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 Federal  Communications  Commission  DA  02-  1123 
 1 
 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  DOEs 
 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 


 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, 
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 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 


 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. 
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 discounts  for  telecommunications  service  from  a  provider  that  is  not  a  telecommunications  common  carrier.  9 
 5.  Virginia  DOE  appealed  SLDs  decision  by  a  letter  dated  May  10,  2000.  10  On  May  10,  2001,  SLD  affirmed  its  initial  funding  decision  and  denied  Virginia  DOEs  appeal.  11 
 The  Administrators  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  Autototes  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  SLDs  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 


 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. 
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 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  DOEs  assertion  that  confusion  relating  to  the  appropriate  characterization  of  Autototes  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  Autototes  Form  498.  All  of  the  information  found  on  Autototes  website  indicated  that  their  primary  business  was  not 
 related  to  common  carrier  service.  28  In  addition,  Autotote  has  not  been  designated  an  eligible 


 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/  AutototeCorp/>  (  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  is  the  top  integrated  supplier  of  instant  tickets,  validation  systems  and  facilities  management  services  to  lotteries.  Autotote  Systems  is  the  largest  supplier 
 of  wagering  systems  and  services  to  racetracks  and  off-  track  facilities.  Autotote  Enterprises  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  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>  (  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.). 
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 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  SLDs  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  providers  common  carrier  status,  the  Common  Carrier  Bureau  remanded  Joplin  to  SLD  for  further  consideration.  37  Ultimately,  SLD 


 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. 
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 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  DOEs  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  DOEs  contention  that 


 Autotote  is  an  eligible  telecommunications  service  provider,  including  Autototes  own  unwillingness  to  substantiate  its  status,  we  affirm  SLDs  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  DOEs  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 


 38  Id. 
 39  Id. 
 40  Universal  Service  Order,  12  FCC  Rcd  at  9005-  23,  9084-  90. 
6