**Before the**

**Federal Communications Commission**

**Washington, DC 20554**

In the Matter of )

)

Request for Review of the )

Decision of the )

Universal Service Administrator by )

)

Virginia State Department of Education ) File No. SLD-163045

Richmond, Virginia )

)

Federal-State Joint Board on ) CC Docket No. 96-45

Universal Service )

)

Changes to the Board of Directors of the ) CC Docket No. 97-21

National Exchange Carrier Association, Inc. )

**order**

**Adopted: May 10, 2002 Released: May 13, 2002**

By the Wireline Competition Bureau:

1.  The Wireline Competition Bureau has under consideration a Request
    for Review filed by the Virginia State Department of Education
    (Virginia DOE), Richmond, Virginia. [^1] Virginia DOE seeks review
    of a decision issued by the Schools and Libraries Division (SLD) of
    the Universal Service Administrative Company (Administrator)
    relating to Virginia DOE's application for discounts under the
    schools and libraries universal service support mechanism.[^2] For
    the reasons set forth below, we deny the Request for Review.

2.  Under the schools and libraries universal service support mechanism,
    eligible schools, libraries, and consortia that include eligible
    schools and libraries, may apply for discounts for eligible
    telecommunications services, Internet access, and internal
    connections.[^3] The Communications Act permits only
    "telecommunications carriers" to receive direct reimbursement under
    the universal service support mechanisms for the provision of
    discounted telecommunications services.[^4] The term
    "telecommunications carrier" includes only carriers that offer
    telecommunications on a common carrier basis.[^5] The Commission
    stated in the *Universal Service Order* that a carrier may be a
    common carrier if it holds itself out "to service indifferently to
    all potential users," but a "carrier will not be a common carrier
    'where its practice is to make individualized decisions in
    particular cases whether and on what terms to serve.'"[^6]

3.  Under SLD procedures, certain categories of service providers are
    automatically considered to be eligible telecommunications carriers.
    Included in this list are incumbent local exchange carriers (ILECs),
    competitive access providers/competitive local exchange carriers
    (CAP/CLECs), and interexchange carriers (IXCs) because they are
    widely acknowledged to be types of service providers that provide
    telecommunications services on a common carrier basis. Under program
    procedures, however, even if a service provider self-designates one
    of these categories, the presumption that they provide service on a
    common carriage basis remains subject to verification by SLD. If a
    service provider selects another category listed on the Form 498,
    such as "PRIV," SLD will investigate in order to determine whether
    the service provider offers their services on a common carriage
    basis. Specifically, SLD looks to whether the relevant state
    regulatory agency has so classified the provider and whether the
    provider advertises services as a common carrier. If SLD is unable
    to confirm that the service provider is an eligible
    telecommunications carrier based on its own inquiry, SLD will ask
    the service provider to provide information either confirming or
    denying that it provides telecommunications services on a common
    carrier basis.

4.  In its application, Virginia DOE requested discounts for
    telecommunications services from Autotote Communications (Autotote),
    a publicly-held business specializing in telecommunications services
    for the racing industry and lottery organizations.[^7] Specifically,
    Autotote was to provide Virginia DOE with satellite connections for
    video distance learning.[^8] By letter dated May 5, 2000, SLD denied
    the request, finding that Virginia DOE requested discounts for
    telecommunications service from a provider that is not a
    telecommunications common carrier.[^9]

5.  Virginia DOE appealed SLD's decision by a letter dated May 10,
    2000.[^10] On May 10, 2001, SLD affirmed its initial funding
    decision and denied Virginia DOE's appeal.[^11] The Administrator's
    Decision on Appeal explained that the services at issue were to be
    provided by a service provider that was not eligible to receive
    universal service support because it did not provide
    telecommunications services on a common carrier basis.[^12] Virginia
    DOE appeals now this decision, seeking a decision that Autotote is a
    telecommunications carrier.[^13]

6.  In the instant Request for Review, Virginia DOE first contends that
    Autotote is a telecommunications carrier. In support, of this
    assertion Virginia DOE makes reference to advertisements in trade
    publications that it claims establish that Autotote sells satellite
    capacity to the public on a non-discriminatory basis.[^14] Virginia
    DOE also compares the facts relating to its Request for Review to
    those in a previous appeal before the Commission, *Joplin*.[^15]
    According to Virginia DOE, SLD incorrectly found that Autotote was
    not an eligible service provider based on Autotote's response on the
    Service Provider Information Form (Form 498).[^16] Specifically,
    Virginia DOE contends that if the instructions for the Form 498 had
    been more explicit, Autotote would have classified itself as a
    common carrier.[^17]

7.  Based on our review of the record, we affirm SLD's determination
    that Autotote is not a "telecommunications carrier" eligible for
    universal service support. According to the contract for services,
    Virginia DOE contracted with Autotote for satellite transponder
    time.[^18] The Commission has determined that companies that simply
    lease transponder capacity on satellites are not providers of
    telecommunications services.[^19] The Commission found that, in
    these situations, the satellite is being leased as a midpoint or
    switch to another telecommunications company which, in turn, uses
    its own earth-stations to provide end-to-end communications.[^20]
    The Commission therefore concluded that because satellite providers
    do not transmit information when they lease bare transponder
    capacity, they do not provide telecommunications services.[^21]

8.  In addition, we are not persuaded by Virginia DOE's assertion that
    confusion relating to the appropriate characterization of Autotote's
    principal line of business on the Form 498 resulted in Autotote
    being improperly classified.[^22] In Funding Year 3, SLD used the
    Form 498 to collect information from carriers and service providers
    participating in the schools and libraries and rural health care
    programs.[^23] According to Virginia DOE, the Form 498 instructions
    are unclear and misleading for non-traditional communications
    providers.[^24] Virginia DOE explains that if SLD or the FCC
    provided a list of which categories qualify as telecommunications
    common carriers, it would have been able to select the appropriate
    category of service.[^25] Autotote designated "PRIV" as the
    descriptive category for its principal communications business on
    its Form 498.[^26] "PRIV" is defined as a private service provider
    that offers excess capacity on a private system that is used
    primarily for internal purposes.[^27] The record, however, reflects
    that SLD was unable to substantiate that Autotote was an eligible
    telecommunications carrier, regardless of the descriptive category
    on Autotote's Form 498. All of the information found on Autotote's
    website indicated that their primary business was not related to
    common carrier service.[^28] In addition, Autotote has not been
    designated an eligible common carrier in the state of Virginia, and
    does not have an application pending.[^29] When subsequently
    contacted by SLD, Autotote did not respond to SLD's repeated
    requests for information to validate the eligibility of their
    services.[^30] Therefore, SLD was unable to verify that Autotote
    provided services on a common carrier basis, and appropriately
    determined that Autotote was not eligible to receive universal
    service support for telecommunications services.

9.  In its appeal to the Commission, Virginia DOE also references
    advertisements in trade publications that it claims were enclosed in
    its appeal to SLD that would have established that Autotote sold
    satellite capacity to the public on a non-discriminatory basis.[^31]
    Virginia DOE did not produce copies of these publications in their
    appeal to the Commission and SLD has no record of these
    enclosures.[^32] We also note that Virginia DOE failed to reference
    such enclosures in its appeal letter to SLD.[^33] We therefore find
    these assertions unpersuasive.

10. Finally, Virginia DOE compares the facts relating to their Request
    for Review to those in a previous appeal before the Bureau,
    *Joplin*.[^34] As in the instant appeal, *Joplin* addressed the
    common carrier status of a service provider based on its Form
    498.[^35] In *Joplin*, the service provider initially characterized
    itself as a private service provider, but eventually revised the
    Form 498 to indicate that it was a non-traditional provider. In its
    appeal to SLD, Joplin provided evidence that the Missouri Public
    Service Commission had certified it as a common carrier.[^36]
    Because of the conflicting evidence relating to the service
    provider's common carrier status, the Common Carrier Bureau remanded
    *Joplin* to SLD for further consideration.[^37] Ultimately, SLD
    reversed its decision based in large part due to the fact that the
    Missouri Public Service Commission certified the service provider as
    a common carrier.[^38]

11. We emphasize that the ultimate question in *Joplin* and the instant
    appeal is whether, based on the evidence before the Commission, the
    service provider is an eligible telecommunications carrier. Virginia
    DOE's appeal is distinguishable from *Joplin* because in *Joplin*,
    there was conflicting evidence on the record relating to whether the
    service provider was a common carrier.[^39] In the instant appeal,
    we have no such contradictory evidence before us.

12. Based on the Commission precedent concerning the leasing of
    satellite transponder time and the absence of information supporting
    Virginia DOE's contention that Autotote is an eligible
    telecommunications service provider, including Autotote's own
    unwillingness to substantiate its status, we affirm SLD's decision
    that Autotote does not provide telecommunications on a common
    carrier basis. Given the clear proscription of the *Universal
    Service Order* against funding telecommunications services provided
    by entities other than common carriers, it was Virginia DOE's
    responsibility to ensure that the service provider it had contracted
    with was indeed a designated telecommunications provider whose
    status could be appropriately substantiated.[^40] Therefore, we find
    based on the record before us that Autotote is not eligible to
    receive direct support under the universal service support mechanism
    for providing telecommunications services to Virginia DOE.

13. ACCORDINGLY, IT IS ORDERED, pursuant to authority delegated under
    sections 0.91, 0.291, and 54.722(a) of the Commission\'s rules, 47
    C.F.R. §§ 0.91, 0.291, and 54.722 (a), that the Request for Review
    filed by the Virginia State Department of Education, Richmond,
    Virginia, on April 16, 2001 IS DENIED.

FEDERAL COMMUNICATIONS COMMISSION

Carol E. Mattey

Deputy Chief, Wireline Competition Bureau

[^1]: *Request for Review of the Decision of the Universal Service
    Administrator by Virginia State Department of Education*, CC Docket
    Nos. 96-45 and 97-21, Request for Review, filed April 16, 2001
    (Request for Review).

[^2]: Section 54.719(c) of the Commission\'s rules provides that any
    person aggrieved by an action taken by a division of the
    Administrator may seek review from the Commission. 47 C.F.R. §
    54.719(c).

[^3]: 47 C.F.R. §§ 54.502, 54.503.

[^4]: *Federal-State Joint Board on Universal Service*, CC Docket No.
    96-45, Report and Order, 12 FCC Rcd 8776, 9005-23, 9084-90 (1997)
    (*Universal Service Order*), as corrected by *Federal‑State Joint
    Board on Universal Service*, CC Docket No. 96‑45, Errata, FCC 97‑157
    (rel. June 4, 1997), *affirmed in part*, *Texas Office of Public
    Utility Counsel v. FCC*, 183 F.3d 393 (5th Cir. 1999) (affirming
    *Universal Service Order* in part and reversing and remanding on
    unrelated grounds), *cert. denied, Celpage, Inc. v. FCC*, 120 S. Ct.
    2212 (May 30, 2000), *cert. denied,* *AT&T Corp. v. Cincinnati Bell
    Tel. Co*., 120 S. Ct. 2237 (June 5, 2000*), cert. dismissed,* *GTE
    Service Corp. v. FCC*, 121 S. Ct. 423 (November 2, 2000);
    *Federal-State Joint Board on Universal Service*, *Access Charge
    Reform, Price Cap Performance Review for Local Exchange Carriers,
    Transport Rate Structure and Pricing, End User Common Line Charge*,
    CC Docket Nos. 96-45, 96-262, 94-1, 91-213, and 95-72, Fourth Order
    on Reconsideration in CC Docket No. 96-45, Report and Order in CC
    Docket Nos. 96-45, 96-262, 94-1, 91-213, 95-72, 13 FCC Rcd 5318,
    5413-14 (1997) (*Fourth Reconsideration Order*).

[^5]: *Universal Service Order*, 12 FCC Rcd at 9177-78; *Fourth
    Reconsideration Order*, 13 FCC Rcd at 5413-14.

[^6]: *Universal Service Order*, 12 FCC Rcd at 9177-78 (*citing National
    Association of Regulatory Utility Commissioners v. FCC*, 533 F.2d
    601, 608 (D.C. 1976) (NARUC II)).

[^7]: FCC Form 471, Virginia State Department of Education, filed
    January 17, 2000.

[^8]: *Id.*

[^9]: Letter from Schools and Libraries Division, Universal Service
    Administrative Company, to Greg Weisiger, Virginia State Department
    of Education, dated May 5, 2000.

[^10]: Letter from Lan Neugent, Virginia State Department of Education
    to Schools and Libraries Division, Universal Service Administrative
    Company, filed May 12, 2000 (SLD Appeal Letter).

[^11]: Letter from Schools and Libraries Division, Universal Service
    Administrative Company, to Lan Neugent, Virginia State Department of
    Education, dated March 30, 2001.

[^12]: *Id.*

[^13]: Request for Review at 1.

[^14]: Request for Review at 3-4.

[^15]: Request for Review at 2.

[^16]: *Id. See* *also* Universal Service Administrative Company Service
    Provider Information Form, OMB 3060-0824 (September 1998) (Form
    498).

[^17]: Request for Review at 2.

[^18]: *See* Request for Review.

[^19]: *Fourth Reconsideration Order*, 13 FCC Rcd at 5477-5479.

[^20]: *Id.*

[^21]: *Id.*

[^22]: Request for Review at 2.

[^23]: Form 498.

[^24]: Request for Review at 2. *See* Instructions for Completing the
    Universal Service Administrative Company Service Provider
    Information Form (FCC Form 498), OMB 3060-0824 (September 1998)
    (Form 498 Instructions).

[^25]: Request for Review at 2-3.

[^26]: Request for Review at 2.

[^27]: Form 498 Instructions.

[^28]: *See* Autotote website,
    \<[www.autotote.com](http://www.autotote.com/)[/AutototeCorp]{.underline}/\>
    ("Our company was formed through the acquisition of Scientific Games
    Holdings, a well-known instant lottery ticket company, by Autotote
    Corporation, the leading pari-mutuel company in the
    world...Scientific Games Corporation is made up of four groups, a
    number of which are the leading competitors in their respective
    fields. [Scientific Games International](http://www.scigames.com/)
    is the top integrated supplier of instant tickets, validation
    systems and facilities management services to lotteries. [Autotote
    Systems](../parimutuel/parimutuel.asp) is the largest supplier of
    wagering systems and services to racetracks and off-track
    facilities. [Autotote Enterprises](../otb/venuemngt.asp) is a
    licensed pari-mutuel operator in Connecticut providing off-track
    venues for patrons to watch horse racing and/or place bets. The
    company is also a licensed pari-mutuel operator in Holland and
    Germany. [Telecommunication products](../telecom/telecomprods.asp)
    utilizes our instant ticket technology to produce prepaid wireless
    phone cards for major telecommunications companies."). *See also*
    Autotote Communications Services,
    \<[http://www.autotote.com/AutototeCorp/parimutuel/communication.asp\>](http://www.autotote.com/AutototeCorp/parimutuel/communication.asp>)
    ("Autotote Communication Services (ACS), a division of Autotote
    Systems Inc, is the leading provider of simulcasting services in the
    United States of America, servicing over fifty tracks and
    broadcasting over 5,500 racing events each year.").

[^29]: Request for Review at 3. Virginia DOE asserts that "because of
    the national reach of satellite communication, no state PUC
    certifies Autotote as a common carrier." Under program procedures,
    even if a service provider is not certified as a common carrier by a
    state commission, the service provider may still offer independent
    evidence to SLD that they provide services on a common carrier
    basis. *See supra* para. 3.

[^30]: The Program Integrity Assurance (PIA) unit contacted Autotote by
    phone on April 6, 2000 and was told that the contact was busy and
    would call PIA on April 7, 2000. There is no record that the
    representative returned the call. PIA attempted to contact Autotote,
    again, on April 13, 2000, but three of the contact phone numbers
    that previously worked were now out of service. On April 13, 2000,
    PIA e-mailed Autotote and requested documentation to validate their
    eligibility. Autotote did not respond. Prior to this, on March 27,
    2000, PIA informed Virginia DOE that documentation validating the
    service provider did not appear to be forthcoming from Autotote, and
    that as a result, there was a risk the application would not be able
    to be processed. *See* PIA Review Contact Report, Virginia State
    Department of Education, Application No. 163045.

[^31]: Request for Review at 3-4.

[^32]: *See* Request for Review.

[^33]: *See* SLD Appeal Letter.

[^34]: Request for Review at 2.

[^35]: *Request for Review by Joplin R8 Schools District, Federal-State
    Joint Board on Universal Service, Changes to the Board of Directors
    of the National Exchange Carrier Association, Inc*., File No.
    SLD-82921, CC Docket Nos. 96-45 and 97-21, Order, 15 FCC Rcd 3677
    (Com. Car. Bur. 2000).

[^36]: *Id.*

[^37]: *Id.*

[^38]: *Id.*

[^39]: *Id.*

[^40]: *Universal Service Order*, 12 FCC Rcd at 9005-23, 9084-90.