensibility and agile 
development, such as providing for the use of application programming 
interfaces (APIs) where appropriate and releasing the code, as open 
source code, where feasible. The Administrator's solutions must also be 
accessible to people with disabilities, as is required for federal 
agency information technology. Additionally, the solutions must meet 
the federal information security and privacy requirements.
    149. The record supports the Administrator releasing RHC Program 
data in as open a manner as possible so that health care providers that 
receive support from the RHC Program and their associated service 
providers can view

[[Page 54976]]

funding request and pricing information, track the status of their RHC 
applications and requests for discounts, and so that they, and the 
public at large, can benefit from greater program transparency and 
public accountability. Commenters also assert that making RHC Program 
funding requests publicly and readily available will promote increased 
competition in the RHC Program and help to reduce waste, fraud, and 
abuse in the program. Further, making non-confidential RHC data open 
and accessible will allow members of the public to develop new and 
innovative methods to analyze RHC Program data, which will benefit all 
stakeholders, including the Commission, as the Commission continued to 
improve the RHC Program. Releasing RHC Program data in this manner 
should also enable greater integration with other datasets such as 
those maintained by the Health Resources & Services Administration 
(HRSA)'s Federal Office of Rural Health Policy. This integration will 
create opportunities for new and innovative analyses about connectivity 
to the nation's health care facilities to support medical care to rural 
communities.
    150. Implementation Schedule. The RHC Program reforms will be 
effective November 12, 2019 unless specifically identified or if a rule 
contains an ``information collection'' subject to approval under the 
Paperwork Reduction Act. Because there are several interlocking changes 
to the rules, the Commission summarized when certain rules will take 
effect to ease the burden on program applicants.
    151. In funding year 2020, rules for prioritizing funding if demand 
exceeds the available funding, rules governing majority-rural 
requirement for Healthcare Connect Fund Program, consortia 
certification rules, competitive bidding rules, invoicing rules, site 
and service substitutions and SPIN change rules, service delivery 
deadline and extension rules, gift rules, and rules governing use of 
consultants and other third parties will all take effect. In funding 
year 2021, the rules for determining urban and rural rates in the 
Telecom Program, the rule providing additional time to complete the 
competitive bidding process, and the application filing window rule 
will take effect.

III. Procedural Matters

A. Paperwork Reduction Act Analysis

    152. The R&O contain new and modified information collection 
requirements subject to the Paperwork Reduction Act of 1995 (PRA), 
Public Law 104-13. It will be submitted to OMB for review under section 
3507(d) of the PRA. OMB, the general public, and other Federal agencies 
will be invited to comment on the new and modified information 
collection requirements contained in the proceeding. In addition, the 
Commission notes that pursuant to the Small Business Paperwork Relief 
Act of 2002, it previously sought specific comments on how to ``further 
reduce the information collection burden for small business concerns 
with fewer than 25 employees.'' The Commission has described impacts 
that might affect small businesses, which includes most businesses with 
fewer than 25 employees, in the Final Regulatory Flexibility Analysis 
(FRFA).

B. Congressional Review Act

    153. The Commission will send a copy of the R&O to Congress and the 
Government Accountability Office pursuant to the Congressional Review 
Act, see 5 U.S.C. 801(a)(1)(A). In addition, the Commission will send a 
copy of the R&O, including the FRFA, to the Chief Counsel for Advocacy 
of the Small Business Administration pursuant to the Small Business 
Regulatory Enforcement Fairness Act of 1996.

C. Final Regulatory Flexibility Analysis

    154. As required by the Regulatory Flexibility Act of 1980 (RFA), 
as amended, the Commission included an Initial Regulatory Flexibility 
Analysis (IRFA) of the possible significant economic impact on a 
substantial number of small entities by the policies and rules proposed 
in the 2017 Promoting Telehealth NPRM & Order. The Commission sought 
written public comment on the proposals in the 2017 Promoting 
Telehealth NPRM & Order, including comment on the IRFA. The Commission 
did not receive any relevant comments in response to this IRFA. This 
Final Regulatory Flexibility Analysis (FRFA) conforms to the RFA.
    155. Need for, and Objectives of, the Report and Order. Section 
254(h)(1)(A) of the Telecommunications Act of 1996 (1996 Act) mandates 
that telecommunications carriers provide telecommunications services 
for health care purposes to eligible rural public or non-profit health 
care providers at rates that are ``reasonably comparable'' to rates in 
urban areas. In addition, section 254(h)(2)(A) of the 1996 Act directs 
the Commission to establish competitively neutral rules to enhance, to 
the extent technically feasible and economically reasonable, access to 
``advanced telecommunications and information services'' for public and 
non-profit health care providers. Based on this legislative mandate, 
the Commission established the two components of the Rural Health Care 
(RHC) Program--the Telecommunications (Telecom) Program and the 
Healthcare Connect Fund Program. The Telecom Program subsidizes the 
difference between urban and rural rates for telecommunications 
services. Eligible rural health care providers can obtain rates on 
telecommunications services for their rural health care facilities that 
are reasonably comparable to rates charged for similar services in 
corresponding urban areas. The Telecom Program has not undergone any 
significant change since its creation more than two decades ago. The 
Healthcare Connect Fund Program, created in 2012, provides a flat 65% 
discount on an array of advanced telecommunications and information 
services. These services include internet access, dark fiber, business 
data, traditional Digital Subscriber Line (DSL), and private carriage 
services. With the Healthcare Connect Fund Program, the Commission 
intended to promote the use of broadband services and facilitate the 
formation of health care provider consortia.
    156. Demand for RHC Program funding has rapidly increased over the 
past few years. As the demand for robust broadband has increased 
throughout the country, the RHC Program has witnessed a dramatic 
increase in health care provider participation. This recent increase in 
RHC Program demand necessitated a re-evaluation of the RHC Program 
rules and procedures to promote the efficient allocation of limited 
funds and provide predictability and transparency for the RHC Program. 
To this end, in December 2017, the Commission released the 2017 
Promoting Telehealth NPRM & Order seeking comments on various ways to 
improve the RHC Program. Specifically, the Commission sought comment on 
whether and how to reform the calculation of urban and rural rates used 
to determine the amount of support available to health care providers 
under the Telecom Program. The Commission also sought comment on 
whether and how to prioritize RHC Program funding when demand exceeds 
the cap to ensure limited support is better targeted to rural and 
Tribal health care providers. Additionally, the Commission sought 
comment on the rules concerning the appropriate percentage of rural 
versus non-rural health care providers in Healthcare Connect Fund 
Program consortia; various actions to prevent waste, fraud, and abuse 
in the RHC

[[Page 54977]]

Program; and how to better align procedures between the Telecom and 
Healthcare Connect Fund Programs.
    157. In the R&O, the Commission implemented a number of the 
proposals in the 2017 Promoting Telehealth NPRM & Order to improve the 
RHC Program. First, the Commission reformed the Telecom Program to more 
efficiently distribute RHC Program funding and minimize the potential 
for waste, fraud, and abuse in the program in order to better maximize 
RHC Program funding. Second, the Commission took several actions to 
target and prioritize funding to those rural areas in the most need of 
health care services and ensure that eligible rural health care 
providers continue to benefit from RHC Program funding. Third, the 
Commission implemented a variety of measures directed at strengthening 
the competitive bidding requirements under the RHC Program to ensure 
that program participants comply with the RHC Program rules and 
procedures, and improve uniformity and transparency across the RHC 
Program. Fourth, the Commission adopted a series of program-wide rules 
and procedures, applying both to the Telecom and Healthcare Connect 
Fund Programs, intended to simplify the application process for program 
participants and provide more clarity regarding the RHC Program 
procedures. Lastly, the Commission directed the Administrator, the 
administrator of the universal service programs, to take a variety of 
actions to simplify the RHC Program's applications process, increase 
transparency in the RHC Program, and ensure that all applicants receive 
complete and timely information to help inform their decisions 
regarding RHC eligible services and purchases. The Commission believes 
that these changes, taken together, will increase the ability of health 
care providers to better utilize telecommunications and broadband 
services to meet the health care needs in their communities, and will 
ensure that RHC Program dollars are serving their intended purpose.
    158. Pursuant to the Small Business Jobs Act of 2010, which amended 
the RFA, the Commission is required to respond to any comments filed by 
the Chief Counsel of the Small Business Administration (SBA), and to 
provide a detailed statement of any change made to the proposed rule(s) 
as a result of those comments. The Chief Counsel did not file any 
comments in response to the proposed rule(s) in this proceeding.
    159. 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.
    160. Small entities potentially affected by the reforms adopted in 
the R&O include eligible non-profit and public health care providers 
and the eligible service providers offering them services, including 
telecommunications service providers, Internet Service Providers 
(ISPs), and service providers of the services and equipment used for 
dedicated broadband networks.
    161. Several of the rule changes will result in additional 
recordkeeping and compliance requirements for small entities. For all 
of those rule changes, the Commission has determined that the benefits 
of an RHC Program that is more aligned with its intended mission, 
administratively streamlined, and stronger in its deterrence of waste, 
fraud, and abuse outweigh the burden of the increased recordkeeping and 
compliance requirements. Other rule changes decrease recordkeeping 
requirements for small entities and make the RHC Program 
administratively less burdensome.
    162. All of the rules implemented by the Commission impose minimal 
burden on small entities by requiring them to become familiar with the 
new rules to comply with them. For many new rules such as--determining 
the urban and rural rates, prioritizing funding based on rurality tiers 
and Medically Underserved Area/Population (MUA/P) designations, 
expanding the timeframe to conduct a competitive bidding process, 
establishing an application filing window, implementing a ``fair and 
open'' competitive bidding standard, establishing competitive bidding 
exemptions and gift rules--the burden of becoming familiar with the new 
rules, including the new format, in order to comply with them is the 
only burden the news rules impose.
    163. Expanding USAC's Authorization to Extend Service Delivery 
Deadline. The Commission adopted a service delivery deadline of June 30 
and four criteria for extending this deadline for non-recurring 
services for qualified applicants. While the Administrator will 
automatically extend the service delivery deadline in situations where 
criteria (1) and (2) are met, applicants must affirmatively request an 
extension and provide documentation to the Administrator for criteria 
(3) and (4). For those applicants seeking an extension under criteria 
(3) or (4), this will minimally increase their recordkeeping 
requirements. The benefit to rural health care providers in receiving 
additional time to implement eligible services outweighs this burden.
    164. Extending the Invoice Deadline. The Commission adopted a 
uniform invoice filing deadline for the RHC Program. Service providers 
and billed entities may request and automatically receive an extension 
of this deadline. For those service providers and billed entities 
seeking an extension, this will minimally increase their recordkeeping 
requirements. The benefit to rural health care providers in receiving 
additional time to submit their invoices to receive universal service 
support outweighs this burden.
    165. Strengthening Service Provider Invoice Certifications. 
Requiring service providers to make additional certifications on the 
Telecom and Healthcare Connect Fund Program invoice forms increases 
their compliance requirements. However, the inclusion of these 
additional certifications does not impose any further burdens on 
service providers because, as participants in the RHC Program, they are 
already required to abide by RHC Program rules. These additional 
certifications simply serve as reminder to service providers of their 
current responsibilities under the RHC Program and help to further 
ensure compliance with the Commission's rules and program requirements 
as part of the ongoing efforts to reduce, waste, fraud, and abuse in 
the RHC Program.
    166. Site and Service Substitutions. The Commission aligned the RHC 
Programs and made the site and service substitution criteria under the 
Healthcare Connect Fund Program applicable to the Telecom Program. 
Those rural health care providers under the Telecom Program seeking to 
make such substitutions must submit requests to the Administrator with 
supporting documentation. While this rule will increase rural health 
care providers' recordkeeping requirements, the benefit to health care 
providers of having a mechanism to request substitutions or 
modifications to a site or service without modifying their funding 
commitment letter outweighs this burden.
    167. Service Provider Identification Number (SPIN) Changes. The 
Commission adopted a rule permitting

[[Page 54978]]

rural health care providers to make service provider changes under 
certain conditions. Although the rule will increase rural health care 
providers' recordkeeping requirements, the benefit to rural health care 
providers of having a mechanism for requesting such changes and clarity 
on what is considered to be permissible SPIN changes under the RHC 
Program outweighs this burden.
    168. Requiring Applicants to Seek Bids for Particular Services. 
Requiring RHC Program applicants to list the requested services for 
which they seek bids (e.g., internet access, bandwidth), and to provide 
sufficient information to enable bidders to reasonably determine the 
needs of the applicant and provide responsive bids, will increase 
applicants' recordkeeping requirements. Ensuring a more equitable 
distribution of limited RHC Program funding justifies this burden.
    169. Cost-Effective Documentation. In the R&O, the Commission 
required applicants to submit documentation to support their 
certifications that they have selected the most cost-effective option 
increases recordkeeping requirements, but found that this is necessary 
to help protect against wasteful spending and ensure that RHC Program 
funds can be distributed as widely and equitably as possible.
    170. Competitive Bidding Certifications and Documentation. The 
Commission took a variety of measures to harmonize the competitive 
bidding rules between the Telecom and Healthcare Connect Fund Programs, 
including harmonizing the certifications that applicants must make when 
requesting service, harmonizing and expanding two key competitive 
bidding documentation requirements, and codifying the requirement that 
both Telecom Program applicants and Healthcare Connect Fund Program 
applicants submit a declaration of assistance identifying each 
consultant or outside expert who aided in the preparation of their 
application in addition to describing the nature of the relationship. 
While these rules increase compliance and recordkeeping requirements, 
the increased burden is outweighed by the increase in competitive 
bidding transparency and accountability within the RHC Program.
    171. Certifications Governing Consultants. The Commission adopted 
rules requiring both rural health care providers and service providers 
to certify that that they have not solicited or accepted a gift or any 
other thing of value from those seeking to participate or participating 
in the RHC Program. While the rules increase compliance requirements, 
the burden is outweighed by the interest in ensuring that the 
competitive bidding process is not unduly or improperly influenced by 
the receipt of gifts.
    172. Cost-Based Rates. The Commission eliminated the cost-based 
mechanism for service providers to establish a rural rate, which will 
decrease recordkeeping requirements for those service providers that 
use the mechanism.
    173. Limitation of Support for Satellite Services. The Commission 
eliminated Sec.  54.609(d) of the rules which allows rural health care 
providers to receive discounts for satellite service even where 
wireline services are available, but caps the discount at the amount 
providers would have received if they purchased functionally similar 
wireline alternatives. Elimination of the rules will decrease 
recordkeeping requirements for rural health care providers.
    174. Eliminating Distance-Based Support. The Commission eliminated 
distance-based support which allows rural health care providers to 
obtain support for charges based on distance. Elimination of the rule 
will decrease recordkeeping requirements for rural health care 
providers.
    175. Streamlining and Improving the RHC Program Forms and Data 
Collection. Streamlining the data collection requirements and 
consolidating the Telecom and Healthcare Connect Fund Programs' online 
forms should reduce recordkeeping requirements for RHC Program 
participants.
    176. Data Quality and Transparency. Requiring the Administrator to 
release RHC Program data in as open a manner as possible will benefit 
rural health care providers and service providers by enabling them to 
view funding and pricing information and track the status of their 
applications, thereby promoting competition within the RHC Program and 
increasing access to pertinent information.
    177. FCC Form Directions. Providing direction on the use of the FCC 
Forms, should make it easier for small entities, particularly those who 
are new to the RHC Program or only occasionally participate in the 
program, to complete the forms by reducing applicant confusion and 
ensuring that entities have the information necessary to comply with 
the Commission's rules and the Administrator's procedures, and expedite 
the application process.
    178. Competitive Bidding Exemptions. The Commission adopted a rule 
aligning the RHC Program rules exempting certain applicants from the 
competitive bidding requirements in the Telecom and Healthcare Connect 
Fund Programs. The rule will decrease rural health care providers' 
recordkeeping requirements under the Telecom Program because those 
applicants qualifying for a competitive bidding exemption will not be 
required to initiate a bidding process by preparing and posting a 
request for services.
    179. The RFA requires an agency to describe any significant 
alternatives that it has considered in reaching its proposed approach, 
which may include (among others) the following four alternatives: (1) 
The establishment of differing compliance or 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 any part thereof, for small 
entities.
    180. This rulemaking could impose additional burdens on small 
entities. The Commission considered alternatives to the rulemaking 
changes that increase projected reporting, recordkeeping and other 
compliance requirements for small entities. Specifically, in 
determining how best to establish urban and rural rates under the 
Telecom Program, the Commission concluded that the Administrator is the 
best entity to make publicly available a standardized set of urban and 
rural rates for use with all Telecom Program applications. Although the 
Commission could obtain this information from rural health care 
providers or service providers, the Administrator is in the best 
position as a single expert entity to establish a publicly accessible 
urban and rural rate database and will greatly lessen the 
administrative burden on rural health care providers and their service 
providers.

IV. Ordering Clauses

    181. Accordingly, it is ordered, pursuant to the authority 
contained in sections 1-4, 201-205, 214, 254, 303(r), and 403 of the 
Communications Act of 1934, as amended, 151 through 154, 201 through 
205, 214, 254, 303(r), and 403, that the R&O is ADOPTED, effective 
November 12, 2019, except that modifications to Paperwork Reduction Act 
burdens shall become effective upon approval by OMB and any new rules 
that contain information collection requirements shall become effective 
immediately upon announcement in the Federal Register of OMB approval.

[[Page 54979]]

    182. It is further ordered that Part 54 of the Commission's rules, 
47 CFR part 54 IS AMENDED as set forth in the Final Rules, and such 
rule amendments shall be effective November 12, 2019, except those 
rules and requirements which contain new or modified information 
collection requirements that require approval by the Office of 
Management and Budget under the Paperwork Reduction Act. The new rules 
that contain information collections subject to PRA review shall become 
effective immediately upon announcement in the Federal Register of OMB 
approval.

List of Subjects in 47 CFR Part 54

    Communications common carriers, Health facilities, Infants and 
children, Internet, Libraries, Reporting and recordkeeping 
requirements, Schools, Telecommunications, Telephone.

Federal Communications Commission.

Katura Jackson,
Federal Register Liaison Officer.

Final Rules

    For the reasons discussed in the preamble, the Federal 
Communications Commission amends 47 CFR part 54 to read as follows:

PART 54--UNIVERSAL SERVICE

0
1. The authority citation for part 54 continues to read as follows:

    Authority: 47 U.S.C. 151, 154(i), 155, 201, 205, 214, 219, 220, 
254, 303(r), 403, and 1302 unless otherwise noted.


0
2. Revise Subpart G to read as follows:

Subpart G--Defined Terms and Eligibility

Sec.
54.600 Terms and definitions.
54.601 Health care provider eligibility.
54.602 Health care support mechanism.

Telecommunications Program

54.603 Consortia, telecommunications services, and existing 
contracts.
54.604 Determining the urban rate.
54.605 Determining the rural rate.
54.606 Calculating support.

Healthcare Connect Fund Program

54.607 Eligible recipients.
54.608 Eligible service providers.
54.609 Designation of consortium leader.
54.610 Letters of agency (LOA).
54.611 Health care provider contribution.
54.612 Eligible services.
54.613 Eligible equipment.
54.614 Eligible participant-constructed and owned network facilities 
for consortium applicants.
54.615 Off-site data centers and off-site administrative offices.
54.616 Upfront payments.
54.617 Ineligible expenses.
54.618 Data collection and reporting.

General Provisions

54.619 Cap.
54.620 Annual filing requirements and commitments.
54.621 Filing window for requests and prioritization of support.
54.622 Competitive bidding requirements and exemptions.
54.623 Funding requests.
54.624 Site and service substitutions.
54.625 Service Provider Identification Number (SPIN) changes.
54.626 Service delivery deadline and extension requests.
54.627 Invoicing process and certifications.
54.628 Duplicate support.
54.629 Prohibition on resale.
54.630 Election to offset support against annual universal service 
fund contribution.
54.631 Audits and record keeping.
54.632 Signature requirements for certifications.
54.633 Validity of electronic signatures and records.


Sec.  54.600  Terms and definitions.

    As used in this subpart, the following terms shall be defined as 
follows:
    (a) Funding year. A ``funding year'' for purposes of the funding 
cap shall be the period between July 1 of the current calendar year 
through June 30 of the next calendar year.
    (b) Health care provider. A ``health care provider'' is any:
    (1) Post-secondary educational institution offering health care 
instruction, including a teaching hospital or medical school;
    (2) Community health center or health center providing health care 
to migrants;
    (3) Local health department or agency;
    (4) Community mental health center;
    (5) Not-for-profit hospital;
    (6) Rural health clinic;
    (7) Skilled nursing facility (as defined in section 395i-3(a) of 
Title 42); or a
    (8) Consortium of health care providers consisting of one or more 
entities described in paragraphs (b)(1) through (7) in this section.
    (c) Off-site administrative office. An ``off-site administrative 
office'' is a facility that does not provide hands-on delivery of 
patient care but performs administrative support functions that are 
critical to the provision of clinical care by eligible health care 
providers.
    (d) Off-site data center. An ``off-site data center'' is a facility 
that serves as a centralized repository for the storage, management, 
and dissemination of an eligible health care provider's computer 
systems, associated components, and data, including (but not limited 
to) electronic health records.
    (e) Rural area. A ``rural area'' is an area that is entirely 
outside of a Core Based Statistical Area; is within a Core Based 
Statistical Area that does not have any Urban Area with a population of 
25,000 or greater; or is in a Core Based Statistical Area that contains 
an Urban Area with a population of 25,000 or greater, but is within a 
specific census tract that itself does not contain any part of a Place 
or Urban Area with a population of greater than 25,000. For purposes of 
this rule, ``Core Based Statistical Area,'' ``Urban Area,'' and 
``Place'' are as identified by the Census Bureau.
    (f) Rural health care provider. A ``rural health care provider'' is 
an eligible health care provider site located in a rural area.
    (g) Urbanized area. An ``urbanized area'' is an area with 50,000 or 
more people as designated by the Census Bureau based on the most recent 
decennial Census.


Sec.  54.601  Health care provider eligibility.

    (a) Eligible health care providers. (1) Only an entity that is 
either a public or non-profit health care provider, as defined in this 
subpart, shall be eligible to receive support under this subpart.
    (2) Each separate site or location of a health care provider shall 
be considered an individual health care provider for purposes of 
calculating and limiting support under this subpart.
    (b) Determination of health care provider eligibility for the 
Healthcare Connect Fund Program. Health care providers in the 
Healthcare Connect Fund Program may certify to the eligibility of 
particular sites at any time prior to, or concurrently with, filing a 
request for services to initiate competitive bidding for the site. 
Applicants who utilize a competitive bidding exemption must provide 
eligibility information for the site to the Administrator prior to, or 
concurrently with, filing a request for funding for the site. Health 
care providers must also notify the Administrator within 30 days of a 
change in the health care provider's name, site location, contact 
information, or eligible entity type.


Sec.  54.602  Health care support mechanism.

    (a) Telecommunications Program. Eligible rural health care 
providers may request support for the difference, if any, between the 
urban and rural rates for telecommunications services, subject to the 
provisions and limitations set forth in Sec. Sec.  54.600 through 
54.602 and 54.603 through 54.606. This support is referred to as the 
``Telecommunications Program.''
    (b) Healthcare Connect Fund Program. Eligible health care providers 
may request support for eligible services, equipment, and 
infrastructure, subject to the provisions and limitations

[[Page 54980]]

set forth in Sec. Sec.  54.600 through 54.602 and 54.607 through 
54.618. This support is referred to as the ``Healthcare Connect Fund 
Program.''
    (c) Allocation of discounts. An eligible health care provider that 
engages in both eligible and ineligible activities or that collocates 
with an ineligible entity shall allocate eligible and ineligible 
activities in order to receive prorated support for the eligible 
activities only. Health care providers shall choose a method of cost 
allocation that is based on objective criteria and reasonably reflects 
the eligible usage of the facilities.
    (d) Health care purposes. Services for which eligible health care 
providers receive support from the Telecommunications Program or the 
Healthcare Connect Fund Program must be reasonably related to the 
provision of health care services or instruction that the health care 
provider is legally authorized to provide under the law in the state in 
which such health care services or instruction are provided.

Telecommunications Program


Sec.  54.603  Consortia, telecommunications services, and existing 
contracts.

    (a) Consortia. (1) Under the Telecommunications Program, an 
eligible health care provider may join a consortium with other eligible 
health care providers; with schools, libraries, and library consortia 
eligible under subpart F of this part; and with public sector 
(governmental) entities to order telecommunications services. With one 
exception, eligible health care providers participating in consortia 
with ineligible private sector members shall not be eligible for 
supported services under this subpart. A consortium may include 
ineligible private sector entities if such consortium is only receiving 
services at tariffed rates or at market rates from those providers who 
do not file tariffs.
    (2) For consortia, universal service support under the 
Telecommunications Program shall apply only to the portion of eligible 
services used by an eligible health care provider.
    (b) Telecommunications services. Any telecommunications service 
that is the subject of a properly completed bona fide request by a 
rural health care provider shall be eligible for universal service 
support. Upon submitting a bona fide request to a telecommunications 
carrier, each eligible rural health care provider is entitled to 
receive the most cost-effective, commercially-available 
telecommunications service, and a telecommunications service carrier 
that is eligible for support under the Telecommunications Program shall 
provide such service at the urban rate, as defined in Sec.  54.604.
    (c) Existing contracts. A signed contract for services eligible for 
Telecommunications Program support pursuant to this subpart between an 
eligible health care provider, as defined under Sec.  54.600, and a 
service provider shall be exempt from the competitive bid requirements 
as set forth in Sec.  54.622(i).


Sec.  54.604  Determining the urban rate.

    (a) Urban rate. An applicant shall use the applicable urban rate 
currently available in the Administrator's database when requesting 
funding. The ``urban rate'' shall be the median of all available rates 
identified by the Administrator for functionally similar services in 
all urbanized areas of the state where the health care provider is 
located to the extent that urbanized area falls within the state.
    (b) Database. The Administrator shall create and maintain on its 
website a database that lists, by state, the eligible 
Telecommunications Program services and the related urban rate.


Sec.  54.605  Determining the rural rate.

    (a) Rural rate. An applicant shall use the lower of the applicable 
``rural rate'' currently available in the Administrator's database or 
the rural rate included in the service agreement that the health care 
provider enters into with the service provider when requesting funding.
    (1) For purposes of paragraph (a) of this section, The rural rate 
will be determined using the following tiers in which a health care 
provider is located:
    (i) Extremely Rural. Areas entirely outside of a Core Based 
Statistical Area.
    (ii) Rural. Areas within a Core Based Statistical Area that does 
not have an Urban Area with a population of 25,000 or greater.
    (iii) Less rural. Areas in a Core Based Statistical Area that 
contains an Urban Area with a population of 25,000 or greater, but are 
within a specific census tract that itself does not contain any part of 
a Place or Urban Area with a population of greater than 25,000.
    (iv) Frontier. For health care providers located in Alaska only, 
areas outside of a Core Based Statistical Area that are inaccessible by 
road as determined by the Alaska Department of Commerce, Community, and 
Economic Development, Division of Community and Regional Affairs. The 
``rural rate'' shall be the median of all available rates for the same 
or functionally similar service offered within the rural tier, 
applicable to the health care provider's location within the state. The 
Administrator shall not include any rates reduced by universal service 
support mechanisms. The ``rural rate'' shall be used as described in 
this subpart to determine the credit or reimbursement due to a 
telecommunications carrier that provides eligible telecommunications 
services to eligible health care providers.
    (b) Database. The Administrator shall create and maintain on its 
website a database that lists, by state, the eligible 
Telecommunications Program services and the related rural rate for each 
such service and for each rural tier.
    (c) Request for waiver. A petition for a waiver of the ``rural 
rate,'' as described in paragraph (a) in this section, may be granted 
if the service provider demonstrates that application of the rural rate 
published by the Administrator would result in a projected rate of 
return on the net investment in the assets used to provide the rural 
health care service that is less than the Commission-prescribed rate of 
return for incumbent rate of return local exchange carriers (LECs). All 
waiver requests must articulate specific facts that demonstrate that 
``good cause'' exists to grant the requested waiver and that granting 
the requested waiver would be in the public interest. To satisfy this 
standard, the waiver request must be substantiated through documentary 
evidence as stated in the following. A waiver request will not be 
entertained if it does not also set forth a rural rate that the service 
provider demonstrates will permit it to obtain no more than the current 
Commission prescribed rate of return authorized for incumbent rate of 
return local exchange carriers.
    (1) For purposes of paragraph (c), petitions seeking a waiver must 
include all financial data and other information to verify the service 
provider's assertions, including, at a minimum, the following 
information:
    (i) Company-wide and rural health care service gross investment, 
accumulated depreciation, deferred state and federal income taxes, and 
net investment; capital costs by category expressed as annual figures 
(e.g., depreciation expense, state and federal income tax expense, 
return on net investment); operating expenses by category (e.g., 
maintenance expense, administrative and other overhead expenses, and 
tax expense other than income tax expense); the applicable state and 
federal income tax rates; fixed charges (e.g., interest expense); and 
any income tax adjustments;
    (ii) An explanation and a set of detailed spreadsheets showing the

[[Page 54981]]

direct assignment of costs to the rural health care service and how 
company-wide common costs are allocated among the company's services, 
including the rural health care service, and the result of these direct 
assignments and allocations as necessary to develop a rate for the 
rural health care service;
    (iii) The company-wide and rural health care service costs for the 
most recent calendar year for which full-time actual, historical cost 
data are available;
    (iv) Projections of the company-wide and rural health care service 
costs for the funding year in question and an explanation of those 
projections;
    (v) Actual monthly demand data for the rural health care service 
for the most recent three calendar years (if applicable);
    (vi) Projections of the monthly demand for the rural health care 
service for the funding year in question, and the data and details on 
the methodology used to make those projections;
    (vii) The annual revenue requirement (capital costs and operating 
expenses expressed as an annual number plus a return on net investment) 
and the rate for the funded service (annual revenue requirement divided 
by annual demand divided by twelve equals the monthly rate for the 
service), assuming one rate element for the service), based on the 
projected rural health care service costs and demands;
    (viii) Audited financial statements and notes to the financial 
statements, if available, and otherwise unaudited financial statements 
for the most recent three fiscal years, specifically, the cash flow 
statement, income statement, and balance sheets. Such statements shall 
include information regarding costs and revenues associated with, or 
used as a starting point to develop, the rural health care service 
rate; and
    (ix) Density characteristics of the rural area or other relevant 
geographical areas including square miles, road miles, mountains, 
bodies of water, lack of roads, remoteness, challenges and costs 
associated with transporting fuel, satellite and backhaul availability, 
extreme weather conditions, challenging topography, short construction 
season or any other characteristics that contribute to the high cost of 
servicing the health care providers.


Sec.  54.606  Calculating support.

    (a) The amount of universal service support provided for an 
eligible service to be funded from the Telecommunications program shall 
be the difference, if any, between the urban rate and the rural rate 
charged for the services, as defined in this section. In addition, all 
reasonable charges that are incurred by taking such services, such as 
state and federal taxes, shall be eligible for universal service 
support. Charges for termination liability, penalty surcharges, and 
other charges not included in the cost of taking such service shall not 
be covered by the universal service support mechanisms.
    (b) The universal service support mechanisms shall provide support 
for intrastate telecommunications services, as set forth in Sec.  
54.101(a), provided to rural health care providers as well as 
interstate telecommunications services.
    (c) Mobile rural health care providers--(1) Calculation of support. 
The support amount allowed under the Telecommunications Program for 
satellite services provided to mobile rural health care providers is 
calculated by comparing the rate for the satellite service to the rate 
for an urban wireline service with a similar bandwidth. Support for 
satellite services shall not be capped at an amount of a functionally 
similar wireline alternative. Where the mobile rural health care 
provider provides service in more than one state, the calculation shall 
be based on the urban areas in each state, proportional to the number 
of locations served in each state.
    (2) Documentation of support. (i) Mobile rural health care 
providers shall provide to the Administrator documentation of the price 
of bandwidth equivalent wireline services in the urban area in the 
state or states where the service is provided. Mobile rural health care 
providers shall provide to the Administrator the number of sites the 
mobile health care provider will serve during the funding year.
    (ii) Where a mobile rural health care provider serves less than 
eight different sites per year, the mobile rural health care provider 
shall provide to the Administrator documentation of the price of 
bandwidth equivalent wireline services. In such case, the Administrator 
shall determine on a case-by-case basis whether the telecommunications 
service selected by the mobile rural health care provider is the most 
cost-effective option. Where a mobile rural health care provider seeks 
a more expensive satellite-based service when a less expensive wireline 
alternative is most cost-effective, the mobile rural health care 
provider shall be responsible for the additional cost.

Healthcare Connect Fund Program


Sec.  54.607  Eligible recipients.

    (a) Rural health care provider site--individual and consortium. 
Under the Healthcare Connect Fund Program, an eligible rural health 
care provider may receive universal service support by applying 
individually or through a consortium. For purposes of the Healthcare 
Connect Fund Program, a ``consortium'' is a group of two or more health 
care provider sites that request support through a single application. 
Consortia may include health care providers who are not eligible for 
support under the Healthcare Connect Fund Program, but such health care 
providers cannot receive support for their expenses and must 
participate pursuant to the cost allocation guidelines in Sec.  
54.617(d).
    (b) Limitation on participation of non-rural health care provider 
sites in a consortium. An eligible non-rural health care provider site 
may receive universal service support only as part of a consortium that 
includes more than 50 percent eligible rural health care provider 
sites. The majority-rural consortia percentage requirement will 
increase by 5 percent for the following funding year (up to a maximum 
of 75 percent) if the Commission must prioritize funding for a given 
year because Rural Health Care Program demand exceeds the funding cap.
    (c) Limitation on large non-rural hospitals. Each eligible non-
rural public or non-profit hospital site with 400 or more licensed 
patient beds may receive no more than $30,000 per year in Healthcare 
Connect Fund Program support for eligible recurring charges and no more 
than $70,000 in Healthcare Connect Fund Program support every five 
years for eligible nonrecurring charges, exclusive in both cases of 
costs shared by the network.


Sec.  54.608  Eligible service providers.

    For purposes of the Healthcare Connect Fund Program, eligible 
service providers shall include any provider of equipment, facilities, 
or services that is eligible for support under the Healthcare Connect 
Fund Program.


Sec.  54.609  Designation of Consortium Leader.

    (a) Identifying a Consortium Leader. Each consortium seeking 
support under the Healthcare Connect Fund Program must identify an 
entity or organization that will lead the consortium (the ``Consortium 
Leader'').
    (b) Consortium Leader eligibility. The Consortium Leader may be the 
consortium itself (if it is a distinct legal entity); an eligible 
health care provider participating in the consortium; or a state 
organization, public sector (governmental) entity (including a Tribal 
government entity), or non-profit entity that is ineligible for 
Healthcare Connect Fund Program support.

[[Page 54982]]

Ineligible state organizations, public sector entities, or non-profit 
entities may serve as Consortium Leaders or provide consulting 
assistance to consortia only if they do not participate as potential 
service providers during the competitive bidding process. An ineligible 
entity that serves as the Consortium Leader must pass on the full value 
of any discounts, funding, or other program benefits secured to the 
consortium members that are eligible health care providers.
    (c) Consortium Leader responsibilities. The Consortium Leader's 
responsibilities include the following:
    (1) Legal and financial responsibility for supported activities. 
The Consortium Leader is the legally and financially responsible entity 
for the activities supported by the Healthcare Connect Fund Program. By 
default, the Consortium Leader is the responsible entity if audits or 
other investigations by Administrator or the Commission reveal 
violations of the Act or Commission rules, with individual consortium 
members being jointly and severally liable if the Consortium Leader 
dissolves, files for bankruptcy, or otherwise fails to meet its 
obligations. Except for the responsibilities specifically described in 
paragraphs (c)(2) through (6) in this section, consortia may allocate 
legal and financial responsibility as they see fit, provided that this 
allocation is memorialized in a formal written agreement between the 
affected parties (i.e., the Consortium Leader, and the consortium as a 
whole and/or its individual members), and the written agreement is 
submitted to the Administrator for approval with, or prior to, the 
request for services. Any such agreement must clearly identify the 
party(ies) responsible for repayment if the Administrator, at a later 
date, seeks to recover disbursements of support to the consortium due 
to violations of program rules.
    (2) Point of contact for the FCC and Administrator. The Consortium 
Leader is responsible for designating an individual who will be the 
``Project Coordinator'' and serve as the point of contact with the 
Commission and the Administrator for all matters related to the 
consortium. The Consortium Leader is responsible for responding to 
Commission and Administrator inquiries on behalf of the consortium 
members throughout the application, funding, invoicing, and post-
invoicing period.
    (3) Typical applicant functions, including forms and 
certifications. The Consortium Leader is responsible for submitting 
program forms and required documentation and ensuring that all 
information and certifications submitted are true and correct. The 
Consortium Leader must also collect and retain a Letter of Agency (LOA) 
from each member, pursuant to Sec.  54.610.
    (4) Competitive bidding and cost allocation. The Consortium Leader 
is responsible for ensuring that the competitive bidding process is 
fair and open and otherwise complies with Commission requirements. If 
costs are shared by both eligible and ineligible entities, the 
Consortium Leader must ensure that costs are allocated in a manner that 
ensures that only eligible entities receive the benefit of program 
discounts.
    (5) Invoicing. The Consortium Leader is responsible for notifying 
the Administrator when supported services have commenced and for 
submitting invoices to the Administrator.
    (6) Recordkeeping, site visits, and audits. The Consortium Leader 
is also responsible for compliance with the Commission's recordkeeping 
requirements and for coordinating site visits and audits for all 
consortium members.


Sec.  54.610  Letters of agency (LOA).

    (a) Authorizations. Under the Healthcare Connect Fund Program, the 
Consortium Leader must obtain the following authorizations:
    (1) Prior to the submission of the request for services, the 
Consortium Leader must obtain authorization, the necessary 
certifications, and any supporting documentation from each consortium 
member to permit the Consortium Leader to submit the request for 
services and prepare and post the request for proposal on behalf of the 
member.
    (2) Prior to the submission of the funding request, the Consortium 
Leader must secure authorization, the necessary certifications, and any 
supporting documentation from each consortium member to permit the 
Consortium Leader to submit the funding request and manage invoicing 
and payments on behalf of the member.
    (b) Optional two-step process. The Consortium Leader may secure 
both required authorizations from each consortium member in either a 
single LOA or in two separate LOAs.
    (c) Required information in a LOA. (1) An LOA must include, at a 
minimum, the name of the entity filing the application (i.e., lead 
applicant or Consortium Leader); the name of the entity authorizing the 
filing of the application (i.e., the participating health care 
provider/consortium member); the physical location of the health care 
provider/consortium member site(s); the relationship of each site 
seeking support to the lead entity filing the application; the specific 
timeframe the LOA covers; the signature, title and contact information 
(including phone number, mailing address, and email address) of an 
official who is authorized to act on behalf of the health care 
provider/consortium member; the signature date; and the type of 
services covered by the LOA.
    (2) For health care providers located on Tribal lands, if the 
health care facility is a contract facility that is run solely by the 
tribe, the appropriate Tribal leader, such as the Tribal chairperson, 
president, or governor, shall also sign the LOA, unless the health care 
responsibilities have been duly delegated to another Tribal government 
representative.


Sec.  54.611  Health care provider contribution.

    (a) Health care provider contribution. All health care providers 
receiving support under the Healthcare Connect Fund Program shall 
receive a 65 percent discount on the cost of eligible expenses and 
shall be required to contribute 35 percent of the total cost of all 
eligible expenses.
    (b) Limits on eligible sources of health care provider 
contribution. Only funds from eligible sources may be applied toward 
the health care provider's required contribution.
    (1) Eligible sources include the applicant or eligible health care 
provider participants; state grants, appropriations, or other sources 
of state funding; federal grants, loans, appropriations except for 
other federal universal service funding, or other sources of federal 
funding; Tribal government funding; and other grants, including private 
grants.
    (2) Ineligible sources include (but are not limited to) in-kind or 
implied contributions from health care providers; direct payments from 
service providers, including contractors and consultants to such 
entities; and for-profit entities.
    (c) Disclosure of health care provider contribution source. Prior 
to receiving support, applicants are required to identify with 
specificity their sources of funding for their contribution of eligible 
expenses.
    (d) Future revenues from excess capacity as source of health care 
provider contribution. A consortium applicant that receives support for 
participant-owned network facilities under Sec.  54.614 may use future 
revenues from excess capacity as a source for the required health care 
provider

[[Page 54983]]

contribution, subject to the following limitations:
    (1) The consortium's selection criteria and evaluation for ``cost-
effectiveness,'' pursuant to Sec.  54.622(g)(1), cannot provide a 
preference to bidders that offer to construct excess capacity;
    (2) The applicant must pay the full amount of the additional costs 
for excess capacity facilities that will not be part of the supported 
health care network;
    (3) The additional cost of constructing excess capacity facilities 
may not count toward a health care provider's required contribution;
    (4) The inclusion of excess capacity facilities cannot increase the 
funded cost of the dedicated health care network in any way;
    (5) An eligible health care provider (typically the consortium, 
although it may be an individual health care provider participating in 
the consortium) must retain ownership of the excess capacity 
facilities. It may make the facilities available to third parties only 
under an indefeasible right of use (IRU) or lease arrangement. The 
lease or IRU between the participant and the third party must be an 
arm's length transaction. To ensure that this is an arm's length 
transaction, neither the service provider that installs the excess 
capacity facilities nor its affiliate is eligible to enter into an IRU 
or lease with the participant;
    (6) Any amount prepaid for use of the excess capacity facilities 
(IRU or lease) must be placed in an escrow account. The participant can 
then use the escrow account as an eligible source of funds for the 
participant's 35 percent contribution to the project; and
    (7) All revenues from use of the excess capacity facilities by the 
third party must be used for the health care provider contribution or 
for the sustainability of the health care network supported by the 
Healthcare Connect Fund Program. Network costs that may be funded with 
any additional revenues that remain will include: Administration costs, 
equipment, software, legal fees, or other costs not covered by the 
Healthcare Connect Fund Program, as long as they are relevant to 
sustaining the network.


Sec.  54.612  Eligible services.

    (a) Eligible services. Subject to the provisions of Sec. Sec.  
54.600 through 54.602 and 54.607 through 54.633, eligible health care 
providers may request support under the Healthcare Connect Fund Program 
for any advanced telecommunications or information service that enables 
health care providers to post their own data, interact with stored 
data, generate new data, or communicate, by providing connectivity over 
private dedicated networks or the public internet for the provision of 
health information technology.
    (b) Eligibility of dark fiber. A consortium of eligible health care 
providers may receive support for ``dark'' fiber where the customer, 
not the service provider, provides the modulating electronics, subject 
to the following limitations:
    (1) Support for recurring charges associated with dark fiber is 
only available once the dark fiber is ``lit'' and actually being used 
by the health care provider. Support for non-recurring charges for dark 
fiber is only available for fiber lit within the same funding year, but 
applicants may receive up to a one-year extension to light fiber, 
consistent with Sec.  54.626(b), if they provide documentation to the 
Administrator that construction was unavoidably delayed due to weather 
or other reasons.
    (2) Requests for proposals that solicit dark fiber solutions must 
also solicit proposals to provide the needed services over lit fiber 
over a time period comparable to the duration of the dark fiber lease 
or indefeasible right of use.
    (3) If an applicant intends to request support for equipment and 
maintenance costs associated with lighting and operating dark fiber, it 
must include such elements in the same request for proposal as the dark 
fiber so that the Administrator can review all costs associated with 
the fiber when determining whether the applicant chose the most cost-
effective bid.
    (c) Dark and lit fiber maintenance costs. (1) Both individual and 
consortium applicants may receive support for recurring maintenance 
costs associated with leases of dark or lit fiber.
    (2) Consortium applicants may receive support for upfront payments 
for maintenance costs associated with leases of dark or lit fiber, 
subject to the limitations in Sec.  54.616.
    (d) Reasonable and customary installation charges. Eligible health 
care providers may obtain support for reasonable and customary 
installation charges for eligible services, up to an undiscounted cost 
of $5,000 per eligible site.
    (e) Upfront charges for service provider deployment of new or 
upgraded facilities. (1) Participants may obtain support for upfront 
charges for service provider deployment of new or upgraded facilities 
to serve eligible sites.
    (2) Support is available to extend service provider deployment of 
facilities up to the ``demarcation point,'' which is the boundary 
between facilities owned or controlled by the service provider, and 
facilities owned or controlled by the customer.


Sec.  54.613  Eligible equipment.

    (a) Both individual and consortium applicants may receive support 
for network equipment necessary to make functional an eligible service 
supported under the Healthcare Connect Fund Program.
    (b) Consortium applicants may also receive support for network 
equipment necessary to manage, control, or maintain an eligible service 
or a dedicated health care broadband network. Support for network 
equipment is not available for networks that are not dedicated to 
health care.
    (c) Network equipment eligible for support includes the following:
    (1) Equipment that terminates a carrier's or other provider's 
transmission facility and any router/switch that is directly connected 
to either the facility or the terminating equipment. This includes 
equipment required to light dark fiber, or equipment necessary to 
connect dedicated health care broadband networks or individual health 
care providers to middle mile or backbone networks;
    (2) Computers, including servers, and related hardware (e.g., 
printers, scanners, laptops) that are used exclusively for network 
management;
    (3) Software used for network management, maintenance, or other 
network operations, and development of software that supports network 
management, maintenance, and other network operations;
    (4) Costs of engineering, furnishing (i.e., as delivered from the 
manufacturer), and installing network equipment; and
    (5) Equipment that is a necessary part of health care provider-
owned network facilities.
    (d) Additional limitations: Support for network equipment is 
limited to equipment:
    (1) Purchased or leased by a Consortium Leader or eligible health 
care provider; and
    (2) Used for health care purposes.


Sec.  54.614  Eligible participant-constructed and owned network 
facilities for consortium applicants.

    (a) Subject to the funding limitations of this subsection and the 
following restrictions, consortium applicants may receive support for 
network facilities that will be constructed and owned by the consortium 
(if the consortium is an

[[Page 54984]]

eligible health care provider) or eligible health care providers within 
the consortium. Subject to the funding limitations under Sec. Sec.  
54.616 and 54.619 and the following restrictions, consortium applicants 
may receive support for network facilities that will be constructed and 
owned by the consortium (if the consortium is an eligible health care 
provider) or eligible health care providers within the consortium.
    (1) Consortia seeking support to construct and own network 
facilities are required to solicit bids for both:
    (i) Services provided over third-party networks; and
    (ii) Construction of participant-owned network facilities, in the 
same request for proposals. Requests for proposals must provide 
sufficient detail so that cost-effectiveness can be evaluated over the 
useful life of the proposed network facility to be constructed.
    (2) Support for participant-constructed and owned network 
facilities is only available where the consortium demonstrates that 
constructing its own network facilities is the most cost-effective 
option after competitive bidding, pursuant to Sec.  54.622(g)(1).
    (b) [Reserved]


Sec.  54.615  Off-site data centers and off-site administrative 
offices.

    (a) The connections and network equipment associated with off-site 
data centers and off-site administrative offices used by eligible 
health care providers for their health care purposes are eligible for 
support under the Healthcare Connect Fund Program, subject to the 
conditions and restrictions set forth in paragraph (b) in this section.
    (b) Conditions and restrictions. The following conditions and 
restrictions apply to support provided under this section.
    (1) Connections eligible for support are only those that are 
between:
    (i) Eligible health care provider sites and off-site data centers 
or off-site administrative offices;
    (ii) Two off-site data centers;
    (iii) Two off-site administrative offices;
    (iv) An off-site data center and the public internet or another 
network;
    (v) An off-site administrative office and the public internet or 
another network; or
    (vi) An off-site administrative office and an off-site data center.
    (2) The supported connections and network equipment must be used 
solely for health care purposes.
    (3) The supported connections and network equipment must be 
purchased by an eligible health care provider or a public or non-profit 
health care system that owns and operates eligible health care provider 
sites.
    (4) If traffic associated with one or more ineligible health care 
provider sites is carried by the supported connection and/or network 
equipment, the ineligible health care provider sites must allocate the 
cost of that connection and/or equipment between eligible and 
ineligible sites, consistent with the ``fair share'' principles set 
forth in Sec.  54.617(d)(1).


Sec.  54.616  Upfront payments.

    (a) Upfront payments include all non-recurring costs for services, 
equipment, or facilities, other than reasonable and customary 
installation charges of up to $5,000.
    (b) The following limitations apply to all upfront payments:
    (1) Upfront payments associated with services providing a bandwidth 
of less than 1.5 Mbps (symmetrical) are not eligible for support; and
    (2) Only consortium applicants are eligible for support for upfront 
payments.
    (c) The following limitations apply if a consortium makes a request 
for support for upfront payments that exceeds, on average, $50,000 per 
eligible site in the consortium:
    (1) The support for the upfront payments must be prorated over at 
least three years; and
    (2) The upfront payments must be part of a multi-year contract.


Sec.  54.617  Ineligible expenses.

    (a) Equipment or services not directly associated with eligible 
services. Expenses associated with equipment or services that are not 
necessary to make an eligible service functional, or to manage, 
control, or maintain an eligible service or a dedicated health care 
broadband network are ineligible for support. For purposes of paragraph 
(a) of this section, examples of ineligible expenses include:
    (1) Costs associated with general computing, software, 
applications, and internet content development are not supported, 
including the following:
    (i) Computers, including servers, and related hardware (e.g., 
printers, scanners, laptops), unless used exclusively for network 
management, maintenance, or other network operations;
    (ii) End user wireless devices, such as smartphones and tablets;
    (iii) Software, unless used for network management, maintenance, or 
other network operations;
    (iv) Software development (excluding development of software that 
supports network management, maintenance, and other network 
operations);
    (v) Helpdesk equipment and related software, or services, unless 
used exclusively in support of eligible services or equipment;
    (vi) Web server hosting;
    (vii) website portal development;
    (viii) Video/audio/web conferencing equipment or services; and
    (ix) Continuous power source.
    (2) Costs associated with medical equipment (hardware and 
software), and other general health care provider expenses are not 
supported, including the following:
    (i) Clinical or medical equipment;
    (ii) Telemedicine equipment, applications, and software;
    (iii) Training for use of telemedicine equipment;
    (iv) Electronic medical records systems; and
    (v) Electronic records management and expenses.
    (b) Inside wiring/internal connections. Expenses associated with 
inside wiring or internal connections are ineligible for support under 
the Healthcare Connect Fund Program.
    (c) Administrative expenses. Administrative expenses are not 
eligible for support under the Healthcare Connect Fund Program. For 
purposes of paragraph (c) of this section, ineligible administrative 
expenses include, but are not limited to, the following expenses:
    (1) Personnel costs (including salaries and fringe benefits), 
except for personnel expenses in a consortium application that directly 
relate to designing, engineering, installing, constructing, and 
managing a dedicated broadband network. Ineligible costs of this 
category include, for example, personnel to perform program management 
and coordination, program administration, and marketing;
    (2) Travel costs, except for travel costs that are reasonable and 
necessary for network design or deployment and that are specifically 
identified and justified as part of a competitive bid for a 
construction project;
    (3) Legal costs;
    (4) Training, except for basic training or instruction directly 
related to and required for broadband network installation and 
associated network operations;
    (5) Program administration or technical coordination (e.g., 
preparing application materials, obtaining letters of agency, preparing 
requests for proposals, negotiating with service providers, reviewing 
bids, and working with the Administrator) that involves anything other 
than the design, engineering, operations, installation, or construction 
of the network;

[[Page 54985]]

    (6) Administration and marketing costs (e.g., administrative costs; 
supplies and materials, except as part of network installation/
construction; marketing studies, marketing activities, or outreach to 
potential network members; and evaluation and feedback studies);
    (7) Billing expenses (e.g., expenses that service providers may 
charge for allocating costs to each health care provider in a network);
    (8) Helpdesk expenses (e.g., equipment and related software, or 
services); and
    (9) Technical support services that provide more than basic 
maintenance.
    (d) Cost allocation for ineligible sites, services, or equipment. 
(1) Ineligible sites. Eligible health care provider sites may share 
expenses with ineligible sites, as long as the ineligible sites pay 
their fair share of the expenses. An applicant may seek support for 
only the portion of a shared eligible expense attributable to eligible 
health care provider sites. To receive support, the applicant must 
ensure that ineligible sites pay their fair share of the expense. The 
fair share is determined as follows:
    (i) If the service provider charges a separate and independent 
price for each site, an ineligible site must pay the full undiscounted 
price.
    (ii) If there is no separate and independent price for each site, 
the applicant must prorate the undiscounted price for the ``shared'' 
service, equipment, or facility between eligible and ineligible sites 
on a proportional fully-distributed basis. Applicants must make this 
cost allocation using a method that is based on objective criteria and 
reasonably reflects the eligible usage of the shared service, 
equipment, or facility. The applicant bears the burden of demonstrating 
the reasonableness of the allocation method chosen.
    (2) Ineligible components of a single service or piece of 
equipment. Applicants seeking support for a service or piece of 
equipment that includes an ineligible component must explicitly request 
in their requests for proposals that service providers include pricing 
for a comparable service or piece of equipment that is comprised of 
only eligible components. If the selected service provider also submits 
a price for the eligible component on a stand-alone basis, the support 
amount is calculated based on the stand-alone price of the eligible 
component. If the service provider does not offer the eligible 
component on a stand-alone basis, the full price of the entire service 
or piece of equipment must be taken into account, without regard to the 
value of the ineligible components, when determining the most cost-
effective bid.
    (3) Written description. Applicants must submit a written 
description of their allocation method(s) to the Administrator with 
their funding requests.
    (4) Written agreement. If ineligible entities participate in a 
network, the allocation method must be memorialized in writing, such as 
a formal agreement among network members, a master services contract, 
or for smaller consortia, a letter signed and dated by all (or each) 
ineligible entity and the Consortium Leader.


Sec.  54.618  Data collection and reporting.

    (a) Each applicant must file an annual report with the 
Administrator on or before September 30 for the preceding funding year, 
with the information and in the form specified by the Wireline 
Competition Bureau.
    (b) Each applicant must file an annual report for each funding year 
in which it receives support from the Healthcare Connect Fund Program.
    (c) For consortia that receive large upfront payments, the 
reporting requirement extends for the life of the supported facility.

General Provisions


Sec.  54.619  Cap.

    (a) Amount of the annual cap. The aggregate annual cap on federal 
universal service support for health care providers shall be $571 
million per funding year, of which up to $150 million per funding year 
will be available to support upfront payments and multi-year 
commitments under the Healthcare Connect Fund Program.
    (1) Inflation increase. In funding year 2018 and subsequent funding 
years, the $571 million cap on federal universal support in the Rural 
Health Care Program shall be increased annually to take into account 
increases in the rate of inflation as calculated in paragraph (a)(2) in 
this section. In funding year 2020 and subsequent funding years, the 
$150 million cap on multi-year commitments and upfront payments in the 
Healthcare Connect Fund Program shall also be increased annually to 
take into account increases in the rate of inflation as calculated in 
paragraph (a)(2) in this section.
    (2) Increase calculation. To measure increases in the rate of 
inflation for the purposes of paragraph (a)(1) in this section, the 
Commission shall use the Gross Domestic Product Chain-type Price Index 
(GDP-CPI). To compute the annual increase as required by paragraph 
(a)(1) in this section, the percentage increase in the GDP-CPI from the 
previous year will be used. For instance, the annual increase in the 
GDP-CPI from 2017 to 2018 would be used for the 2018 funding year. The 
increase shall be rounded to the nearest 0.1 percent by rounding 0.05 
percent and above to the next higher 0.1 percent. This percentage 
increase shall be added to the amount of the annual Rural Health Care 
Program funding cap and the internal cap on multi-year commitments and 
upfront payments in the Healthcare Connect Fund Program from the 
previous funding year. If the yearly average GDP-CPI decreases or stays 
the same, the annual Rural Health Care Program funding cap and the 
internal cap on multi-year commitments and upfront payments in the 
Healthcare Connect Fund Program shall remain the same as the previous 
year.
    (3) Public notice. After calculating the annual Rural Health Care 
Program funding cap and the internal cap on multi-year commitments and 
upfront payments in the Healthcare Connect Fund Program based on the 
GDP-CPI, the Wireline Competition Bureau shall publish a public notice 
in the Federal Register within 60 days announcing any increase of the 
annual funding cap based on the rate of inflation.
    (4) Amount of unused funds. All unused collected funds shall be 
carried forward into subsequent funding years for use in the Rural 
Health Care Program in accordance with the public interest and 
notwithstanding the annual cap. The Administrator, on a quarterly 
basis, shall report to the Commission on unused Rural Health Care 
Program funding from prior years.
    (5) Application of unused funds. On an annual basis, in the second 
quarter of each calendar year, all unused collected funds from prior 
years shall be available for use in the next full funding year of the 
Rural Health Care Program notwithstanding the annual cap as described 
in paragraph (a) in this section. The Wireline Competition Bureau, in 
consultation with the Office of the Managing Director, shall determine 
the proportion of unused funding for use in the Rural Health Care 
Program in accordance with the public interest to either satisfy demand 
notwithstanding the annual cap, reduce collections for the Rural Health 
Care Program, or to hold in reserve to address contingencies for 
subsequent funding years. The Wireline Competition Bureau shall direct 
the Administrator to carry out the necessary actions for the use of 
available funds consistent with the direction specified in this 
section.
    (b) [Reserved]

[[Page 54986]]

Sec.  54.620  Annual filing requirements and commitments.

    (a) Annual filing requirement. Health care providers seeking 
support under the RHC Program shall file new funding requests for each 
funding year consistent with the filing periods established under this 
subpart, except for health care providers who have received a multi-
year funding commitment in this section.
    (b) Long-term contracts. If health care providers enter into long-
term contracts for eligible services, the Administrator shall only 
commit funds to cover the portion of such a long-term contract 
scheduled to be delivered during the funding year for which universal 
service support is sought, except for multi-year funding commitments as 
described in this section.
    (c) Multi-year commitments under the Healthcare Connect Fund 
Program. Participants in the Healthcare Connect Fund Program are 
permitted to enter into multi-year contracts for eligible expenses and 
may receive funding commitments from the Administrator for a period 
that covers up to three years of funding. If a long-term contract 
covers a period of more than three years, the applicant may also have 
the contract designated as ``evergreen'' under Sec.  54.622(i)(3), 
which will allow the applicant to re-apply for funding under the 
contract after three years without having to undergo additional 
competitive bidding.


Sec.  54.621  Filing window for requests and prioritization of support.

    (a) Filing window for requests. (1) The Administrator shall open an 
initial application filing window with an end date no later than 90 
days prior to the start of the funding year (i.e., no later than April 
1). Prior to announcing the initial opening and closing dates, the 
Administrator shall seek the approval of the proposed dates from the 
Chief of the Wireline Competition Bureau.
    (2) The Administrator, after consultation with the Wireline 
Competition Bureau, may implement such additional filing periods as it 
deems necessary. To the extent that the Administrator opens an 
additional filing period, it shall provide notice and include in that 
notice or soon thereafter the amount of remaining available funding.
    (3) The Administrator shall treat all health care providers filing 
an application within a filing window period as if their applications 
were simultaneously received. All funding requests submitted outside of 
a filing window will not be accepted unless and until the Administrator 
opens another filing window.
    (b) Prioritization of support. The Administrator shall act in 
accordance with this section when a filing window period for the 
Telecommunications Program and the Healthcare Connect Fund Program, as 
described in paragraph (a) in this section, is in effect. When a filing 
period described in paragraph (a) in this section closes, the 
Administrator shall calculate the total demand for Telecommunications 
Program and Healthcare Connect Fund Program support submitted by all 
applicants during the filing window period. If the total demand during 
the filing window period exceeds the total remaining support available 
for the funding year, then the Administrator shall distribute the 
available funds consistent with the following priority schedule:

                                Table 1 to Paragraph (b)--Prioritization Schedule
----------------------------------------------------------------------------------------------------------------
                                           In a medically  underserved area/
Health care provider site is located in:          population (MUA/P)                     Not in MUA/P
----------------------------------------------------------------------------------------------------------------
Extremely Rural Tier (counties entirely   Priority 1........................  Priority 4.
 outside of a Core Based Statistical
 Area).
Rural Tier (census tracts within a Core   Priority 2........................  Priority 5.
 Based Statistical Area that does not
 have an urban area or urban cluster
 with a population equal to or greater
 than 25,000).
Less Rural Tier (census tracts within a   Priority 3........................  Priority 6.
 Core Based Statistical Area with an
 urban area or urban cluster with a
 population equal to or greater than
 25,000, but where the census tract does
 not contain any part of an urban area
 or urban cluster with population equal
 to or greater than 25,000).
Non-Rural Tier (all other non-rural       Priority 7........................  Priority 8.
 areas).
----------------------------------------------------------------------------------------------------------------

    (1) Application of prioritization schedule. The Administrator shall 
fully fund all eligible requests falling under the first prioritization 
category before funding requests in the next lower prioritization 
category. The Administrator shall continue to process all funding 
requests by prioritization category until there are no available funds 
remaining. If there is insufficient funding to fully fund all requests 
in a particular prioritization category, then the Administrator will 
pro-rate the available funding among all eligible requests in that 
prioritization category only pursuant to the proration process 
described in paragraph (b)(2) in this section.
    (2) Pro-rata reductions. The Administrator shall act in accordance 
with this section when a filing window period for the 
Telecommunications Program and the Healthcare Connect Fund Program, as 
described in paragraph (a) in this section, is in effect. When a filing 
window period described in paragraph (a) in this section closes, the 
Administrator shall calculate the total demand for Telecommunications 
Program and Healthcare Connect Fund Program support submitted by all 
applicants during the filing window period. If the total demand during 
a filing window period exceeds the total remaining support available 
for the funding year, the Administrator shall take the following steps:
    (i) The Administrator shall divide the total remaining funds 
available for the funding year by the demand within the specific 
prioritization category to produce a pro-rata factor;
    (ii) The Administrator shall multiply the pro-rata factor by the 
total dollar amount requested by each applicant in the prioritization 
category; and
    (iii) The Administrator shall commit funds to each applicant for 
Telecommunications Program and Healthcare Connect Fund Program support 
consistent with this calculation.


Sec.  54.622  Competitive bidding requirements and exemptions.

    (a) Competitive bidding requirement. All applicants are required to 
engage in a competitive bidding process for supported services, 
facilities, or equipment, as applicable, consistent with the 
requirements set forth in this section and any additional applicable 
state, Tribal, local, or other procurement requirements, unless they 
qualify for an exemption listed in paragraph (j) in this section. In 
addition, applicants may engage in competitive bidding even if they 
qualify for an exemption.

[[Page 54987]]

Applicants who utilize a competitive bidding exemption may proceed 
directly to filing a funding request as described in Sec.  54.623.
    (b) Fair and open process. (1) Applicants participating in the 
Telecommunications Program or Healthcare Connect Fund Program must 
conduct a fair and open competitive bidding process. The following 
actions are necessary to satisfy the ``fair and open'' competitive 
standard in the Telecommunications Program and the Healthcare Connect 
Fund Program:
    (i) All potential bidders and service providers must have access to 
the same information and must be treated in the same manner throughout 
the procurement process.
    (ii) Service providers who intend to bid on supported services many 
not simultaneously help the applicant complete its request for proposal 
(RFP) or Request for Services form.
    (iii) Service providers who have submitted a bid to provide 
supported services, equipment, or facilities to a health care provider 
may not simultaneously help the health care provider evaluate submitted 
bids or choose a winning bid.
    (iv) Applicants must respond to all service providers that have 
submitted questions or proposals during the competitive bidding 
process.
    (v) All applicants and service providers must comply with any 
applicable state, Tribal, or local procurement laws, in addition to the 
Commission's competitive bidding requirements. The competitive bidding 
requirements in this section are not intended to preempt such state, 
Tribal, or local requirements.
    (c) Selecting a cost-effective service. In selecting a provider of 
eligible services, the applicant shall carefully consider all bids 
submitted and must select the most cost-effective means of meeting its 
specific health care needs. ``Cost-effective'' is defined as the method 
that costs the least after consideration of the features, quality of 
transmission, reliability, and other factors that the health care 
provider deems relevant to choosing a method of providing the required 
health care services. In the Healthcare Connect Fund Program, when 
choosing the most ``cost-effective'' bid, price must be a primary 
factor, but need not be the only primary factor. A non-price factor may 
receive an equal weight to price, but may not receive a greater weight 
than price.
    (d) Bid evaluation criteria. Applicants must develop weighted 
evaluation criteria (e.g., a scoring matrix) that demonstrates how the 
applicant will choose the most cost-effective bid before submitting its 
request for services. The applicant must specify on its bid evaluation 
worksheet and/or scoring matrix the requested services for which it 
seeks bids, the information provided to bidders to allow bidders to 
reasonably determine the needs of the applicant, its minimum 
requirements for the developed weighted evaluation criteria, and each 
service provider's proposed service levels for the criteria. The 
applicant must also specify the disqualification factors, if any, that 
it will use to remove bids or bidders from further consideration. After 
reviewing the bid submissions and identifying the bids that satisfy the 
applicant's specific needs, the applicant must then select the service 
provider that offers the most cost-effective service.
    (e) Request for Services. Applicants must submit the following 
documents to the Administrator in order to initiate competitive 
bidding:
    (1) Request for Services, including certifications. The applicant 
must submit a Request for Services and make the following 
certifications as part of its Request for Services:
    (i) The health care provider seeking supported services is a public 
or nonprofit entity that falls within one of the seven categories set 
forth in the definition of health care provider, listed in Sec.  
54.600;
    (ii) The health care provider seeking supported services is 
physically located in a rural area as defined in Sec.  54.600, or is a 
member of a Healthcare Connect Fund Program consortium which satisfies 
the rural health care provider composition requirements set forth in 
Sec.  54.607(b);
    (iii) The person signing the application is authorized to submit 
the application on behalf of the health care provider or consortium 
applicant;
    (iv) The person signing the application has examined the Request 
for Services and all attachments, and to the best of his or her 
knowledge, information, and belief, all statements contained in the 
request are true;
    (v) The applicant has complied with any applicable state, Tribal, 
or local procurement rules;
    (vi) All requested Rural Health Care Program support will be used 
solely for purposes reasonably related to the provision of health care 
service or instruction that the health care provider is legally 
authorized to provide under the law of the state in which the services 
are provided;
    (vii) The supported services will not be sold, resold, or 
transferred in consideration for money or any other thing of value;
    (viii) The applicant satisfies all of the requirements under 
section 254 of the Act and applicable Commission rules; and
    (ix) The applicant has reviewed all applicable requirements for the 
Telecommunications Program or the Healthcare Connect Fund Program, as 
applicable, and will comply with those requirements.
    (2) Aggregated purchase details. If the service or services are 
being purchased as part of an aggregated purchase with other entities 
or individuals, the full details of any such arrangement, including the 
identities of all co-purchasers and the portion of the service or 
services being purchased by the health care provider, must be 
submitted.
    (3) Bid evaluation criteria. Requirements for bid evaluation 
criteria are described in paragraph (d) in this section and must be 
included with the applicant's Request for Services.
    (4) Declaration of Assistance. All applicants must submit a 
``Declaration of Assistance'' with their Request for Services. In the 
Declaration of Assistance, the applicant must identify each and every 
consultant, service provider, and other outside expert, whether paid or 
unpaid, who aided in the preparation of its applications. The applicant 
must also describe the nature of the relationship it has with each 
consultant, service provider, or other outside expert providing such 
assistance.
    (5) Request for proposal (if applicable). (i) Any applicant may use 
an RFP. Applicants who use an RFP must submit the RFP and any 
additional relevant bidding information to the Administrator with its 
Request for Services.
    (ii) An applicant must submit an RFP:
    (A) If it is required to issue an RFP under applicable State, 
Tribal, or local procurement rules or regulations;
    (B) If the applicant is a consortium seeking more than $100,000 in 
program support during the funding year, including applications that 
seek more than $100,000 in program support for a multi-year commitment; 
or
    (C) If the applicant is a consortium seeking support for 
participant-constructed and owned network facilities.
    (iii) RFP requirements.
    (A) An RFP must provide sufficient information to enable an 
effective competitive bidding process, including describing the health 
care provider's service needs and defining the scope of the project and 
network costs (if applicable).

[[Page 54988]]

    (B) An RFP must specify the time period during which bids will be 
accepted.
    (C) An RFP must include the bid evaluation criteria described in 
paragraph (d) in this section, and solicit sufficient information so 
that the criteria can be applied effectively.
    (D) Consortium applicants seeking support for long-term capital 
investments whose useful life extends beyond the time period of the 
funding commitment (e.g., facilities constructed and owned by the 
applicant, fiber indefeasible rights of use) must seek bids in the same 
RFP from service providers who propose to meet those needs via services 
provided over service provider-owned facilities, for a time period 
comparable to the life of the proposed capital investment.
    (E) Applicants may prepare RFPs in any manner that complies with 
the rules in this subpart and any applicable state, Tribal, or local 
procurement rules or regulations.
    (6) Additional requirements for Healthcare Connect Fund Program 
consortium applicants.
    (i) Network plan. Consortium applicants must submit a narrative 
describing specific elements of their network plan with their Request 
for Services. Consortia applicants are required to use program support 
for the purposes described in their narrative. The required elements of 
the narrative include:
    (A) Goals and objectives of the network;
    (B) Strategy for aggregating the specific needs of health care 
providers (including providers that serve rural areas) within a state 
or region;
    (C) Strategy for leveraging existing technology to adopt the most 
efficient and cost-effective means of connecting those providers;
    (D) How the supported network will be used to improve or provide 
health care delivery;
    (E) Any previous experience in developing and managing health 
information technology (including telemedicine) programs; and
    (F) A project management plan outlining the project's leadership 
and management structure, and a work plan, schedule, and budget.
    (ii) Letters of agency (LOA). Consortium applicants must submit 
LOAs pursuant to Sec.  54.610.
    (f) Public posting by the Administrator. The Administrator shall 
post on its website the following competitive bidding documents, as 
applicable:
    (1) Request for Services;
    (2) Bid evaluation criteria;
    (3) RFP; and
    (4) Network plans for Healthcare Connect Fund Program applicants.
    (g) 28-day waiting period. After posting the documents described in 
paragraph (f) in this section, as applicable, on its website, the 
Administrator shall send confirmation of the posting to the applicant. 
The applicant shall wait at least 28 days from the date on which its 
competitive bidding documents are posted on the Administrator's website 
before selecting and committing to a service provider. The confirmation 
from the Administrator shall include the date after which the applicant 
may sign a contract with its chosen service provider(s).
    (1) Selection of the most ``cost-effective'' bid and contract 
negotiation. Each applicant is required to certify to the Administrator 
that the selected bid is, to the best of the applicant's knowledge, the 
most cost-effective option available. Applicants are required to submit 
the documentation, identified in Sec.  54.623, to support their 
certifications.
    (2) Applicants who plan to request evergreen status under this 
section must enter into a contract that identifies both parties, is 
signed and dated by the health care provider or Consortium Leader after 
the 28-day waiting period expires, and specifies the type, term, and 
cost of service(s).
    (h) Gift restrictions. (1) Subject to paragraphs (h)(3) and (4) in 
this section, an eligible health care provider or consortium that 
includes eligible health care providers, may not directly or indirectly 
solicit or accept any gift, gratuity, favor, entertainment, loan, or 
any other thing of value from a service provider participating in or 
seeking to participate in the Rural Health Care Program. No such 
service provider shall offer or provide any such gift, gratuity, favor, 
entertainment, loan, or other thing of value except as otherwise 
provided in this section. Modest refreshments not offered as part of a 
meal, items with little intrinsic value intended solely for 
presentation, and items worth $20 or less, including meals, may be 
offered or provided, and accepted by any individual or entity subject 
to this rule, if the value of these items received by any individual 
does not exceed $50 from any one service provider per funding year. The 
$50 amount for any service provider shall be calculated as the 
aggregate value of all gifts provided during a funding year by the 
individuals specified in paragraph (h)(2)(ii) in this section.
    (2) For purposes of this paragraph:
    (i) The terms ``health care provider'' or ``consortium'' shall 
include all individuals who are on the governing boards of such 
entities and all employees, officers, representatives, agents, 
consultants, or independent contractors of such entities involved on 
behalf of such health care provider or consortium with the Rural Health 
Care Program, including individuals who prepare, approve, sign, or 
submit Rural Health Care Program applications, or other forms related 
to the Rural Health Care Program, or who prepare bids, communicate, or 
work with Rural Health Care Program service providers, consultants, or 
with the Administrator, as well as any staff of such entities 
responsible for monitoring compliance with the Rural Health Care 
Program; and
    (ii) The term ``service provider'' includes all individuals who are 
on the governing boards of such an entity (such as members of the board 
of directors), and all employees, officers, representatives, agents, 
consultants, or independent contractors of such entities.
    (3) The restrictions set forth in this paragraph shall not be 
applicable to the provision of any gift, gratuity, favor, 
entertainment, loan, or any other thing of value, to the extent given 
to a family member or a friend working for an eligible health care 
provider or consortium that includes eligible health care providers, 
provided that such transactions:
    (i) Are motivated solely by a personal relationship;
    (ii) Are not rooted in any service provider business activities or 
any other business relationship with any such eligible health care 
provider; and
    (iii) Are provided using only the donor's personal funds that will 
not be reimbursed through any employment or business relationship.
    (4) Any service provider may make charitable donations to an 
eligible health care provider or consortium that includes eligible 
health care providers in the support of its programs as long as such 
contributions are not directly or indirectly related to the Rural 
Health Care Program procurement activities or decisions and are not 
given by service providers to circumvent competitive bidding and other 
Rural Health Care Program rules, including those in Sec.  54.611(a), 
requiring health care providers under the Healthcare Connect Fund 
Program to contribute 35 percent of the total cost of all eligible 
expenses.
    (i) Exemptions to the competitive bidding requirements--(1) 
Government Master Service Agreement (MSA). Eligible health care 
providers that seek support for services and equipment

[[Page 54989]]

purchased from MSAs negotiated by federal, state, Tribal, or local 
government entities on behalf of such health care providers and others, 
if such MSAs were awarded pursuant to applicable federal, state, 
Tribal, or local competitive bidding requirements, are exempt from the 
competitive bidding requirements under this section.
    (2) Master Service Agreements approved under the Rural Health Care 
Pilot Program or Healthcare Connect Fund Program. An eligible health 
care provider site may opt into an existing MSA approved under the 
Rural Health Care Pilot Program or Healthcare Connect Fund Program and 
seek support for services and equipment purchased from the MSA without 
triggering the competitive bidding requirements under this section, if 
the MSA was developed and negotiated in response to an RFP that 
specifically solicited proposals that included a mechanism for adding 
additional sites to the MSA.
    (3) Evergreen contracts. (i) The Administrator may designate a 
multi-year contract as ``evergreen,'' which means that the service(s) 
covered by the contract need not be re-bid during the contract term.
    (ii) A contract entered into by a health care provider or 
consortium as a result of competitive bidding may be designated as 
evergreen if it meets all of the following requirements:
    (A) Is signed by the individual health care provider or consortium 
lead entity;
    (B) Specifies the service type, bandwidth, and quantity;
    (C) Specifies the term of the contract;
    (D) Specifies the cost of services to be provided; and
    (E) Includes the physical location or other identifying information 
of the health care provider sites purchasing from the contract.
    (iii) Participants may exercise voluntary options to extend an 
evergreen contract without undergoing additional competitive bidding 
if:
    (A) The voluntary extension(s) is memorialized in the evergreen 
contract;
    (B) The decision to extend the contract occurs before the 
participant files its funding request for the funding year when the 
contract would otherwise expire; and
    (C) The voluntary extension(s) do not exceed five years in the 
aggregate.
    (4) Schools and libraries program master contracts. Subject to the 
provisions in Sec.  54.500, Sec.  54.501(c)(1), and Sec.  54.503, an 
eligible health care provider in a consortium with participants in the 
schools and libraries universal service support program and a party to 
the consortium's existing contract is exempt from the competitive 
bidding requirements if the contract was approved in the schools and 
libraries universal service support program as a master contract. The 
health care provider must comply with all Rural Health Care Program 
rules and procedures except for those applicable to competitive 
bidding.
    (5) Annual undiscounted cost of $10,000 or less. An applicant under 
the Healthcare Connect Fund Program that seeks support for $10,000 or 
less of total undiscounted eligible expenses for a single year is 
exempt from the competitive bidding requirements under this section, if 
the term of the contract is one year or less. This exemption does not 
apply to applicants under the Telecommunications Program.


Sec.  54.623  Funding requests.

    (a) Once a service provider is selected, applicants must submit a 
Request for Funding (and supporting documentation) to provide 
information about the services, equipment, or facilities selected; 
rates, service provider(s); and date(s) of service provider selection, 
as applicable.
    (1) Certifications. The applicant must provide the following 
certifications as part of its Request for Funding:
    (i) The person signing the application is authorized to submit the 
application on behalf of the health care provider or consortium.
    (ii) The applicant has examined the form and all attachments, and 
to the best of his or her knowledge, information, and belief, all 
statements of fact contained in this section are true.
    (iii) The health care provider or consortium has considered all 
bids received and selected the most cost-effective method of providing 
the requested services.
    (iv) All Rural Health Care Program support will be used only for 
eligible health care purposes.
    (v) The health care provider or consortium is not requesting 
support for the same service from both the Telecommunications Program 
and the Healthcare Connect Fund Program.
    (vi) The health care provider or consortium and/or its consultant, 
if applicable, has not solicited or accepted a gift or any other thing 
of value from a service provider participating in or seeking to 
participate in the Rural Health Care Program.
    (vii) The applicant satisfies all of the requirements under section 
254 of the Act and applicable Commission rules and understands that any 
letter from the Administrator that erroneously commits funds for the 
benefit of the applicant may be subject to rescission.
    (viii) The applicant has reviewed all applicable rules and 
requirements for the Rural Health Care Program and will comply with 
those rules and requirements.
    (ix) The applicant will retain all documentation associated with 
the applications, including all bids, contracts, scoring matrices, and 
other information associated with the competitive bidding process, and 
all billing records for services received, for a period of at least 
five years.
    (x) The consultants or third parties hired by the applicant do not 
have an ownership interest, sales commission arrangement, or other 
financial stake in the service provider chosen to provide the requested 
services, and that they have otherwise complied with the Rural Health 
Care Program rules, including the Commission's rules requiring a fair 
and open competitive bidding process.
    (xi) Additional certification for the Telecom Program. Telecom 
Program applicants must certify that the rural rate on their Request 
for Funding does not exceed the appropriate rural rate determined by 
the Administrator.
    (2) Contracts or other documentation. All applicants must submit a 
contract or other documentation, as applicable, that clearly identifies 
the service provider(s) selected and the health care provider(s) who 
will receive the services; costs for which support is being requested; 
and the term of the service agreement(s) if applicable (i.e., if 
services are not being provided on a month-to-month basis). For 
services provided under contract, the applicant must submit a copy of 
the contract signed and dated (after the Allowable Contract Selection 
Date) by the individual health care provider or Consortium Leader. If 
the services are not being provided under contract, the applicant must 
submit a bill, service offer, letter, or similar document from the 
service provider that provides the required information.
    (3) Competitive bidding documents. Applicants must submit 
documentation to support their certifications that they have selected 
the most cost-effective option, including a copy of each bid received 
(winning, losing, and disqualified), the bid evaluation criteria, and 
the following documents (as applicable): Completed bid evaluation 
worksheets or matrices; explanation for any disqualified bids; a list 
of people who evaluated bids (along with their title/role/relationship 
to the applicant organization); memos, board minutes, or similar 
documents related to the service provider selection/award; copies of 
notices to winners; and any correspondence with service providers prior 
to and during the bidding,

[[Page 54990]]

evaluation, and award phase of the process. Applicants who claim a 
competitive bidding exemption must submit relevant documentation to 
allow the Administrator to verify that the applicant is eligible for 
the claimed exemption.
    (4) Cost allocation for ineligible entities or components. Where 
applicable, applicants must submit a description of how costs will be 
allocated for ineligible entities or components, as well as any 
agreements that memorialize such arrangements with ineligible entities.
    (5) Additional documentation for Healthcare Connect Fund Program 
consortium applicants. A consortium applicant must also submit the 
following:
    (i) Any revisions to the network plan submitted with the Request 
for Services pursuant to Sec.  54.622, as necessary. If not previously 
submitted, the consortium should provide a narrative description of how 
the network will be managed, including all administrative aspects of 
the network, including, but not limited to, invoicing, contractual 
matters, and network operations. If the consortium is required to 
provide a sustainability plan as set forth in the following, the 
revised budget should include the budgetary factors discussed in the 
sustainability plan requirements.
    (ii) A list of each participating health care provider and all of 
their relevant information, including eligible (and ineligible, if 
applicable) cost information.
    (iii) Evidence of a viable source for the undiscounted portion of 
supported costs.
    (iv) Sustainability plans for applicants requesting support for 
long-term capital expenses: Consortia that seek funding to construct 
and own their own facilities or obtain indefeasible right of use or 
capital lease interests are required to submit a sustainability plan 
with their funding requests demonstrating how they intend to maintain 
and operate the facilities that are supported over the relevant time 
period. Applicants may include by reference other portions of their 
applications (e.g., project management plan, budget). The 
sustainability plan must, at a minimum, address the following points:
    (A) Projected sustainability period. Indicate the sustainability 
period, which at a minimum is equal to the useful life of the funded 
facility. The consortium's budget must show projected income and 
expenses (i.e., for maintenance) for the project at the aggregate 
level, for the sustainability period.
    (B) Principal factors. Discuss each of the principal factors that 
were considered by the participant to demonstrate sustainability. This 
discussion must include all factors that show that the proposed network 
will be sustainable for the entire sustainability period. Any factor 
that will have a monetary impact on the network must be reflected in 
the applicant's budget.
    (C) Terms of membership in the network. Describe generally any 
agreements made (or to be entered into) by network members (e.g., 
participation agreements, memoranda of understanding, usage agreements, 
or other similar agreements). The sustainability plan must also 
describe, as applicable:
    (1) Financial and time commitments made by proposed members of the 
network;
    (2) If the project includes excess bandwidth for growth of the 
network, describe how such excess bandwidth will be financed; and
    (3) If the network will include ineligible health care providers 
and other network members, describe how fees for joining and using the 
network will be assessed.
    (D) Ownership structure. Explain who will own each material element 
of the network (e.g., fiber constructed, network equipment, end user 
equipment). For purposes of this subsection, ``ownership'' includes an 
indefeasible right of use interest. Applicants must clearly identify 
the legal entity that will own each material element. Applicants must 
also describe any arrangements made to ensure continued use of such 
elements by the network members for the duration of the sustainability 
period.
    (E) Sources of future support. Describe other sources of future 
funding, including fees to be paid by eligible health care providers 
and/or non-eligible entities.
    (F) Management. Describe the management structure of the network 
for the duration of the sustainability period. The applicant's budget 
must describe how management costs will be funded.
    (v) Material change to sustainability plan. A consortium that is 
required to file a sustainability plan must maintain its accuracy. If 
there is a material change to a required sustainability plan that would 
impact projected income or expenses by more than 20 percent or $100,000 
from the previous submission, or if the applicant submits a funding 
request based on a new Request for Funding (i.e., a new competitively 
bid contract), the consortium is required to re-file its sustainability 
plan. In the event of a material change, the applicant must provide the 
Administrator with the revised sustainability plan no later than the 
end of the relevant quarter, clearly showing (i.e., by redlining or 
highlighting) what has changed.


Sec.  54.624  Site and service substitutions.

    (a) Health care providers or Consortium Leaders may request a site 
or service substitution if:
    (1) The substitution is provided for in the contract, within the 
change clause, or constitutes a minor modification;
    (2) The site is an eligible health care provider and the service is 
an eligible service under the Telecommunications Program or the 
Healthcare Connect Fund Program;
    (3) The substitution does not violate any contract provision or 
state, Tribal, or local procurement laws; and
    (4) The requested change is within the scope of the controlling 
Request for Services, including any applicable RFP used in the 
competitive bidding process.
    (b) Filing deadline. An applicant must file their request for a 
site or service change to the Administrator no later than the service 
delivery deadline as defined in Sec.  54.626.


Sec.  54.625  Service Provider Identification Number (SPIN) changes.

    (a) Corrective SPIN change. A ``corrective SPIN change'' is any 
amendment to the SPIN associated with a Funding Request Number that 
does not involve a change to the service provider associated with that 
Funding Request Number. An applicant under the Telecommunications 
Program or the Healthcare Connect Fund Program may file a request for a 
corrective SPIN change with the Administrator to:
    (1) Correct ministerial errors;
    (2) Update the service provider's SPIN that resulted from a merger 
or acquisition of companies; or
    (3) Effectuate a change to the SPIN that does not involve a change 
to the service provider of a funding request and was not initiated by 
the applicant.
    (b) Operational SPIN Change. An ``operational SPIN change'' is any 
change to the service provider associated with a Funding Request 
Number. An applicant under the Telecommunications Program or the 
Healthcare Connect Fund Program may file a request for an operational 
SPIN change with the Administrator if:
    (1) The applicant has a legitimate reason to change providers 
(e.g., breach of contract or the service provider is unable to 
perform); and
    (2) The applicant's newly selected service provider received the 
next highest point value in the original bid evaluation, assuming there 
were multiple bidders.
    (c) Filing deadline. An applicant must file their request for a 
corrective or

[[Page 54991]]

operational SPIN change with the Administrator no later than the 
service delivery deadline as defined by Sec.  54.626.


Sec.  54.626  Service delivery deadline and extension requests.

    (a) Service delivery deadline. Except as provided in the following, 
applicants must use all recurring and non-recurring services for which 
Telecommunications Program and Healthcare Connect Fund Program funding 
has been approved by June 30 of the funding year for which the program 
support was sought. The Administrator will deem ineligible for 
Telecommunications Program and Healthcare Connect Fund Program support 
all charges incurred for services delivered before or after the close 
of the funding year.
    (b) Deadline extension for non-recurring services. An applicant may 
request and receive from the Administrator a one-year extension of the 
implementation deadline for non-recurring services if it satisfies one 
of the following criteria:
    (1) Applicants whose funding commitment letters are issued by the 
Administrator on or after March 1 of the funding year for which 
discounts are authorized;
    (2) Applicants that receive service provider change authorizations 
or site and service authorizations from the Administrator on or after 
March 1 of the funding year for which discounts are authorized;

    Note 1 to paragraphs (b)(1) and (b)(2):  The Administrator shall 
automatically extend the service delivery deadline for applicants 
who satisfy paragraphs (b)(1) or (2) in this section. When 
calculating the extended deadline, March 1 is the key date for 
determining whether to extend the service delivery deadline. If one 
of the conditions listed in paragraph (b) in this section is 
satisfied before March 1 (of any year), the deadline will not be 
extended and the applicant will have until June 30 of that calendar 
year to complete implementation. If one of the conditions under 
paragraph (b)(1) through (2) in this section is satisfied on or 
after March 1 the calendar year, the applicant will have until June 
30 of the following calendar year to complete implementation.

    (3) Applicants whose service providers are unable to complete 
implementation for reasons beyond the service provider's control; or

    Note 1 to paragraph (b)(3):  An applicant seeking a one-year 
extension must affirmatively request an extension on or before the 
June 30 deadline for paragraph (b)(3) in this section. The 
Administrator will address any situations arising under paragraph 
(b)(3) in this section on a case-by-case basis. Applicants must 
submit documentation to the Administrator requesting relief pursuant 
to paragraph (b)(3) in this section on or before June 30 of the 
relevant funding year. That documentation must include, at a 
minimum, an explanation regarding the circumstances that make it 
impossible for installation to be completed by June 30 and a 
certification by the applicant that, to the best of their knowledge, 
the request is truthful.

    (4) Applicants whose service providers are unwilling to complete 
delivery and installation because the applicant's funding request is 
under review by the Administrator for program compliance.

    Note 1 to Paragraph (b)(4):  An applicant seeking a one-year 
extension must affirmatively request an extension on or before the 
June 30 deadline for paragraph (b)(4) in this section. Applicants 
seeking an extension under paragraph (b)(4) in this section must 
certify to the Administrator that their service provider was 
unwilling to deliver or install the non-recurring services before 
the end of the funding year. Applicants must make this certification 
on or before June 30 of the relevant funding year. The revised 
implementation date will be calculated based on the date the 
Administrator issues a funding commitment.

Sec.  54.627  Invoicing process and certifications.

    (a) Invoice filing deadline. Invoices must be submitted to the 
Administrator within 120 days after the later of:
    (1) The service delivery deadline, as defined in Sec.  54.626; or
    (2) The date of a revised funding commitment letter issued pursuant 
to an approved post-commitment request made by the applicant or service 
provider or a successful appeal of a previously denied or reduced 
funding request. Before the Administrator may process and pay an 
invoice, it must receive a completed invoice from the service provider.
    (b) Invoice deadline extension. Service providers or billed 
entities may request a one-time extension of the invoicing deadline by 
no later than the deadline calculated pursuant to paragraph (a) in this 
section. The Administrator shall grant a 120-day extension of the 
invoice filing deadline, if it is timely requested.
    (c) Telecommunications Program. (1) The applicant must submit 
documentation to the Administrator confirming the service start date, 
the service end or disconnect date, or whether the service was never 
turned on.
    (2) Upon receipt of the invoice(s) and supporting documentation, 
the Administrator shall generate a Health Care Provider Support 
Schedule (HSS), which the service provider shall use to determine how 
much credit the applicant will receive for the services.
    (3) Certifications. Before the Administrator may process and pay an 
invoice, both the health care provider and the service provider must 
make the following certifications.
    (i) The health care provider must certify that:
    (A) The service has been or is being provided to the health care 
provider;
    (B) The universal service credit will be applied to the 
telecommunications service billing account of the health care provider 
or the billed entity as directed by the health care provider;
    (C) It is authorized to submit this request on behalf of the health 
care provider;
    (D) It has examined the invoice and supporting documentation and 
that to the best of its knowledge, information and belief, all 
statements of fact contained in the invoice and supporting 
documentation are true;
    (E) It or the consortium it represents satisfies all of the 
requirements and will abide by all of the relevant requirements, 
including all applicable Commission rules, with respect to universal 
service benefits provided under 47 U.S.C. 254; and
    (F) It understands that any letter from the Administrator that 
erroneously states that funds will be made available for the benefit of 
the applicant may be subject to rescission.
    (ii) The service provider must certify that:
    (A) The information contained in the invoice is correct and the 
health care providers and the Billed Account Numbers have been credited 
with the amounts shown under ``Support Amount to be Paid by USAC;''
    (B) It has abided by all of the relevant requirements, including 
all applicable Commission rules;
    (C) It has received and reviewed the HSS, invoice form and 
accompanying documentation, and that the rates charged for the 
telecommunications services, to the best of its knowledge, information 
and belief, are accurate and comply with the Commission's rules;
    (D) It is authorized to submit the invoice;
    (E) The health care provider paid the appropriate urban rate for 
the telecommunications services;
    (F) The rural rate on the invoice does not exceed the appropriate 
rural rate determined by the Administrator;
    (G) It has charged the health care provider for only eligible 
services prior to submitting the invoice for payment and accompanying 
documentation;
    (H) It has not offered or provided a gift or any other thing of 
value to the applicant (or to the applicant's personnel, including its 
consultant) for which it will provide services; and

[[Page 54992]]

    (I) The consultants or third parties it has hired do not have an 
ownership interest, sales commission arrangement, or other financial 
stake in the service provider chosen to provide the requested services, 
and that they have otherwise complied with Rural Health Care Program 
rules, including the Commission's rules requiring fair and open 
competitive bidding.
    (J) As a condition of receiving support, it will provide to the 
health care providers, on a timely basis, all documents regarding 
supported equipment or services that are necessary for the health care 
provider to submit required forms or respond to Commission or 
Administrator inquiries.
    (d) Healthcare Connect Fund Program. (1) Certifications. Before the 
Administrator may process and pay an invoice, the Consortium Leader (or 
health care provider, if participating individually) and the service 
provider must make the following certifications:
    (i) The Consortium Leader or health care provider must certify 
that:
    (A) It is authorized to submit this request on behalf of the health 
care provider or consortium;
    (B) It has examined the invoice form and attachments and, to the 
best of its knowledge, information, and belief, all information 
contained on the invoice form and attachments are true and correct;
    (C) The health care provider or consortium members have received 
the related services, network equipment, and/or facilities itemized on 
the invoice form; and
    (D) The required 35 percent minimum contribution for each item on 
the invoice form was funded by eligible sources as defined in the 
Commission's rules and that the required contribution was remitted to 
the service provider.
    (ii) The service provider must certify that:
    (A) It has been authorized to submit this request on behalf of the 
service provider;
    (B) It has applied the amount submitted, approved, and paid by the 
Administrator to the billing account of the health care provider(s) and 
Funding Request Number (FRN)/FRN ID listed on the invoice;
    (C) It has examined the invoice form and attachments and that, to 
the best of its knowledge, information, and belief, the date, 
quantities, and costs provided in the invoice form and attachments are 
true and correct;
    (D) It has abided by all program requirements, including all 
applicable Commission rules and orders;
    (E) It has charged the health care provider for only eligible 
services prior to submitting the invoice form and accompanying 
documentation;
    (F) It has not offered or provided a gift or any other thing of 
value to the applicant (or to the applicant's personnel, including its 
consultant) for which it will provide services;
    (G) The consultants or third parties it has hired do not have an 
ownership interest, sales commission arrangement, or other financial 
stake in the service provider chosen to provide the requested services, 
and that they have otherwise complied with Rural Health Care Program 
rules, including the Commission's rules requiring fair and open 
competitive bidding; and
    (H) As a condition of receiving support, it will provide to the 
health care providers, on a timely basis, all documents regarding 
supported equipment, facilities, or services that are necessary for the 
health care provider to submit required forms or respond to Commission 
or Administrator inquiries.


Sec.  54.628  Duplicate support.

    (a) Eligible health care providers that seek support under the 
Healthcare Connect Fund Program for telecommunications services may not 
also request support from the Telecommunications Program for the same 
services.
    (b) Eligible health care providers that seek support under the 
Telecommunications Program or the Healthcare Connect Fund Program may 
not also request support from any other universal service program for 
the same expenses.


Sec.  54.629  Prohibition on resale.

    (a) Prohibition on resale. Services purchased pursuant to universal 
support mechanisms under this subpart shall not be sold, resold, or 
transferred in consideration for money or any other thing of value.
    (b) Permissible fees. The prohibition on resale set forth in 
paragraph (a) in this section shall not prohibit a health care provider 
from charging normal fees for health care services, including 
instruction related to services purchased with support provided under 
this subpart.


Sec.  54.630  Election to offset support against annual universal 
service fund contribution.

    (a) A service provider that contributes to the universal service 
support mechanisms under this subpart and subpart H of this part to 
eligible health care providers may, at the election of the contributor:
    (1) Treat the amount eligible for support under this subpart as an 
offset against the contributor's universal service support obligation 
for the year in which the costs for providing eligible services were 
incurred; or
    (2) Receive direct reimbursement from the Administrator for that 
amount.
    (b) Service providers that are contributors shall elect in January 
of each year the method by which they will be reimbursed and shall 
remain subject to that method for the duration of the calendar year. 
Any support amount that is owed a service provider that fails to remit 
its monthly universal service contribution obligation shall first be 
applied as an offset to that contributor's contribution obligation. 
Such a service provider shall remain subject to the offsetting method 
for the remainder of the calendar year in which it failed to remit its 
monthly universal service obligation. A service provider that continues 
to be in arrears on its universal service contribution obligations at 
the end of a calendar year shall remain subject to the offsetting 
method for the next calendar year.
    (c) If a service provider providing services eligible for support 
under this subpart elects to treat that support amount as an offset 
against its universal service contribution obligation and the total 
amount of support owed exceeds its universal service obligation, 
calculated on an annual basis, the service provider shall receive a 
direct reimbursement in the amount of the difference. Any such 
reimbursement due a service provider shall be provided by the 
Administrator no later than the end of the first quarter of the 
calendar year following the year in which the costs were incurred and 
the offset against the contributor's universal service obligation was 
applied.


Sec.  54.631  Audits and recordkeeping.

    (a) Random audits. All participants under the Telecommunications 
Program and Healthcare Connect Fund Program shall be subject to random 
compliance audits to ensure compliance with program rules and orders.
    (b) Recordkeeping. Participants, including Consortium Leaders and 
health care providers, shall maintain records to document compliance 
with program rules and orders for at least five years after the last 
day of service delivered in a particular funding year sufficient to 
establish compliance with all rules in this subpart.
    (1) Telecommunications Program. (i) Participants must maintain, 
among other things, records of allocations for consortia and entities 
that engage in eligible and ineligible activities, if applicable.
    (ii) Mobile rural health care providers shall maintain annual logs 
for a period

[[Page 54993]]

of five years. Mobile rural health care providers shall maintain annual 
logs indicating: The date and locations of each clinical stop; and the 
number of patients served at each clinical stop. Mobile rural health 
care providers shall make their logs available to the Administrator and 
the Commission upon request.
    (iii) Service providers shall retain documents related to the 
delivery of discounted services for at least five years after the last 
day of the delivery of discounted services. Any other document that 
demonstrates compliance with the statutory or regulatory requirements 
for the rural health care mechanism shall be retained as well.
    (2) Healthcare Connect Fund Program. (i) Participants who receive 
support for long-term capital investments in facilities whose useful 
life extends beyond the period of the funding commitment shall maintain 
records for at least five years after the end of the useful life of the 
facility. Participants shall maintain asset and inventory records of 
supported network equipment to verify the actual location of such 
equipment for a period of five years after purchase.
    (ii) Service providers shall retain records related to the delivery 
of supported services, facilities, or equipment to document compliance 
with the Commission rules or orders pertaining to the Healthcare 
Connect Fund Program for at least five years after the last day of the 
delivery of supported services, equipment, or facilities in a 
particular funding year.
    (c) Production of records. Both participants and service providers 
under the Telecommunications Program and Healthcare Connect Fund 
Program shall produce such records at the request of the Commission, 
any auditor appointed by the Administrator or Commission, or any other 
state or federal agency with jurisdiction.
    (d) Obligation of service providers. Service providers in the 
Telecommunications Program and Healthcare Connect Fund Program must 
certify, as a condition of receiving support, that they will provide to 
health care providers, on a timely basis, all information and documents 
regarding supported equipment, facilities, or services that are 
necessary for the health care provider to submit required forms or 
respond to Commission or Administrator inquiries. The Administrator may 
withhold disbursements for the service provider if the service 
provider, after written notice from the Administrator, fails to comply 
with this requirement.


Sec.  54.632  Signature requirements for certifications.

    (a) For individual health care provider applicants, required 
certifications must be provided and signed by an officer or director of 
the health care provider, or other authorized employee of the health 
care provider.
    (b) For consortium applicants, an officer, director, or other 
authorized employee of the Consortium Leader must sign the required 
certifications.
    (c) Pursuant to Sec.  54.633, electronic signatures are permitted 
for all required certifications.


Sec.  54.633  Validity of electronic signatures and records.

    (a) For the purposes of this subpart, an electronic signature 
(defined by the Electronic Signatures in Global and National Commerce 
Act, as an electronic sound, symbol, or process, attached to or 
logically associated with a contract or other record and executed or 
adopted by a person with the intent to sign the record) has the same 
legal effect as a written signature.
    (b) For the purposes of this subpart, an electronic record (defined 
by the Electronic Signatures in Global and National Commerce Act, as a 
contract or other record created, generated, sent, communicated, 
received, or stored by electronic means) constitutes a record.

[FR Doc. 2019-20173 Filed 10-10-19; 8:45 am]
 BILLING CODE 6712-01-P