FCC Press Release
May 8, 1998.
NEWS Report No. CC 98-13
May 8, 1998

Commission Proposes Single Entity to Administer Federal Universal Service Support Mechanisms; Reports to Congress on Funding, Disbursement Issues

In a Report to Congress submitted today, the Commission proposed a single entity that would administer all forms of federal universal service support. The Report responds to Congress' request that the Commission propose a single entity for administering universal service support for rural health careproviders and schools and libraries. The Commission proposed that these duties be performed by the Universal Service Administrative Company (USAC), the entity that currently administers the high cost and low income support mechanisms and that performs billing, collection, and disbursement functions forall of the universal service support mechanisms.

Noting that the USAC board includes individuals with the experience and expertise to understand and implement the distinct missions of the schools and libraries and rural health care support mechanisms as well as significant industry-wide representation of both contributors to and beneficiaries of the universal service support mechanisms, the Commission concluded the best option in accordance with Congress' request would be for USAC to serve as the permanent, sole administrator. The Commission found that this option may best further the goals of efficient administration and accountability while minimizing disruption of the on-going administration of the universal service support mechanisms. To preserve the distinct missions, expertise, and integrity of the schools and libraries and rural health care support mechanisms, board committees, subsidiaries, or divisions within USAC may be appropriate. The Commission also proposed measures to foster greater accountability of the new USAC entity to Congress and the Commission.

To implement the proposed reorganization, the Commission requested that USAC and the current administrators of support for schools and libraries and rural health care providers jointly prepare and submit a plan of reorganization for approval by the Commission. The Commission intends to seek public comment on these proposals and consult with the Federal State Joint Board on Universal Service before taking final action. The proposed consolidation would become effective on January 1,1999.

The Commission stated its understanding that Congress' request concerning revision of the administrative structure was sparked in part by a recent letter from the General Accounting Office (GAO) which concluded that the Commission lacked authority to direct the National Exchange Carrier Association (NECA), as a condition of its appointment as temporary universal service administrator, to create separate entities for the purposes of administering support for schools and libraries and rural health care providers. The Commission stated its belief that it did act lawfully, but welcomed action by Congress to resolve the issues raised by the GAO's letter. Accordingly, the Commission respectfully requested from Congress specific statutory authority that would eliminate any question concerning the Commission's authority in this regard.

In today's Report, the Commission also responded to Congress' request for information concerning funding and disbursements for the schools and libraries support mechanism. Included in the Report:

o The Commission stated its concern that carriers provide clear and accurate information to subscribers regarding universal service surcharges on telephone bills. The Commission intends to seek comment on the extent to which carriers are not providing complete or truthful information in connection with these surcharges, and what actions the Commission may take in this regard.

o The Commission noted the tremendous need for universal service support demonstrated by schools and libraries in every state of the union. More than 30,000 applications for universal service support have been filed already by schools andlibraries, with a projected demand for $2.02 billion indiscounts. Next week the Commission will issue a Public Notice seeking comment on whether funding for schools and libraries should equal demand or be limited to anamount that does notcause long distance rates to rise.

o Based on preliminary information, the Commission estimated that the access charges long distance carriers pay to local telephone companies will be reduced by approximately $700 million on July 1, 1998. Accordingly, the Commission estimated that the quarterly collection rate for schools and libraries could rise from $325 million (the second quarter collection rate) to approximately $524 million without increasing payments by long distance carriers. As a result, schools and libraries could be funded at approximately $1.67 billion for the 1998 calendar year without increasing payments by long distance carriers.

To ensure that the benefits of the Telecommunications Act of 1996 extend to all Americans, Congress expanded universal service under the Act to provide, among other things, support to eligible schools and libraries. In so doing, Congress recognized that, by facilitating the deployment of advancedtechnologies to America's classrooms, the schools and libraries support mechanism represents a direct and vital investment in the community. Consistent with Congress' mandate, the Commission has taken steps to assure both that the schools and libraries support mechanism is adequately funded and that the expenditures made on behalf of eligible schools and libraries are delivered effectively and efficiently. The Commission said today's Report demonstrates the effective administration of this important new support mechanism.

Action by the Commission, May 8, 1998, by Report to Congress (FCC 98-85). Chairman Kennard, Commissioners Ness and Tristani, with Commissioners Furchtgott-Roth and Powell dissenting and Commissioners Ness, Furchtgott-Roth, and Powell issuing separate statements.

News Media contact: Rochelle Cohen at (202) 418-0253. Common Carrier Bureau contact: Lisa Boehley at (202)418-7395.

May 8, 1998

Press Statement of FCC Chairman William E. Kennard

As we continue to implement and streamline the universal service mechanisms, there are certain fundamental rules of priority we must follow. First and foremost, we must place poor and rural communities at the front of the line. Funding will go first to schools in poorer communities, whether they are in sparsely populated rural areas or inner city school districts. These are the schools and school kids with the greatest needs and they must be our first priority.

We also must ensure that extending the reach of universal service to schools and libraries and rural health care providers does not unduly increase costs for other users of the network.

For many decades universal service has guaranteed that residents of rural and high cost areas have the same affordable access to quality phone service as urban residents. We have honored this commitment, and will continue to do so, even as we undertake certain reforms to it and begin to implement new support mechanisms established pursuant to the Telecommunications Act of 1996.

In addition, we must take into account the distinct mission of the rural health care mechanism and thereby ensure that rural health care providers are able to afford the telecommunications services they need to deliver quality care to the communities they serve.

With these priorities in mind, I am happy to provide Congress with our proposal for changes to the way these mechanisms are administered. The Schools and Libraries Corporation and the Rural Health Care Corporation deserve high marks for their efforts to date. The small staff of the Schools and Libraries Corporation has alone processed over 45,000 applications for funding to help students learn with today's technology. While I am therefore very proud of the efficient and effective manner in which these groups have begun to implement these mechanisms, I am mindful of Congress' concern that we further streamline the process.

Today's report is a major step in that direction.

We face many challenges. Among other things, we must deal with the nay sayers who seem to believe that the full promise of universal service is beyond our grasp, and who are simply opposed to the fundamental principles of universal service. I believe that fulfilling the promise of universal service is not only achievable, but is imperative as a matter of good public policy and as a matter of law. My duty as Chairman is to improve upon the historical success of universal service as we reform it in the manner dictated by the 1996 Act. And with the help of Congress, the states, and my colleagues at the Commission, I intend to do just that.