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 Federal  Communications  Commission  FCC  03-  288 
 Before  the  Federal  Communications  Commission 
 Washington,  D.  C.  20554 

 In  the  Matter  of 
 Rural  Health  Care  Support  Mechanism 
 )  ) 
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 )  ) 
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 WC  Docket  No.  02-  60 

 REPORT  AND  ORDER,  ORDER  ON  RECONSIDERATION,  AND  FURTHER  NOTICE  OF  PROPOSED  RULEMAKING 
 Adopted:  November  13,  2003  Released:  November  17,  2003 
 Comment  Date:  60  days  after  publication  in  the  Federal  Register  Reply  Comment  Date:  105  days  after  publication  in  the  Federal  Register 

 By  the  Commission:  Chairman  Powell  and  Commissioners  Abernathy,  Copps,  and  Adelstein  issuing  separate  statements. 

 TABLE  OF  CONTENTS 
 Paragraph 
 I.  INTRODUCTION  .....................................................................................................................  1 

 II.  BACKGROUND  .......................................................................................................................  3 
 III.  REPORT  AND  ORDER..........  11 
 A.  Eligible  Health  Care  Provider............................................................................................  11 
 B.  Eligible  Services  ................................................................................................................  18 
 1.  Internet  Access.............................................................................................................  18  2.  Other  Services..............................................................................................................  30 

 C.  Calculation  of  Discounted  Services  ...................................................................................  31 
 1.  Interpretation  of  Similar  Services.............................................................................  31  2.  Urban  Area...................................................................................................................  35 
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 3.  Maximum  Allowable  Distance  ....................................................................................  38  4.  Satellite  Services..........................................................................................................  42 
 5.  Insular  Areas  ................................................................................................................  45 
 D.  Other  Changes  to  the  Rural  Health  Care  Support  Mechanism  ..........................................  48 
 1.  Allocation  Guidelines  and  Record-  Keeping  Requirements.........................................  48  2.  Streamlining  the  Application  Process..........................................................................  52 
 3.  Pro-  Rata  Reductions  If  Annual  Cap  Exceeded............................................................  55  4.  Ensuring  the  Selection  of  Cost-  Effective  Services  ......................................................  57 
 5.  Other  Non-  Substantive  Rule  Changes  .........................................................................  59  6.  Implementation  ............................................................................................................  60 

 IV.  ORDER  ON  RECONSIDERATION.......................................................................................  61 
 V.  FURTHER  NOTICE  OF  PROPOSED  RULEMAKING  ........................................................  63 
 A.  Definition  of  Rural  Area.................................................................................................  63  B.  Support  for  Satellite  Services  for  Mobile  Rural  Health  Clinics  ........................................  65 
 C.  Administrative  Matters  ......................................................................................................  69 
 VI.  PROCEDURAL  MATTERS  ...................................................................................................  70 
 A.  Regulatory  Flexibility  Analysis  .........................................................................................  70  B.  Paperwork  Reduction  Act  Analysis  ...................................................................................  71 
 C.  Filing  Procedures  ...............................................................................................................  72  D.  Further  Information............................................................................................................  80 

 VII.  ORDERING  CLAUSES.........................................................................................................  82 
 APPENDIX  A    FINAL  RULES  APPENDIX  B    LIST  OF  COMMENTERS  AND  REPLY  COMMENTERS 
 APPENDIX  C    FINAL  REGULATORY  FLEXIBILITY  ANALYSIS  APPENDIX  D    INITIAL  REGULATORY  FLEXIBILITY  ANALYSIS 

 I.  INTRODUCTION 
 1.  In  this  Report  and  Order,  Order  on  Reconsideration,  and  Further  Notice  of  Proposed  Rulemaking,  we  modify  our  rules  to  improve  the  effectiveness  of  the  rural  health  care 

 support  mechanism,  which  provides  discounts  to  rural  health  care  providers  to  access  modern  telecommunications  for  medical  and  health  maintenance  purposes.  Because  participation  in  the 
 rural  health  care  support  mechanism  has  not  met  the  Commissions  initial  projections,  we  amend  our  rules  to  improve  the  program,  increase  participation  by  rural  health  care  providers, 
 and  ensure  that  the  benefits  of  the  program  continue  to  be  distributed  in  a  fair  and  equitable  manner.  Specifically,  we  expand  the  scope  of  entities  eligible  to  receive  discounts,  provide 
 support  for  Internet  access,  and  modify  the  way  in  which  we  calculate  discounts  to  offer  rural  health  care  providers  more  flexibility.  In  addition,  in  the  Order  on  Reconsideration,  we  deny 
 Mobile  Satellite  Ventures  Subsidiarys  petition  for  reconsideration  of  the  1997  Universal 
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 Service  Order.  1  Lastly,  in  the  Further  Notice  of  Proposed  Rulemaking,  we  seek  comment  on  modifications  to  the  definition  of  rural  area  for  the  rural  health  care  support  mechanism, 
 whether  additional  modifications  to  our  rules  are  appropriate  to  facilitate  the  provision  of  support  to  mobile  rural  health  clinics  for  satellite  services,  and  additional  outreach  efforts  and 
 measures  to  streamline  further  the  application  process.  The  actions  we  take  today  encourage  the  development  of  public/  private  partnerships  and  other  creative  solutions  to  meet  the  needs  of 
 rural  communities  and  increase  participation  in  the  rural  health  care  mechanism. 
 2.  The  actions  we  take  today  will  also  strengthen  telemedicine  and  telehealth  networks  across  the  nation,  help  improve  the  quality  of  health  care  services  available  in  rural  America, 

 and  better  enable  rural  communities  to  rapidly  diagnose,  treat,  and  contain  possible  outbreaks  of  disease.  Moreover,  enhancing  access  to  an  integrated  nation-  wide  telecommunications  network 
 for  rural  health  care  providers  will  further  the  Commissions  core  responsibility  to  make  available  a  rapid  nation-  wide  network  for  the  purpose  of  the  national  defense,  particularly  with 
 the  increased  awareness  of  the  possibility  of  biological  or  chemical  terrorist  attacks.  Finally,  these  changes  will  further  the  Commissions  efforts  to  improve  its  oversight  of  the  operation  of 
 the  program  to  ensure  that  the  statutory  goals  of  section  254  of  the  Telecommunications  Act  of  1996  are  met  without  waste,  fraud,  or  abuse.  2 

 II.  BACKGROUND 
 3.  In  section  254  of  the  Act,  Congress  sought  to  provide  rural  health  care  providers  an  affordable  rate  for  the  services  necessary  for  the  purposes  of  telemedicine  and  instruction 

 relating  to  such  services.  3  Specifically,  Congress  directed  telecommunications  carriers  [  to]  provide  telecommunications  services  which  are  necessary  for  the  provision  of  health  care 
 services  in  a  State,  including  instruction  relating  to  such  services,  to  any  public  or  nonprofit  health  care  provider  that  serves  persons  who  reside  in  rural  areas  in  that  State,  at  rates  that  are 
 reasonably  comparable  to  rates  charged  for  similar  services  in  urban  areas  in  that  State.  4  Congress  also  directed  the  Commission  to  enhance  access  to  advanced  telecommunications  and 
 information  services  for  health  care  providers.  5 
 4.  The  Commission  implemented  this  statutory  directive  by  adopting  the  rural  health  care  support  mechanism  in  the  1997  Universal  Service  Order.  Specifically,  the  Commission 

 concluded  that  telecommunications  carriers  must  charge  eligible  rural  health  care  providers  a  rate  for  each  supported  service  that  is  no  higher  than  the  highest  tariffed  or  publicly  available 
 commercial  rate  for  a  similar  service  in  the  closest  city  in  the  state  with  a  population  of  50,000 

 1  Federal-  State  Joint  Board  on  Universal  Service,  CC  Docket  No.  96-  45,  Report  and  Order,  12  FCC  Rcd  8776 
 (1997)  (1997  Universal  Service  Order)  (subsequent  history  omitted). 
 2  Pub.  L.  No.  104-  104,  110  Stat.  56.  The  1996  Act  amended  the  Communications  Act  of  1934  (the  Act).  See  47 
 U.  S.  C.    151  et  seq. 
 3  H.  R.  Conf.  Rep.  No.  458,  104  th  Cong.  2  nd  Sess.  133  (1996).  See  also  Pub.  L.  No.  104-  104,  110  Stat.  56. 

 4  See  47  U.  S.  C.    151  et  seq.  (adding  47  U.  S.  C.    254(  h)(  1)(  A)  to  the  Act). 

 5  47  U.  S.  C.    254(  h)(  2)(  A). 
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 or  more  people,  taking  distance  charges  into  account.  6  The  Commission  also  adopted  mechanisms  to  provide  support  for  limited  toll-  free  access  to  an  Internet  service  provider.  7  The 
 Commission  adopted  an  annual  cap  of  $400  million  for  universal  service  support  for  rural  health  care  providers.  8  The  Commission  based  its  conclusions  on  analysis  of  the  condition  of  the  rural 
 health  care  community  and  technology  at  that  time.  9 
 5.  Since  then,  the  Commission  has  made  some  changes  to  the  rural  health  care  support  mechanism  to  make  it  more  viable  and  to  reflect  technological  changes.  10  Because  only  a  small 

 number  of  rural  health  care  providers  qualified  for  discounts  in  the  original  funding  cycle,  which  covered  the  period  from  January  1,  1998  through  June  30,  1999,  the  Commission 
 reevaluated  the  structure  of  the  rural  health  care  universal  service  support  mechanism  in  the  fall  of  1999.  11  At  that  time,  the  Commission:  (1)  simplified  the  urban/  rural  rate  calculation;  (2) 
 eliminated  the  per-  location  discount  limit;  (3)  encouraged  participation  in  consortia;  and  (4)  re-allocated  billing  and  collection  expenses  by  the  number  of  participants  in  the  rural  health  care 
 universal  service  support  mechanism.  12  The  Commission  also  determined  that  the  definition  of  health  care  provider  does  not  include  nursing  homes,  hospices,  other  long-  term  care  facilities, 
 or  emergency  medical  service  facilities.  13  The  Commission  also  decided  not  to  further  clarify  the  definition  of  health  care  provider  or  to  provide  additional  support  for  long  distance 

 6  1997  Universal  Service  Order,  12  FCC  Rcd  at  9093,  para.  608. 
 7  Id. 
 8  47  C.  F.  R.    54.623;  1997  Universal  Service  Order,  12  FCC  Rcd  at  9141,  para.  705.  The  Commission 
 subsequently  limited  support  for  the  first  funding  cycle  to  $100  million.  See  Federal-  State  Joint  Board  on  Universal  Service,  CC  Docket  No.  96-  45,  Fifth  Order  on  Reconsideration  and  Fourth  Report  and  Order  in  CC 

 Docket  No.  96-  45,  13  FCC  Rcd  14915,  14928-  33  (1998). 
 9  See  1997  Universal  Service  Order,  12  FCC  Rcd  at  9094  n.  1556  (based  upon  material  supplied  by  the  Advisory 
 Committee  on  Telecommunications  and  Health  Care  (comprised  of  experts  in  the  fields  of  health  care,  telecommunications,  and  telemedicine)  and  the  Federal-  State  Joint  Board  on  Universal  Service  (referring  to  FCC 

 Advisory  Committee  on  Telecommunications  and  Health  Care,  Findings  and  Recommendations,  October  15,  1996,  and  Federal-  State  Joint  Board  on  Universal  Service,  CC  Docket  No.  96-  45,  Recommended  Decision,  12 
 FCC  Rcd  87  (1996)  (Recommended  Decision)). 
 10  In  September  1999,  the  Commission  adopted  the  Fourteenth  Order  on  Reconsideration,  in  which  the 
 Commission  determined  that  all  telecommunications  carriers  that  provide  supported  services  to  eligible  health  care  providers  under  section  254(  h)(  1)(  A)  are  entitled  to  have  a  credit  against  their  universal  service  contribution 

 obligation  equal  to  the  difference  between  the  lower,  urban  rate  they  offer  eligible  health  care  providers  for  supported  telecommunications  services  and  the  higher,  rural  rates  that  would  normally  be  charged  to  these 
 customers.  Federal-  State  Joint  Board  on  Universal  Service,  CC  Docket  No.  96-  45,  Fourteenth  Order  on  Reconsideration,  14  FCC  Rcd  20106  (1999)  (Fourteenth  Order  on  Reconsideration). 

 11  Changes  to  the  Board  of  Directors  of  the  National  Exchange  Carrier  Association,  Inc.,  Federal-  State  Joint 
 Board  on  Universal  Service,  CC  Docket  Nos.  97-  21  and  96-  45,  Sixth  Order  on  Reconsideration  in  CC  Docket  No.  97-  21  and  Fifteenth  Order  on  Reconsideration  in  CC  Docket  No.  96-  45,  14  FCC  Rcd  18756,  18760-  61,  para.  7 

 (1999)  (Fifteenth  Order  on  Reconsideration)  (noting  that  there  were  2,  500  initial  applications,  and  only  a  small  fraction  made  it  through  the  first  funding  cycle). 

 12  Fifteenth  Order  on  Reconsideration,  14  FCC  Rcd  at  18762,  para.  9. 
 13  Id.  at  18786,  para.  48. 
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 telecommunications  service.  14 
 6.  The  rural  health  care  community  and  participating  service  providers  now  have  six  years  of  experience  with  the  rural  health  care  support  mechanism.  15  Over  this  period,  the  rural 

 health  care  mechanism  has  provided  support  to  rural  health  care  providers  in  45  states  and  the  U.  S.  Virgin  Islands,  to  enable  them  to  obtain  access  to  modern  telecommunications  services  for 
 medical  and  health  maintenance  purposes.  16  Such  support  has  facilitated  the  delivery  of  medical  services  to  people  who  would  otherwise  have  to  wait  for  care,  go  without  it,  or  take 
 long  and  expensive  journeys  across  difficult  terrain  to  find  help.  Telemedicine  allows  rural  health  care  providers  in  isolated  areas  to  consult  with  specialists  in  an  effective  manner  and  treat 
 patients  locally,  rather  than  waiting  for  scheduled  visits  or  trying  to  describe  patient  conditions  orally  to  specialists  with  the  requisite  degree  of  accuracy  and  completeness. 

 7.  In  some  instances,  telemedicine  can  save  lives.  For  example,  a  video  teleconference  link  allowed  a  surgeon  in  Anchorage  to  provide  real-  time  guidance  to  a  doctor  in  an  isolated 
 village  in  Alaska  while  he  performed  life-  saving  emergency  surgery  to  stem  bleeding  for  a  patient  diagnosed  with  an  ectopic  pregnancy.  17  The  emergency  surgery  was  necessary,  because 
 the  patient  could  not  be  airlifted  to  Anchorage  due  to  fog.  In  Virginia,  telemedicine  links,  which  transported  high-  quality  ultrasound  pictures,  allowed  a  neonatal  cardiologist  to  remotely 
 diagnose  an  infant  located  in  a  rural  hospital  with  a  descending  aorta.  18  The  doctor  was  able  to  prescribe  medication,  which  provided  additional  time  to  transport  the  infant  to  a  specialty 
 hospital  for  open  heart  surgery. 
 8.  In  2002,  the  Commission  issued  a  Notice  of  Proposed  Rulemaking  (NPRM)  to  review  the  rural  health  care  universal  service  support  mechanism.  19  The  Commission  was 

 prompted  to  act  by  a  number  of  factors.  First,  the  mechanism  is  greatly  underutilized.  Only  1,194  rural  health  care  providers  out  of  nearly  8,300  potential  applicants  received  support  in 
 Funding  Year  2001.  20  Indeed,  notwithstanding  the  annual  funding  cap  of  $400  million,  the 
 14  Id.  at  18762,  para.  9. 

 15  Funding  Year  2003  is  the  sixth  year  of  the  program. 
 16  Second  Annual  Telehealth  Leadership  Conference,  Washington,  DC,  June  2,  2003,  Session  III  Universal 
 Service  Fund  Update,  available  at  http://  www.  americantelemed.  org/  conf/  annualmeet.  htm  (retrieved  November  13,  2003)  (The  following  States  are  not  currently  receiving  support:  CT,  DE,  MD,  RI.  Two  states  that  do  not  have 

 rural  areas,  DC  and  NJ,  are  also  not  currently  receiving  support.). 
 17  Nichole  Tsong,  Live  Video  Gives  Kotzebue  Doctor  a  Surgeons  Eye,  Anchorage  Daily  News,  September  4, 
 2003,  at  A1. 
 18  Steve  Thompson,  No  Mountain  Too  High,  Rural  Cooperatives  May/  June  2003,  at  22. 

 19  Rural  Health  Care  Support  Mechanism,  Notice  of  Proposed  Rulemaking,  WC  Docket  No.  02-  60,  17  FCC  Rcd 
 7806  (2002)  (NPRM).  We  received  seventy-  five  comments,  fourteen  reply  comments,  and  six  ex  partes  in  response  to  the  NPRM.  Appendix  B  provides  the  full  and  abbreviated  names  of  the  parties.  See  Appendix  B. 

 20  See  USAC  Rural  Health  Care  Division  All  Stats-  6-  30-  03  (FY  2001)  (Note  that  results  for  Funding  Year  2002 
 that  closes  on  October  8,  2003,  are  not  yet  available);  Universal  Service  Administrative  Company  Report  of  Health  Care  Providers  Eligible  for  Support  Under  the  Rural  Health  Care  Universal  Service  Support  Mechanism,  at 

 4  (April  5,  2001)  (USAC  Research  Results  Report)  (stating  there  were  approximately  8,297  health  care  providers  in  the  United  States  as  of  September  2000). 
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 Rural  Health  Care  Division  (RHCD)  of  the  Universal  Service  Administrative  Company  (USAC  or  the  Administrator)  disbursed  only  $30.25  million  in  total  discounts  for  the  first  five  years  of 
 operation  of  the  universal  service  support  mechanism.  21  Reexamining  certain  aspects  of  our  rules  and  instituting  other  streamlining  changes  should  greatly  increase  the  number  of  rural 
 health  care  providers  that  could  benefit  from  the  mechanism,  without  modifying  the  existing  funding  cap. 

 9.  Second,  changes  in  telecommunications  technology  and  its  use  by  the  medical  community  warrant  a  re-  evaluation  of  some  aspects  of  the  mechanism.  For  instance,  Internet 
 points  of  presence  now  exist  throughout  the  countrys  telecommunications  network.  22  More  sophisticated  medical  imaging  technology  is  available  today  than  existed  in  1997,  which 
 requires  high  speed  access  to  display  images  used  for  diagnostic  purposes.  23 
 10.  Finally,  in  addition  to  section  254,  our  core  statutory  mandate,  as  set  out  in  47  U.  S.  C.    151,  states  in  relevant  part,  that  we  should  make  available,  so  far  as  possible,  to  all 

 the  people  of  the  United  States    a  rapid,  efficient,  Nation-  wide    wire  and  radio  communications  service  with  adequate  facilities  at  reasonable  charges,  for  the  purpose  of  the 
 national  defense,  [and]  for  the  purpose  of  promoting  safety  of  life  and  property  through  the  use  of  wire  and  radio  communication.  24  Consistent  with  the  statutory  mandate,  further  utilization 
 of  the  rural  health  care  universal  service  support  mechanism  may  benefit  the  development  of  a  broader  and  more  fully  integrated  network  of  health  care  providers  across  our  nation.  In  the 
 aftermath  of  recent  national  events,  the  importance  of  such  a  network  to  national  security  and  public  safety  is  significant.  Improvements  to  the  rural  health  care  support  mechanism  also 
 should  better  enable  rural  communities  to  rapidly  diagnose,  treat,  and  contain  possible  outbreaks  of  disease,  while  helping  to  provide  better  health  care  generally  in  rural  areas  by  facilitating 
 broader  and  faster  transfer  of  critical  information.  In  addition  to  crisis  response,  telemedicine  and  telehealth  could  play  a  critical  role  in  informing  rural  health  care  providers  about  emerging 

 21  See  Universal  Service  Administrative  Company  2002  Annual  Report.  The  RHCD  administers  the  rural  health 
 care  support  mechanism  under  the  direction  of  the  Federal  Communications  Commission.  See  Changes  to  the  Board  of  Directors  of  the  National  Exchange  Carrier  Association,  Inc.,  Federal-  State  Joint  Board  on  Universal 

 Service,  CC  Docket  Nos.  97-  21  and  96-  45,  Third  Report  and  Order  in  CC  Docket  No.  97-  21  and  Fourth  Order  on  Reconsideration  in  CC  Docket  No.  97-  21  and  Eighth  Order  on  Reconsideration  in  CC  Docket  No.  96-  45,  13  FCC 
 Rcd  25058  (1998). 
 22  See,  e.  g.,  NTCA  Members  Internet/  Broadband  Survey  Report,  National  Telephone  Cooperative  Association,  at  17 
 (November  2000),  available  at  http://  ntca.  netstrategies.  com/  content_  documents/  broadbandstudy.  pdf  (retrieved  November  13,  2003)  (referencing  a  survey  of  members  of  the  National  Telephone  Cooperative  Association 

 indicating  that  about  97%  of  respondents  reported  local  dial-  up  telephone  access  within  their  service  areas).  See  also  Ronald  A.  Wirtz,  The  Need  For  Speed,  Fedgazetts,  November  1,  2001,  available  at 
 http://  minneapolisfed.  org/  pubs/  fedgaz/  01-  11/  speed.  cfm  (retrieved  November  13,  2003)  (  Early  on,  access  to  the  Internet  often  meant  a  long-  distance  call  to  an  ISP,  which  had  limited  points-  of-  presence...  a  variety  of  sources 
 suggest  that  [the  ISP  industry]  has  grown  from  several  hundred  five  or  six  years  ago  to  some  3,  500  by  1998,  to  about  7,000  today,  each  of  which  brings  with  it  at  least  one  additional  POP  to  the  system,  and  usually  many  more.). 

 23  See,  e.  g.,  David  Charles,  M.  D.,  Whats  Next:  Skyway  to  Health,  Telephony,  April  1,  2002,  at  40. 
 24  47  U.  S.  C.    151. 
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 threats  and  improving  preparedness.  25 
 III.  REPORT  AND  ORDER 
 A.  Eligible  Health  Care  Provider 
 11.  Background.  Section  254(  h)(  1)(  A)  requires  telecommunications  carriers  to  provide  discounted  telecommunications  services  to  any  public  or  non-  profit  health  care  provider  that 

 serves  rural  areas  in  a  State.  26  Section  254(  h)(  7)(  B)  defines  the  term  health  care  provider  as: 
 (i)  post-  secondary  educational  institutions  offering  health  care  instruction,  teaching  hospitals,  and  medical  schools; 

 (ii)  community  health  centers  or  health  centers  providing  health  care  to  migrants;  (iii)  local  health  departments  or  agencies; 
 (iv)  community  mental  health  centers;  (v)  not-  for-  profit  hospitals; 
 (vi)  rural  health  clinics;  and  (vii)  consortia  of  health  care  providers  consisting  of  one  or  more  entities  described  in 
 clause  (i)  through  (vi).  27 
 In  the  1997  Universal  Service  Order,  the  Commission  declined  to  expand  the  definition  of  health  care  provider  beyond  these  seven  statutory  categories.  28  The  Commission  concluded 

 that  if  Congress  had  intended  other  entities  to  qualify  as  health  care  providers,  it  would  have  explicitly  included  them  within  the  statute.  29  Accordingly,  on  reconsideration,  the  Commission 
 rejected  arguments  to  expand  the  definition  of  health  care  provider  to  include  long-  term  care  facilities,  such  as  nursing  homes  and  hospices,  and  emergency  medical  service  facilities.  30  The 
 Commission  did  not  address  what  would  constitute  a  public  health  care  provider. 
 12.  Subsequently,  in  the  NPRM,  the  Commission  sought  comment  on  whether  it  should  revisit  its  prior  interpretations  of  the  terms  health  care  provider  and  rural  health  clinic  to 

 expand  the  number  of  entities  eligible  to  receive  discounted  telecommunications  services.  31  Specifically,  the  Commission  invited  comment  on  whether  to  expand  the  definition  to  include 
 rural  health  care  providers  that  provide  ineligible  services,  even  on  a  primary  basis,  but  also 
 25  See,  e.  g.,  HHS  Bioterrorism  Preparedness:  CDCs  Role  in  Public  Health  Protection,  Statement  by  Tommy  G. 
 Thompson  before  the  Commission  on  Energy  and  Commerce,  U.  S.  House  of  Representatives  (November  15,  2001)  (emphasizing  the  importance  of  public  health  communications  infrastructure  to  facilitate  information 

 sharing  concerning  potential  bioterrorism  agents);  147  Cong.  Rec.  H10440  (December  19,  2001)  (statement  of  Rep.  Bereuter)  (noting  importance  of  telemedicine  in  combating  bioterrorism). 

 26  47  U.  S.  C.    254(  h)(  1)(  A)  (emphasis  added). 
 27  47  U.  S.  C.    254(  h)(  7)(  B). 
 28  1997  Universal  Service  Order,  12  FCC  Rcd  at  9118-  19,  paras.  655-  56. 

 29  Id. 
 30  Fifteenth  Order  on  Reconsideration,  14  FCC  Rcd  at  18786,  para.  48. 
 31  NPRM,  17  FCC  Rcd  at  7813,  para.  16. 
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 serve  as  a  rural  health  clinic  or  in  another  capacity  that  would  qualify  it  as  an  eligible  health  care  provider  under  the  statute.  32  The  Commission  explained  that  such  multipurpose  providers 
 might  play  a  vital  role  in  responding  to  public  health  crises  affecting  communities  located  in  remote  regions  of  our  country.  33  The  Commission  also  sought  comment  on  whether  it  would  be 
 practical  to  prorate  discounts  to  the  extent  these  entities  operate  as  eligible  health  care  providers.  34 

 13.  Discussion.  We  now  further  define  the  statutory  term  public  health  care  provider.  We  conclude  that  dedicated  emergency  departments  of  rural  for-  profit  hospitals  that  participate 
 in  Medicare  should  be  deemed  public  health  care  providers  eligible  to  receive  prorated  rural  heath  care  support.  35  We  agree  with  commenters  that  this  clarification  is  consistent  with 
 congressional  intent  and  is  necessary  to  give  meaning  to  the  term  public  health  care  provider  under  the  rural  health  care  program.  36  Dedicated  emergency  departments  in  for-  profit  hospitals, 
 including  the  emergency  departments  of  critical  access  hospitals,  37  are  required,  pursuant  to  the 
 32  Id. 
 33  Id. 
 34  Id.  at  para.  17. 
 35  47  C.  F.  R.    54.601(  a)(  1)  as  adopted  herein.  Previously,  these  providers  were  ineligible  for  support  because  they 
 are  associated  with  for-  profit  hospitals.  See  47  U.  S.  C.    254(  h)(  7)(  B).  Dedicated  emergency  departments  are  defined  under  health  care  regulations  as  any  department  or  facility  of  the  hospital,  regardless  of  whether  it  is  located 

 on  or  off  the  main  hospital  campus,  that  meets  at  least  one  of  the  following  requirements: 
 (1)  It  is  licensed  by  the  State  in  which  it  is  located  under  applicable  State  law  as  an  emergency  room  or  emergency  department; 
 (2)  It  is  held  out  to  the  public  (by  name,  posted  signs,  advertising,  or  other  means)  as  a  place  that  provides  care  for  emergency  medical  conditions  on  an  urgent  basis 
 without  requiring  a  previously  scheduled  appointment;  or  (3)  During  the  calendar  year  immediately  preceding  the  calendar  year  in  which  a 
 determination  under  this  section  is  being  made,  based  on  a  representative  sample  of  patient  visits  that  occurred  during  the  calendar  year,  it  provides  at  least  one-  third 
 of  all  of  its  outpatient  visits  for  the  treatment  of  emergency  medical  conditions  on  an  urgent  basis  without  requiring  a  previously  scheduled  appointment. 
 42  C.  F.  R.    489.24. 
 36  See,  e.  g.,  Letter  to  Marlene  Dortch,  Secretary,  Federal  Communications  Commission,  from  Karen  S.  Rheuban, 
 MD,  Medical  Director,  and  Eugene  Sullivan,  MS,  Director,  filed  on  behalf  of  the  Office  of  Telemedicine,  University  of  Virginia  Health  System,  dated  August  15,  2003  (  UVA  Ex  Parte);  Kansas  DHE  Comments  at  1; 

 Kansas  Hosp.  Assoc.  Comments  at  1;  Kingston  eHealth  Comments  at  4;  Minn.  Ambulance  Assoc.  Comments  at  1;  NRHA  Comments  1;  Nebraska  Office  of  Rural  Health  Comments  1. 

 37  Critical  access  hospitals  were  created  under  the  Medicare  Rural  Hospital  Flexibility  Program,  authorized  by 
 Congress  under  section  4201  of  the  Balanced  Budget  Act  of  1997.  Balanced  Budget  Act  of  1997,  Pub.  L.  105-  33,    4201,  111  Stat.  251,  712-  31,  756-  59  (1997).  In  essence,  critical  access  hospitals  are  limited-  service  rural  non-  or 

 for-  profit  hospitals  that  provide  outpatient  and  short-  term  inpatient  hospital  care  on  an  urgent  or  emergency  basis,  then  release  patients  or  transfer  them  to  a  full-  service  hospital.  To  date,  over  100  critical  access  hospitals  have 
 been  designated  by  the  state  as  necessary  providers  of  medical  services.  See  National  Conference  of  State  Legislatures  Rural  Health  Brief    Ensuring  the  Survival  of  Critical  Access  Hospitals:  The  New  Medicare  Rural 
 Hospital  Flexibility  Program  and  the  Important  Role  for  States  (2000),  available  at  http://  www.  ruralhealth.  hrsa.  gov/  pub/  IssueBrief1.  htm  (retrieved  September  4,  2003). 

 (continued.) 
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 Emergency  Medical  Treatment  and  Labor  Act  (EMTALA),  38  to  provide  medical  screening  examinations  to  all  patients  who  present  themselves  and  to  stabilize  or  arrange  for  appropriate 
 transfer  of  those  patients  with  emergency  conditions.  39  Thus,  such  providers  are  public  in  nature  by  virtue  of  the  persons  they  are  required,  pursuant  to  EMTALA,  to  examine  and/  or  treat 
 for  emergency  medical  conditions. 
 14.  Moreover,  we  now  determine  that  dedicated  emergency  departments  in  for-  profit  rural  hospitals  constitute  rural  health  clinics.  40  As  UVA  notes,  in  most  communities, 

 emergency  departments  are  the  only  ambulatory  care  entities  that  serve  the  public  on  a  24-  hour  a  day,  7-  day  a  week  basis.  41  In  many  instances,  emergency  departments  of  rural  for-  profit 
 hospitals  and  critical  access  hospitals  are  the  only  health  care  providers  in  rural  areas  serving  the  medical  needs  of  the  community.  Dedicated  emergency  departments  typically  provide  the  types 
 of  medical  services  often  provided  in  traditional  health  clinics.  Therefore,  we  find  that  dedicated  emergency  departments  in  rural  for-  profit  hospitals  should  be  eligible  to  receive  prorated 
 discounts  as  public  health  providers,  and  more  specifically  as  public  rural  health  clinics.  It  is  necessary  to  clarify  the  definition  of  rural  health  clinic  in  this  way  to  promote 
 timely  access  to  acute  specialty  healthcare  services,  chronic  disease  management  programs  and  other  preventive  services  essential  to  public  health  and  safety.  These  entities  are  generally  the 
 initial  point  of  entry  into  the  healthcare  system  for  any  person  suffering  the  consequences  of  a  severe  catastrophe  or  accident  and  constitute  a  vital  segment  of  the  health  care  community, 
 particularly  in  the  event  of  a  national  public  health  emergency. 
 15.  Additionally,  as  suggested  by  several  commenters,  42  given  the  realities  of  rural  health  care  providers  in  offering  quality  health  care  services  in  rural  areas,  we  clarify  the  entities 

 listed  in  section  254(  h)(  7)(  B)  that  qualify  as  rural  health  care  providers.  We  conclude  that  entities  listed  in  section  254(  h)(  7)(  B)  include  non-  profit  entities  that  function  as  one  of  the  listed 
 entities  on  a  part-  time  basis.  43  Pursuant  to  this  modification,  non-  profit  entities  that  provide  ineligible  services,  even  on  a  primary  basis,  would  be  able  to  receive  prorated  support 

 (Continued  from  previous  page) 
 38  EMTALA  was  passed  as  part  of  the  Consolidated  Omnibus  Budget  Reconciliation  Act  of  1985  (COBRA), 
 which  was  signed  into  law  in  1986.  See  Consolidated  Omnibus  Budget  Reconciliation  Act  of  1985,  Pub.  L.  99-272,    9121,  100  Stat.  82  (1986). 

 39  See  42  U.  S.  C.    1395dd.  Specifically,  section  (c)(  1)  of  the  Emergency  Medical  Treatment  and  Labor  Act 
 (EMTALA)  states  that  if  an  individual  at  a  hospital  has  an  emergency  medical  condition  which  has  not  been  stabilized...  the  hospital  may  not  transfer  the  individual  unless--(  A)(  ii)  a  physician  has  signed  a  certification  that, 

 based  upon  the  information  available  at  the  time  of  transfer,  the  medical  benefits  reasonably  expected  from  the  provision  of  appropriate  medical  treatment  at  another  medical  facility  outweigh  the  increased  risks  to  the 
 individual.  42  U.  S.  C.    1395dd(  c)(  1).  These  provisions  are  applicable  to  both  non-  profit  and  for-  profit  hospitals.  See  42  U.  S.  C.    1395dd. 

 40  47  U.  S.  C.    254(  h)(  7)(  B)(  vi). 
 41  See  UVA  Ex  Parte  at  3. 
 42  See,  e.  g.,  Institute  of  Rural  Health  Comments  at  5;  UVA  Comments  at  7-  10. 
 43  47  U.  S.  C.    254(  h)(  7)(  B). 
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 commensurate  with  their  provision  of  eligible  rural  health  care  services.  44  For  example,  if  a  doctor  operated  a  rural  health  clinic  on  a  non-  profit  basis  in  a  rural  community  one  day  per 
 week  or  during  evenings  in  the  local  community  center,  that  community  center  would  be  able  to  receive  prorated  support,  because  it  serves  as  a  rural  health  clinic  on  a  part-  time  basis.  45 
 Similarly,  if  a  non-  profit  community  mental  health  center  also  operated  as  a  for-  profit  pharmacy,  that  center  would  also  be  able  to  receive  prorated  support  as  a  part-  time  community 
 mental  health  center.  46  Our  goal  in  implementing  this  proposal  is  two-  fold    to  encourage  the  development  of  public/  private  partnerships  and  other  creative  solutions  to  meet  the  needs  of 
 rural  communities,  and  to  increase  participation  in  the  rural  health  care  support  mechanism. 
 16.  We  decline  to  expand  the  definition  of  health  care  provider  to  include  nursing  homes,  hospices,  and  other  long-  term  care  facilities.  47  Congress  specifically  listed  seven 

 categories  of  entities  eligible  for  support  under  this  program  in  section  254(  h)(  7)(  B).  48  Given  this  specific  listing,  we  find  that  if  Congress  had  intended  to  include  nursing  homes,  hospices, 
 and  other  long-  term  care  facilities  as  health  care  providers,  it  would  have  explicitly  done  so  in  the  statute.  49  The  Commission  is  not  authorized  to  amend  the  statute  to  add  categories  to  the 
 definition,  as  suggested  by  commenters.  Thus,  we  affirm  the  Commissions  previous  decision  that  nursing  homes,  hospices,  and  other  long-  term  care  facilities  are  ineligible  for  support, 
 whether  operated  on  a  for-  profit  or  non-  profit  basis.  50  However,  because  Congress  did  specifically  list  seven  categories  of  entities  qualifying  as  health  care  providers,  the  Commission 
 may  clarify  the  types  of  entities  that  fit  within  those  seven  categories.  Therefore,  consistent  with  our  clarification  that  entities  that  serve  as  a  non-  profit  rural  health  care  clinic  on  a  part-  time 
 basis  are  health  care  providers,  part-  time  non-  profit  rural  health  care  clinics  are  eligible  for  prorated  support,  even  when  associated  with  a  nursing  home,  hospice,  or  other  long-  term  care 
 facility.  51 
 17.  In  addition,  at  this  time,  we  decline  to  expand  the  definition  of  rural  health  care  provider  to  include  any  rural,  non-  profit  health  care  entity  with  a  certified  Medicare  and/  or 

 Medicare  provider  number  as  proposed  by  commenters.  52  The  record  lacks  sufficient 

 44  47  C.  F.  R.    54.601(  d)  as  adopted  herein. 
 45  47  U.  S.  C.    254(  h)(  7)(  B)(  vi);  see  infra  paras.  49-  51  for  discussion  on  allocating  eligible  and  ineligible  use. 
 46  Id. 
 47  See,  e.  g.,  Avera  Comments  at  1;  Cortland  Co.  Health  Dept.  Comments  at  1;  Univ.  of  Arizona  Health  Sciences 
 Comments  at  1;  Arkansas  DIS  Reply  Comments  at  1. 
 48  47  U.  S.  C.    254(  h)(  7)(  B). 

 49  47  U.  S.  C.  254(  h)(  7)(  B). 
 50  Fifteenth  Order  on  Reconsideration,  14  FCC  Rcd  at  18786,  para.  48. 
 51  We  thus  reverse  in  part  the  Commissions  decision  that  non-  profit  nursing  homes,  hospices,  and  long-  term  care 
 facilities  are  100%  ineligible.  To  the  extent  such  entities  function  as  rural  health  clinics,  even  on  a  part-  time  basis,  they  would  be  eligible  for  prorated  support  as  described  above.  See  supra  para.  14. 

 52  See  ATA  Comments  at  5;  CTTC  Comments  at  4;  Center  for  Telemedicine  Law  Comments  at  5;  Institute  of 
 Rural  Health  Comments  at  5;  MGHS  Reply  Comments  at  6;  Nevada  State  Office  Comments  at  4;  Northwest  (continued.) 
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 information  to  identify  the  types  of  entities  that  would  become  eligible  under  this  proposal,  as  Medicare/  Medicaid  supports  a  wide  range  of  services,  drugs,  and  products.  We  are  concerned 
 that  by  including  such  entities  within  the  definition  of  health  care  provider  we  may  exceed  our  statutory  authority.  Moreover,  with  the  information  in  the  record  we  are  unable  to 
 determine  the  potential  impact  on  the  demand  for  support. 
 B.  Eligible  Services 
 1.  Internet  Access 
 18.  Background.  Information  services  are  defined  in  the  Act  as  the  offering  of  a  capability  for  generating,  acquiring,  storing,  transforming,  processing,  retrieving,  utilizing,  or 

 making  available  information  via  telecommunications,  and  includes  electronic  publishing,  but  does  not  include  any  use  of  any  such  capability  for  the  management,  control,  or  operation  of  a 
 telecommunications  system  or  the  management  of  a  telecommunications  service.  53  Internet  access  is  an  information  service  that  allows  consumers,  including  rural  health  care  providers,  to 
 access  the  Internet.  54  More  specifically,  Internet  access  allows  users  to  alter  the  format  of  information  through  computer  processing  applications  such  as  protocol  conversion  and 
 interaction  with  stored  data.  55 
 19.  Section  254(  h)(  2)(  A)  provides  that  the  Commission  shall  establish  competitively  neutral  rules  to  enhance,  to  the  extent  technically  feasible  and  economically  reasonable,  access 

 to  advanced  telecommunications  and  information  services  for  all  public  and  non-  profit  elementary  and  secondary  school  classrooms,  health  care  providers,  and  libraries  .  .  .  .  56 
 Accordingly,  the  Act  contemplates  actions  to  enhance  access  to  information  services,  such  as  Internet  access,  for  rural  health  care  providers.  57 

 (Continued  from  previous  page)  Telehealth  Comments  at  3;  Poudre  Valley  Health  Comments  at  1;  Univ.  of  Tennessee  Health  Science  Comments 
 at  3. 
 53  47  U.  S.  C.    153(  20). 

 54  Fundamentally,  the  Internet  is  a  global,  packet  switched  network  that  enables  interconnection  between  networks 
 using  Internet  Protocol  (IP).  The  Supreme  Court  has  described  the  Internet  as  an  international  network  of  interconnected  computers.  Reno  v.  ACLU,  521  U.  S.  844,  849-  50  (1997).  See  also  Kevin  Werbach,  Digital 

 Tornado:  The  Internet  and  Telecommunications  Policy,  Office  of  Plans  and  Policy  Working  Paper  Series  29,  15  (1997). 

 55  Federal-  State  Joint  Board  on  Universal  Service,  CC  Docket  No.  96-  45,  Report  to  Congress,  13  FCC  Rcd  11501, 
 11516-  17,  para.  33  (1998)  (Report  to  Congress)  (citations  and  internal  quotations  omitted).  See  also  Appropriate  Framework  for  Broadband  Access  to  the  Internet  over  Wireline  Facilities,  Universal  Service  Obligations  of 

 Broadband  Providers,  Computer  III  Further  Remand  Proceedings:  Bell  Operating  Company  Provision  of  Enhanced  Services;  1998  Biennial  Regulatory  Review    Review  of  Computer  III  and  ONA  Safeguards  and  Requirements,  CC 
 Docket  Nos.  02-  33,  95-  20,  98-  10,  Notice  of  Proposed  Rulemaking,  17  FCC  Rcd  3019  nn.  16-  17,  27,  38  (2002)  (Wireline  Broadband  Internet  Access  NPRM). 

 56  47  U.  S.  C.    254(  h)(  2)(  A). 
 57  See  Texas  Office  of  Public  Utility  Counsel,  183  F.  3d  at  443-  44  (affirming  the  Commissions  authority  under 
 section  254(  h)(  2)(  A)  to  provide  support  to  non-  telecommunications  carriers  in  their  provision  of  Internet  access  and  internal  connections).  See  also  1997  Universal  Service  Order,  12  FCC  Rcd  at  9107,  para.  630. 
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 20.  In  the  1997  Universal  Service  Order,  the  Commission  concluded  that  section  254(  h)(  2)(  A)  authorizes  a  universal  service  support  mechanism  to  enhance  access  to 
 information  services,  as  long  as  the  mechanism  is  competitively  neutral,  technically  feasible,  and  economically  reasonable.  58  The  Commission  declined,  however,  to  provide  support  to  rural 
 health  care  providers  for  Internet  access  at  that  time  due  to  the  limited  record  and  the  complexity  of  the  proposals.  59  Pursuant  to  section  254(  h)(  2)(  A),  the  Commission  did,  however, 
 provide  limited  support  for  toll  charges  incurred  by  all  health  care  providers  that  could  not  obtain  toll-  free  access  to  an  ISP.  60 

 21.  In  the  NPRM,  the  Commission  sought  comment  on  whether  to  provide  support  for  Internet  access  provided  to  rural  health  care  providers.  61  The  Commission  also  sought  comment 
 on  the  range  of  health  care  services  and  information  that  is  available  via  the  Internet,  on  the  ability  of  the  Internet  to  provide  to  rural  communities  the  types  of  health  care  information  that 
 are  available  in  urban  areas,  and,  in  general,  on  how  health  care  providers  can  make  use  of  the  Internet  to  provide  better  health-  related  services.  62  Finally,  the  Commission  sought  comment  on 
 whether  demand  for  Internet  access  would  likely  increase  total  program  demand  above  the  $400  million  cap  and  how  increased  demand  would  affect  the  operation  of  the  rural  health  care 
 mechanism.  63 
 22.  Discussion.  Given  the  rapid  development  of  the  Internets  capacities,  the  proliferation  of  applications  available  on  the  Internet,  and  the  increase  in  the  number  of  Internet 

 users  since  the  1997  Universal  Service  Order  was  issued,  we  believe  that  it  is  now  appropriate  to  provide  funding  for  Internet  access  to  rural  health  care  providers.  64  In  particular,  we 
 conclude  that  support  equal  to  twenty-  five  percent  of  the  monthly  cost  for  any  form  of  Internet  access  reasonably  related  to  the  health  care  needs  of  the  facility  should  be  provided  to  rural 
 health  care  providers.  65  The  definition  for  Internet  access  that  we  adopt  here  is  intended  to  provide  rural  health  care  providers  considerable  flexibility  to  utilize  the  resources  available  over 
 the  Internet  that  will  assist  them  in  fulfilling  their  health  care  needs. 
 23.  We  agree  with  commenters  that  the  Internet  can  serve  as  an  invaluable  resource,  by 

 58  1997  Universal  Service  Order,  12  FCC  Rcd  at  9109,  para.  634.  Indeed,  the  Commission  specifically  rejected  the 
 notion  that  support  for  non-  telecommunications  services  is  .  .  .  barred  under  .  .  .  section  254(  h)(  2).  Id.  See  also  47  U.  S.  C.    154(  i). 

 59  1997  Universal  Service  Order,  12  FCC  Rcd  at  9106-  07,  9161,  paras.  629-  30,  749. 
 60  1997  Universal  Service  Order,  12  FCC  Rcd  at  9107-  08,  para.  631;  47  U.  S.  C.    254(  h)(  2)(  A).  The  support  was 
 limited  to  the  lesser  of  $180.00  or  30  hours  of  usage  per  month,  if  a  rural  health  care  provider  could  not  reach  an  ISP  without  incurring  toll  charges.  1997  Universal  Service  Order,  12  FCC  Rcd  at  9159,  para.  745. 

 61  NPRM,  17  FCC  Rcd  at  7815,  para.  20. 
 62  Id.  at  7816,  para.  22. 
 63  Id.  at  7816,  para.  25. 
 64  See  generally  1997  Universal  Service  Order. 
 65  47  C.  F.  R.    54.  601(  c)(  2)(  ii),  54.  621(  a)  as  adopted  herein. 
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 providing  on-  line  courses  in  health  education,  66  medical  research,  67  follow-  up  care,  68  regulatory  information  such  as  compliance  with  the  Health  Insurance  Portability  and  Accountability  Act  of 
 1996,  69  video  conferencing,  70  web-  based  electronic  benefit  claim  systems  including  on-  line  billing,  71  and  other  crucial  business  functions.  72  The  incredible  potential  of  the  Internet  to 
 provide  access  to  such  a  breadth  of  medical  information  may  also  help  reduce  isolation  in  rural  communities.  73  In  light  of  the  development  of  medical  applications  for  the  Internet  since  1997, 
 we  conclude  that  encouraging  access  to  this  information  service  will  improve  the  level  of  care  available  in  rural  areas. 

 24.  Furthermore,  health  care  information  shared  over  the  Internet  may  enable  rural  health  care  providers  to  diagnose,  treat,  and  contain  possible  outbreaks  of  disease  or  respond  to 
 health  emergencies.  We  agree  with  commenters  that  Internet  access  provides  a  vital  link  to  information  and  instantaneous  communications  in  times  of  natural  disasters  and  public  health 
 emergencies.  74  National  connectivity  of  telehealth  and  telemedicine  networks  could  also  promote  the  national  defense  by  serving  as  vehicles  for  rapid,  secure  communications  in  times 
 of  emergency,  75  due  to  outbreaks  of  disease  or  biological  and  chemical  attacks.  76 

 66  See  Alaska  Comments  at  2;  Alliance  Comments  at  1;  Avera  Comments  at  2. 
 67  See  GCI  Comments  at  6-  7. 
 68  See  Healthcare  Anywhere  Reply  Comments  at  4-  9  (  Health  care  providers  can  use  the  Internet  to  receive 
 immediate  results  of  screenings  for  patients  that  is  crucial  to  follow-  up  care.  Patient  compliance  with  follow-  up  care  is  more  likely  if  a  patient  gets  the  results  during  his  or  her  visit,  gets  advice  on  what  to  do  next,  and  gets  the 

 opportunity  to  ask  questions  about  his  or  her  condition.  A  rural  patient  may  need  immediate  results  more  than  an  urban  patient  because  a  rural  patient  is  less  likely  to  have  a  telephone  for  receiving  results  and  setting  up  follow-  up 
 appointments.). 
 69  See  Alliance  Comments  5-  6;  David  Bolt,  Lewis  Co.  Primary  Care  Center,  email  8/  22/  03;  Kansas  DHE 
 Comments  at  1;  Kansas  Hosp.  Assoc.  Comments  at  1;  see  also  Health  Insurance  Portability  and  Accountability  Act  of  1996,  Pub.  L.  No.  104-  191,  110  Stat.  2021-  31. 

 70  See  Washington  Rural  Comments  at  1-  2. 
 71  See  Shannon  Clark,  Ashley  County  Medical  Center,  email  8/  18/  03;  Kansas  DHE  Comments  at  1;  Kansas  Hosp. 
 Assoc.  at  1. 
 72  See  Kansas  DHE  Comments  at  1;  Kansas  Hosp.  Assoc.  Comments  at  1.  [  A]  nyone  with  access  to  the  Internet 
 may  take  advantage  of  a  wide  variety  of  communication  and  information  retrieval  methods[  such  as]  electronic  mail  (e-  mail),  automatic  mailing  list  services  (  mail  exploders,    sometimes  referred  to  as  listservs), 

 newsgroups,    chat  rooms,    and  the  World  Wide  Web.    All  of  these  methods  can  be  used  to  transmit  text;  most  can  transmit  sound,  pictures,  and  moving  video  images.  Taken  together,  these  tools  constitute  a  unique  medium  -- 
 known  to  its  users  as  cyberspace  --  located  in  no  particular  geographical  location  but  available  to  anyone,  anywhere  in  the  world,  with  access  to  the  Internet.  Reno  v.  ACLU,  521  U.  S.  at  851. 

 73  See  NPRM,  17  FCC  Rcd  at  7816,  para.  22. 
 74  See  Adams  Co.  Health  Dept.  Comments  at  2;  Alliance  Comments  at  1-  2;  Cortland  Co.  Health  Dept.  Comments 
 at  1;  Lane  Co.  Health  Dept.  Comments  at  2;  NACCHO  Comments  at  1;  NRHA  Comments  at  2;  WGA  Comments  at  3. 

 75  See  Univ.  of  Arizona  Health  Sciences  Comments  at  2;  Illinois  Center  for  Rural  Health  Comments  at  3;  Kingston 
 eHealth  Comments  2,  4;  Madden  Comments  at  2;  NM  Health  Resources  Comments  at  3;  NOSORH  Comments  at  (continued.) 
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 25.  Accordingly,  for  purposes  of  the  rural  health  care  support  mechanism  only,  we  define  eligible  Internet  access  as  an  information  service  that  enables  rural  health  care 
 providers  to  post  their  own  data,  interact  with  stored  data,  generate  new  data,  or  communicate  over  the  World  Wide  Web.  77  Eligible  Internet  access  provides  access  to  the  world-  wide 
 information  resource  of  the  Internet,  and  includes  all  features  typically  provided  by  Internet  service  providers  to  provide  adequate  functionality  and  performance.  To  qualify  as  Internet 
 access  under  the  definition  we  adopt  today  for  the  rural  health  care  support  mechanism,  transmissions  must  traverse  the  Internet  in  some  fashion.  Internet  access  may  provide  transport 
 of  digital  communications  using  any  Internet-  based  protocols,  including  encapsulation  of  data,  video,  or  voice. 

 26.  We  specifically  decline  to  adopt  the  definition  of  Internet  access  currently  used  in  the  schools  and  libraries  support  mechanism.  Under  those  rules,  Internet  access  includes: 
 (2)  The  transmission  of  information  as  part  of  a  gateway  to  an  information  service,  when  that  transmission  does  not  involve  the  generation  or  alteration  of 
 the  content  of  information,  but  may  include  data  transmission,  address  translation,  protocol  conversion,  billing  management,  introductory  informational  content,  and 
 navigational  systems  that  enable  users  to  access  information  services,  and  that  do  not  affect  the  presentation  of  information  to  users[.] 
 47  C.  F.  R.    54.5. 
 This  definition  thus  specifically  precludes  support  for  features  that  provide  the  capability  to  generate  or  alter  the  content  of  information.  78  We  believe  adopting  such  a  limitation  for  the  rural 

 health  care  program  would  significantly  undercut  the  utility  of  providing  support  for  Internet  access  to  rural  health  care  providers,  because  the  ability  to  alter  and  interact  with  information 
 over  the  Internet  is  precisely  the  feature  that  could  facilitate  improved  medical  care  in  rural  areas.  Under  the  rural  health  care  support  mechanism,  we  will  provide  support  for  Internet  access,  as 
 long  as  it  is  reasonably  related  to  the  health  care  needs  of  the  facility,  and  it  is  the  most  cost-effective  method  of  meeting  those  needs.  79  We  will  not  provide  support,  however,  for  the 
 (Continued  from  previous  page)  3;  Tri-  County  Memorial  Hosp.  Comments  at  2-  3.  See  also  The  Telemedicine  Response  to  Homeland  Safety  and 
 Security:  Developing  a  National  Network  for  Rapid  and  Effective  Response  for  Emergency  Medical  Care  (2001),  available  at  http://  www.  americantelemed.  org/  news/  homelandsecurity3.  3.  htm  (retrieved  November  13,  2003) 
 (ATAs  proposal  regarding  the  use  of  telemedicine  in  support  of  homeland  security). 
 76  See  Alliance  Comments  5-  6;  FRC  Reply  Comments  at  13;  Kingston  eHealth  Comments  2,  4;  Madden 
 Comments  at  2;  Minn.  Ambulance  Assoc.  Comments  at  2;  NRHA  Comments  at  2;  Nevada  State  Office  Comments  at  6;  NM  Health  Resources  Comments  at  3;  NOSORH  Comments  at  3;  Tri-  County  Memorial  Hosp.  Comments  at 

 3. 
 77  47  C.  F.  R.    54.601(  c)(  2)(  i)  as  adopted  herein. 

 78  To  implement  this  rule  in  the  schools  and  libraries  program,  the  Administrator  utilizes  cost  allocation  to  provide 
 partial  funding  to  Internet  access  service  that  contains  both  eligible  and  ineligible  features.  If,  however,  the  ineligible  functionality  is  strictly  ancillary  to  the  principle  use  of  the  Internet  access  service,  the  full  price  of  the 

 service  is  eligible  for  discount.  See  Cost  Allocation  for  Products  and  Services  that  Contain  Eligible  and  Ineligible  Components  (2002),  available  at  http://  www.  sl.  universalservice.  org/  reference/  costallocationguide.  asp  (retrieved 
 November  13,  2003). 
 79  See  supra  para.  22,  infra  para.  28. 
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 purchase  of  internal  connections,  computer  equipment  or  other  telecommunications  equipment,  even  when  used  to  access  the  Internet,  because  such  items  are  not  information  services. 
 27.  We  conclude  that  a  flat  discount  percentage  of  twenty-  five  percent  off  the  cost  of  monthly  Internet  access  will  assist  health  care  providers  seeking  to  purchase  Internet  access, 
 while  also  providing  incentives  for  rural  health  care  providers  to  make  prudent  economic  decisions  concerning  their  telemedical  needs.  80  We  agree  with  commenters  that  a  flat  discount, 
 analogous  to  the  operation  of  the  schools  and  libraries  support  mechanism,  will  lead  to  greater  predictability  and  fairness  among  health  care  providers.  81  A  flat  discount  is  consistent  with 
 section  254(  b)(  5),  which  requires  a  specific,  sufficient,  and  predictable  mechanism  .  .  .  because  it  limits  the  amount  of  support  that  each  health  care  provider  may  receive  per  month  to  a 
 reasonable  level.  82  A  flat  discount  is  also  easy  to  administer.  Although  it  is  difficult  to  estimate  the  impact  of  providing  support  for  Internet  access  service  due  to  the  wide  range  of 
 costs  between  and  among  the  various  types  of  Internet  access  services,  83  we  agree  with  commenters  projections  that  our  actions  today  regarding  Internet  access  are  unlikely  to  result  in 
 program  demand  in  excess  of  the  cap.  84  We  act  conservatively  by  choosing  a  twenty-  five 
 80  Rural  health  care  providers  can  use  this  discount  towards  the  cost  of  monthly  charges  for  information  services 
 only.  See  supra  para.  18  (defining  information  services).  Support  for  telecommunications  services  is  not  included  under  this  discount.  The  Act  defines  telecommunications  service  as  the  offering  of 

 telecommunications  for  a  fee  directly  to  the  public,  or  to  such  classes  of  users  as  to  be  effectively  available  directly  to  the  public,  regardless  of  the  facilities  used.  47  U.  S.  C.    153(  46). 

 81  See  Alaska  Comments  at  3;  Avera  Comments  at  2;  Florida  PSC  Comments  at  6;  Kingston  eHealth  Comments  at 
 7. 
 82  1997  Universal  Service  Order,  12  FCC  Rcd  at  9159-  60,  para.  746;  47  U.  S.  C.    254(  b)(  5). 

 83  Commenters  state  that  the  monthly  cost  of  Internet  access  in  rural  areas  ranges  from  $21.95  to  $800  for  DSL, 
 $45  to  $400  for  cable  modem,  $40  to  $300  for  wireless,  $30  to  $13,  000  for  satellite,  $200  to  $1046  for  T-  1,  and  $9.  95-$  26.  95  for  dial-  up.  See  Jason  Wulf,  Avera  Health,  email  8/  18/  03  ($  21.  95/  month  for  DSL);  Andy  Adams, 

 Murray  Hospital,  email  8/  19/  03  ($  60/  month  for  DSL);  Cherri  Colliton,  Perham  Memorial  Hospital  and  Home,  Perham,  MN,  email  8/  22/  03  ($  200-  800/  month  for  DSL);  Andy  Adams,  Murray  Hospital,  email  8/  19/  03 
 ($  45/  month  for  cable  modem);  Karen  Thuli,  Upland  Hills  Health,  email  8/  19/  03  ($  140/  month  for  cable  modem);  Robert  Shwajlyk,  Nathan  Littauer  Hospital,  Gloversville,  NY,  email  8/  18/  03  ($  399.25/  month  for  cable  modem); 
 Stephanie  Burnfin,  Wright  Memorial  Hospital,  email  8/  19/  03  ($  40/  month  for  wireless);  Jason  Wulf,  Avera  Health,  email  8/  18/  03  ($  44.  95/  month  for  wireless);  Bill  Brennan,  Saint  Francis  Medical  Center,  Grand  Island,  NE,  email 
 8/  19/  03  ($  250-  300/  month  for  wireless);  Nancy  Erickson,  Kossuth  Regional  Health  Center,  Algona,  IA,  email  8/  18/  03  ($  30-  44/  month  for  satellite);  Larry  Pergerson,  Scotland  Health,  email  8/  18/  03  ($  110/  month  for  satellite); 
 Val  Warzewick,  Yukon-  Kuskokwim  Health  Corporation,  Bethel,  Alaska,  email  8/  19/  03  ($  13,  000/  month  for  satellite);  Karen  Thuli,  Upland  Hills  Health,  email  8/  19/  03  ($  200/  month  for  T-  1);  Lee  Benson,  Faith  Regional 
 Health  Services,  email  8/  18/  03  ($  900/  month  for  T-  1);  Rick  Tighe,  County  Hospital,  Atlantic,  Iowa,  email  8/  18/  03  ($  1046/  month  for  T-  1);  Chris  Gillespie,  Dickinson  County,  email  8/  18/  03  ($  9.95/  month  for  dial-  up);  Rick  Tighe, 
 County  Hospital,  Atlantic,  Iowa,  email  8/  18/  03  ($  19.  95/  month  for  dial-  up);  Jerry  Clayton,  Kodiak,  AK,  email  8/  18/  03  ($  26.  95/  month  for  dial-  up). 

 84  See  Adams  Co.  Health  Dept.  Comments  at  2;  Alliance  Comments  at  6;  Cortland  Co.  Health  Dept.  Comments  at 
 2;  Lane  Co.  Health  Dept.  Comments  at  2;  NACCHO  Comments  at  2;  NRHA  Comments  at  2;  UVA  Comments  at  15;  Verizon  Comments  at  4.  For  example,  some  commenters  projected  that  assuming  10,000  rural  health  care 

 providers  took  advantage  of  support  for  Internet  access  at  a  rate  of  approximately  $100  per  month,  the  annual  expenditure  for  Internet  access  would  be  $12  million.  See  Cortland  Co.  Health  Dept.  Comments  at  2;  Lane  Co. 
 Health  Dept.  Comments  at  2;  NACCHO  Comments  at  2;  NRHA  Comments  at  2.  Assuming,  arguendo,  that  all  8,  300  eligible  providers  were  to  request  funding  under  this  mechanism,  on  a  pro-  rata  basis,  that  would  be  roughly 
 (continued.) 
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 percent  flat  discount  initially  because  it  will  provide  an  incentive  for  rural  health  care  providers  to  choose  a  level  of  service  appropriate  to  their  needs,  will  provide  more  certainty  that  demand 
 for  Internet  access  support  will  not  exceed  the  annual  funding  cap,  and  will  deter  wasteful  expenditures.  Furthermore,  we  find  that  a  twenty-  five  percent  discount  is  reasonable  because 
 provision  of  support  to  health  care  providers  under  the  rural  health  care  support  mechanism  is  not  contingent  on  economic  need,  similar  to  the  twenty-  five  percent  discount  provided  to  the 
 least  disadvantaged  rural  schools  and  libraries.  85  As  we  gain  more  experience  with  this  aspect  of  the  support  mechanism,  we  will  determine  whether  an  increase  in  the  discount  is  necessary  or 
 advisable.  Finally,  we  disagree  with  WorldCom  that  support  for  Internet  access  must  be  based  on  the  difference  between  urban  and  rural  rates,  because  section  254(  h)(  2)(  A)  of  the  Act,  the 
 statutory  provision  dealing  with  information  services,  makes  no  reference  to  an  urban-  rural  comparison,  unlike  section  254(  h)(  1)(  A).  86  The  urban-  rural  comparison  for  telecommunications 
 services  that  Worldcom  cites  to  in  section  254(  h)(  1)(  A)  does  not  apply  to  information  services  such  as  Internet  access.  87  Provision  of  Internet  access  and  other  information  services  is 
 governed  by  section  254(  h)(  2)(  A).  88 
 28.  Consistent  with  the  Commissions  long-  standing  principles  of  competitive  neutrality,  rural  health  care  providers  may  receive  discounts  for  the  most  cost-  effective  form  of  Internet 

 access,  regardless  of  the  platform.  89  Thus,  a  provider  could  opt  for  dial-  up  Internet  access  or  broadband  Internet  access  over  wireline,  cable,  wireless,  or  satellite  platforms.  90  Health  care 
 providers  must  certify,  however,  that  the  particular  Internet  access  service  selected  is  the  most  cost-  effective  way  of  meeting  the  facilitys  health  care  needs.  91  We  believe  this  policy  will 
 provide  flexibility  to  rural  health  care  providers  to  purchase  the  most  appropriate  offerings  for  their  health  care  needs  and  may  also  facilitate  the  deployment  of  facilities-  based  broadband 

 (Continued  from  previous  page)  $48,000  per  provider  ($  400  million/  8,300).  It  is  unlikely  that  most  entities  would  receive  yearly  Internet  access 
 discounts  anywhere  close  to  this  amount.  An  entity  would  need  to  be  spending  almost  $200,000  per  year,  or  $16,666  per  month,  to  obtain  discounts  equivalent  to  roughly  $48,000,  given  the  twenty-  five  percent  discount  we 
 adopt  today. 
 85  47  C.  F.  R.    54.505(  c). 

 86  See  WorldCom  Comments  at  5-  6  (agreeing  that  the  Commission  has  the  authority  to  subsidize  Internet  access 
 but  only  the  difference  between  rates  for  urban  and  rural  Internet  access);  47  U.  S.  C.    254(  h)(  1)(  A),  254(  h)(  2)(  A).  But  see  Intelenet  Comments  at  5;  Kingston  eHealth  Comments  at  7-  8;  Nevada  State  Office 

 Comments  at  6  (agreeing  that  no  urban-  rural  comparison  is  necessary). 
 87  47  U.  S.  C.    254(  h)(  1)(  A),  254(  h)(  2)(  A). 

 88  47  U.  S.  C.    254(  h)(  2)(  A). 
 89  See  47  U.  S.  C.    254(  h)(  2);  1997  Universal  Service  Order,  12  FCC  Rcd  at  8801-  02,  paras.  46-  49.  We  note  that 
 health  care  providers  in  rural  insular  areas  will  be  able  to  receive  the  twenty-  five  percent  discount  off  the  cost  of  Internet  access  even  if  they  are  located  in  the  most  populous  area  in  the  State  because  no  urban-  rural  comparison  is 

 required.  See  infra  para.  47. 
 90  The  comments  we  received  showed  that  most  health  care  providers  prefer  broadband  technology  to  dial-  up.  See 
 Adams  Co.  Health  Dept.  Comments  at  2;  ATA  Comments  at  11-  12;  CTL  Comments  at  11-  12;  Evangelical  Lutheran  Comments  at  2;  GCI  Reply  Comments  at  3-  4;  Healthcare  Anywhere  Reply  Comments  at  4-  5. 

 91  See  infra  note  184  (defining  cost-  effective  method). 
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 deployment  in  rural  areas.  92 
 29.  Moreover,  we  will  continue  to  provide  support  for  toll  charges  incurred  by  health  care  providers  that  cannot  obtain  toll-  free  access  to  an  ISP,  limited  to  the  lesser  of  $180.00  or  30 

 hours  of  usage  per  month.  93  The  1997  Universal  Service  Order  stated  that  the  proliferation  of  ISPs  and  the  competitive  marketplace  soon  should  eliminate  the  need  for  such  support.  94 
 However,  we  are  persuaded  by  commenters  showings  that  the  need  for  such  support  still  exists.  95  Providing  support  for  limited  toll  charges  will  place  those  providers  who  cannot  reach 
 an  ISP  without  incurring  toll  charges  on  the  same  footing  as  other  health  care  providers  with  respect  to  Internet  access. 

 2.  Other  Services 
 30.  We  decline  at  this  time  to  provide  support  for  services  other  than  telecommunications  services,  Internet  access,  and  limited  toll  charges.  In  the  NPRM,  the 

 Commission  sought  comment  on  whether  we  should  establish  new  policies  to  enhance  access  to  advanced  telecommunications  and  information  services  for  health  care  providers  consistent  with 
 the  scope  of  our  authority  under  section  254(  h)(  2)(  A).  96  Commenters  suggested  that  telecommunications  equipment,  surcharges  imposed  by  statewide  or  regional  networks,  internal 
 connections,  and  health  care  providers  travel  costs  should  be  eligible  for  universal  service  support.  97  We  find  that  providing  support  for  telecommunications  equipment,  surcharges,  and 
 travel  costs  exceeds  the  scope  of  our  statutory  authority  under  section  254(  h),  because  these  items  are  neither  telecommunications  nor  information  services.  98  In  addition,  we  believe  there 
 is  insufficient  information  in  the  record  to  provide  support  for  internal  connections.  Moreover,  given  our  experience  with  the  schools  and  libraries  support  mechanism,  we  are  concerned  that 
 providing  support  for  internal  connections  may  place  an  undue  burden  on  the  rural  health  care  support  mechanism. 

 92  Accord  Cortland  Co.  Health  Dept.  Comments  at  2;  Evangelical  Lutheran  Comments  at  2;  GCI  Comments  at  7; 
 Intelenet  Comments  at  6;  Lane  Co.  Health  Dept.  Comments  at  2;  NRHA  Comments  at  2. 
 93  47  C.  F.  R.    54.  601(  c)(  2),  54.621. 

 94  1997  Universal  Service  Order,  12  FCC  Rcd  at  9161,  para.  748. 
 95  See,  e.  g.,  Alaska  Comments  at  3;  Arkansas  DIS  Reply  Comments  at  1;  Florida  PSC  Comments  at  4-  6;  PA  Public 
 Utility  Reply  Comments  at  7.  But  see  Alliance  Comments  at  1-  2;  AHA  Comments  at  4-  5;  Avera  Comments  at  1  (advocating  elimination  of  discounts  for  toll  charges). 

 96  NPRM,  17  FCC  Rcd  at  7817,  para.  26. 
 97  See  Illinois  Center  for  Rural  Health  Comments  at  3;  Washington  Rural  Comments  at  2. 
 98  47  U.  S.  C.    254(  h).  We  have  previously  concluded  that  the  provision  of  universal  service  support  for 
 telecommunications  equipment  is  outside  the  scope  of  our  statutory  authority.  See  Fifteenth  Order  on  Reconsideration,  14  FCC  Rcd  at  18780-  82,  paras.  38-  40. 
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 C.  Calculation  of  Discounted  Services 
 1.  Interpretation  of  Similar  Services 
 31.  Background.  Section  254(  h)(  1)(  A)  of  the  Act  provides  that  [  a]  telecommunications  carrier  shall,  upon  receiving  a  bona  fide  request,  provide  telecommunications  services  which  are 

 necessary  for  the  provision  of  health  care  services  in  a  State,  including  instruction  relating  to  such  services,  to  any  public  or  nonprofit  health  care  provider  that  serves  persons  who  reside  in 
 rural  areas  in  that  State  at  rates  that  are  reasonably  comparable  to  rates  charged  for  similar  services  in  urban  areas  in  that  State.  99  Our  rules  do  not  define  similar  for  purposes  of 
 comparing  urban  and  rural  services.  100  The  Commissions  policy  has  been  to  calculate  discounts  for  telecommunications  services  based  on  the  difference  between  the  urban  and  rural 
 rates  for  technically  similar  services.  101 
 32.  In  the  NPRM,  the  Commission  sought  comment  on  whether  the  similarity  of  urban  and  rural  services  should  be  determined  on  the  basis  of  functionality  from  the  perspective  of  the 

 end  user,  rather  than  on  the  basis  of  whether  urban  and  rural  services  are  technically  similar.  102  The  Commission  recognized  that  the  current  policy  may  create  inequities  between  urban  and 
 rural  health  care  providers.  103  Specifically,  the  Commission  sought  comment  on  whether  comparisons  should  be  made  between  or  among  different  types  of  high-  speed  transport  offered 
 by  telecommunications  carriers  that  may  be  viewed  as  functionally  equivalent  by  end  users.  104 
 33.  Discussion.  We  alter  our  current  policy  to  allow  rural  health  care  providers  to  compare  the  urban  and  rural  rates  for  functionally  similar  services  as  viewed  from  the 

 perspective  of  the  end  user.  We  agree  with  commenters  that  our  current  policy  of  comparing  technically  similar  services  does  not  take  into  account  that  certain  telecommunications  services 
 offered  in  urban  areas  are  not  always  available  in  rural  areas.  105  In  particular,  new  technologies  are  often  first  deployed  in  urban  areas,  and  such  services  may  be  less  expensive  than  services  in 
 rural  areas  based  on  older  technologies.  This  modification  to  our  rules  will  better  effectuate  the  mandate  of  Congress  to  ensure  comparable  services  for  rural  areas,  as  provided  in  section  254 
 of  the  Act,  by  allowing  rural  health  care  providers  to  benefit  from  obtaining  telecommunications  services  at  rates  equivalent  to  those  in  urban  areas.  106  Eligible  health  care  providers  must 

 99  47  U.  S.  C.    254(  h)(  1)(  A)  (emphasis  added). 
 100  See  47  C.  F.  R.    54.  605,  54.  607,  54.  609. 
 101  See  Form  466  Instructions,  OMB  3060-  0804  (April  2001)  at  6  (line  30);  NPRM,  17  FCC  Rcd  at  7819,  para. 
 34. 
 102  NPRM,  17  FCC  Rcd  at  7819,  para.  35. 

 103  Id.  at  para.  34. 
 104  Id.  at  para.  35. 
 105  See  Illinois  Center  for  Rural  Health  Comments  at  2;  Kansas  DHE  Comments  at  2;  NM  Health  Resources 
 Comments  at  2;  NOSORH  Comments  at  2;  Tri-  County  Memorial  Hosp.  Comments  at  2;  Washington  Rural  Comments  at  3. 

 106  47  U.  S.  C.    254. 
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 purchase  telecommunications  services  and  compare  their  service  to  a  functionally  equivalent  telecommunications  service  in  order  to  receive  this  discount. 
 34.  Accordingly,  we  create  safe  harbor  categories  of  functionally  equivalent  services  based  on  the  advertised  speed  and  nature  of  the  service.  For  purposes  of  the  rural  health  care 
 support  mechanism  only,  we  establish  the  following  advertised  speed  categories  as  functionally  equivalent:  low    144-  256  kbps;  medium    257-  768  kbps;  high    769-  1400  kbps  (1.4  mbps);  T-1 
   1.41-  8  mbps;  107  T-  3    8.1-  50  mbps.  We  will  also  consider  whether  a  service  is  symmetrical  or  asymmetrical  when  determining  functional  equivalencies.  Telecommunications  services  will 
 be  considered  functionally  similar  when  operated  at  advertised  speeds  within  the  same  category  (low,  medium,  high,  T-  1,  or  T-  3)  and  when  the  nature  of  the  service  is  the  same  (symmetrical  or 
 asymmetrical).  For  example,  a  symmetrical  fractional  T-  1  service  operating  at  an  advertised  speed  of  144  kbps  would  be  considered  functionally  similar  to  a  symmetrical  DSL  transmission 
 service  with  an  advertised  speed  of  256  kbps.  108  By  developing  safe  harbor  categories  of  functionally  equivalent  speeds,  we  hope  to  minimize  the  disparity  in  rates  of  services  available 
 in  rural  and  urban  areas  in  an  administratively  easy  fashion.  We  will  update  these  categories,  as  needed,  to  reflect  technological  developments. 

 2.  Urban  Area 
 35.  Background.  Section  254(  h)(  1)(  A)  of  the  Act  directs  us  to  provide  support  for  rates  that  are  reasonably  comparable  to  rates  charged  for  similar  services  in  urban  areas  in  that 

 State.  109  Thus,  under  our  current  rules,  for  service  charges  that  are  not  distance-  based,  qualifying  entities  receive  discounts  for  the  difference,  if  any,  between  the  urban  rate  110  and  the 
 rural  rate  111  charged  for  the  service.  112  The  urban  rate  is  based  on  the  rate  for  similar  services  in 
 107  For  purposes  of  categorizing  functionally  similar  services,  E-  1  service  is  equivalent  to  US  T-  1  service. 
 108  We  specifically  refer  to  rates  for  a  DSL  transmission  service,  and  not  to  rates  for  a  DSL-  based  Internet  access 
 service.  The  Commission  has  not  determined  whether  DSL-  based  Internet  access  is  an  information  service,  or  telecommunications  service.  See  generally  Wireline  Broadband  Internet  Access  NPRM.  We  also  decline,  at  this 

 time,  to  consider,  for  purposes  of  making  a  comparison  of  functionally  similar  services,  cable  modem  services  to  be  a  telecommunications  service,  pending  the  issuance  of  a  non-  appealable  final  judicial  decision  concluding  that 
 it  constitutes  a  telecommunications  service.  See  generally  Brand  X  Internet  Services  v.  FCC,  No.  02-  70518,  FCC  No.  FCC-  Act  2-  77,  2003  WL  22283874  (9  th  Cir.  2003)  (Brand  X  v.  FCC). 

 109  47  U.  S.  C.    254(  h)(  1)(  A). 
 110  The  urban  rate  is  currently  defined  as  a  rate  no  higher  than  the  highest  tariffed  or  publicly-  available  rate 
 charged  to  a  commercial  customer  for  a  similar  service  provided  over  the  same  distance  in  the  nearest  city  in  the  state  with  a  population  of  at  least  50,  000.  47  C.  F.  R.    54.  605(  a)  (2003).  However,  if  a  rural  health  care  provider 

 is  seeking  discounts  for  services  provided  over  a  distance  that  is  greater  than  the  standard  urban  distance  (SUD)  (the  average  of  the  longest  diameters  of  all  cities  with  a  population  of  50,  000  or  more  within  the  state)  for  that 
 state,  the  urban  rate  for  purposes  of  the  calculation  is  the  rate  charged  for  a  similar  service  provided  over  the  SUD  in  the  nearest  city  in  the  state  with  a  population  of  at  least  50,  000.  47  C.  F.  R.    54.  605(  b)  (2003). 

 111  The  current  rural  rate  is  the  average  of  the  rates  actually  being  charged  to  commercial  customers,  other  than 
 health  care  providers,  for  identical  or  similar  services  provided  by  the  telecommunications  carrier  providing  the  service  in  the  rural  area  in  which  the  health  care  provider  is  located.  47  C.  F.  R.    54.  607(  a)  (2003). 

 112  47  C.  F.  R.    54.609(  a). 
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 the  nearest  large  city,  defined  as  the  city  located  in  the  eligible  health  care  providers  state,  with  a  population  of  at  least  50,000,  that  is  nearest  to  the  healthcare  providers  location, 
 measuring  point  to  point,  from  the  health  care  providers  location  to  the  point  on  that  citys  jurisdictional  boundary  closest  to  the  health  care  providers  location.  113 

 36.  In  the  NPRM,  the  Commission  sought  comment  on  whether  to  alter  our  rules  to  allow  comparison  of  rural  rates  with  rates  in  any  urban  area  in  the  state,  not  only  comparison 
 with  the  rates  in  the  nearest  city  with  a  population  of  over  50,000.  114  The  Commission  noted  that  evidence  suggests  that  the  largest  cities  in  a  state  have  significantly  lower  rates  and  more 
 service  options  than  the  nearest  city  of  at  least  50,000  to  the  health  care  provider.  115  The  Commission  also  sought  comment  on  whether  this  proposal  is  the  best  way  to  effectuate  the 
 statutory  mandate.  116  Finally,  the  Commission  also  invited  comment  on  the  potential  effect  this  change  may  have  on  demand  for  support  under  the  rural  health  care  mechanism.  117 

 37.  Discussion.  We  now  revise  section  54.605  of  our  rules  to  allow  rural  health  care  providers  to  compare  rural  rates  to  urban  rates  in  any  city  with  a  population  of  at  least  50,000  in 
 the  state,  as  opposed  to  the  nearest  city  with  a  population  of  50,000.  118  The  Commission  originally  required  comparison  to  the  nearest  city  with  50,000  people,  in  part,  because  they 
 believed  health  care  providers  would  likely  connect  to  a  point  in  that  nearest  large  city.  119  Based  on  our  experience  with  the  program  and  information  in  the  record,  health  care  providers 
 may  not  always  find  the  needed  expertise  in  the  nearest  large  city.  120  Allowing  comparison  to  rates  in  any  city  in  the  state  acknowledges  that  rural  health  care  providers  may  communicate 
 with  experts  in  other  cities  in  the  state.  Such  action  also  should  allow  rural  health  care  providers  to  benefit  from  the  lowest  rates  for  services  in  the  State,  thereby  providing  additional 
 support  to  develop  better  telemedicine  links.  Verizon  asserts  that,  under  this  policy,  rural  health  care  providers  may  receive  better  rates  than  those  available  in  some  urban  areas  of  the  state.  121 
 However,  we  believe  that  the  public  interest  in  providing  more  flexibility  in  utilizing  telemedicine  services  and  quality  health  care  facilities  outweighs  any  minimal  advantage  gained 

 113  47  C.  F.  R.    54.605(  c). 
 114  NPRM,  17  FCC  Rcd  at  7821,  para.  42. 
 115  Id. 
 116  Id.  at  para.  43. 
 117  Id. 
 118  47  C.  F.  R.    54.  605  as  adopted  herein.  For  example,  if  a  rural  health  care  provider  is  charged  by  its 
 telecommunications  provider  $250.  00  for  installation  of  an  ISDN-  128  Kbps  line,  and  is  charged  $175.  00  monthly  for  the  service,  but  the  urban  rate  in  a  city  in  the  state  is  only  $150.  00  for  installation  and  $100.  00  per  month  for 

 service,  the  telecommunications  service  provider  would  give  the  rural  health  care  provider  a  one-  time  installation  credit  of  $100.  00  and  give  a  discount  of  $75.  00  monthly. 

 119  1997  Universal  Service  Order,  12  FCC  Rcd  at  9125,  para.  670. 
 120  See,  e.  g.,  CA  Primary  Care  Assoc.  Comments  at  2;  NSRHN  Comments  at  9. 
 121  See  Verizon  Comments  at  14;  see  also  WorldCom  Comments  at  8. 
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 by  rural  health  care  providers  over  those  health  care  providers  located  in  certain  urban  areas.  122  Further,  we  do  not  believe  the  urban  rates  within  states  differ  so  significantly  that  revising  this 
 rule  will  increase  demand  to  the  extent  that  we  may  risk  exceeding  the  funding  cap  of  $400  million. 

 3.  Maximum  Allowable  Distance 
 38.  Background.  Pursuant  to  our  rules,  the  Administrator  determines  the  standard  urban  distance,  (SUD)  which  is  the  average  of  the  longest  diameters  of  all  cities  in  the  state 

 with  a  population  of  at  least  50,000.  123  The  Administrator  also  calculates  the  Maximum  Allowable  Distance  (MAD),  which  is  the  distance  between  the  rural  health  care  provider  and  the 
 farthest  point  on  the  jurisdictional  boundary  of  the  nearest  large  city  in  the  state  with  a  population  of  at  least  50,000.  124  Under  our  rules,  for  distance-  based  charges,  qualifying  entities 
 that  connect  to  locations  within  or  outside  of  the  state  receive  discounts  for  services  over  any  distance  greater  than  the  SUD  but  less  than  the  MAD.  125 

 39.  In  the  NPRM,  the  Commission  sought  comment  on  whether  to  eliminate  or  revise  the  MAD  restriction  in  our  rules.  126  The  Commission  further  invited  comment  on,  in  lieu  of 
 eliminating  the  restriction,  whether  it  should  modify  it  or  adopt  another  limitation,  such  as  the  greatest  distance  between  the  location  of  the  rural  health  care  provider  and  the  furthest  point  on 
 the  border  of  the  same  state  or  the  distance  between  the  health  care  provider  and  the  nearest  point  of  tertiary  care.  127 

 40.  Discussion.  We  revise  the  MAD  to  equal  the  distance  between  the  rural  health  care  provider  and  the  farthest  point  on  the  jurisdictional  boundary  of  the  largest  city  in  that  State.  128 
 122  Numerous  commenters  support  modification  of  this  rule  to  permit  rural  health  care  providers  to  receive  support 
 based  on  a  comparison  to  the  lowest  rates  available  in  any  urban  area  in  the  state.  See  Adams  Co.  Health  Dept.  Comments  at  3;  Alaska  Comments  at  4;  AHA  Comments  at  7;  ASTA  Comments  at  8-  12;  ATA  Comments  at  6; 

 Arkansas  DIS  Reply  Comments  at  2;  Blue  Cross  Comments  at  6;  CA  Primary  Care  Assoc.  Comments  at  2;  CTTC  Comments  at  6;  Illinois  Center  for  Rural  Health  Comments  at  1-  2;  CTL  Comments  at  6;  Cortland  Co.  Health 
 Dept.  Comments  at  2;  Healthcare  Anywhere,  Inc.  Comments  at  5;  Institute  of  Rural  Health  Comments  at  6;  Kansas  DHE  Comments  at  2;  Kansas  Hosp.  Assoc.  Comments  at  2;  Madden  Comments  at  1;  Kingston  eHealth 
 Comments  at  5;  Lane  Co.  Health  Dept.  Comments  at  2;  MGHS  Reply  Comments  at  4-  5;  Minn.  Ambulance  Assoc.  Comments  at  2;  MHTA  Comments  at  3;  NACCHO  Comments  at  2;  NRHA  Comments  at  2;  NTCA  Comments  at 
 7;  Nebraska  Office  of  Rural  Health  Comments  at  1;  NM  Health  Resources  Comments  at  1;  NSRHN  Comments  at  9;  NOSORH  Comments  at  2;  Poudre  Valley  Health  Comments  at  1;  Tri-  County  Memorial  Hosp.  Comments  at  1; 
 UVA  Comments  at  14-  15;  Washington  Rural  Comments  at  3;  WGA  Comments  at  3. 
 123  47  C.  F.  R.    54.605(  d). 

 124  47  C.  F.  R.    54.613. 
 125  47  C.  F.  R.    54.  609.  For  example,  if  a  rural  health  care  provider  has  a  dedicated  T-  1  line  from  its  site  to  an 
 urban  hospital  with  a  circuit  distance  of  100  miles,  the  MAD  is  125  miles,  the  carrier  charges  $10  per  mile  for  the  line,  and  the  SUD  in  the  state  is  10  miles,  it  would  be  eligible  for  $900  discount  per  month  (the  circuit  distance  of 

 100  miles  less  the  SUD  of  10  miles,  multiplied  by  the  rate  of  $10  per  mile  per  month). 
 126  NPRM,  17  FCC  Rcd  at  7822,  para.  45. 

 127  Id.  at  7823,  para.  48. 
 128  47  C.  F.  R.    54.625(  a)  as  adopted  herein. 
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 Accordingly,  for  distance-  based  charges  actually  incurred,  we  modify  our  rules  to  provide  support  to  rural  health  care  providers  to  any  location  that  exceeds  the  SUD  and  is  less  than  this 
 revised  MAD.  129  As  the  Commission  indicated  in  the  NPRM,  our  experience  to  date  suggests  that  limiting  rural  heath  care  providers  to  discounts  for  distance-  based  charges  to  the  nearest 
 city  of  50,000  or  more  may  not  be  adequate  for  purposes  of  creating  a  comprehensive  telehealth  and  telemedicine  network.  130  Further,  commenters  contend  that  the  current  MAD  assumes  that 
 the  rural  health  care  provider  will  connect  with  specialists  in  the  nearest  urban  area,  which  may  not  necessarily  have  the  essential  complement  of  specialists  to  provide  telemedicine  services.  131 
 We  believe,  in  most  instances,  calculating  the  MAD  as  described  above  will  provide  more  support  for  distance-  based  charges  than  our  current  rules,  without  creating  additional 
 administrative  burdens  for  the  Administrator.  In  addition,  this  modification  should  provide  rural  health  care  providers  access  to  high  levels  of  care  and  greater  flexibility  in  developing 
 appropriate  telehealth  networks. 
 41.  Although  commenters  generally  favor  eliminating  the  MAD,  132  we  decline  to  do  so  at  this  time.  We  are  concerned  that  eliminating  the  MAD  could  result  in  wasteful  expenditures 

 for  the  program,  as  providers  could  connect  to  more  distant  locations  when  a  closer  one  would  suffice.  Expanding  the  MAD  to  the  largest  city  in  a  state  should  provide  support  sufficient  to 
 enable  rural  health  care  providers  to  connect  with  health  care  facilities  with  a  wide  range  of  medical  expertise,  without  introducing  the  potential  for  waste  associated  with  eliminating  the 
 MAD  or  making  the  MAD  equal  to  the  furthest  point  in  the  state.  Moreover,  we  decline  to  expand  the  MAD  to  equal  the  distance  between  the  health  care  provider  and  the  nearest  center 
 of  tertiary  care.  133  Although  this  proposal  may  have  a  more  direct  relationship  to  health  care  services,  we  agree  with  commenters  that  the  nearest  point  of  tertiary  care  may  not  provide  the 
 required  specialized  expertise.  134  In  addition,  this  proposal  would  require  the  identification  and  continued  monitoring  of  all  tertiary  care  centers  throughout  the  Nation,  which  would  impose 
 significant  administrative  burdens  upon  the  Administrator  of  the  program. 

 129  47  C.  F.  R.    54.609(  a)(  1)(  ii)  as  adopted  herein. 
 130  NPRM,  17  FCC  Rcd  at  7822,  para.  45;  see  Adams  Co.  Health  Dept.  Comments  at  2;  AFHCAN  Comments  at  7; 
 AHA  Comments  at  7;  CA  Primary  Care  Assoc.  Comments  at  2;  Cortland  Co.  Health  Dept.  Comments  at  3;  Institute  of  Rural  Health  Comments  at  7;  NACCHO  Comments  at  2;  NRHA  at  2. 

 131  See,  e.  g.,  CA  Primary  Care  Assoc.  Comments  at  2;  NSRHN  Comments  at  9. 
 132  See,  e.  g.,  Adams  Co.  Health  Dept.  Comments  at  2;  AFHCAN  Comments  at  7;  Alaska  Comments  at  5;  Alaska 
 Telehealth  Comments  at  3;  ASTA  Comments  at  8;  Arkansas  DIS  Reply  Comments  at  2;  Blue  Cross  Comments  at  7;  CA  Primary  Care  Assoc.  Comments  at  2;  Tri-  County  Memorial  Hosp.  Comments  at  1;  Washington  Rural 

 Comments  at  2;  WGA  Comments  at  3. 
 133  The  Commission  sought  comment  on  this  option  in  the  NPRM.  NPRM,  17  FCC  Rcd  at  7823,  para.  48.  Noting 
 that  it  was  unable  to  identify  the  criteria  for  determining  the  nearest  point  of  tertiary  care,  the  Commission  also  sought  comment  on  how  to  define  the  point  of  tertiary  care.  No  commenter  submitted  information  on  the 

 definition  of  a  point  of  tertiary  care. 
 134  See  NSRHN  Comments  at  10  (opposing  limiting  MAD  to  nearest  point  of  tertiary  care  in  part  because  not  all 
 tertiary  care  services  are  offered  in  all  urban  communities);  see  also  Kingston  eHealth  Comments  at  5-  6  (noting  that  the  Pacific  jurisdictions  lack  tertiary  hospitals  with  specialty  care). 
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 4.  Satellite  Services 
 42.  Background.  Under  the  Commissions  policies,  as  indicated  above,  the  cost  of  rural  satellite  service  is  compared  to  the  cost  of  urban  satellite  service.  135  Because  the  price  of 

 satellite  service  typically  does  not  vary  by  location,  rural  health  care  providers  using  satellite  services  generally  do  not  receive  discounts  under  the  rural  health  care  program.  136  However, 
 there  is  an  exception  that  allows  for  some  support  for  satellite  service.  Rural  health  care  providers  that  are  located  in  areas  with  no  terrestrial-  based  alternative  may  compare  rural 
 satellite  rates  to  urban  wireline  rates,  which  results  in  support  for  such  providers.  137 
 43.  In  the  NPRM,  the  Commission  sought  comment  on  whether  to  modify  our  rules  governing  discounts  for  satellite  services.  138  Specifically,  the  Commission  sought  comment  on 

 how  a  modification  to  our  current  policy  to  base  discounts  on  the  difference  in  urban  and  rural  rates  between  functionally  similar  services  would  affect  health  care  providers  seeking  discounts 
 for  satellite  services.  139  The  Commission  recognized  that  rural  health  care  providers  using  satellite  services,  particularly  in  remote  and  insular  areas,  have  been  disadvantaged  under  our 
 current  policy  because,  in  many  instances,  satellite  systems  provide  the  only  viable  means  for  providers  to  receive  telecommunications  services.  140 

 44.  Discussion.  We  revise  our  policy  to  allow  rural  health  care  providers  to  receive  discounts  for  satellite  services  even  where  alternative  terrestrial-  based  services  may  be 
 available.  As  suggested  by  commenters,  however,  these  discounts  will  be  capped  at  the  amount  providers  would  have  received  if  they  purchased  functionally  similar  terrestrial-  based 
 alternatives.  141  Providers  seeking  discounts  for  satellite  services  will  be  required  to  provide  to  the  Administrator  documentation  of  the  urban  and  rural  rates  for  the  terrestrial-  based  alternative 
 services.  We  believe  imposing  a  cap  on  support  for  satellite  service  is  necessary  because  satellite  services  are  often  significantly  more  expensive  than  terrestrial-  based  services.  Thus, 
 pursuant  to  these  changes,  where  rural  health  care  providers  opt  for  more  expensive  satellite-based  services  when  a  cheaper  terrestrial-  based  alternative  is  available,  the  provider,  and  not  the 
 support  mechanism,  will  be  responsible  for  the  additional  cost.  For  example,  if  a  health  care  provider  pays  $100  per  month  for  satellite  service,  the  rural  rate  for  a  comparable  wireline 
 service  plan  is  $60  per  month,  and  the  urban  rate  is  $40  per  month,  the  health  care  provider  would  receive  $20  per  month  towards  the  satellite  service.  We  conclude  this  approach  furthers 

 135  See  supra  para.  35;  47  C.  F.  R.    54.  605,  54.  607,  54.  609. 
 136  NPRM,  17  FCC  Rcd  at  7820,  para.  38. 
 137  Currently,  only  rural  health  care  providers  in  Alaska  have  received  support  for  satellite  services  pursuant  to  this 
 policy. 
 138  NPRM,  17  FCC  Rcd  at  7820,  para.  38. 

 139  Id. 
 140  Id. 
 141  See  Kansas  DHE  Comments  at  2;  Kansas  Hosp.  Assoc.  Comments  at  3;  UVA  Comments  at  14;  MSV  Reply 
 Comments  at  6  (suggesting  the  Commission  compare  the  rural  terrestrial  cost  of  mobile  services  to  the  urban  terrestrial  cost  and  apply  that  same  discount  to  satellite). 
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 the  principle  of  competitive  neutrality  and  recognizes  the  role  that  satellite  services  may  play  in  rural  areas  without  unduly  increasing  the  size  of  the  fund.  We  also  seek  further  comment  in  the 
 accompanying  Further  Notice  on  whether  additional  rule  changes  should  be  adopted  to  facilitate  support  for  mobile  rural  health  care  providers.  142 

 5.  Insular  Areas 
 45.  Background.  Section  254(  h)(  1)(  A)  provides  that  telecommunications  carriers  must  offer  telecommunications  services  to  rural  health  care  providers  at  rates  that  are  reasonably 

 comparable  to  rates  charged  for  similar  services  in  urban  areas  in  that  State.  143  Consistent  with  this  statutory  language,  for  purposes  of  calculating  the  urban  rate  to  determine  the  amount  of 
 universal  service  support  received  by  rural  health  providers  in  insular  areas,  144  the  Commission  looks  at  the  rates  charged  customers  for  a  similar  service  in  the  largest  population  center  in  the 
 State.  145  The  Commission,  however,  has  recognized  that  use  of  this  calculation  may  be  ill-suited  for  insular  areas  because  many  rural  health  care  providers  are  located  in  the  largest 
 population  center  in  the  territory,  which  results  in  no  recognizable  urban/  rural  rate  comparison.  146  Accordingly,  in  the  NPRM,  the  Commission  sought  comment  on  whether 
 section  254(  h)(  2)(  A)  gives  us  the  authority  to  allow  rural  health  care  providers  to  receive  discounts  by  comparing  the  rural  rate  to  the  nearest  large  city  outside  of  their  State.  147  The 
 Commission  also  sought  comment  on  alternative  means  for  addressing  the  problems  of  insular  areas,  consistent  with  section  254.  148 

 46.  Discussion.  Although  we  continue  to  recognize  that  using  urban  rates  within  a  State  as  the  benchmark  for  reasonable  rates  may  be  ill-  suited  to  certain  insular  areas,  we  believe  that 
 the  proposal  of  some  commenters  149  to  permit  the  comparison  of  insular  rural  rates  to  the 

 142  See  infra  paras.  64-  67. 
 143  47  U.  S.  C.    254(  h)(  1)(  A)  (emphasis  added).  The  Commission  determined  that  the  provisions  of  section 
 254(  h)(  1)(  A)  apply  to  insular  areas  because  the  Act  defines  State  to  include  all  territories  and  possessions  of  the  United  States.  47  U.  S.  C.  153(  40);  see  1997  Universal  Service  Order,  12  FCC  Rcd  at  9135,  para.  692. 

 144  The  term  insular  area,  includes  but  is  not  limited  to,  American  Samoa,  the  U.  S.  Virgin  Islands, 
 Commonwealth  of  the  Northern  Mariana  Islands,  Guam  and  Puerto  Rico.  1997  Universal  Service  Order,  12  FCC  Rcd  at  9136,  para.  695  n.  1820. 

 145  47  C.  F.  R.    54.  605-  609  (2003).  The  Commission  designated  the  largest  population  center  as  the  urban  area  for 
 insular  areas  since  many  insular  areas  do  not  have  cities  with  populations  as  large  as  50,  000.  1997  Universal  Service  Order,  12  FCC  Rcd  at  9136-  38,  paras.  693-  69. 

 146  NPRM,  17  FCC  Rcd  at  7823-  24,  para.  49. 
 147  Id.  at  7824,  para.  50.  The  Commission  also  sought  comment  in  the  Unserved  and  Underserved  Areas  Further 
 Notice  on  this  specific  issue.  Federal-  State  Joint  Board  on  Universal  Service;  Promoting  Deployment  and  Subscribership  in  Unserved  and  Underserved  Areas,  Including  Tribal  and  Insular  Areas,  CC  Docket  No.  96-  45, 

 Further  Notice  of  Proposed  Rulemaking,  14  FCC  Rcd  21177,  21235-  36,  para.  143  (1999)  (Unserved  and  Underserved  Area  Further  Notice). 

 148  NPRM,  17  FCC  Rcd  at  7824,  para.  50. 
 149  See,  e.  g.,  Alaska  Comments  at  5;  American  Samoa  Medical  Center  Comments  at  2;  ASTA  Comments  at  3-  6; 
 ATA  Comments  at  13;  CTL  Comments  at  13;  Guam  Dept.  of  PHSS  Comments  at  1.  Specifically,  they  suggest  (continued.) 
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 nearest  urban  area  outside  the  State  is  inconsistent  with  the  statutory  language  set  forth  in  section  254(  h)(  1)(  A).  150  As  the  Commission  indicated  in  the  Fifteenth  Order  on 
 Reconsideration,  Congress  could  have  provided  discounts  for  telecommunications  services  that  connect  rural  health  care  providers  to  the  nearest  major  hospital  within  or  outside  the  State.  151 
 Congress,  however,  explicitly  provided  that  rates  should  be  compared  to  the  urban  rate  in  that  State.  152  We  continue  to  believe  section  254(  h)(  1)(  A)  precludes  us  from  designating  an  urban 
 area  outside  of  the  State  as  the  benchmark  for  comparison  for  remote,  insular  areas.  153 
 47.  We  also  disagree  with  American  Samoa  Telecommunications  Authority  that  section  254(  h)(  2)(  A)  authorizes  the  Commission  to  provide  support  for  telecommunication  links 

 between  American  Samoa  to  an  urban  center  outside  the  territory,  such  as  Honolulu,  Hawaii,  without  regard  to  the  urban-  rural  rate  difference.  154  Section  254(  h)(  2)(  A)  authorizes  the 
 Commission  to  take  action  to  increase  access  to  advanced  telecommunications  and  information  services.  155  Support  for  telecommunications  services,  however,  is  provided  subject  to  section 
 254(  h)(  1)(  A)  and  as  discussed  herein,  requires  an  urban  to  rural  comparison  within  the  State.  Although  we  do  not  believe  we  can  grant  the  request  of  providers  in  insular  areas,  we  do 
 provide  support  for  Internet  access  for  all  eligible  rural  health  care  providers,  including  those  in  insular  areas,  which  we  believe  will  functionally  provide  significant  support  to  health  care 
 providers  in  insular  areas.  156 
 D.  Other  Changes  to  the  Rural  Health  Care  Support  Mechanism 
 1.  Allocation  Guidelines  and  Record-  Keeping  Requirements 
 48.  Background.  Under  the  Commissions  rules,  rural  health  care  providers  that  receive  support  under  the  rural  health  care  universal  service  support  mechanism  are  subject  to  record-keeping 

 and  record  production  requirements,  and  random  audits  to  ensure  compliance.  157  In  the  NPRM,  we  sought  comment  on  the  effectiveness  of  our  current  rules  regarding  audits,  and  other 

 (Continued  from  previous  page)  designating  Honolulu,  Hawaii,  as  the  urban  center  for  comparison  for  insular  areas.  See,  e.  g.,  American  Samoa 
 Medical  Center  Comments  at  2;  FRC  Reply  Comments  at  4;  Guam  Dept.  of  PHSS  Comments  at  1;  Guam  Memorial  Hosp.  Comments  at  2;  HTC  Reply  Comments  at  2;  IT  &  E  Comments  at  1-  2. 

 150  47  U.  S.  C.    254(  h)(  1)(  A). 
 151  Fifteenth  Order  on  Reconsideration,  14  FCC  Rcd  at  18784,  para.  44. 
 152  47  U.  S.  C.    254(  h)(  1)(  A). 
 153  Id. 
 154  ASTA  Comments  at  11. 
 155  47  U.  S.  C.    254(  h)(  2)(  A). 
 156  For  example,  if  an  eligible  rural  health  care  provider  in  American  Samoa  purchased  Internet  access  via  satellite, 
 it  would  receive  a  twenty-  five  percent  discount  on  the  price  for  that  service.  See  supra  paras.  27-  28. 
 157  See  generally  47  C.  F.  R.    54.  619. 
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 procedures  to  ensure  the  appropriate  use  of  funds  available  under  this  support  mechanism.  158 
 49.  Discussion.  Because  entities  that  engage  in  both  eligible  and  ineligible  activities  or  that  collocate  with  an  entity  that  provides  ineligible  services  will  now  be  eligible  for  prorated 

 support,  we  adopt  rules  requiring  such  providers  to  allocate  their  discounts  to  prevent  discounts  from  flowing  to  ineligible  activities  or  providers  of  services.  159  Prorated  discounts  will  be 
 provided  commensurate  only  with  entities  eligible  activities.  The  method  of  cost  allocation  chosen  by  an  applicant  should  be  based  on  objective  criteria,  and  reasonably  reflect  the  eligible 
 usage  of  the  facilities.  160  Thus,  if  telecommunications  facilities  are  used  jointly  for  eligible  and  ineligible  purposes,  the  allocation  should  be  based  on  the  percentage  of  time  the  facility  is  used 
 for  eligible  purposes  or  some  other  method  that  reasonably  reflects  eligible  usage.  Health  care  providers  must  keep  documentation  explaining  their  allocation  methods  for  five  years  and 
 present  that  information  to  USAC  upon  request.  161  We  also  direct  USAC  to  evaluate  the  allocation  methods  selected  by  program  participants  in  the  course  of  its  audit  activities  to  ensure 
 program  integrity.  Additionally,  we  codify  the  requirement  that  health  care  providers  must  maintain  records  for  their  purchases  of  supported  services  for  at  least  five  years  sufficient  to 
 document  their  compliance  with  all  Commission  requirements.  162 
 50.  To  illustrate  the  general  principle  of  discount  allocation,  we  provide  several  safe  harbor  examples  of  allocation  methods.  First,  if  a  dedicated  emergency  department  in  a  for-profit 

 rural  hospital  shares  access  to  a  T-  3  with  the  rest  of  the  hospital,  and  the  T-  3  is  used  seventy-  five  hours  per  week  related  to  EMTALA-  emergency  care  and  the  education  of  health 
 care  professionals  who  work  in  the  dedicated  emergency  department  and  fifty  hours  per  week  related  to  other  hospital  use,  the  T-  3  would  be  used  for  eligible  purposes  sixty  percent  of  the 
 time  (seventy-  five  hours  of  use  by  emergency  department  divided  by  125  total  hours  of  use  by  the  entire  hospital).  Therefore,  the  eligible  dedicated  emergency  department  would  receive 
 sixty  percent  of  the  difference  between  the  urban  and  rural  rate  for  the  T-  3.  Second,  another  dedicated  emergency  department  in  a  for-  profit  rural  hospital  that  shares  access  to  a  T-  3  with 
 the  rest  of  the  hospital,  might  choose  to  allocate  discounts  based  on  employee  hours.  For  example,  if  the  emergency  department  staff,  including  on-  call  physicians,  is  staffed  at  3,360 
 hours  per  week  (twenty  employees  covering  168  hours  per  week),  and  the  rest  of  the  hospital  is  staffed  at  4,000  hours  per  week  (100  employees  covering  40  hours  per  week),  the  emergency 
 department  would  receive  forty-  six  percent  of  the  difference  between  the  urban  and  rural  T-  3  rate  (3,360  emergency  staff  hours  divided  by  7,360  total  staff  hours).  Third,  if  a  non-  profit  rural 

 158  NPRM,  17  FCC  Rcd  at  7827,  para.  61. 
 159  47  C.  F.  R.    54.601(  d)  as  adopted  herein;  Accord  Intelenet  Comments  at  2  (encouraging  the  Commission  to 
 modify  its  rules  so  that  an  otherwise  eligible  health  care  provider  that  is  collocated  with  an  ineligible  entity  may  be  considered  for  partial  universal  service  support). 

 160  47  C.  F.  R.    54.601(  d)  as  adopted  herein. 
 161  See  47  C.  F.  R.    54.  619(  a)(  1)  as  adopted  herein.  Participants  in  the  schools  and  libraries  program  are  also 
 required  under  USAC  procedures  to  retain  documentation  for  five  years.  See  Universal  Service  Administrative  Company:  Records  Retention,  available  at  http://  www.  sl.  universalservice.  org/  applicants/  records.  asp  (retrieved 

 November  13,  2003). 
 162  47  C.  F.  R.    54.619(  a)(  1)  as  adopted  herein.  See  also  FCC  Form  466  Instructions. 
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 health  clinic  operates  in  a  local  community  center  for  five  hours  one  evening  per  week  and  uses  the  community  centers  T-  1  line,  and  the  community  centers  normal  operating  hours  are  10 
 AM    10  PM,  Monday  thru  Saturday,  the  T-  1  would  be  used  for  eligible  purposes  seven  percent  of  the  time  (five  hours  divided  by  eighty-  four  open  hours  in  a  week).  Therefore,  the  eligible 
 non-  profit  rural  health  clinic  would  receive  seven  percent  of  the  difference  between  the  urban  and  rural  rate  for  the  T-  1.  Fourth,  if  a  dedicated  emergency  department  in  a  for-  profit  rural 
 hospital  shares  access  to  a  T-  1  with  the  rest  of  the  hospital,  and  the  dedicated  emergency  department  occupies  250  square  feet  and  the  hospital  occupies  2,500  square  feet,  the  T-  1  would 
 be  used  for  eligible  purposes  ten  percent  of  the  time  (250  square  feet  divided  by  2,500  square  feet).  Therefore,  the  eligible  dedicated  emergency  department  would  receive  ten  percent  of  the 
 difference  between  the  urban  and  rural  rate  for  the  T-  1.  If  a  rural  health  care  provider  can  document  that  it  adopted  an  allocation  method  consistent  with  one  of  these  four  examples,  we 
 will  consider  the  method  compliant  with  our  requirements.  Rural  health  care  providers  may  choose  a  different  allocation  method,  but  will  bear  the  burden  of  demonstrating,  in  the  event  of 
 an  audit  or  otherwise,  that  the  chosen  method  was  based  on  objective  criteria  and  reasonably  reflects  the  eligible  usage  of  the  facilities. 

 51.  Conversely,  when  services  are  used  solely  by  an  eligible  entity  for  eligible  purposes,  no  allocation  would  be  necessary.  For  example,  if  a  T-  1  is  located  solely  in  the  dedicated 
 emergency  room  and  is  used  only  for  medical  or  educational  purposes,  the  dedicated  emergency  room  would  be  able  to  receive  the  full  discount  based  on  the  difference  between  the  urban  and 
 rural  rate.  Similarly,  if  there  is  a  phone  line  in  a  private  room  at  the  community  center  that  is  dedicated  exclusively  to  a  rural  health  care  clinic,  no  allocation  would  be  necessary  because  the 
 personnel  staffing  the  part-  time  rural  health  care  clinic  would  be  the  only  ones  to  use  the  phone. 
 2.  Streamlining  the  Application  Process 
 52.  Background.  In  the  NPRM,  we  sought  comment  on  ways  to  streamline  the  application  process  to  make  it  more  accessible  and  reduce  overall  administrative  costs  to  rural 

 health  care  providers.  163  Commenters  suggested  USAC  streamline  the  application  process  by  pre-  filling  forms  for  repeat  applicants,  164  combining  or  eliminating  forms,  165  implementing  on-line 
 filing  166  and  e-  certification  capability,  167  simplifying  the  process  for  identifying  urban 

 163  NPRM,  17  FCC  Rcd  at  7825,  para.  51. 
 164  See  ATA  Comments  at  7-  9;  CTL  Comments  7-  9;  Institute  of  Rural  Health  Comments  at  7;  Madden  Comments 
 at  1;  MGHS  Reply  Comments  at  3;  MHTA  Comments  at  2;  NM  Health  Resources  Comments  at  2;  NSRHN  Comments  at  10-  11;  Northwest  TeleHealth  Comments  at  2;  NOSORH  Comments  at  2;  Tri-  County  Memorial 

 Hosp.  Comments  at  2;  Univ.  of  Arizona  Health  Sciences  Comments  at  2;  Washington  Rural  Comments  at  3;  UVA  Comments  at  18-  19. 

 165  See  AFHCAN  Comments  at  7;  Alaska  Telehealth  Comments  at  3;  Blue  Cross  Comments  at  4;  GCI  Comments 
 at  9;  GCI  Reply  Comments  at  6;  Nebraska  Office  of  Rural  Health  Comments  at  1-  2;  Kansas  DHE  Comments  at  2;  Kansas  Hosp.  Assoc.  Comments  at  2. 

 166  See  AHA  Comments  at  8;  Avera  Comments  at  4. 
 167  See  Blue  Cross  Comments  at  5;  NSRHN  Comments  at  10-  11. 
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 rates,  168  and  conducting  more  outreach  efforts.  169  Moreover,  some  commenters  suggested  that  discount  payments  should  be  provided  directly  to  health  care  providers.  They  argue  the  current 
 system,  which  provides  discounts  directly  to  service  providers  after  the  required  paperwork  is  processed,  who  in  turn  provide  discounted  services  to  health  care  providers,  results  in  health 
 care  providers  having  to  front  load  the  costs  of  the  discount  while  USAC  develops  the  payment  schedule  with  the  service  provider.  170 

 53.  Discussion.  Since  the  NPRM  was  released,  USAC  has  streamlined  the  application  process  significantly  in  response  to  the  numerous  comments  submitted  in  this  proceeding  on 
 this  issue.  171  For  example,  USAC  has  implemented  electronic  filing  and  e-  certification  for  all  forms  172  and  has  arranged  for  electronic  forms  to  be  filled  automatically  with  the  previous  year's 
 information  for  repeat  on-  line  filers.  173  USAC  has  also  created  a  database  of  urban  rates  on  its  website.  174  As  a  result,  a  health  care  provider  can  now  bypass  the  arduous  step  of  having  to 
 retrieve  this  information  from  its  carrier.  In  addition,  USAC  has  significantly  expanded  its  outreach  efforts,  such  as  by  sending  mailings  to  carriers  and  health  care  providers  to  alert  them 

 168  See  ATA  Comments  at  7-  9;  CTL  Comments  at  7-  9;  NTCA  Comments  at  5;  Poudre  Valley  Health  Comments  at 
 1;  WorldCom  Comments  at  9-  10. 
 169  See  generally  Alaska  Comments  at  5,  8;  Alliance  Comments  at  5-  6;  AHA  Comments  at  8;  Arizona 
 Telemedicine  Comments  at  2;  Arkansas  DIS  Reply  Comments  at  1;  Illinois  Center  for  Rural  Health  Comments  at  2;  Florida  PSC  Comments  at  7-  8;  Kansas  DHE  comments  at  3;  Kansas  Hosp.  Assoc.  Comments  at  3;  Madden 

 Comments  at  1;  MGHS  Reply  Comments  at  3;  Mayo  Comments  at  1;  Nevada  State  Office  Comments  at  9;  NM  Health  Resources  Comments  at  2;  NOSORH  Comments  at  2;  Univ.  of  Arizona  Health  Sciences  Comments  at  2; 
 Washington  Rural  Comments  at  3;  Tri-  County  Memorial  Hosp.  Comments  at  2;  WorldCom  Comments  at  9-  10. 
 170  See  ATA  Comments  at  7-  9;  Blue  Cross  Comments  at  5-  6;  CTTC  Comments  at  7;  CTL  at  7-  9;  Grogg 
 Comments  at  2;  Institute  of  Rural  Health  Comments  at  4;  MGHS  Reply  Comments  at  3;  MHTA  Comments  at  2;  NSRHN  Comments  at  10-  11;  Northwest  TeleHealth  Comments  at  4;  Univ.  of  Tennessee  Health  Science 

 Comments  at  2-  3. 
 171  See  generally  AFHCAN  Comments  at  6-  7;  Alaska  Comments  at  5;  Alaska  Telehealth  Comments  at  3;  Alliance 
 Comments  at  3-  4;  AHA  Comments  at  8-  9;  ATA  Comments  at  7-  9;  Arizona  Telemedicine  Comments  at  2;  Arkansas  DIS  Reply  Comments  at  1;  Avera  Comments  at  4;  Blue  Cross  Comments  at  4-  5;  Illinois  Center  for  Rural 

 Health  Comments  at  2;  CTL  Comments  7-  9;  Clifford  Comments  at  1;  GCI  Comments  at  9;  GCI  Reply  Comments  at  6;  Institute  of  Rural  Health  Comments  at  7;  Kansas  DHE  Comments  at  2;  Madden  Comments  at  1;  MGHS 
 Reply  Comments  at  3;  Minn.  Ambulance  Assoc.  Comments  at  2;  Nebraska  Office  of  Rural  Health  Comments  at  1-2;  Nevada  State  Office  Comments  at  9;  NM  Health  Resources  Comments  at  2;  NSRHN  Comments  at  10-  11; 
 Northwest  TeleHealth  Comments  at  2;  NOSORH  Comments  at  2-  3;  SBC/  BellSouth  Joint  Reply  Comments  at  4;  Tri-  County  Memorial  Hosp.  Comments  at  1-  2;  Univ.  of  Arizona  Health  Sciences  Comments  at  2;  Washington 
 Rural  Comments  at  3,  5;  WorldCom  Comments  at  9-  10;  UVA  Comments  at  18-  19.  See  also  Universal  Service  Administrative  Company:  Funding  Year  2003  Process  Overview,  available  at 
 http://  www.  rhc.  universalservice.  org/  overview/  processoverview_  2003.  asp  (retrieved  November  13,  2003). 
 172  USAC  launched  e-  certification  for  FCC  Form  465  on  January  28,  2002.  New  applicants  or  applicants  that  have 
 not  enabled  e-  certification  must  print,  sign,  and  mail  a  paper  FCC  Form  465  to  USAC.  USAC  launched  e-certification  for  FCC  Form  466  on  June  19,  2003  and  for  FCC  Form  467  on  April  29,  2002. 

 173  USAC  launched  pre-  filled  FCC  Form  465  on  January  1,  2002,  pre-  filled  FCC  Form  466  on  June  19,  2003,  and 
 pre-  filled  FCC  Form  467  on  April  29,  2002. 
 174  See  Universal  Service  Administrative  Company:  Urban  Rates,  available  at 
 http://  www.  universalservice.  org/  rhcdb/  urbanrates/  search.  asp  (retrieved  November  13,  2003). 
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 to  changes  in  the  program,  holding  monthly  conference  calls  for  carriers  and  health  care  providers  to  ask  questions  and  raise  concerns,  and  setting  up  a  toll-  free  access  number  where 
 carriers  and  health  care  providers  can  call  at  their  convenience.  175  Finally,  USAC  has  eliminated  the  form  submitted  by  service  providers,  FCC  Form  468,  by  combining  the  relevant 
 information  into  FCC  Form  466,  which  is  submitted  by  applicants.  176  This  modification  to  the  reimbursement  process  has  reduced  to  a  great  extent  the  interval  between  receipt  of  service  and 
 payments  to  service  providers,  thereby  mitigating  commenters  concerns. 
 54.  We  believe  USACs  efforts  to  ease  the  burdens  of  applying  to  the  program  have  been  exemplary,  as  further  evidenced  by  the  number  of  completed  applications  received  by 

 USAC  in  Funding  Year  2003  compared  to  Funding  Year  2002.  Nevertheless,  in  the  Further  Notice  of  Proposed  Rulemaking,  we  seek  comment  on  ways  in  which  USAC  could  further 
 streamline  the  application  process  and  expand  outreach  efforts.  In  addition,  we  note  that  the  Commission,  through  the  Consumer  &  Governmental  Affairs  Bureau,  will  endeavor  through  its 
 educational  and  outreach  efforts,  to  ensure  that  those  most  likely  affected  are  informed  about  the  actions  taken  in  this  Order.  In  addition  to  making  fact  sheets  and  other  informational  materials 
 available  for  dissemination  through  the  Commissions  website,  the  Commission  will  include  the  dissemination  of  such  information  as  part  of  its  on-  going,  grassroots  outreach  efforts  directed  at 
 rural  America  and  undertaken  in  coordination  with  other  federal  and  state  agencies. 
 3.  Pro-  Rata  Reductions  If  Annual  Cap  Exceeded 
 55.  Background.  The  annual  cap  on  universal  service  support  for  health  care  providers  is  currently  $400  million  per  funding  year.  177  Generally,  funds  are  available  to  applicants  filing 

 requests  on  a  first-  come-  first-  served  basis.  178  If  the  total  demand  for  support  in  a  year  exceeds  the  cap,  however,  the  Administrator  shall  divide  the  total  annual  support  available  by  the  total 
 amount  requested  in  that  year,  and  multiply  that  result,  which  is  the  pro-  rata  factor,  by  the  amount  requested  by  each  applicant,  in  order  to  determine  the  amount  each  applicant  shall 
 receive.  179  Only  applicants  that  file  within  the  filing  window  will  receive  pro-  rata  support  under  these  circumstances.  The  filing  window  date  for  each  Funding  Year  is  posted  on  USACs 
 homepage.  180  To  date,  discount  amounts  requested  under  the  rural  health  care  universal  service  support  mechanism  have  never  exceeded  the  annual  cap.  In  light  of  potential  changes  to  the 

 175  See  generally  USACs  website  found  at  http://  www.  rhc.  universalservice.  org. 
 176  On  June  19,  2003,  USAC  eliminated  Form  468  from  Funding  Year  2003  onward.  See  Universal  Service 
 Administrative  Company:  FCC  Form  468  Eliminated  for  Funding  Year  2003,  available  at  http://  www.  rhc.  universalservice.  org/  whatsnew/  062003.  asp#  2  (retrieved  November  13,  2002).  See  also  Kansas 

 DHE  Comments  at  2  and  KHA  Comments  at  2  (suggesting  that  Form  468  be  eliminated  to  streamline  application  process  because  telecommunication  carriers  struggle  to  complete  the  form  in  a  timely  manner). 

 177  47  C.  F.  R.    54.623(  a). 
 178  47  C.  F.  R.    54.623(  c)(  1). 
 179  47  C.  F.  R.    54.623(  f). 
 180  See  USACs  homepage  available  at  http://  www.  rhc.  universalservice.  org/  homepage.  asp  (retrieved  November 
 13,  2003).  For  example,  the  filing  window  for  Funding  Year  2003  runs  from  March  26-  June  2,  2003.  See  also  47  C.  F.  R.    54.  623(  c). 
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 program,  we  sought  comment  in  the  NPRM  on  whether  to  modify  our  current  rules  governing  the  allocation  of  funds  under  the  rural  health  care  universal  service  support  mechanism  if 
 demand  should  exceed  the  annual  cap.  181 
 56.  Discussion.  Based  on  our  estimates  and  the  comments  we  have  received,  we  continue  to  believe  that  our  current  rules  requiring  pro-  rata  distribution  of  funds  if  requests 

 exceed  the  cap,  are  the  most  effective  and  equitable  means  of  distributing  limited  funds  in  accordance  with  the  goals  and  purposes  of  the  statute.  Therefore,  we  agree  with  the  majority  of 
 commenters  that  the  current  rules  should  be  maintained.  182  We  note  that  the  rules  adopted  in  this  Order  could  increase  the  level  of  discounts  requested  in  a  year,  so  applicants  are  encouraged 
 to  submit  applications  during  the  filing  window  to  secure  their  universal  service  funding.  We  disagree  with  the  commenter  that  suggested  we  prioritize  universal  service  support  for 
 telecommunication  services  over  information  services.  183  We  do  not  think  such  a  measure  is  necessary  at  this  time  because  program  demand  has  never  approached  the  cap.  Moreover, 
 prioritization  would  add  another  level  of  unnecessary  administrative  complexity  to  the  support  mechanism. 

 4.  Ensuring  the  Selection  of  Cost-  Effective  Services 
 57.  Background.  Current  rules  require  rural  health  care  applicants  to  consider  all  bids  received  in  response  to  the  posting  on  USACs  webpage  of  their  Description  of  Services 

 Requested  Form  (FCC  Form  465)  and  certify  that  they  have  selected  the  most  cost-  effective  method  of  providing  the  requested  services  to  meet  its  health  care  telecommunications 
 needs.  184  There  are  no  restrictions,  however,  on  the  type  of  service  offerings  a  rural  health  care  provider  may  select.  In  the  NPRM,  we  sought  comment  on  whether  there  currently  are  adequate 
 measures  to  ensure  that  rural  health  care  providers  purchase  the  most  cost-  effective  services.  185  We  also  sought  comment  on  whether  we  should  implement  changes  to  encourage  applicants  to 
 use  the  lowest-  cost  technology  available.  186 
 58.  Discussion.  We  agree  with  commenters  that  the  current  rules  are  adequate  to  ensure  that  health  care  providers  select  the  most  cost-  effective  services.  187  Our  certification 

 requirements,  combined  with  the  requirement  that  health  care  providers  remain  responsible  for  a  significant  portion  of  service  costs  (i.  e.,  the  urban  rate  of  telecommunications  services  and  75% 

 181  NPRM,  17  FCC  Rcd  at  7825,  para.  54. 
 182  Alliance  Comments  at  4;  Avera  Comments  at  4;  Intelenet  Comments  at  7;  Kansas  DHE  Comments  at  3;  Kansas 
 Hosp.  Assoc.  Comments  at  3;  PA  Public  Utility  Reply  Comments  at  8. 
 183  See  GCI  Comments  at  9;  GCI  Reply  Comments  at  6. 

 184  The  most  cost-  effective  method  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  .  .  .  47  C.  F.  R.    54.  615(  c)(  7).  See  also  supra  para.  28. 

 185  NPRM,  17  FCC  Rcd  at  7827,  para.  59. 
 186  Id. 
 187  Alliance  Comments  at  5;  MSV  Comments  at  7. 
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 of  Internet  access)  will  ensure  that  rural  health  care  providers  make  prudent  economic  decisions.  188  We  also  agree  with  commenters  that  applicants  should  not  be  required  to  use  the 
 lowest-  cost  technology  because  factors  other  than  cost,  such  as  reliability  and  quality,  may  be  relevant  to  fulfill  their  telemedical  needs.  189 

 5.  Other  Non-  Substantive  Rule  Changes 
 59.  In  the  NECA  Order,  the  Commission  directed  the  National  Exchange  Carrier  Association  (NECA)  to  establish  the  Rural  Health  Care  Corporation  to  administer  the  rural 

 health  care  support  mechanism.  190  Subsequently,  the  Commission  directed  the  Rural  Health  Care  Corporation  to  be  merged  into  a  division  of  USAC.  191  In  light  of  the  Commissions  prior 
 actions,  we  hereby  amend  our  rules  to  replace  all  references  to  the  Rural  Health  Care  Corporation  with  the  Rural  Health  Care  Division.  192  We  also  revise  section  54.609(  a)(  1)(  i) 
 to  conform  to  the  Fifteenth  Order  on  Reconsideration.  193  We  also  adopt  several  other  non-substantive  rule  changes  to  improve  the  clarity  of  the  rules.  194 

 6.  Implementation 
 60.  Funding  Year  2003  for  the  rural  health  care  program  ends  June  30,  2003,  and  Funding  Year  2004  begins  July  1,  2004.  Because  we  do  not  wish  to  introduce  changes  to  the 

 program  in  the  middle  of  a  funding  year,  the  modifications  to  the  program  adopted  in  this  Order  will  be  implemented  beginning  with  Funding  Year  2004.  We  direct  USAC  to  take  the 
 necessary  operational  steps  to  implement  the  improvements  to  the  program  adopted  herein  for  Funding  Year  2004. 

 IV.  ORDER  ON  RECONSIDERATION 
 61.  Background.  In  the  1997  Universal  Service  Order,  the  Commission  concluded  that 
 188  Certification  that  a  rural  health  care  provider  selects  the  most  cost-  effective  method,  pursuant  to    54.  615(  c)(  7) 
 of  our  rules,  will  be  extended  to  include  the  provision  of  support  for  Internet  access.  47  C.  F.  R.    54.621(  a)  as  adopted  herein.  See  also  supra  note  184  (defining  cost-  effective  method). 

 189  Accord  Intelenet  Comments  at  8  (Intelenet  posits  that  rules  requiring  applicants  to  use  lowest  cost  technology 
 available  could  result  in  providers  being  relegated  to  using  obsolete  or  soon-  to-  be-  retired  technology.  Sometimes  initially  higher  cost  options  may  prove  to  be  lower  in  the  long-  run,  by  providing  useful  benefits  to  telemedicine  in 

 terms  of  scalability,  maintenance,  and  future  developments). 
 190  Changes  to  the  Board  of  Directors  of  the  National  Exchange  Carrier  Association,  Federal-  State  Joint  Board  on 
 Universal  Service,  Report  and  Order  and  Second  Order  on  Reconsideration,  CC  Docket  Nos.  97-  21,  96-  45,  12  FCC  Rcd  18400  (1997)  (NECA  Order). 

 191  Changes  to  the  Board  of  Directors  of  the  National  Exchange  Carrier  Association,  Inc.,  Federal-  State  Joint  Board 
 on  Universal  Service,  Third  Report  and  Order,  Fourth  Order  on  Reconsideration,  Eighth  Order  on  Reconsideration,  CC  Docket  Nos.  97-  21,  96-  45,  13  FCC  Rcd  25058  (1998). 

 192  47  C.  F.  R.    54.603  as  amended  herein. 
 193  Fifteenth  Order  on  Reconsideration,  14  FCC  Rcd  at  18779  n.  122. 
 194  See  47  C.  F.  R.    54.  601  as  adopted  herein. 
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 telecommunications  carriers  must  charge  eligible  rural  health  care  providers  a  rate  for  each  supported  service  that  is  no  higher  than  the  highest  tariffed  or  publicly  available  commercial 
 rate  for  a  similar  service  in  the  closest  city  in  the  state  with  a  population  of  50,000  or  more.  195  Subsequently,  the  predecessor  to  Mobile  Satellite  Ventures  Subsidiary  (MSV),  filed  a  Petition 
 for  Clarification  or  Reconsideration  of  this  decision  requesting  the  Commission  to  establish  that  the  urban  services  that  are  similar  to  [MSV]  s  rural  [services]  are  the  terrestrial  mobile 
 communications  services  typically  used  by  ambulances  and  other  emergency  medical  vehicles  in  a  states  urban  areas  .  .  .  [and  that]  support  for  rural  health  care  providers  that  use  [MSV]  s 
 services  should  be  calculated  on  the  basis  of  actual  airtime  usage  rates  that  [MSV]  charges  for  calls  outside  a  customers  predefined  talk-  group.  196  MSV  noted  that  under  this  approach, 
 market  forces  and  the  relative  cost-  effectiveness  of  these  competing  technologies  can  determine  which  mobile  technology  is  the  most  successful  in  rural  and  remote  areas.  197  In  the  NPRM,  the 
 Commission  sought  comment  on  MSVs  proposal.  198 
 62.  Discussion.  Consistent  with  the  policy  objectives  underlying  our  decision  as  indicated  above,  199  we  deny,  to  the  extent  indicated  herein,  MSVs  petition  for  reconsideration 

 of  the  1997  Universal  Service  Order.  200  We  decline  to  revise  our  policy,  as  MSV  suggests,  to  subsidize  satellite  service  at  the  same  price  as  terrestrial  mobile  service.  201  We  agree  with 
 Verizon  that  equalizing  these  rates  could  undercut  competition  and  competitive  neutrality.  202  Although  we  agree  that  MSV  and  similar  carriers  provide  valuable  services  to  rural  areas, 
 particularly  insular  areas  unserved  by  wireline  carriers,  we  are  concerned  that  equalizing  the  rates  for  satellite  and  terrestrial  mobile  service  could  significantly  increase  program  demand  and 
 disadvantage  those  carriers  already  providing  functionally  similar  services  at  more  competitive  prices.  Accordingly,  we  deny  MSVs  petition  for  reconsideration  to  the  extent  indicated 
 herein.  203 

 195  1997  Universal  Service  Order,  12  FCC  Rcd  at  9124-  25,  paras.  669-  70. 
 196  AMSC  Subsidiary  Corporation  (AMSC)  Petition  for  Clarification  or  Reconsideration,  filed  July  17,  1997,  at  8- 
 9  (MSV  Petition  for  Reconsideration).  AMSC  subsequently  changed  its  name  to  Mobile  Satellite  Ventures  Subsidiary  (MSV);  MSV  Comments,  filed  Dec.  20,  2001  (updating  its  petition  for  reconsideration). 

 197  MSV  Petition  for  Reconsideration  at  9. 
 198  NPRM,  17  FCC  Rcd  at  7820-  21,  para.  39. 
 199  See  supra  para.  44. 
 200  MSV  Petition  for  Reconsideration;  see  also  MSV  Comments,  filed  July  1,  2002.  We  will  address  the  additional 
 issues  raised  by  MSV  in  its  petition  for  reconsideration  related  to  the  Commissions  high-  cost-  area  support  rules  in  a  subsequent  order.  See  MSV  Petition  for  Reconsideration  at  5-  8. 

 201  MSV  Petition  for  Reconsideration  at  9. 
 202  Verizon  Comments  at  10. 
 203  As  discussed  above,  rural  health  care  providers  will  be  able  to  apply  capped  discounts  towards  satellite  service. 
 See  supra  para.  44.  In  addition,  if  there  is  no  terrestrial  alternative,  health  care  providers  may  compare  the  cost  of  rural  satellite  service  to  urban  wireline  rates.  See  supra  para.  42. 
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 V.  FURTHER  NOTICE  OF  PROPOSED  RULEMAKING 
 A.  Definition  of  Rural  Area 
 63.  We  seek  comment  on  modifications  to  the  definition  of  rural  area  for  the  rural  health  care  universal  service  support  mechanism.  Currently,  an  area  qualifies  as  rural  if  it  is 

 located  in  a  non-  metropolitan  county  as  defined  by  the  Office  of  Management  and  Budget  or  is  specifically  identified  in  the  Goldsmith  Modification  to  1990  Census  data  published  by  the 
 Office  of  Rural  Health  Care  Policy  (ORHP).  204  In  response  to  the  NPRM,  several  commenters  state  that  ORHP  no  longer  utilizes  the  definition  adopted  by  the  Commission  in  1997  and  that 
 there  will  be  no  Goldsmith  Modification  to  the  most  recent  2000  Census  data.  205  Several  commenters  suggest  that  the  Commission  adopt  the  rural  designation  system  currently  utilized 
 by  ORHP,  the  Rural  Urban  Commuting  Area  (RUCA)  system.  206  Others  propose  to  define  rural  as  non-  urbanized  areas,  as  specified  by  the  Census  Bureau.  207  Finally,  some  commenters  assert 
 that  if  the  Commission  adopts  a  new  definition  of  rural,  it  should  grandfather  existing  areas  that  currently  qualify  as  rural,  if  they  would  no  longer  qualify  under  the  new  definition.  208 

 64.  We  seek  comment  on  whether  we  should  adopt  a  new  definition  of  rural  area  for  the  rural  health  care  program,  and,  if  so,  what  that  new  definition  should  be.  We  seek  comment  on 
 whether  there  are  any  definitions  for  rural  areas  used  by  other  government  agencies  or  medical  organizations  that  would  be  appropriate  for  the  rural  health  care  program.  In  addition  to 
 describing  any  proposed  new  definitions,  we  ask  commenters  to  address  the  specific  proposals  that  have  already  been  raised  in  the  record.  Commenters  are  encouraged  to  describe  the  effects 
 of  any  new  definition  to  the  program,  e.  g.  how  many  existing  rural  areas  would  become  non-rural  and  vice  versa.  We  also  seek  comment  on  whether  there  are  reasons  we  should  or  should 
 not  use  the  same  definition  of  rural  for  both  the  rural  health  care  and  schools  and  libraries  support  mechanisms.  209 

 204  See  47  C.  F.  R.    54.5. 
 205  See  Kansas  DHE  Comments  at  3. 
 206  See,  e.  g.,  Illinois  Center  for  Rural  Health  Comments  at  3;  NM  Health  Resources  Comments  at  3. 
 207  See,  e.  g.,  ATA  Comments  at  5;  Blue  Cross  Comments  at  4;  NSRHN  Comments  at  7-  8.  For  the  2000  Census, 
 urban  territories  include  urbanized  areas  (UA)  and  urban  clusters  (UC),  which  consist  of  core  census  block  groups  or  blocks  that  have  a  population  density  of  at  least  1,000  people  per  square  mile  and  surrounding  census  blocks 

 that  have  an  overall  density  of  at  least  500  people  per  square  mile.  Rural  territories  include  areas  located  outside  of  UAs  and  UCs.  See  The  United  States  2000  Census:  Census  2000  Urban  and  Rural  Classification,  available  at 
 http://  census.  gov/  geo/  www/  ua/  ua_  2k.  html  (retrieved  September  11,  2003). 
 208  See  Midwest  Networks  Comments  at  4. 

 209  We  note  that  the  schools  and  libraries  support  mechanism  currently  uses  the  same  definition  of  rural  area  as  the 
 rural  health  care  support  mechanism.  We  will  seek  comment  on  possible  changes  to  the  rural  area  definition  in  the  context  of  the  schools  and  libraries  program  in  a  separate  notice  of  proposed  rulemaking.  We  further  note  that  we 

 have  sought  comment  on  the  appropriate  definition  of  a  rural  area  in  the  context  of  promoting  the  rapid  and  efficient  deployment  of  spectrum-  based  services  in  rural  areas.  We  specifically  sought  comment  on  the  following 
 definitions:  (1)  counties  with  a  population  density  of  100  persons  or  fewer  per  square  mile;  (2)  RSAs;  (3)  non-  nodal  counties  within  an  EA;  (4)  the  definition  for  rural  used  by  the  RUS  for  its  broadband  program;  (5)  the  definition 
 for  rural  area  used  by  the  Commission  in  connection  with  universal  service  support  for  schools,  libraries,  and  rural  (continued.) 
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 B.  Support  for  Satellite  Services  for  Mobile  Rural  Health  Clinics 
 65.  We  also  seek  comment  on  whether  additional  modifications  to  our  rules  are  appropriate  to  facilitate  the  provision  of  support  to  mobile  rural  health  clinics  for  satellite 

 services.  Satellite  services  may  be  used  by  mobile  rural  health  clinics  that  operate  in  vans  or  boats  to  deliver  telemedical  services  via  satellite  to  residents  in  rural  areas.  For  example,  one 
 non-  profit  entity  is  launching  the  first  mobile  telemammography  van  to  diagnose  breast  cancer  in  women  in  four  rural  tribal  lands  in  North  and  South  Dakota  early  next  year.  210  This  van  will 
 conduct  mammograms  and  deliver  results  to  rural  American  Indian  women  while  they  wait.  211  The  vans  clinician  will  send  the  mammogram  via  satellite,  which  is  contained  in  sixty-  four 
 megabytes  of  data,  to  doctors  at  the  University  of  Colorado,  who  will  diagnose  any  abnormalities  and  email  the  van  with  the  patients  results.  212  The  van  will  serve  approximately 
 12,000  women  among  the  four  tribes,  at  a  rate  of  ten  to  twelve  women  a  day.  213  The  van  will  be  stationed  at  each  reservation  for  approximately  two  weeks  at  a  time  and  will  travel 
 approximately  200-  300  days  a  year,  depending  on  travel  time  and  maintenance  and  repairs  to  the  van.  214  Satellite  service  for  the  van  will  cost  approximately  $10,000  a  month.  215 

 66.  In  the  foregoing  Report  and  Order,  we  conclude  that  support  for  satellite  services  should  be  capped  at  the  amount  a  provider  would  receive  if  it  received  functionally-  similar 
 terrestrial-  based  services.  216  We  seek  comment  on  whether  it  is  appropriate  to  apply  this  rule  to  mobile  rural  health  care  providers,  which  by  their  very  nature,  are  unlikely  to  be  able  to  utilize 
 terrestrially-  based  services  effectively.  In  particular,  due  to  the  mobile  nature  of  a  telemedical  unit  and  the  large  volume  of  data  it  will  likely  send,  would  a  satellite  connection  be  the  most 
 cost-  effective  method  of  providing  service,  even  if  a  terrestrial  alternative  is  available?  Should  a  terrestrial  alternative  be  deemed  available  and  functionally  similar,  if  by  its  nature  it  is  tied 

 (Continued  from  previous  page)  health  care  providers;  (6)  the  definition  of  rural  based  on  census  tracts  as  outlined  by  the  Economic  Research 
 Service  of  the  USDA;  (7)  the  Census  Bureau  definition  of  rural  counties;  and  (8)  any  census  tract  that  is  not  within  ten  miles  of  any  incorporated  or  census-  designated  place  containing  more  than  2,500  people,  and  is  not 
 within  a  county  or  county  equivalent  which  has  an  overall  population  density  of  more  than  500  persons  per  square  mile  of  land.  See  Facilitating  the  Provision  of  Spectrum-  Based  Services  to  Rural  Areas  and  Promoting 
 Opportunities  for  Rural  Telephone  Companies  To  Provide  Spectrum-  Based  Services;  2000  Biennial  Regulatory  Review,  Spectrum  Aggregation  Limits  for  Commercial  Mobile  Radio  Services;  Increasing  Flexibility  To  Promote 
 Access  to  and  the  Efficient  and  Intensive  Use  of  Spectrum  and  the  Widespread  Deployment  of  Wireless  Services,  and  To  Facilitate  Capital  Formation,  WT  Docket  Nos.  02-  381,  01-  14,  03-  202,  Notice  of  Proposed  Rulemaking,  FCC 
 03-  222,  paras.  10-  12  (rel.  Oct.  6,  2003). 
 210  Letter  to  Marlene  Dortch,  Secretary  for  the  Federal  Communications  Commission,  from  Anne  Linton,  Healthcare 
 Anywhere  dated  October  21,  2003  (Healthcare  Anywhere  Ex  Parte). 
 211  Id. 

 212  Id. 
 213  Id. 
 214  Id. 
 215  Id. 
 216  See  supra  para.  44. 
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 to  a  fixed  location?  We  seek  comment  on  how  mobile  health  care  providers  should  make  a  cost-  effective  determination  for  satellite  services  and  whether  they  should  consider  the 
 installation  and  disconnection  charges  that  would  be  incurred  if  the  mobile  rural  health  clinic  were  to  order  a  wireline  connection  at  each  docking  location.  Commenters  should  also  discuss 
 whether  mobile  rural  health  clinics  should  be  required  to  service  a  specific  number  of  locations  before  satellite  services  are  deemed  cost-  effective. 

 67.  In  the  event  we  conclude  that  the  cap  on  the  provision  of  support  for  satellite  services  where  terrestrial  service  is  available  should  not  apply  in  these  circumstances,  how 
 should  support  be  provided  (i.  e.,  how  should  discounts  be  calculated)  for  satellite  services?  Commenters  are  encouraged  to  discuss  whether  rural  satellite  services  for  mobile  rural  health 
 clinics  should  be  compared  to  urban  terrestrial  services  and  under  what  circumstances.  We  note  that  two  other  commenters  in  this  proceeding  proposed  to  provide  support  for  satellite  services 
 for  mobile  health  care  providers.  217  Commenters  should  discuss  these  commenters  proposals.  We  also  ask  commenters  to  estimate  the  amount  of  support  a  mobile  rural  health  clinic  would 
 likely  receive  and  the  number  of  mobile  units  that  would  likely  be  eligible.  The  non-  profit  entity  associated  with  the  telemammography  van  states  that  distance-  based  charges  will  not 
 apply  to  satellite  services  in  the  continental  United  States.  218  We  seek  comment  on  whether  other  similarly  situated  mobile  rural  health  clinics  would  be  subject  to  distance-  based  charges 
 using  satellite  services  and,  if  so,  how  the  revised  MAD  would  impact  support  levels. 
 68.  We  seek  comment  on  how  we  should  determine  whether  a  mobile  health  clinic  serves  rural  areas.  In  particular,  should  that  determination  depend  on  the  principal  place  of 

 business  of  the  provider  (such  as  its  mailing  address),  or  should  it  depend  on  where  the  mobile  health  clinic  actually  provides  service?  We  also  seek  comment  on  whether  support  for  a  mobile 
 rural  health  clinic  should  be  prorated  if  it  also  serves  non-  rural  locations. 
 C.  Administrative  Matters 
 69.  In  addition,  we  seek  comment  on  ways  to  streamline  further  the  application  process  and  expand  outreach  efforts.  In  the  foregoing  Report  and  Order,  we  note  that  USAC  has 

 implemented  many  steps  to  streamline  the  application  process  and  has  increased  its  outreach  efforts,  since  the  NPRM  was  released  in  2002.  219  Among  other  things,  USAC  has  implemented 
 on-  line  application  filing  and  has  arranged  for  electronic  forms  to  be  filled  automatically  with 
 217  See  ATA  Comments  at  13-  14;  CTL  Comments  at  13-  14.  Specifically,  these  commenters  proposed  that  the 
 Commission  should  consider  allowing  MSV  and  similar  companies,  to  receive  universal  service  support  for  mobile  satellite  services  when  certain  conditions  are  met:  (1)  the  satellite  services  are  provided  only  via  a  mobile 

 unit  that  will  serve  a  minimum  of  four  rural  communities  within  a  State;  (2)  support  would  not  be  provided  to  a  company  installing  a  fixed  based  unit  in  an  area  where  terrestrial  based  services  are  available,  unless  they  can 
 demonstrate  that  the  rates  are  equal  to  the  highest  tariffed  rates  of  the  local  exchange  carrier;  (3)  discounts  for  this  service  would  be  calculated  the  same  as  discounts  for  terrestrial  based  service;  (4)  the  healthcare  provider  using 
 the  mobile  service  must  maintain  a  detailed  log  of  all  network  time  used,  the  date  it  was  used  and  the  location  from  which  the  mobile  service  was  provided,  and  submit  the  logs  to  USAC  within  forty-  five  days  of  the  closing  of  a 
 funding  year.  See  id. 
 218  See  Healthcare  Anywhere  Ex  Parte. 

 219  See  supra  para.  54. 
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 the  previous  years  information  for  repeat  on-  line  filers.  Nevertheless,  we  seek  comment  on  what  additional  steps  USAC  could  take  to  ease  further  the  burdens  associated  with  the 
 application  process.  For  example,  what  would  be  the  advantages  and  disadvantages  of  implementing  multi-  year  applications,  so  that  beneficiaries  would  not  need  to  apply  every 
 funding  year?  We  also  seek  comment  on  whether  there  are  additional  outreach  efforts  that  USAC  could  take  to  inform  eligible  applicants  of  the  benefits  of  the  program.  For  instance, 
 should  USAC  conduct  focus  groups  among  rural  health  care  providers  to  develop  ideas  on  how  to  identify  providers  that  operate  only  on  a  part-  time  basis?  Should  USAC  contact  service 
 providers  in  rural  areas  to  solicit  suggestions  for  potential  eligible  users  in  the  area? 
 VI.  PROCEDURAL  MATTERS 
 A.  Regulatory  Flexibility  Analysis 
 70.  As  required  by  the  Regulatory  Flexibility  Act,  5  U.  S.  C.    604,  the  Commission  has  prepared  a  Final  Regulatory  Flexibility  Analysis  (FRFA)  for  the  Report  and  Order,  set  forth  at 

 Appendix  C.  The  Commission  has  also  prepared  an  Initial  Regulatory  Flexibility  Analysis  (IRFA)  for  the  Further  Notice  of  Proposed  Rulemaking  (Further  Notice),  set  forth  at  Appendix 
 D.  Comments  on  the  FRFA  and  IRFA  should  be  labeled  as  IRFA  or  FRFA  Comments,  and  should  be  submitted  pursuant  to  the  filing  dates  and  procedures  set  forth  in  paragraphs  72-  79, 
 infra. 
 B.  Paperwork  Reduction  Act  Analysis 
 71.  This  Report  and  Order,  Order  on  Reconsideration,  and  Further  Notice  of  Proposed  Rulemaking  (Report  and  Order)  contains  either  a  proposed  or  modified  information  collection. 

 As  part  of  the  continuing  effort  to  reduce  paperwork  burdens,  we  invite  the  general  public  and  the  Office  of  Management  and  Budget  (OMB)  to  comment  on  the  information  collections 
 contained  in  this  Report  and  Order,  as  required  by  the  Paperwork  Reduction  Act  of  1995,  44  U.  S.  C.    3501  et  seq.  Public  and  agency  comments  are  due  at  the  same  time  as  other  comments 
 on  this  Report  and  Order;  OMB  comments  are  due  60  days  from  the  date  of  publication  of  this  Report  and  Order  in  the  Federal  Register.  Comments  should  address:  1)  whether  the  proposed 
 collection  of  information  is  necessary  for  the  proper  performance  of  the  functions  of  the  Commission,  including  whether  the  information  shall  have  practical  utility;  2)  the  accuracy  of 
 the  Commissions  burden  estimates;  3)  ways  to  enhance  the  quality,  utility,  and  clarity  of  the  information  collected;  and  4)  ways  to  minimize  the  burden  of  the  collection  of  information  on 
 the  respondents,  including  the  use  of  automated  collection  techniques  or  other  forms  of  information  technology. 

 C.  Filing  Procedures 
 72.  Pursuant  to  sections  1.415  and  1.419  of  the  Commissions  rules,  220  interested  parties  may  file  comments  not  later  than  60  days  after  publication  of  the  Report  and  Order  in  the 

 Federal  Register  and  may  file  reply  comments  not  later  than  105  days  after  publication  of  the  Report  and  Order  in  the  Federal  Register.  In  order  to  facilitate  review  of  comments  and  reply 

 220  47  C.  F.  R.    1.415,  1.  419. 
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 comments,  parties  should  include  the  name  of  the  filing  party  and  the  date  of  the  filing  on  all  pleadings.  Comments  may  be  filed  using  the  Commissions  Electronic  Comment  Filing  System 
 (ECFS)  or  by  filing  paper  copies.  221 
 73.  Comments  filed  through  the  ECFS  can  be  sent  as  an  electronic  file  via  the  Internet  to  <http://  www.  fcc.  gov/  cgb/  ecfs>.  Generally,  only  one  copy  of  an  electronic  submission  must  be 

 filed.  If  multiple  docket  or  rulemaking  numbers  appear  in  the  caption  of  this  proceeding,  however,  commenters  must  transmit  one  electronic  copy  of  the  comments  to  each  docket  or 
 rulemaking  number  referenced  in  the  caption.  In  completing  the  transmittal  screen,  commenters  should  include  their  full  name,  U.  S.  Postal  Service  mailing  address,  and  the  applicable  docket  or 
 rulemaking  number.  Parties  may  also  submit  an  electronic  comment  by  Internet  e-  mail.  To  get  filing  instructions  for  e-  mail  comments,  commenters  should  send  an  e-  mail  to  <ecfs@  fcc.  gov>, 
 and  should  include  the  following  words  in  the  body  of  the  message,  get  form.  A  sample  form  and  directions  will  be  sent  in  reply.  Or  you  may  obtain  a  copy  of  the  ASCII  Electronic 
 Transmittal  Form  (FORM-  ET)  at  <www.  fcc.  gov/  e-  file/  email.  html>. 
 74.  Parties  that  choose  to  file  by  paper  must  file  an  original  and  four  copies  of  each  filing.  Filings  can  be  sent  by  hand  or  messenger  delivery,  by  commercial  overnight  courier,  or 

 by  first-  class  or  overnight  U.  S.  Postal  Service  mail  (although  we  continue  to  experience  delays  in  receiving  U.  S.  Postal  Service  mail).  The  Commissions  contractor,  Natek,  Inc.,  will  receive 
 hand-  delivered  or  messenger-  delivered  paper  filings  for  the  Commissions  Secretary  at  a  new  location  in  downtown  Washington,  DC.  The  address  is  236  Massachusetts  Avenue,  NE,  Suite 
 110,  Washington,  DC  20002.  The  filing  hours  at  this  location  will  be  8:  00  a.  m.  to  7:  00  p.  m.  All  hand  deliveries  must  be  held  together  with  rubber  bands  or  fasteners.  Any  envelopes  must  be 
 disposed  of  before  entering  the  building. 
 75.  Commercial  overnight  mail  (other  than  U.  S.  Postal  Service  Express  Mail  and  Priority  Mail)  must  be  sent  to  9300  East  Hampton  Drive,  Capitol  Heights,  MD  20743.  U.  S. 

 Postal  Service  first-  class  mail,  Express  Mail,  and  Priority  Mail  should  be  addressed  to  445  12th  Street,  SW,  Washington,  D.  C.  20554.  All  filings  must  be  addressed  to  the  Commission's 
 Secretary,  Office  of  the  Secretary,  Federal  Communications  Commission. 

 If  you  are  sending  this  type  of  document  or  using  this  delivery 
 method 
 It  should  be  addressed  for  delivery  to 

 Hand-  delivered  or  messenger-  delivered  paper  filings  for  the  Commissions 
 Secretary 
 236  Massachusetts  Avenue,  NE,  Suite  110, 
 Washington,  DC  20002  (8:  00  to  7:  00  p.  m.)  Other  messenger-  delivered  documents, 
 including  documents  sent  by  overnight  mail  (other  than  United  States  Postal 
 Service  Express  Mail  and  Priority  Mail) 

 9300  East  Hampton  Drive,  Capitol  Heights,  MD  20743 
 (8:  00  a.  m.  to  5:  30  p.  m.) 
 United  States  Postal  Service  first-  class  mail,  Express  Mail,  and  Priority  Mail  445  12  th  Street,  SW  Washington,  DC  20554 

 221  See  Electronic  Filing  of  Documents  in  Rulemaking  Proceedings,  13  FCC  Rcd  11322,  11326  (1998). 
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 76.  Parties  who  choose  to  file  by  paper  should  also  submit  their  comments  on  diskette.  These  diskettes,  plus  one  paper  copy,  should  be  submitted  to:  Sheryl  Todd, 
 Telecommunications  Access  Policy  Division,  Wireline  Competition  Bureau,  Federal  Communications,  at  the  filing  window  at  236  Massachusetts  Avenue,  N.  E.,  Suite  110, 
 Washington,  D.  C.  20002.  Such  a  submission  should  be  on  a  3.5-  inch  diskette  formatted  in  an  IBM  compatible  format  using  Word  or  compatible  software.  The  diskette  should  be 
 accompanied  by  a  cover  letter  and  should  be  submitted  in  read  only  mode.  The  diskette  should  be  clearly  labeled  with  the  commenters  name,  proceeding  (including  the  docket  number, 
 in  this  case  WC  Docket  No.  02-  60,  type  of  pleading  (comment  or  reply  comment),  date  of  submission,  and  the  name  of  the  electronic  file  on  the  diskette.  The  label  should  also  include 
 the  following  phrase  Disk  Copy  -  Not  an  Original.  Each  diskette  should  contain  only  one  partys  pleadings,  preferably  in  a  single  electronic  file.  In  addition,  commenters  must  send 
 diskette  copies  to  the  Commissions  copy  contractor,  Qualex  International,  Portals  II,  445  12st  Street,  S.  W.,  Room  CYB402,  Washington,  D.  C.  20554  (see  alternative  addresses  above  for 
 delivery  by  hand  or  messenger). 
 77.  Regardless  of  whether  parties  choose  to  file  electronically  or  by  paper,  parties  should  also  file  one  copy  of  any  documents  filed  in  this  docket  with  the  Commissions  copy  contractor, 

 Qualex  International,  Portals  II,  445  12th  Street  S.  W.,  CY-  B402,  Washington,  D.  C.  20554  (see  alternative  addresses  above  for  delivery  by  hand  or  messenger)  (telephone  202-  863-  2893; 
 facsimile  202-  863-  2898)  or  via  e-  mail  at  qualexint@  aol.  com. 
 78.  Written  comments  by  the  public  on  the  proposed  and/  or  modified  information  collections  are  due  on  the  same  day  as  comments  on  the  Report  and  Order,  i.  e.,  on  or  before  60 

 days  after  publication  of  the  Report  and  Order  in  the  Federal  Register.  Written  comments  must  be  submitted  by  OMB  on  the  proposed  and/  or  modified  information  collections  on  or  before  60 
 days  after  publication  of  the  Report  and  Order  in  the  Federal  Register.  In  addition  to  filing  comments  with  the  Secretary,  a  copy  of  any  comments  on  the  information  collections  contained 
 herein  should  be  submitted  to  Judith  B.  Herman,  Federal  Communications  Commission,  Room  1-  C804,  445  12  th  Street,  S.  W.,  Washington,  D.  C.  20554,  or  via  the  Internet  to 
 jbherman@  fcc.  gov,  and  to  Jeanette  Thornton,  OMB  Desk  Officer,  Room  10236  NEOB,  725  17  th  Street,  N.  W.,  Washington,  D.  C.  20503  or  via  the  Internet  to  JThornto@  omb.  eop.  gov. 

 79.  The  full  text  of  this  document  is  available  for  public  inspection  and  copying  during  regular  business  hours  at  the  FCC  Reference  Information  Center,  Portals  II,  445  12  th  Street,  SW, 
 Room  CY-  A257,  Washington,  DC,  20554.  This  document  may  also  be  purchased  from  the  Commissions  duplicating  contractor,  Qualex  International,  Portals  II,  445  12  th  Street,  SW, 
 Room  CY-  B402,  Washington,  DC,  20554,  telephone  (202)  863-  2893,  facsimile  (202)  863-  2898,  or  via  e-  mail  qualexint@  aol.  com. 

 D.  Further  Information 
 80.  Alternative  formats  (computer  diskette,  large  print,  audio  recording,  and  Braille)  are  available  to  persons  with  disabilities  by  contacting  Brian  Millin  at  (202)  418-  7426  voice,  (202) 

 418-  7365  TTY,  or  bmillin@  fcc.  gov.  This  Report  and  Order  can  also  be  downloaded  in  Microsoft  Word  and  ASCII  formats  at  <http://  www.  fcc.  gov/  ccb/  universalservice/  highcost>. 
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 Federal  Communications  Commission  FCC  03-  288 
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 81.  For  further  information,  contact  Shannon  Lipp  at  (202)  418-  7954  or  Regina  Brown  at  (202)  418-  0792  in  the  Telecommunications  Access  Policy  Division,  Wireline  Competition 
 Bureau. 
 VII.  ORDERING  CLAUSES 
 82.  Accordingly,  IT  IS  ORDERED  that,  pursuant  to  the  authority  contained  in  sections  1,  4(  i),  4(  j),  201-  205,  214,  254,  and  403  of  the  Communications  Act  of  1934,  as  amended,  47 

 U.  S.  C.    151,  154(  i),  154(  j),  201-  205,  214,  254,  and  403,  this  Report  and  Order,  Order  on  Reconsideration,  and  Further  Notice  of  Proposed  Rulemaking  IS  ADOPTED. 

 83.  IT  IS  FURTHER  ORDERED  that,  pursuant  to  the  authority  contained  in  section  405,  of  the  Communications  Act  of  1934,  as  amended,  47  U.  S.  C.    405,  and  sections  0.291  and 
 1.429  of  the  Commissions  rules,  47  C.  F.  R.    0.291  and  1.429,  Mobile  Satellite  Ventures  Subsidiarys  Petition  for  Clarification  or  Reconsideration  IS  DENIED  to  the  extent  indicated 
 herein. 
 84.  IT  IS  FURTHER  ORDERED  that  Part  54  of  the  Commissions  rules,  47  C.  F.  R.  Part  54,  IS  AMENDED  as  set  forth  in  Appendix  A  attached  hereto,  effective  thirty  (30)  days  after 

 the  publication  of  this  Report  and  Order,  Order  on  Reconsideration,  and  Further  Notice  of  Proposed  Rulemaking  in  the  Federal  Register. 

 85.  IT  IS  FURTHER  ORDERED  that  the  Commissions  Consumer  and  Governmental  Affairs  Bureau,  Reference  Information  Center,  SHALL  SEND  a  copy  of  this  Report  and  Order, 
 Order  on  Reconsideration,  and  Further  Notice  of  Proposed  Rulemaking,  including  the  Final  Regulatory  Flexibility  Analysis  and  Initial  Regulatory  Flexibility  Analysis,  to  the  Chief  Counsel 
 for  Advocacy  of  the  Small  Business  Administration. 

 FEDERAL  COMMUNICATIONS  COMMISSION 

 Marlene  H.  Dortch  Secretary 
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 Federal  Communications  Commission  FCC  03-  288 
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 APPENDIX  A 
 Final  Rules 

 For  the  reasons  discussed  in  the  preamble,  the  Federal  Communications  Commission  amends  47 
 C.  F.  R.  Part  54  as  follows: 
 PART  54  -  UNIVERSAL  SERVICE 
 1.  The  authority  citation  for  Part  54  continues  to  read  as  follows: 
 Authority:  47  U.  S.  C.    1,  4(  i),  201,  205,  214,  and  254  unless  otherwise  noted. 
 2.  Amend    54.601  by  removing  paragraphs  (a)(  3),  (b)(  3),  and  (b)(  4),  redesignating 
 paragraphs  (a)(  4)  and  (a)(  5)  as  (a)(  3)  and  (a)(  4),  revising  paragraphs  (a)(  1),  newly  redesignated 
 (a)(  3),  and  (c),  and  adding  paragraph  (d)  to  read  as  follows: 
   54.601  Eligibility. 
 (a)  *  *  * 
 (1)  Except  with  regard  to  those  services  provided  under    54.621(  b),  only  an  entity  that  is  either 
 a  public  or  non-  profit  rural  health  care  provider,  as  defined  in  this  section,  shall  be  eligible  to 
 receive  supported  services  under  this  subpart. 
 *  *  *  *  * 
 (3)  For  purposes  of  this  subpart,  a  rural  health  care  provider  is  a  public  or  non-  profit  health  care 
 provider  located  in  a  rural  area,  as  defined  in  this  subpart. 
 *  *  *  *  * 
 (c)  Services. 
 (1)  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,  subject  to  the 
 limitations  described  in  this  paragraph.  The  length  of  a  supported  telecommunications  service 
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 Federal  Communications  Commission  FCC  03-  288 
 A-  2 
 may  not  exceed  the  distance  between  the  health  care  provider  and  the  point  farthest  from  that 
 provider  on  the  jurisdictional  boundary  of  the  largest  city  in  a  state  as  defined  in    54.625(  a). 
 (2)  Internet  Access  and  Limited  Toll-  Free  Access  to  Internet. 
 (i)  For  purposes  of  this  subpart,  eligible  Internet  access  is  an  information  service  that  enables 
 rural  health  care  providers  to  post  their  own  data,  interact  with  stored  data,  generate  new  data,  or 
 communicate  over  the  World  Wide  Web. 
 (ii)  Internet  access  shall  be  eligible  for  universal  service  support  under    54.621(  a). 
 (iii)  Limited  toll-  free  access  to  an  Internet  service  provider  shall  be  eligible  for  universal  service 
 support  under    54.621(  b). 
 (d)  Allocation  of  Discounts.  An  eligible  health  care  provider  that  engages  in  eligible  and 
 ineligible  activities  or  that  collocates  with  an  entity  that  provides  ineligible  services  shall  allocate 
 eligible  and  ineligible  activities  in  order  to  receive  a  prorated  discount  for  eligible  activities. 
 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. 
   54.603  [Amended] 
 3.  Amend    54.603  by  replacing  the  term  Rural  Health  Care  Corporation  in  paragraphs 
 (b)(  1),  (b)(  2),  (b)(  3),  (b)(  4),  and  (b)(  5)  with  Rural  Health  Care  Division. 
 4.  Amend    54.605  by  removing  paragraph  (c),  redesignating  paragraphs  (d)  and  (e)  as  (c) 
 and  (d),  and  revising  paragraphs  (a)  and  (b)  to  read  as  follows: 
   54.605  Determining  the  urban  rate. 
 (a)  If  a  rural  health  care  provider  requests  an  eligible  service  to  be  provided  over  a  distance  that 
 is  less  than  or  equal  to  the  standard  urban  distance,  as  defined  in  paragraph  (c)  of  this  section, 
 for  the  state  in  which  it  is  located,  the  urban  rate  for  that  service  shall  be  a  rate  no  higher  than  the 
 highest  tariffed  or  publicly-  available  rate  charged  to  a  commercial  customer  for  a  functionally 
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 A-  3 
 similar  service  in  any  city  with  a  population  of  50,000  or  more  in  that  state,  calculated  as  if  it 
 were  provided  between  two  points  within  the  city. 
 (b)  If  a  rural  health  care  provider  requests  an  eligible  service  to  be  provided  over  a  distance  that 
 is  greater  than  the  standard  urban  distance,  as  defined  in  paragraph  (c)  of  this  section,  for  the 
 state  in  which  it  is  located,  the  urban  rate  for  that  service  shall  be  a  rate  no  higher  than  the 
 highest  tariffed  or  publicly-  available  rate  charged  to  a  commercial  customer  for  a  functionally 
 similar  service  provided  over  the  standard  urban  distance  in  any  city  with  a  population  of  50,000 
 or  more  in  that  state,  calculated  as  if  the  service  were  provided  between  two  points  within  the 
 city. 
 *  *  *  *  * 
 5.  Revise    54.609  to  read  as  follows: 
   54.609  Calculating  support. 
 (a)  Except  with  regard  to  services  provided  under    54.621  and  subject  to  the  limitations  set  forth 
 in  this  subpart,  the  amount  of  universal  service  support  for  an  eligible  service  provided  to  a 
 public  or  non-  profit  rural  health  care  provider  shall  be  the  difference,  if  any,  between  the  urban 
 rate  and  the  rural  rate  charged  for  the  service,  as  defined  herein.  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.  Rural  health  care  providers  may  choose  one  of  the  following  two 
 support  options. 
 (1)  Distance-  Based  Support.  The  Administrator  shall  consider  the  base  rates  for 
 telecommunications  services  in  rural  areas  to  be  reasonably  comparable  to  the  base  rates  charged 
 for  functionally  similar  telecommunications  service  in  urban  areas  in  that  state,  and,  therefore, 
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 Federal  Communications  Commission  FCC  03-  288 
 A-  4 
 the  Administrator  shall  not  include  these  charges  in  calculating  the  support.  The  Administrator 
 shall  include,  in  the  support  calculation,  all  other  charges  specified,  and  all  actual  distance-  based 
 charges  as  follows: 
 (i)  If  the  requested  service  distance  is  less  than  or  equal  to  the  SUD  for  the  state,  the  distance-based 
 charges  for  the  rural  health  care  provider  are  reasonably  comparable  to  those  in  urban 
 areas,  so  the  health  care  provider  will  not  receive  distance-  based  support. 
 (ii)  If  the  requested  service  distance  is  greater  than  the  SUD  for  the  state,  but  less  than  the 
 maximum  allowable  distance,  the  distance-  based  charge  actually  incurred  for  that  service  can  be 
 no  higher  than  the  distance-  based  charges  for  a  functionally  similar  service  in  any  city  in  that 
 state  with  a  population  of  50,000  or  more  over  the  SUD. 
 (iii)  Distance-  based  charges  are  charges  based  on  a  unit  of  distance,  such  as  mileage-  based 
 charges. 
 (iv)  Except  with  regard  to  services  provided  under    54.621,  a  telecommunications  carrier  that 
 provides  telecommunications  service  to  a  rural  health  care  provider  participating  in  an  eligible 
 health  care  consortium,  and  the  consortium  must  establish  the  actual  distance-  based  charges  for 
 the  health  care  providers  portion  of  the  shared  telecommunications  services. 
 (2)  Base  Rate  Support.  If  a  telecommunications  carrier,  health  care  provider,  and/  or  consortium 
 of  health  care  providers  reasonably  determines  that  the  base  rates  for  telecommunications 
 services  in  rural  areas  are  not  reasonably  comparable  to  the  base  rates  charged  for  functionally 
 similar  telecommunications  service  in  urban  areas  in  that  state,  the  telecommunications  carrier, 
 health  care  provider,  and/  or  consortium  of  health  care  providers  may  request  that  the 
 Administrator  perform  a  more  comprehensive  support  calculation.  The  requester  shall  provide  to 
 the  Administrator  the  information  to  establish  both  the  urban  and  rural  rates  consistent  with   
 54.605  and    54.607,  and  submit  to  the  Administrator  with  Form  466  all  of  the  documentation 
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 necessary  to  substantiate  the  request. 
 (i)  Except  with  regard  to  services  provided  under    54.621,  a  telecommunications  carrier  that 
 provides  telecommunications  service  to  a  rural  health  care  provider  participating  in  an  eligible 
 health  care  consortium,  and  the  consortium  must  establish  the  applicable  rural  base  rates  for 
 telecommunications  service  for  the  health  care  providers  portion  of  the  shared 
 telecommunications  services,  as  well  as  the  applicable  urban  base  rates  for  the 
 telecommunications  service. 
 (b)  Absent  documentation  justifying  the  amount  of  universal  service  support  requested  for  health 
 care  providers  participating  in  a  consortium,  the  Administrator  shall  not  allow 
 telecommunications  carriers  to  offset,  or  receive  reimbursement  for,  the  amount  eligible  for 
 universal  service  support. 
 (c)  The  universal  service  support  mechanisms  shall  provide  support  for  intrastate 
 telecommunications  services,  as  set  forth  in    54.101(  a),  provided  to  rural  health  care  providers 
 as  well  as  interstate  telecommunications  services. 
 (3)  Satellite  services. 
 (i)  Rural  public  and  non-  profit  health  care  providers  may  receive  support  for  rural  satellite 
 services,  even  when  another  functionally  similar  terrestrial-  based  service  is  available  in  that  rural 
 area.  Discounts  for  satellite  services  shall  be  capped  at  the  amount  the  rural  health  care  provider 
 would  have  received  if  they  purchased  a  functionally  similar  terrestrial-  based  alternative. 
 (ii)  Rural  health  care  providers  seeking  discounts  for  satellite  services  shall  provide  to  the 
 Administrator  with  the  Form  466  documentation  of  the  urban  and  rural  rates  for  the  terrestrial-based 
 alternatives. 
 (iii)  Where  a  rural  health  care  provider  seeks  a  more  expensive  satellite-  based  service  when  a 
 less  expensive  terrestrial-  based  alternative  is  available,  the  rural  health  care  provider  shall  be 
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 responsible  for  the  additional  cost. 
 6.  Amend    54.613  by  revising  paragraph  (a)  to  read  as  follows: 
   54.613  Limitations  on  supported  services  for  rural  health  care  providers. 
 (a)  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  at  a  rate  no  higher  than  the  highest  urban  rate,  as  defined  in   
 54.605,  at  a  distance  not  to  exceed  the  distance  between  the  eligible  health  care  providers  site 
 and  the  farthest  point  on  the  jurisdictional  boundary  of  the  city  in  that  state  with  the  largest 
 population. 
 *  *  *  *  * 
 7.  Revise    54.619  to  read  as  follows: 
   54.619  Audits  and  recordkeeping. 
 (a)  Health  care  providers. 
 (1)  Recordkeeping.  Health  care  providers  shall  maintain  for  their  purchases  of  services 
 supported  under  this  subpart  documentation  for  five  years  from  the  end  of  the  funding  year 
 sufficient  to  establish  compliance  with  all  rules  in  this  subpart.  Documentation  must  include, 
 among  other  things,  records  of  allocations  for  consortia  and  entities  that  engage  in  eligible  and 
 ineligible  activities,  if  applicable. 
 (2)  Production  of  records.  Health  care  providers  shall  produce  such  records  at  the  request  of  any 
 auditor  appointed  by  the  Administrator  or  any  other  state  or  federal  agency  with  jurisdiction. 
 (3)  Random  audits.  Health  care  providers  shall  be  subject  to  random  compliance  audits  to 
 ensure  that  requesters  are  complying  with  the  certification  requirements  set  forth  in    54.615(  c) 
 and  are  otherwise  eligible  to  receive  universal  service  support  and  that  rates  charged  comply  with 
 the  statute  and  regulations. 
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 (4)  Annual  report.  The  Administrator  shall  use  the  information  obtained  under  paragraphs  (a)(  1), 
 (a)(  2),  (b)(  1)  and  (b)(  2)  of  this  section  to  evaluate  the  effects  of  the  regulations  adopted  in  this 
 subpart  and  shall  report  its  findings  to  the  Commission  on  the  first  business  day  in  May  of  each 
 year. 
 8.  Revise    54.621  to  read  as  follows: 
   54.621  Access  to  advanced  telecommunications  and  information  services. 
 (a)  Twenty-  five  percent  of  the  monthly  cost  of  eligible  Internet  access  shall  be  eligible  for 
 universal  support.  Health  care  providers  shall  certify  that  the  Internet  access  selected  is  the  most 
 cost-  effective  method  for  their  health  care  needs  as  defined  in    54.615(  c)(  7),  and  that  purchase 
 of  the  Internet  access  is  reasonably  related  to  the  health  care  needs  of  the  rural  health  care 
 provider. 
 (b)  Each  eligible  health  care  provider  that  cannot  obtain  toll-  free  access  to  an  Internet  service 
 provider  shall  be  entitled  to  receive  the  lesser  of  the  toll  charges  incurred  for  30  hours  of  access 
 per  month  to  an  Internet  service  provider  or  $180  per  month  in  toll  charge  credits  for  toll  charges 
 imposed  for  connecting  to  an  Internet  service  provider. 
 9.  Amend    54.625  by  revising  paragraph  (a)  to  read  as  follows: 
   54.625  Support  for  services  beyond  the  maximum  supported  distance  for  rural  health 
 care  providers. 
 (a)  The  maximum  support  distance  is  the  distance  from  the  health  care  provider  to  the  farthest 
 point  on  the  jurisdictional  boundary  of  the  city  in  that  state  with  the  largest  population,  as 
 calculated  by  the  Administrator. 
 *  *  *  *  * 
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 APPENDIX  B 
 List  of  Parties  Filing  Comments  in  Response  to  the  Notice  of  Proposed  Rulemaking 

 Comments 
 1.  Adams  County  Health  Department  (Adams  Co.  Health  Dept.)  2.  Alaska,  State  of  (Alaska) 
 3.  Alaska  Federal  Health  Care  Access  Network  (AFHCAN)  4.  Alaska  Telehealth  Advisory  Council  (Alaska  Telehealth) 
 5.  Alliance  Information  Management,  Inc.  (Alliance)  6.  American  Hospital  Association  (AHA) 
 7.  American  Samoa  Medical  Center  Authority,  LBJ  Tropical  Medical  Center  (American  Samoa  Medical  Center) 
 8.  American  Samoa  Telecommunications  Authority  (ASTCA)  9.  American  Telemedicine  Association  (ATA) 
 10.  Arizona  Telemedicine  Program  (Arizona  Telemedicine)  11.  Arkansas  Department  of  Information  Systems  (Arkansas  DIS) 
 12.  Avera  Health  (Avera)  13.  Beacon  Telecommunications  Advisors,  LLC  (Beacon) 
 14.  California  Primary  Care  Association  (CA  Primary  Care  Assoc.)  15.  California  Rural  Health  Policy  Council  (CA  Rural  Health  Policy) 
 16.  California  Telehealth  &  Telemedicine  Center  (CTTC)  17.  Canter  for  Rural  Health, 
 Illinois  Department  of  Public  Health  (Illinois  Center  for  Rural  Health)  18.  Center  for  Telemedicine  Law  (CTL) 
 19.  Coder,  Denise  (Coder)  20.  Childrens  Hospital  of  L.  A.  (L.  A.  Childrens  Hospital) 
 21.  Clifford,  Larry  (Clifford)  22.  Cortland  County  Health  Department  (Cortland  Co.  Health  Dept.) 
 23.  The  Evangelical  Lutheran  Good  Samaritan  Society  (Evangelical  Lutheran)  24.  Federal  Regional  Council  (FRC) 
 25.  Florida  Public  Service  Commission  (Florida  PSC)  26.  General  Communications,  Inc.  (GCI) 
 27.  Grogg,  Kevin,  Shepherd  Center  (Grogg)  28.  Guam  Department  of  Mental  Health  and  Substance  Abuse  (Guam  Dept.  of  MHSA) 
 29.  Guam  Department  of  Public  Health  and  Social  Services  (Guam  Dept.  of  PHSS)  30.  Guam  Memorial  Hospital  Authority  (Guam  Memorial  Hosp.) 
 31.  Healthcare  Anywhere,  Inc.  (Healthcare)  32.  Institute  of  Rural  Health,  The  (Institute  of  Rural  Health) 
 33.  Intelenet  Commission  (Intelnet)  34.  IT&  E  Overseas,  Inc.  (IT&  E) 
 35.  Kansas  Department  of  Health  &  Environment  (Kansas  DHE)  36.  Kansas  Hospital  Association  (Kansas  Hosp.  Assoc.) 
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 37.  Kingston  eHealth  (Kingston  eHealth)  38.  Lane  Co.  Health  Department  (Lane  Co.  Health  Dept.) 
 39.  Madden,  Karen  A.  (Madden)  40.  Marquette  General  Health  System  (MGHS) 
 41.  Mayo  Foundation  (Mayo)  42.  Mid-  Nebraska  Telemedicine  Network,  Good  Samaritan  Health  Systems  and, 
 Kearney  Nebraska  (Mid-  Nebraska  Telemedicine)  43.  Midwest  Networks,  LLC  (Midwest  Networks) 
 44.  Minnesota  Ambulance  Association  (Minn.  Ambulance  Assoc.)  45.  Minnesota  Rural  Health  Association  (Minn.  Rural  Health  Assoc.) 
 46.  Mobile  Satellite  Ventures  Subsidiary  LLC  (MSV)  47.  Montana  Healthcare  Telecommunications  Alliance  (MHTA) 
 48.  National  Association  of  County  and  City  Health  Officials  (NACCHO)  49.  National  Organization  of  State  offices  of  Rural  Health  (NOSORH) 
 50.  National  Rural  Health  Association  (NRHA)  51.  National  Telecommunications  Cooperative  Association  (NTCA) 
 52.  Nebraska  Office  of  Rural  Health  (Nebraska  Office  of  Rural  Health)  53.  Nevada  State  Office  of  Rural  (Nevada  State  Office) 
 54.  New  Mexico  Health  Resources,  Inc.  (NM  Health  Resources)  55.  Northern  Sierra  Rural  Health  Network  (NSRHN) 
 56.  Northwest  TeleHealth  (Northwest  TeleHealth)  57.  Pan  Pacific  Education  and  Communication  (Pan  Pacific  Education  and  Communication) 
 58.  Experiment  by  Satellite  (PEACESAT)  59.  PCI  Communications  (PCI) 
 60.  Poudre  Valley  Health  System  (Poudre  Valley  Health)  61.  Rural  Wisconsin  Health  Cooperative  (RWHC) 
 62.  Startec  Global  Communications  Corporation  (Startec)  63.  Tri-  County  Memorial  Hospital  (Tri-  County  Memorial  Hosp.) 
 64.  University  of  Arizona  Health  Sciences  Center  (Univ.  of  Arizona  Health  Sciences)  65.  University  of  New  Mexico  Health  and  Sciences  Center  (Univ.  of  NM  Health  and  Sciences) 
 66.  University  of  Tennessee  Health  Science  Center  (Univ.  of  Tennessee  Health  Science  )  67.  University  of  Vermont  College  of  Medicine  (Univ.  of  Vermont  College  of  Medicine) 
 68.  University  of  Virginia  Office  of  Telemedicine  Health  Systems  (UVA)  69.  VA  Medical  and  Regional  Office  Center  Honolulu  (VAMROC-  Honolulu) 
 70.  Verizon  (Verizon)  71.  Washington  Rural  Health  Association  (Washington  Rural) 
 72.  Western  Governors  Association  (WGA)  73.  Williams,  Rustan  (Williams) 
 74.  WorldCom,  Inc.  (WorldCom)  75.  Yurok  Tribe  (Yurok  Tribe) 

 Reply  Comments 
 1.  Arkansas  Department  of  Information  Systems  (Arkansas  DIS)  2.  Blue  Cross  of  California  (Blue  Cross) 
 3.  Center  for  Telemedicine  Law  (Center  for  Telemedicine) 
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 B-  3 
 4.  Commonwealth  of  the  Northern  Mariana  Islands,  Office  of  the  Governor  (Commonwealth  of  the  Northern  Mariana  Islands) 
 5.  Federal  Regional  Council  (FRC)  6.  General  Communication,  Inc.  (General  Communication) 
 7.  Healthcare  Anywhere,  Inc.  (Healthcare  Anywhere)  8.  Hemophilia  Treatment  Center  (HTC) 
 9.  Mobile  Satellite  Ventures  Subsidiary  LLC  (MSV)  10.  Pacific  Islands  Health  Officers  Association  (Pacific  Islands  HOA) 
 11.  Pennsylvania  Public  Utility  (PA  Public  Utility)  12.  Qwest  Communications  International  Inc.  (Qwest) 
 13.  SBC  Communications  Inc.  and  BellSouth  Corp.  (SBC/  BellSouth)  14.  Verizon  (Verizon) 

 Ex  Partes 
 1.  Rep.  Boucher  (Boucher)  2.  Guam,  Officer  of  the  Governor  (Guam) 
 3.  Healthcare  Anywhere  (Healthcare  Anywhere)  4.  National  Telecommunications  Cooperative  Association  (NTCA) 
 5.  University  of  Virginia  Office  of  Telemedicine  Health  Systems  (UVA)  6.  Washington  Federal  Strategies  (Washington  Federal) 
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 APPENDIX  C 
 FINAL  REGULATORY  FLEXIBILITY  ANALYSIS 
 (REPORT  AND  ORDER) 
 1.  As  required  by  the  Regulatory  Flexibility  Act  of  1980,  as  amended  (RFA),  1  an  Initial  Regulatory  Flexibility  Analysis  (IRFA)  was  incorporated  in  the  Notice  of  Proposed 
 Rulemaking.  2  The  Commission  sought  written  public  comments  on  the  proposals  in  the  NPRM,  including  comment  on  the  IRFA.  The  Commission  received  seventy-  five  comments,  fourteen 
 reply  comments,  and  six  ex  partes  in  response  to  the  NPRM.  This  present  Final  Regulatory  Flexibility  Analysis  (FRFA)  conforms  to  the  RFA.  3 

 A.  Need  for,  and  Objectives  of,  the  Report  and  Order 
 2.  The  Commission  is  required  by  section  254  of  the  Act  to  promulgate  rules  to  implement  the  universal  service  provisions  of  section  254.  4  On  May  8,  1997,  the  Commission 

 adopted  rules  that  reformed  its  system  of  universal  service  support  mechanisms  so  that  universal  service  is  preserved  and  advanced  as  markets  move  toward  competition.  5  Among  other  things, 
 the  Commission  adopted  a  mechanism  to  provide  discounted  telecommunications  services  to  public  or  non-  profit  health  care  providers  that  serve  persons  in  rural  areas.  Over  the  last  few 
 years,  important  changes  in  the  rural  health  community  prompt  us  to  review  the  rural  health  care  universal  service  support  mechanism.  6  In  this  Report  and  Order,  we  adopt  several 
 modifications  to  the  Commissions  rules  to  improve  the  effectiveness  of  the  rural  health  care  universal  service  support  mechanism  and  increase  utilization  of  this  mechanism  by  rural  health 
 care  providers. 
 3.  Specifically,  in  the  Report  and  Order,  we  clarify  the  scope  of  entities  eligible  to  receive  discounts.  7  We  conclude  that  dedicated  emergency  departments  of  rural  for-  profit 

 hospitals  that  participate  in  Medicare  should  be  deemed  public  health  care  providers  eligible  to  receive  prorated  rural  heath  care  support.  8  We  believe  this  clarification  is  necessary  to  give 

 1  See  5  U.  S.  C.    603.  The  RFA,  see  5  U.  S.  C.    601  12,  has  been  amended  by  the  Small  Business  Regulatory 
 Enforcement  Fairness  Act  of  1996  (SBREFA),  Pub.  L.  No.  104-  121,  Title  II,  110  Stat.  857  (1996). 

 2  Rural  Health  Care  Support  Mechanism,  Notice  of  Proposed  Rulemaking,  WC  Docket  No.  02-  60,  17  FCC  Rcd 
 7806  (2002)  (NPRM). 
 3  See  5  U.  S.  C.    604. 

 4  47  U.  S.  C.    254. 
 5  1997  Universal  Service  Order,  12  FCC  Rcd  at  9118-  19,  paras.  655-  56. 

 6  See  supra  paras.  8-  10. 
 7  See  supra  paras.  13-  17. 
 8  See  supra  para.  13. 
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 meaning  to  the  term  public  health  care  provider  under  the  rural  health  care  program.  Moreover,  we  also  determine  that  dedicated  emergency  departments  in  for-  profit  rural  hospitals 
 constitute  rural  health  clinics.  9  These  entities  are  generally  the  initial  point  of  entry  into  the  healthcare  system  for  any  person  suffering  the  consequences  of  a  severe  catastrophe  or  accident 
 and  constitute  a  vital  segment  of  the  health  care  community,  particularly  in  the  event  of  a  national  public  health  emergency.  Additionally,  we  conclude  that  entities  listed  in  section 
 254(  h)(  7)(  B)  include  non-  profit  entities  that  function  as  one  of  the  listed  entities  on  a  part-  time  basis.  10  Pursuant  to  this  modification,  non-  profit  entities  that  provide  ineligible  services,  even 
 on  a  primary  basis,  would  be  able  to  receive  prorated  support  commensurate  with  their  provision  of  eligible  rural  health  care  services.  11  Our  goal  in  implementing  this  proposal  is  two-fold 
   to  encourage  the  development  of  public/  private  partnerships  and  other  creative  solutions  to  meet  the  needs  of  rural  communities,  and  to  increase  participation  in  the  rural  health  care 
 support  mechanism.  Further,  because  entities  that  engage  in  both  eligible  and  ineligible  activities  or  that  collocate  with  an  entity  that  provides  ineligible  services  will  now  be  eligible 
 for  prorated  support,  we  also  adopt  rules  requiring  such  providers  to  allocate  their  discounts  to  prevent  discounts  from  flowing  to  ineligible  activities  or  providers  of  services.  12 

 4.  We  also  provide  funding  for  Internet  access  for  rural  health  care  providers.  13  We  conclude  that  support  equal  to  twenty-  five  percent  of  the  monthly  cost  for  any  form  of  Internet 
 access  reasonably  related  to  the  health  care  needs  of  the  facility  should  be  provided  to  rural  health  care  providers.  14  We  believe  that  the  Internet  can  serve  as  an  invaluable  resource,  by 
 providing  on-  line  courses  in  health  education,  medical  research,  follow-  up  care,  regulatory  information  such  as  compliance  with  Health  Insurance  Portability  and  Accountability  Act  of 
 1996,  video  conferencing,  web-  based  electronic  benefit  claim  systems  including  on-  line  billing,  and  other  crucial  business  functions.  15  The  incredible  potential  of  the  Internet  to  access  such  a 
 breadth  of  medical  information  may  also  help  reduce  isolation  in  rural  communities.  Furthermore,  health  care  information  shared  over  the  Internet  may  enable  rural  health  care 
 providers  to  diagnose,  treat,  and  contain  possible  outbreaks  of  disease  or  respond  to  health  emergencies.  Thus,  in  light  of  the  development  of  medical  applications  for  the  Internet  since 
 1997,  we  conclude  that  encouraging  access  to  this  information  service  will  improve  the  level  of  care  available  in  rural  areas.  16 

 5.  We  also  alter  our  current  policy  to  allow  rural  health  care  providers  to  compare  the  urban  and  rural  rates  for  functionally  similar  services  as  viewed  from  the  perspective  of  the  end 

 9  See  supra  para.  14. 
 10  See  supra  para.  15. 
 11  Id. 
 12  See  supra  paras.  49-  51. 
 13  See  supra  para.  22. 
 14  Id. 
 15  See  supra  para.  23. 
 16  Id. 
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 user.  17  This  modification  to  our  rules  will  better  effectuate  the  mandate  of  Congress  to  ensure  comparable  services  for  rural  areas,  as  provided  in  section  254  of  the  Act,  by  allowing  rural 
 health  care  providers  to  benefit  from  obtaining  telecommunications  services  at  rates  equivalent  to  those  in  urban  areas. 

 6.  We  also  revise  section  54.605  of  our  rules  to  allow  rural  health  care  providers  to  compare  rural  rates  to  urban  rates  in  any  city  with  a  population  of  at  least  50,000  in  the  state,  as 
 opposed  to  the  nearest  city  with  a  population  of  50,000.  18  Allowing  comparison  to  rates  in  any  city  in  the  state  acknowledges  that  rural  health  care  providers  may  communicate  with  experts  in 
 other  cities  in  the  state.  Such  action  also  should  allow  rural  health  care  providers  to  benefit  from  the  lowest  rates  for  services  in  the  State,  thereby  providing  additional  support  to  develop 
 better  telemedicine  links. 
 7.  Additionally,  we  revise  the  maximum  allowable  distance  (MAD)  to  equal  the  distance  between  the  rural  health  care  provider  and  the  farthest  point  on  the  jurisdictional 

 boundary  of  the  largest  city  in  that  State.  19  Accordingly,  for  distance-  based  charges,  we  modify  our  rules  to  provide  support  to  rural  health  care  providers  to  any  location  (within  or  outside  of 
 the  state)  that  exceeds  the  SUD  and  is  less  than  this  revised  MAD.  20  We  believe,  in  most  instances,  calculating  the  MAD  as  described  above  will  provide  more  support  for  distance-based 
 charges  than  our  current  rules,  without  creating  additional  administrative  burdens  for  the  Administrator.  In  addition,  this  modification  should  provide  rural  health  care  providers  access  to 
 high  levels  of  care  and  greater  flexibility  in  developing  appropriate  telehealth  networks. 
 8.  Lastly,  we  revise  our  policy  to  allow  rural  health  care  providers  to  receive  discounts  for  satellite  services  even  where  alternative  terrestrial-  based  services  may  be  available.  21 

 However,  these  discounts  will  be  capped  at  the  amount  providers  would  have  received  if  they  purchased  functionally  similar  terrestrial-  based  alternatives.  22  We  conclude  this  approach 
 furthers  the  principle  of  competitive  neutrality  and  recognizes  the  role  that  satellite  services  may  play  in  rural  areas  without  unduly  increasing  the  size  of  the  fund. 

 B.  Summary  of  Significant  Issues  Raised  by  Public  Comments  in  Response  to  the  IRFA 
 9.  No  petitions  for  reconsideration  or  comments  were  filed  directly  in  response  to  the  IRFA  or  on  issues  affecting  small  businesses. 

 C.  Description  and  Estimate  of  the  Number  of  Small  Entities  To  Which  Rules  Will  Apply 
 10.  The  RFA  directs  agencies  to  provide  a  description  of,  and  where  feasible,  an 
 17  See  supra  para.  33. 

 18  See  supra  para.  37. 
 19  See  supra  para.  40. 
 20  Id. 
 21  See  supra  para.  44. 
 22  Id. 
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 estimate  of  the  number  of  small  entities  that  may  be  affected  by  the  proposed  rules,  if  adopted.  23  The  RFA  generally  defines  the  term  small  entity  as  having  the  same  meaning  as  the  terms 
 small  business,  small  organization,  and  small  governmental  jurisdiction.  24  In  addition,  the  term  small  business  has  the  same  meaning  as  the  term  small  business  concern  under  the 
 Small  Business  Act.  25  A  small  business  concern  is  one  which:  (1)  is  independently  owned  and  operated;  (2)  is  not  dominant  in  its  field  of  operation;  and  (3)  satisfies  any  additional  criteria 
 established  by  the  Small  Business  Administration  (SBA).  26 
 11.  A  small  organization  is  generally  any  not-  for-  profit  enterprise  which  is  independently  owned  and  operated  and  is  not  dominant  in  its  field.  27  Nationwide,  as  of  1992, 

 there  were  approximately  275,801  small  organizations.  28  The  term  small  governmental  jurisdiction  is  defined  as  governments  of  cities,  counties,  towns,  townships,  villages,  school 
 districts,  or  special  districts,  with  a  population  of  less  than  fifty  thousand.  29  As  of  1997,  there  were  approximately  87,453  government  jurisdictions  in  the  United  States.  30  This  number 
 includes  39,044  counties,  municipal  governments,  and  townships,  of  which  27,546  have  populations  of  fewer  than  50,000  and  11,498  counties,  municipal  governments,  and  townships 
 have  populations  of  50,000  or  more.  Thus,  we  estimate  that  the  number  of  small  government  jurisdictions  must  be  75,955  or  fewer.  Small  entities  potentially  affected  by  the  proposals 
 herein  include  small  rural  health  care  providers,  small  local  health  departments  and  agencies,  and  small  eligible  service  providers  offering  discounted  services  to  rural  health  care  providers, 
 including  telecommunications  carriers  and  ISPs. 
 a.  Rural  Health  Care  Providers 
 12.  Section  254(  h)(  5)(  B)  of  the  Act  defines  the  term  health  care  provider  and  sets  forth  seven  categories  of  health  care  providers  eligible  to  receive  universal  service  support.  31 

 Although  SBA  has  not  developed  a  specific  size  category  for  small,  rural  health  care  providers, 
 23  5  U.  S.  C.    603(  b)(  3). 
 24  5  U.  S.  C.    601(  6). 
 25  5  U.  S.  C.    601(  3)  (incorporating  by  reference  the  definition  of  small-  business  concern  in  the  Small  Business 
 Act,  15  U.  S.  C.    632).  Pursuant  to  5  U.  S.  C.    601(  3),  the  statutory  definition  of  a  small  business  applies  unless  an  agency,  after  consultation  with  the  Office  of  Advocacy  of  the  Small  Business  Administration  and  after 

 opportunity  for  public  comment,  establishes  one  or  more  definitions  of  such  term  which  are  appropriate  to  the  activities  of  the  agency  and  publishes  such  definition(  s)  in  the  Federal  Register. 

 26  15  U.  S.  C.    632. 
 27  5  U.  S.  C.    601(  4). 
 28  1992  Economic  Census,  U.  S.  Bureau  of  the  Census,  Table  6  (special  tabulation  of  data  under  contract  to  Office 
 of  Advocacy  of  the  U.  S.  Small  Business  Administration). 
 29  5  U.  S.  C.    601(  5). 

 30  1995  Census  of  Governments,  U.  S.  Census  Bureau,  United  States  Department  of  Commerce,  Statistical  Abstract 
 of  the  United  States  (2000). 
 31  See  47  U.  S.  C.    254(  h)(  5)(  B). 
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 recent  data  indicate  that  there  are  a  total  of  8,297  health  care  providers,  consisting  of:  (1)  625  post-  secondary  educational  institutions  offering  health  care  instruction,  teaching  hospitals,  and 
 medical  schools;  (2)  866  community  health  centers  or  health  centers  providing  health  care  to  migrants;  (3)  1633  local  health  departments  or  agencies;  (4)  950  community  mental  health 
 centers;  (5)  1951  not-  for-  profit  hospitals;  and  (6)  2,272  rural  health  clinics.  32  We  have  no  additional  data  specifying  the  numbers  of  these  health  care  providers  that  are  small  entities.  In 
 addition,  non-  profit  entities  that  act  as  health  care  providers  on  a  part-  time  basis  will  now  be  eligible  to  receive  prorated  support.  However,  we  have  no  data  specifying  the  number  of 
 potential  new  applicants.  Consequently,  using  the  date  we  do  have,  we  estimate  that  there  are  8,297  or  fewer  small  health  care  providers  potentially  affected  by  the  actions  proposed  in  this 
 Notice. 
 13.  As  noted  earlier,  non-  profit  businesses  and  small  governmental  units  are  considered  small  entities  within  the  RFA.  In  addition,  we  note  that  census  categories  and  associated 

 generic  SBA  small  business  size  categories  provide  the  following  descriptions  of  small  entities.  33  The  broad  category  of  Ambulatory  Health  Care  Services  consists  of  further 
 categories  and  the  following  SBA  small  business  size  standards.  34  The  categories  of  providers  with  annual  receipts  of  $6  million  or  less  consists  of:  Offices  of  Dentists;  Offices  of 
 Chiropractors;  Offices  of  Optometrists;  Offices  of  Mental  Health  Practitioners  (except  Physicians);  Offices  of  Physical,  Occupational  and  Speech  Therapists  and  Audiologists;  Offices 
 of  Podiatrists;  Offices  of  All  Other  Miscellaneous  Health  Practitioners;  and  Ambulance  Services.  The  category  of  Ambulatory  Health  Care  Services  providers  with  $8.5  million  or  less 
 in  annual  receipts  consists  of:  Offices  of  Physicians;  Family  Planning  Centers;  Outpatient  Mental  Health  and  Substance  Abuse  Centers;  Health  Maintenance  Organization  Medical 
 Centers;  Freestanding  Ambulatory  Surgical  and  Emergency  Centers;  All  Other  Outpatient  Care  Centers,  Blood  and  Organ  Banks;  and  All  Other  Miscellaneous  Ambulatory  Health  Care 
 Services.  The  category  of  Ambulatory  Health  Care  Services  providers  with  $11.5  million  or  less  in  annual  receipts  consists  of:  Medical  Laboratories;  Diagnostic  Imaging  Centers;  and 
 Home  Health  Care  Services.  The  category  of  Ambulatory  Health  Care  Services  providers  with  $29  million  or  less  in  annual  receipts  consists  of  Kidney  Dialysis  Centers.  For  all  of  these 
 Ambulatory  Health  Care  Service  Providers,  census  data  indicate  that  there  is  a  combined  total  of  345,476  firms  that  operated  in  1997.  35  Of  these,  339,911  had  receipts  for  that  year  of  less 

 32  In  the  1997  Universal  Service  Order,  we  estimated  that  there  were  (1)  625  post-  secondary  educational 
 institutions  offering  health  care  instruction,  teaching  hospitals,  and  medical  schools,  including  403  rural  community  colleges,  124  medical  schools  with  rural  programs,  [FN426]  and  98  rural  teaching  hospitals;  (2)  1,  200 

 community  health  centers  or  health  centers  providing  health  care  to  migrants;  (3)  3,093  local  health  departments  or  agencies  including  1,  271  local  health  departments  and  1,822  local  boards  of  health;  (4)  2,000 
 community  mental  health  centers;  (5)  2,049  "not-  for-  profit  hospitals;  and  (6)  3,  329  rural  health  clinics.  The  total  of  these  numbers  was  12,  296.  1997  Universal  Service  Order,  12  FCC  Rcd  at  9241-  42,  para.  924.  More 
 recent  data,  however,  indicates  that  some  of  these  1997  numbers  may  have  been  overstated. 
 33  North  American  Industry  Classification  System:  United  States,  1997  at  629-  53. 

 34  13  C.  F.  R.    121.  201;  NAICS  Codes  621111,  62112,  621210,  621310,  621320,  621330,  621340621391,  621399, 
 621410,  621420,  621491,  621492,  621493,  621498,  621511,  621512,  621610,  621910,  621991,  621999.  35  1997  Economic  Census,  Establishment  of  Firm  Size,  U.  S.  Census  Bureau,  U.  S.  Department  of  Commerce, 

 Economics  and  Statistics  Administration,  Document  EC97S62S-  SZ  (1997  Health  Care  Data). 
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 than  $5  million.  36  In  addition,  an  additional  3414  firms  had  annual  receipts  of  $5  million  to  $9.99  million;  and  additional  1475  firms  had  receipts  of  $10  million  to  $24.99  million;  and  an 
 additional  401  had  receipts  of  $25  million  to  $49.  99  million.  37  We  therefore  estimate  that  virtually  all  Ambulatory  Health  Care  Services  providers  are  small,  given  SBAs  size  categories. 
 In  addition,  we  have  no  data  specifying  the  numbers  of  these  health  care  providers  that  are  rural  and  meet  other  criteria  of  the  Act. 

 14.  The  broad  category  of  Hospitals  consists  of  the  following  categories  and  the  following  small  business  providers  with  annual  receipts  of  $29  million  or  less:  General  Medical 
 and  Surgical  Hospitals,  Psychiatric  and  Substance  Abuse  Hospitals;  and  Specialty  Hospitals.  38  For  all  of  these  health  care  providers,  census  data  indicate  that  there  is  a  combined  total  of  330 
 firms  that  operated  in  1997,  of  which  237  or  fewer  had  revenues  of  less  than  $25  million.  39  An  additional  45  firms  had  annual  receipts  of  $25  million  to  $49.  99  million.  40  We  therefore 
 estimate  that  most  Hospitals  are  small,  given  SBAs  size  categories.  In  addition,  we  have  no  data  specifying  the  numbers  of  these  health  care  providers  that  are  rural  and  meet  other  criteria 
 of  the  Act. 
 15.  The  broad  category  of  Nursing  and  Residential  Care  Facilities  consists  of  the  following  categories  and  the  following  small  business  size  standards.  41  The  category  of  Nursing 

 and  Residential  Care  Facilities  with  annual  receipts  of  $6  million  or  less  consists  of:  Residential  Mental  Health  and  Substance  Abuse  Facilities;  Homes  for  the  Elderly;  and  Other 
 Residential  Care  Facilities.  The  category  of  Nursing  and  Residential  Care  Facilities  with  annual  receipts  of  $8.5  million  or  less  consists  of  Residential  Mental  Retardation  Facilities.  The 
 category  of  Nursing  and  Residential  Care  Facilities  with  annual  receipts  of  less  than  $11.5  million  consists  of  Nursing  Care  Facilities  and  Continuing  Care  Retirement  Communities.  For 
 all  of  these  health  care  providers,  census  data  indicates  that  there  are  a  combined  total  of  18,011  firms  that  operated  in  1997.  42  Of  these,  16,165  or  fewer  firms  had  annual  receipts  of  below  $5 
 million.  43  In  addition,  1205  firms  had  annual  receipts  of  $5  million  to  $9.99  million,  and  450  firms  had  receipts  of  $10  million  to  $24.99  million.  44  We  therefore  estimate  that  a  great 
 majority  of  Nursing  and  Residential  Care  Facilities  are  small,  given  SBAs  size  categories.  In  addition,  we  have  no  data  specifying  the  numbers  of  these  health  care  providers  that  are  rural 
 and  meet  other  criteria  of  the  Act. 
 36  Id. 
 37  Id. 
 38  13  C.  F.  R.    121.  201;  NAICS  Codes  622110,  622210,  622310. 
 39  1997  Health  Care  Data. 
 40  Id. 
 41  13  C.  F.  R.    121.  201;  NAICS  Codes  623110,  623210,  623220,  623311,  623312,  623990. 
 42  1997  Health  Care  Data. 
 43  Id. 
 44  Id. 
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 16.  The  broad  category  of  Social  Assistance  consists  of  the  category  of  Emergency  and  Other  Relief  Services  and  small  business  size  standard  of  annual  receipts  of  $6  million  or  less.  45 
 For  all  of  these  health  care  providers,  census  data  indicates  that  there  are  a  combined  total  of  37,778  firms  that  operated  in  1997.  46  Of  these,  37,649  or  fewer  firms  had  annual  receipts  of 
 below  $5  million.  An  additional  73  firms  had  annual  receipts  of  $5  million  to  $9.99  million.  47  We  therefore  estimate  that  virtually  all  Social  Assistance  providers  are  small,  given  SBAs  size 
 categories.  In  addition,  we  have  no  data  specifying  the  numbers  of  these  health  care  providers  that  are  rural  and  meet  other  criteria  of  the  Act. 

 b.  Providers  of  Telecommunications  and  Other  Services 
 17.  We  have  included  small  incumbent  local  exchange  carriers  in  this  present  RFA  analysis.  As  noted  above,  a  small  business  under  the  RFA  is  one  that,  inter  alia,  meets  the 

 pertinent  small  business  size  standard  (e.  g.,  a  telephone  communications  business  having  1,500  or  fewer  employees),  and  is  not  dominant  in  its  field  of  operation.  48  The  SBAs  Office  of 
 Advocacy  contends  that,  for  RFA  purposes,  small  incumbent  local  exchange  carriers  are  not  dominant  in  their  field  of  operation  because  any  such  dominance  is  not  national  in  scope.  49 
 We  have  therefore  included  small  incumbent  local  exchange  carriers  in  this  RFA  analysis,  although  we  emphasize  that  this  RFA  action  has  no  effect  on  Commission  analyses  and 
 determinations  in  other,  non-  RFA  contexts. 
 18.  Total  Number  of  Telephone  Companies  Affected.  The  United  States  Bureau  of  the  Census  (the  Census  Bureau)  reports  that,  at  the  end  of  1997,  there  were  6,239  firms  engaged 

 in  providing  telephone  services,  as  defined  therein.  50  This  number  contains  a  variety  of  different  categories  of  carriers,  including  local  exchange  carriers,  interexchange  carriers,  competitive 
 access  providers,  cellular  carriers,  mobile  service  carriers,  operator  service  providers,  pay  telephone  operators,  PCS  providers,  covered  SMR  providers,  and  resellers.  It  seems  certain  that 
 some  of  those  6,239  telephone  service  firms  may  not  qualify  as  small  entities  because  they  are  not  independently  owned  and  operated.  51  For  example,  a  PCS  provider  that  is  affiliated  with 
 an  interexchange  carrier  having  more  than  1,500  employees  would  not  meet  the  definition  of  a  small  business.  It  seems  reasonable  to  conclude,  therefore,  that  6,239  or  fewer  telephone 

 45  13  C.  F.  R.    121.  201;  NAICS  Code  624230. 
 46  1997  Health  Care  Data. 
 47  Id. 
 48  15  U.  S.  C.    632. 
 49  Letter  from  Jere  W.  Glover,  Chief  Counsel  for  Advocacy,  SBA,  to  William  E.  Kennard,  Chairman,  FCC  (May 
 27,  1999).  The  Small  Business  Act  contains  a  definition  of  small-  business  concern,  which  the  RFA  incorporates  into  its  own  definition  of  small  business.  See  15  U.  S.  C.    632(  a)  (Small  Business  Act);  5  U.  S.  C.    601(  3) 

 (RFA).  SBA  regulations  interpret  small  business  concern  to  take  into  account  the  concept  of  dominance  on  a  national  basis.  13  C.  F.  R.    121.  102(  b). 

 50  1997  Economic  Census,  Establishment  and  Firm  Size,  U.  S.  Census  Bureau,  U.  S.  Department  of  Commerce, 
 Economics  and  Statistics  Administration,  Document  EC97S51S-  SZ  (1997  Economic  Census),  at  67. 
 51  15  U.  S.  C.    632(  a)(  1). 
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 service  firms  are  small  entity  telephone  service  firms  that  may  be  affected  by  the  decisions  and  rules  adopted  in  this  Report  and  Order. 
 19.  Local  Exchange  Carriers,  Interexchange  Carriers,  Competitive  Access  Providers,  Operator  Service  Providers,  Payphone  Providers,  and  Resellers.  Neither  the  Commission  nor 
 SBA  has  developed  a  definition  particular  to  small  local  exchange  carriers  (LECs),  interexchange  carriers  (IXCs),  competitive  access  providers  (CAPs),  operator  service  providers 
 (OSPs),  payphone  providers  or  resellers.  The  closest  applicable  definition  for  these  carrier-types  under  SBA  rules  is  for  telephone  communications  companies  other  than  radiotelephone 
 (wireless)  companies.  52  The  most  reliable  source  of  information  regarding  the  number  of  these  carriers  nationwide  of  which  we  are  aware  appears  to  be  the  data  that  we  collect  annually  on  the 
 Form  499-  A.  According  to  our  most  recent  data,  there  are  1,335  incumbent  LECs,  349  CAPs,  204  IXCs,  21  OSPs,  758  payphone  providers  and  454  resellers.  53  Although  it  seems  certain  that 
 some  of  these  carriers  are  not  independently  owned  and  operated,  or  have  more  than  1,500  employees,  we  are  unable  at  this  time  to  estimate  with  greater  precision  the  number  of  these 
 carriers  that  would  qualify  as  small  business  concerns  under  SBA's  definition.  Consequently,  we  estimate  that  there  are  fewer  than  1,335  incumbent  LECs,  349  CAPs,  204  IXCs,  21  OSPs, 
 758  payphone  providers,  and  541  resellers  that  may  be  affected  by  the  decisions  and  rules  adopted  in  this  Report  and  Order. 

 20.  Internet  Service  Providers.  The  SBA  has  developed  a  small  business  size  standard  for  On-  Line  Information  Services,  NAICS  code  514191.  54  This  category  comprises 
 establishments  primarily  engaged  in  providing  direct  access  through  telecommunications  networks  to  computer-  held  information  compiled  or  published  by  others.  55  Under  this  small 
 business  size  standard,  a  small  business  is  one  having  annual  receipts  of  $18  million  or  less.  56  Based  on  firm  size  data  provided  by  the  Bureau  of  the  Census,  3,123  firms  are  small  under 
 SBAs  $18  million  size  standard  for  this  category  code.  57  Although  some  of  these  Internet  Service  Providers  (ISPs)  might  not  be  independently  owned  and  operated,  we  are  unable  at  this 
 time  to  estimate  with  greater  precision  the  number  of  ISPs  that  would  qualify  as  small  business  concerns  under  SBAs  small  business  size  standard.  Consequently,  we  estimate  that  there  are 
 3,123  or  fewer  small  entity  ISPs  that  may  be  affected. 
 21.  Satellite  Service  Carriers.  The  SBA  has  developed  a  definition  for  small  businesses 
 52  13  C.  F.  R.    121.  210,  North  American  Industry  Classification  System  (NAICS)  Codes  513310,  513330,  513340. 
 53  See  FCC,  Common  Carrier  Bureau,  Industry  Analysis  Division,  Trends  in  Telephone  Service,  Table  5.3  (August 
 2001)  (Telephone  Trends  Report).  The  total  for  resellers  includes  both  toll  resellers  and  local  resellers.  The  category  for  CAPs  also  includes  competitive  local  exchange  carriers  (LECs). 

 54  See  generally  North  American  Industry  Classification  System    United  States  (1997),  NAICS 
 code  514191. 
 55  See  generally  North  American  Industry  Classification  System    United  States  (1997),  NAICS 
 code  514191. 
 56  13  CFR    121.201,  NAICS  code  514191. 

 57  Office  of  Advocacy,  U.  S.  Small  Business  Administration,  Firm  Size  Data  by  Industry  and 
 Location. 
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 within  the  category  of  Satellite  Telecommunications.  According  to  SBA  regulations,  a  small  business  under  the  category  of  Satellite  communications  is  one  having  annual  receipts  of  $12.5 
 million  or  less.  58  According  to  SBAs  most  recent  data,  there  are  a  total  of  371  firms  with  annual  receipts  of  $9,999,999  or  less,  and  an  additional  69  firms  with  annual  receipts  of 
 $10,000,000  or  more.  59  Thus,  the  number  of  Satellite  Telecommunications  firms  that  are  small  under  the  SBA's  $12  million  size  standard  is  between  371  and  440.  Further,  some  of  these 
 Satellite  Service  Carriers  might  not  be  independently  owned  and  operated.  Consequently,  we  estimate  that  there  are  fewer  than  440  small  entity  ISPs  that  may  be  affected  by  the  decisions 
 and  rules  of  the  present  action. 
 22.  Wireless  Service  Providers.  The  SBA  has  developed  a  definition  for  small  businesses  within  the  two  separate  categories  of  Cellular  and  Other  Wireless 

 Telecommunications  or  Paging.  Under  that  SBA  definition,  such  a  business  is  small  if  it  has  1,500  or  fewer  employees.  60  According  to  the  Commissions  most  recent  Telephone  Trends 
 Report  data,  1,495  companies  reported  that  they  were  engaged  in  the  provision  of  wireless  service.  61  Of  these  1,495  companies,  989  reported  that  they  have  1,500  or  fewer  employees  and 
 506  reported  that,  alone  or  in  combination  with  affiliates,  they  have  more  than  1,500  employees.  We  do  not  have  data  specifying  the  number  of  these  carriers  that  are  not  independently  owned 
 and  operated,  and  thus  are  unable  at  this  time  to  estimate  with  greater  precision  the  number  of  wireless  service  providers  that  would  qualify  as  small  business  concerns  under  the  SBA's 
 definition.  Consequently,  we  estimate  that  there  are  989  or  fewer  small  wireless  service  providers  that  may  be  affected  by  the  rules. 

 23.  Cable  and  Other  Subscription  Programming  or  Other  Program  Distribution  and  Related  Entities.  The  SBA  has  developed  small  business  size  standards  which  include  all  such 
 companies  generating  $12.5  million  or  less  in  revenue  annually.  These  standards  cover  two  categories  of  Cable  Services:  Cable  and  Other  Subscription  Programming;  and  Cable  and  Other 
 Program  Distribution. 
 24.  Cable  and  Other  Subscription  Programming.  62  This  industry  comprises  establishments  primarily  engaged  in  operating  studios  and  facilities  for  the  broadcasting  of 

 programs  on  a  subscription  or  fee  basis.  These  establishments  produce  programming  in  their  own  facilities  or  acquire  programming  from  external  sources.  The  programming  material  is 
 usually  delivered  to  a  third  party,  such  as  cable  systems  or  direct-  to-  home  satellite  systems,  for  transmission  to  viewers.  According  to  Census  Bureau  data  for  1997,  there  were  a  total  of  234 
 firms  in  this  category,  total,  that  had  operated  for  the  entire  year.  Of  this  total,  188  firms  had 

 58  13  C.  F.  R.    121.  201;  NAICS  Code  513340. 
 59  1997  Economic  Census  at  16. 
 60  13  C.  F.  R.    121.  210;  NAICS  Code  513322. 
 61  Telephone  Trends  Report,  Table  5.3. 
 62  13  CFR    121.201,  North  American  Industry  Classification  System  (NAICS)  code  513210  (changed  to  515210 
 in  October  2002). 
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 annual  receipts  of  under  $10  million.  63  Consequently,  the  Commission  estimates  that  the  majority  of  providers  in  this  service  category  are  small  businesses  that  may  be  affected  by  the 
 rules  and  policies  adopted  herein. 
 25.  Cable  and  Other  Program  Distribution.  64  This  category  includes  cable  systems  operators,  closed  circuit  television  services,  direct  broadcast  satellite  services,  multipoint 

 distribution  systems,  satellite  master  antenna  systems,  and  subscription  television  services.  According  to  Census  Bureau  data  for  1997,  there  were  a  total  of  1,311  firms  in  this  category, 
 total,  that  had  operated  for  the  entire  year.  65  Of  this  total,  1,180  firms  had  annual  receipts  of  under  $10  million  and  an  additional  52  firms  had  receipts  of  $10  million  or  more  but  less  than 
 $25  million.  Consequently,  the  Commission  estimates  that  the  majority  of  providers  in  this  service  category  are  small  businesses  that  may  be  affected  by  the  rules  and  policies  adopted 
 herein. 
 D.  Description  of  Projected  Reporting,  Recordkeeping,  and  Other  Compliance  Requirements 

 26.  The  Report  and  Order  adopts  several  modifications  to  the  Commissions  rules  to  improve  the  effectiveness  of  the  rural  health  care  universal  service  support  mechanism  and 
 increase  utilization  of  this  mechanism  by  rural  health  care  providers.  As  articulated  above,  in  the  Report  and  Order,  we  clarify  the  scope  of  entities  eligible  to  receive  discounts.  66 
 Specifically,  because  entities  that  engage  in  eligible  and  ineligible  activities  or  that  collocate  with  an  entity  that  provides  ineligible  services  will  now  be  eligible  for  prorated  support,  we 
 adopt  rules  requiring  such  providers  to  allocate  their  discounts  to  prevent  discounts  from  flowing  to  ineligible  activities  or  providers  of  services.  67  Health  care  providers  are  required  to 
 maintain  documentation  explaining  their  allocation  methods  for  five  years  and  present  that  information  to  USAC  upon  request.  68  The  method  of  cost  allocation  chosen  by  an  applicant 
 should  be  based  on  objective  criteria  and  reasonably  reflect  the  eligible  usage  of  the  facilities.  Additionally,  health  care  providers  must  maintain  for  their  purchases  of  supported  services 
 procurement  records  for  at  least  five  years  sufficient  to  document  their  compliance  with  all  Commission  requirements.  69 

 E.  Steps  Taken  to  Minimize  Significant  Economic  Impact  on  Small  Entities,  and 
 63  U.  S.  Census  Bureau,  1997  Economic  Census,  Subject  Series:  Information,  Establishment  and  Firm  Size 
 (Including  Legal  Form  of  Organization),  Table  4,  NAICS  code  513210  (issued  October  2000). 
 64  13  CFR    121.201,  North  American  Industry  Classification  System  (NAICS)  code  513220  (changed  to  517510 
 in  October  2002). 
 65  U.  S.  Census  Bureau,  1997  Economic  Census,  Subject  Series:  Information,  Establishment  and  Firm  Size 
 (Including  Legal  Form  of  Organization),  Table  4,  NAICS  code  513220  (issued  October  2000). 
 66  See  supra  paras.  13-  17. 

 67  47  C.  F.  R.    54.601(  d)  as  adopted  herein. 
 68  See  47  C.  F.  R.    54.  619(  a)(  1)  as  adopted  herein. 

 69  47  C.  F.  R.    54.619(  a)(  1)  as  adopted  herein. 
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 Significant  Alternatives  Considered 
 27.  The  RFA  requires  an  agency  to  describe  any  significant  alternatives  that  it  has  considered  in  reaching  its  proposed  approach  impacting  small  business,  which  may  include  the 

 following  four  alternatives  (among  others):  (1)  the  establishment  of  differing  compliance  and  reporting  requirements  or  timetables  that  take  into  account  the  resources  available  to  small 
 entities;  (2)  the  clarification,  consolidation,  or  simplification  of  compliance  or  reporting  requirements  under  the  rule  for  small  entities;  (3)  the  use  of  performance,  rather  than  design, 
 standards;  and  (4)  an  exemption  from  coverage  of  the  rule,  or  part  thereof,  for  small  entities.  70 
 28.  In  this  Report  and  Order,  we  amend  our  rules  to  improve  the  program,  increase  participation  by  rural  health  care  providers,  and  ensure  that  the  benefits  of  the  program  continue 

 to  be  distributed  in  a  fair  and  equitable  manner.  Specifically,  we  expand  the  scope  of  entities  eligible  to  receive  discounts,  provide  support  for  Internet  access,  and  modify  the  way  in  which 
 we  calculate  discounts  to  offer  rural  health  care  providers  more  flexibility.  The  actions  taken  in  the  Report  and  Order  help  improve  the  quality  of  health  care  services  available  in  rural 
 America,  and  better  enable  rural  communities  to  rapidly  diagnose,  treat,  and  contain  possible  outbreaks  of  disease.  Thus,  rural  health  care  providers  stand  to  benefit  directly  from  the 
 modifications  to  our  rules  and  policies. 
 F.  Report  to  Congress 
 29.  The  Commission  will  send  a  copy  of  the  Report  and  Order,  Order  on  Reconsideration,  and  Further  Notice  of  Proposed  Rulemaking,  including  this  FRFA,  in  a  report 

 to  be  sent  to  Congress  pursuant  to  the  Congressional  Review  Act.  71  In  addition,  the  Commission  will  send  a  copy  of  the  Report  and  Order,  Order  on  Reconsideration,  and  Further  Notice  of 
 Proposed  Rulemaking,  including  this  FRFA,  to  the  Chief  Counsel  for  Advocacy  of  the  Small  Business  Administration.  A  copy  of  the  Report  and  Order,  Order  on  Reconsideration,  and 
 Further  Notice  of  Proposed  Rulemaking  and  FRFA  (or  summaries  thereof)  will  also  be  published  in  the  Federal  Register.  72 

 70  See  5  U.  S.  C.    603(  c)(  1)-(  4). 
 71  See  5  U.  S.  C.    801(  a)(  1)(  A). 
 72  See  5  U.  S.  C.    604(  b). 
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 APPENDIX  D 
 INITIAL  REGULATORY  FLEXIBILITY  ANALYSIS 
 (FURTHER  NOTICE  OF  PROPOSED  RULEMAKING) 
 1.  As  required  by  the  Regulatory  Flexibility  Act  of  1980,  as  amended  (RFA),  1  the  Commission  has  prepared  the  present  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  this  Further  Notice.  Written  public  comments  are  requested  on  this 
 IRFA.  Comments  must  be  identified  as  responses  to  the  IRFA  and  must  be  filed  by  the  deadlines  for  comments  on  the  Further  Notice  provided  below  in  Section  VI(  C)  above.  The 
 Commission  will  send  a  copy  of  the  Further  Notice,  including  this  IRFA,  to  the  Chief  Counsel  for  Advocacy  of  the  Small  Business  Administration.  2  In  addition,  the  Further  Notice  and  IRFA 
 (or  summaries  thereof)  will  be  published  in  the  Federal  Register.  3 
 A.  Need  for,  and  Objectives  of,  the  Proposed  Rules 
 2.  The  Commission  is  required  by  section  254  of  the  Act  to  promulgate  rules  to  implement  the  universal  service  provisions  of  section  254.  4  On  May  8,  1997,  the  Commission 

 adopted  rules  that  reformed  its  system  of  universal  service  support  mechanisms  so  that  universal  service  is  preserved  and  advanced  as  markets  move  toward  competition.  5  Among  other  things, 
 the  Commission  adopted  a  mechanism  to  provide  discounted  telecommunications  services  to  public  or  non-  profit  health  care  providers  that  serve  persons  in  rural  areas.  Over  the  last  few 
 years,  important  changes  in  the  rural  health  community  prompt  us  to  review  the  rural  health  care  universal  service  support  mechanism.  6 

 3.  In  this  Further  Notice,  we  seek  comment  on  whether  and  how  to  modify  the  definition  of  rural  area  as  utilized  in  the  rural  health  care  support  mechanism.  7  We  also  seek 
 comment  on  whether  additional  modifications  to  our  rules  are  appropriate  to  facilitate  the  provision  of  support  to  mobile  rural  health  clinics  for  satellite  services.  8  Lastly,  we  seek 

 1  See  5  U.  S.  C.    603.  The  IRFA,  see  5  U.  S.  C.    601-  12,  has  been  amended  by  the  Small  Business  Regulatory 
 Enforcement  Fairness  Act  of  1996  (SBREFA)  Pub.  L.  No.  104-  121,  Title  II,  110  Stat  857  (1996). 
 2  See  5  U.  S.  C.    603(  a). 

 3  See  id. 
 4  47  U.  S.  C.    254. 
 5  1997  Universal  Service  Order,  12  FCC  Rcd  at  9118-  19,  paras.  655-  56. 
 6  See  supra  paras.  8-  10. 
 7  See  supra  paras.  63-  64. 
 8  See  supra  paras.  65-  68. 
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 D-  2 
 comments  on  ways  to  streamline  further  the  application  process  and  expand  outreach  efforts.  9 
 B.  Legal  Basis 
 4.  This  Further  Notice  is  adopted  pursuant  to  sections  1,  4(  i),  (4j),  201-  205,  251,  252,  and  303  of  the  Communications  Act  of  1934,  as  amended,  47  U.  S.  C.    151,  154(  i),  (j),  201- 

 205,  251,  252,  and  303. 
 C.  Description  and  Estimate  of  the  Number  of  Small  Entities  To  Which  Rules  Will  Apply 

 5.  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  rules  adopted  herein.  10  The 
 RFA  generally  defines  the  term  small  entity  as  having  the  same  meaning  as  the  terms  small  business,  small  organization,  and  small  governmental  jurisdiction.  11  In  addition,  the  term 
 small  business  has  the  same  meaning  as  the  term  small  business  concern  under  the  Small  Business  Act,  unless  the  Commission  has  developed  one  or  more  definitions  that  are  appropriate 
 to  its  activities.  12  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)  meets 
 any  additional  criteria  established  by  the  Small  Business  Administration  (SBA).  13 
 6.  We  have  described  in  detail,  supra,  in  the  FRFA,  the  categories  of  entities  that  may  be  directly  affected  by  any  rules  or  proposals  adopted  in  our  efforts  to  reform  the  universal 

 service  rural  health  care  support  mechanism.  14  For  this  IRFA,  we  hereby  incorporate  those  entity  descriptions  by  reference. 

 D.  Description  of  Projected  Reporting,  Recordkeeping,  and  Other  Compliance  Requirements 
 7.  The  Further  Notice  seeks  comment  on  potential  changes  to  the  definition  of  rural  area  for  the  rural  health  care  support  mechanism.  This  potential  change  will  not  impact 
 reporting  or  recordkeeping  requirements,  however,  it  could  impact  the  overall  pool  of  eligible  applicants.  The  Further  Notice  also  seeks  comment  on  whether  additional  support  should  be 
 provided  to  mobile  rural  health  clinics  that  utilize  satellite  services.  If  changes  are  adopted,  mobile  rural  health  clinics,  including  small  rural  health  clinics,  could  potentially  be  required  to 

 9  See  supra  para.  69. 
 10  5  U.  S.  C.    604(  a)(  3). 

 11  5  U.  S.  C.    601(  6). 
 12  5  U.  S.  C.    601(  3)  (incorporating  by  reference  the  definition  of  small  business  concern  in  5  U.  S.  C.    632). 
 Pursuant  to  5  U.  S.  C.    601(  3),  the  statutory  definition  of  a  small  business  applies  unless  an  agency  after  consultation  with  the  Office  of  Advocacy  of  the  Small  Business  Administration  and  after  opportunity  for  public 

 comment,  establishes  one  or  more  definitions  of  such  term  which  are  appropriate  to  the  activities  of  the  agency  and  publishes  such  definition  in  the  Federal  Register. 

 13  15  U.  S.  C.    632. 
 14  See  supra  Appendix  C,  paras.  10-  24. 
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 submit  additional  information  regarding  their  mobile  services,  if  they  choose  to  seek  discounts.  Lastly,  the  Further  Notice  seeks  comment  on  ways  to  streamline  further  the  application  process. 
 If  the  application  process  is  streamlined  further,  this  would  eliminate  some  of  the  paperwork  associated  with  the  application  process. 

 E.  Steps  Taken  to  Minimize  Significant  Economic  Impact  on  Small  Entities,  and  Significant  Alternatives  Considered 
 8.  The  RFA  requires  an  agency  to  describe  any  significant  alternatives  that  it  has  considered  in  reaching  its  proposed  approach  impacting  small  business,  which  may  include  the 
 following  four  alternatives  (among  others):  (1)  the  establishment  of  differing  compliance  and  reporting  requirements  or  timetables  that  take  into  account  the  resources  available  to  small 
 entities;  (2)  the  clarification,  consolidation,  or  simplification  of  compliance  or  reporting  requirements  under  the  rule  for  small  entities;  (3)  the  use  of  performance,  rather  than  design, 
 standards;  and  (4)  an  exemption  from  coverage  of  the  rule,  or  part  thereof,  for  small  entities.  15 
 9.  In  this  Further  Notice,  we  seek  comment  on  a  new  definition  of  rural  area.  If  a  new  definition  is  adopted,  this  could  change  the  size  of  the  overall  pool  of  eligible  applicants  for 

 universal  service  support  for  rural  health  care  providers.  We  also  seek  comment  on  whether  to  provide  additional  support  to  mobile  rural  health  clinics  that  utilize  satellite  services.  In  seeking 
 to  minimize  the  burdens  imposed  on  small  entities  where  doing  so  does  not  compromise  the  goals  of  the  universal  service  mechanism,  we  invite  comment  on  definitions  and  proposals  for 
 additional  support  for  mobile  rural  health  clinics  that  might  be  made  less  burdensome  for  small  entities.  In  addition,  we  seek  comment  on  ways  to  streamline  further  the  application  process 
 and  expand  outreach  efforts.  If  the  application  process  is  streamlined  further,  this  could  ease  the  burden  on  small  entities  associated  with  the  application  process.  Additionally,  outreach  efforts 
 would  better  inform  such  businesses  about  the  benefits  of  the  rural  health  care  program  and  potentially  increase  small  business  participation  in  the  program. 

 F.  Federal  Rules  that  May  Duplicate,  Overlap,  or  Conflict  with  the  Proposed  Rules 
 10.  None. 

 15  See  5  U.  S.  C.    603(  c)(  1)-(  4). 
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 SEPARATE  STATEMENT  OF  CHAIRMAN  MICHAEL  K.  POWELL 

 Re:  Rural  Health  Care  Support  Mechanism,  Report  and  Order,  Order  on  Reconsideration,  and  Further  Notice  of  Proposed  Rulemaking 
 Telemedicine  creates  medical  expertise  on  demand  for  people  living  in  rural  America.  The  telemedicine  support  measures  we  adopt  today  have  the  potential  to  bring  millions  of 
 Americans  from  rural  and  remote  parts  of  the  country  closer  than  ever  to  top-  quality  doctors  and  medical  specialists.  Geographic  isolation  should  no  longer  be  a  barrier  to  timely,  quality  medical 
 care. 
 Telemedicine  networks  are  also  integral  to  our  homeland  security  efforts.  In  times  of  national  crisis,  telemedicine  networks  can  bring  much-  needed  healthcare  information  to  first 
 responders.  For  example,  telemedicine  capabilities  serve  as  a  link  between  medical  professionals  and  homeland  security  teams  to  ensure  that  experts  are  available  in  the  event  of  a  biological  or 
 chemical  attack. 
 Although  the  rural  health  care  program  has  a  $400  million  annual  maximum,  demand  for  Funding  Years  2000  and  2001  averaged  approximately  $14  million  a  year.  Today,  we  adopt  rule 
 changes  to  encourage  the  development  of  public/  private  partnerships  and  other  creative  solutions  to  meet  the  needs  of  rural  communities  and  increase  participation  in  the  rural  health  care 
 program.  Todays  Order  clarifies  that  dedicated  emergency  departments  in  for-  profit  rural  hospitals  are  public  health  care  providers  eligible  for  support  because  these  rural  hospitals  are 
 required  by  other  federal  laws  to  examine  and  stabilize  all  patients  who  walk  in  the  door.  The  rule  changes  we  adopt  today  represent  important  reforms  of  our  eligibility  criteria  and  should 
 ensure  scope  of  services  eligible  for  support  under  our  rural  health  care  program. 
 Most  residents  in  rural  or  remote  areas  of  the  country  do  not  have  the  luxury  of  even  one  major  medical  facility  near  their  homes,  much  less  access  to  the  world-  renowned  team  of 
 doctors,  clinicians  and  researchers  that  major  educational  institutions  and  research  hospitals  can  assemble.  Innovations  in  computing  and  telecommunications  technology,  however,  allow 
 doctors  to  perform  many  medical  procedures  even  though  hundreds  or  even  thousands  of  miles  separate  doctor  and  patient.  Recently,  I  witnessed  the  transformative  potential  of  telemedicine 
 when  I  visited  the  University  of  Virginias  Office  of  Telemedicine.  At  the  University  of  Virginia,  I  saw  firsthand  not  only  the  types  of  technologies  that  doctors  can  use  to  improve 
 health  care,  but  also  the  telecommunications  services    and  service  providers    that  are  making  telemedicine  a  reality  in  rural  areas  of  America  and  across  the  globe.  The  changes  to  our  rural 
 health  care  program  that  we  adopt  today  probably  may  not  bring  back  housecalls,  but  they  will  help  promote  the  admirable  goal  of  helping  to  extend  the  expertise  of  some  of  the  nations  most 
 advanced  medical  professionals  into  some  of  the  nations  most  rural  and  remote  areas. 
 I  look  forward  to  working  with  my  colleagues  to  unlock  the  potential  of  this  program  and  to  expeditiously  addressing  the  issues  presented  in  the  Further  Notice. 
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 SEPARATE  STATEMENT  OF  COMMISSIONER  KATHLEEN  Q.  ABERNATHY 

 Re:  Rural  Health  Care  Support  Mechanism,  Report  and  Order,  Order  on  Reconsideration,  and  Further  Notice  of  Proposed  Rulemaking 
 I  am  extremely  pleased  to  support  this  Order  and  its  significant  improvements  to  the  rural  health  care  support  mechanism.  While  the  universal  service  programs  overall  have  successfully 
 delivered  benefits  to  consumers  living  in  high-  cost  areas,  to  patrons  of  schools  and  libraries,  and  to  persons  of  limited  means,  there  is  no  question  that  the  rural  health  care  mechanism  has  been 
 underutilized.  I  am  confident  that  todays  action  will  more  faithfully  deliver  on  Congresss  promise  to  lower  telecommunications  costs  for  health  care  providers  serving  rural  communities. 

 In  turn,  our  action  should  make  telemedicine  available  for  many  consumers  for  whom  visits  to  specialists  otherwise  would  cause  great  hardships.  We  often  talk  about  the  benefits  of 
 broadband  services,  but  telemedicine  may  be  the  most  important  application  of  them  all.  Telemedicine  has  the  potential  to  make  it  irrelevant  whether  a  patient  lives  in  a  downtown  urban 
 area  or  on  a  mountaintop.  I  have  seen  demonstrations  of  how  telemedicine  connects  patients  in  remote  areas  of  Alaska  to  hospitals  and  clinics  hundreds  of  miles  away,  often  preventing  the 
 ordeal  (and  immense  cost)  of  air  transport.  I  was  also  privileged  to  have  the  opportunity  last  week  to  visit  the  University  of  Virginias  exemplary  telemedicine  program,  which  serves 
 consumers  throughout  the  Appalachian  region  of  the  state.  It  was  truly  heartwarming  to  hear  testimonials  from  patients  whose  lives  have  been  improved  by  the  availability  of  high-  speed 
 telecommunications  links  throughout  rural  Virginia.  And  it  was  awe-  inspiring  to  listen  to  a  patients  heartbeat  or  view  a  cardiac  ultrasound  in  perfect  fidelity  and  clarity  from  hundreds  of 
 miles  away.  Dr.  Karen  Rheuban  and  her  colleagues  have  done  an  amazing  job  at  UVA,  and  I  hope  other  states  and  institutions  follow  their  example. 

 I  also  hope  that  we  will  find  ways  in  the  further  rulemaking  to  fund  mobile  clinics,  such  as  the  satellite-  enabled  mammography  van  that  Healthcare  Anywhere  proposes  to  use  to  serve 
 women  on  tribal  lands  in  North  and  South  Dakota.  Such  innovative  ideas  not  only  would  bring  critical  health  care  services  to  underserved  communities,  but  also  might  lower  health  care  costs 
 by  making  preventive  care  more  widespread. 
 Finally,  while  I  fully  support  taking  steps  that  are  likely  to  drive  up  the  demand  for  universal  service  funding,  I  am  confident  that  our  rules  will  continue  to  ensure  that  funding  needs 
 are  met  without  waste,  fraud,  or  abuse.  For  example,  although  we  have  expanded  the  program  to  provide  discounts  on  Internet  access  for  the  first  time,  we  have  set  the  initial  discount  rate  for 
 Internet  access  at  a  modest  25  percent  to  prevent  excessive  fund  growth  and  to  ensure  that  providers  have  adequate  incentives  to  avoid  overpayment.  In  time,  we  may  decide  that 
 additional  funding  is  warranted,  but  we  must  balance  the  tremendous  benefits  of  telemedicine  against  the  significant  burdens  that  are  being  placed  on  consumers  to  fund  our  various  universal 
 service  support  mechanisms.  At  this  point,  the  balance  clearly  tilts  in  favor  of  expanding  the  program,  because  it  has  barely  begun  to  fulfill  Congresss  mandate  to  establish  an  effective  rural 
 health  care  support  mechanism. 
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 Federal  Communications  Commission  FCC  03-  288 
 SEPARATE  STATEMENT  OF  COMMISSIONER  MICHAEL  J.  COPPS 

 Re:  Rural  Health  Care  Support  Mechanism,  Report  and  Order,  Order  on  Reconsideration,  and  Further  Notice  of  Proposed  Rulemaking 
 I  am  pleased  very  pleased  to  see  this  rural  health  care  item  on  our  agenda  today.  This  is  a  program  that  we  need  to  put  to  work.  We  need  to  put  it  to  work  because  rural  America  lags 
 the  rest  of  the  country  in  access  to  premium  health  care,  and  we  need  to  do  it  now  more  than  ever  because  of  the  heightened  threats  of  bio-  terrorism  and  health  catastrophe  that  follow  in  the  wake 
 of  9/  11.  Rural  America  wasnt  where  it  should  have  been  in  access  to  good  health  services  before  9/  11,  and  if  terror  visited  there  now,  all  the  reports  tell  us,  rural  America  is  less-  equipped 
 to  deal  with  it  than  we  are  in  the  metropolitan  areas,  and  goodness  knows  we  need  a  lot  of  improvements  here,  too. 

 For  those  who  are  interested  in  seeing  how  rural  health  care  providers  can  make  use  of  telecommunications  infrastructure  to  provide  needed  services,  its  there  to  see.  In  growing 
 numbers  of  places,  you  can  see  telemedicine  and  telehealth  improving  the  quality  of  life  in  rural  communities  by  providing  patients  in  remote  areas  with  access  to  services  that  would  otherwise 
 have  been  unavailable.  We  are  seeing  patient  diagnostic  services,  patient  follow-  up  care,  educational  offerings  for  rural  health  care  professionals,  and  the  dissemination  of  all  sorts  of 
 critical  health  related  information. 
 Last  week,  I  had  the  opportunity  to  learn  about  this  first-  hand  when  I  spent  some  quality  time  in  the  south  central  Wisconsin  town  of  Beaver  Dam,  at  the  Beaver  Dam  Community 
 Hospital.  I  had  the  opportunity  there  to  have  a  long  conversation  with  the  people  who  run  this  rural  facility  and  the  people  responsible  for  the  telecommunications  technologies  used  to  provide 
 patient  care. 
 Here  at  the  Commission  we  now  understand  that  our  Rural  Health  Care  Program  has  not  lived  up  to  its  potential.  We  set  aside  as  much  as  $400  million  annually,  but  in  the  first  five 
 years  of  the  program,  just  over  $30  million  was  disbursed  to  rural  facilities.  This  is  not  on  the  scale  of  what  I  suspect  the  Commission  had  in  mind  when  the  program  was  first  set  up,  and  it  is 
 certainly  not  on  the  scale  of  what  Congress  had  in  mind  when  it  directed  the  Commission  to  ensure  that  health  care  providers  serving  rural  communities  have  access  to  services  on  par  with 
 those  available  in  urban  areas.  And,  as  I  said  a  minute  ago,  it  falls  even  farther  short  of  what  it  should  be  in  light  of  9/  11. 

 In  response,  we  change  our  rules  today.  In  particular,  we  expand  our  interpretation  of  eligible  health  care  providers,  provide  flat  support  for  Internet  access  and  revise  our  standard  for 
 urban  area  rate  comparisons.  I  support  these  changes  because  I  believe  they  will  improve  the  Rural  Health  Care  Program  in  a  manner  that  is  consistent  with  our  statutory  mandate. 

 But  other  problems  serious  problems  remain  and  they  keep  this  program  from  being  utilized  the  way  it  should  be  utilized.  My  conversations  in  Beaver  Dam,  and  my  earlier 
 conversations  in  the  remote  town  of  Levelock,  Alaska,  convince  me  that  basic  lack  of  outreach  and  a  cumbersome  application  process  may  be  the  real  culprits  here. 
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 2 
 The  Rural  Health  Care  Program  is  only  as  strong  as  the  community  that  knows  about  it.  And  you  know  what?  A  lot  of  communities  dont  know  about  this  program.  So,  for  openers,  we 
 need  to  work  much  more  closely  with  the  American  Hospital  Association,  state  health  care  organizations,  rural  government  associations  and  telecommunications  carriers  serving  rural 
 communities  to  get  the  word  out.  Like  so  many  of  our  universal  service  programs  designed  for  end-  user  beneficiaries  without  outreach  they  risk  irrelevance,  perhaps  even  extinction. 

 Then  there  is  the  application  process.  It  needs  a  major  overhaul.  At  Beaver  Dam  Community  Hospital,  they  spent  six  months  to  secure  what  wound  up  being  only  a  single  month 
 of  funding.  Figuring  out  the  appropriate  discount  rate,  securing  necessary  information  from  telecommunications  carriers  and  completing  the  mountain  of  related  forms  is  a  time  consuming 
 and  arduous  task.  The  application  calls  on  health  care  professionals  to  master  the  complexities  of  such  things  as  total  billed  miles  and  the  intricacies  of  all  sorts  of  convoluted  tariff  rates.  These 
 rural  hospitals  have  limited  staff,  they  have  urgent  priorities,  and  in  a  matter  like  this,  where  months  of  work  translate  into  a  couple  thousand  dollars  of  one-  month  support,  they  question  if 
 the  paper  chase  is  at  all  worth  it.  From  what  I  saw,  I  dont  blame  them.  And  I  fear  Beaver  Dams  experience  is  not  unusual.  I  know  that  USAC  has  recently  made  some  improvements, 
 including  a  new  database  of  urban  rates  and  enhanced  electronic  filing  capabilities  and  also  making  the  second  year  application  easier,  and  I  congratulate  them  for  that.  But  we  can,  we 
 should,  and  we  must  do  more.  We  are  justifiably  concerned  with  deterring  waste  and  abuse,  but  we  should  recognize  that  the  complexity  of  the  process  here  is  deterring  worthy  applicants  and 
 that  is  really  waste  and  abuse. 
 I  commend  the  Chairman  and  the  Wireline  Competition  Bureau  for  developing  this  item  today,  and  I  am  encouraged  that  the  Chairman  and  Commissioner  Abernathy  made  a  trip  last 
 week  to  visit  the  University  of  Virginia  Office  of  Telemedicine.  Raising  the  profile  of  this  program  helps.  Todays  Order  helps.  And  tackling  some  of  these  other  problems  would  help. 
 This  program  involves  national  security  and  our  national  well-  being.  We  can  all  be  zealous  advocates  for  this  cause.  I  look  forward  to  working  with  my  colleagues,  the  Bureau,  rural  health 
 care  providers  and  the  industry  to  make  this  program  what  it  deserves  to  be. 
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 SEPARATE  STATEMENT  OF  COMMISSIONER  JONATHAN  S.  ADELSTEIN 

 Re:  Rural  Health  Care  Support  Mechanism,  Report  and  Order,  Order  on  Reconsideration,  and  Further  Notice  of  Proposed  Rulemaking 
 Today  we  modify  our  rules  to  improve  the  effectiveness  of  the  rural  health  care  support  mechanism.  I  believe  that  the  modifications  that  we  make  will  improve  the  program,  increase 
 participation  of  rural  health  care  providers,  and  ensure  that  benefits  of  the  program  continue  to  be  distributed  in  a  fair  and  equitable  manner.  This  program  has  not  yet  met  the  Commissions 
 projections,  and  has  not  lived  up  to  Congress  expectations.  These  changes  will  help  the  program  fulfill  its  enormous  potential  to  improve  the  quality  of  health  care  in  rural  America. 

 Todays  decision  is  one  of  those  that  really  makes  our  jobs  as  public  servants  incredibly  rewarding.  There  are  only  winners  in  todays  decision.  And  we  are  all  winners  as  a  result  of 
 todays  decision.  A  chain  is  only  as  strong  as  its  weakest  link,  and  today  we  further  fortify  the  links  in  our  communications  network. 

 As  a  result  of  todays  decision,  more  entities  will  be  eligible  for  funding.  It  is  critically  important  that  we  now  permit  funding  of  dedicated  emergency  facilities  in  for-  profit  hospitals  as 
 rural  health  care  clinics.  These  facilities  are  often  the  first  line  of  defense  and  the  portal  for  the  patients  entry  into  the  health  care  system.  This  change  is  particularly  important  in  light  of  our 
 national  security  concerns  and  the  need  to  address  any  national  emergency  situation  that  may  present  itself.  For  example,  if  there  is  a  chemical  or  biological  attack  and  a  patient  presents 
 himself  to  the  dedicated  care  facility,  access  to  rural  health  care  funding  may  help  ensure  a  quicker,  more  comprehensive  determination  of  the  crisis  at  hand,  potentially  saving  many  lives. 

 It  is  critical  that  we  will  allow  for  funding  of  part-  time  rural  health  care  facilities.  This  is  the  reversal  of  a  prior  rule  that  rural  health  care  providers  associated  with  non-  profit  nursing 
 homes,  hospices  and  long  term  care  facilities  are  100%  ineligible  for  funding.  It  will  enhance  the  availability  of  health  care  in  rural  areas  that  dont  have  any  other  option  or  entity  to  serve  as  a 
 health  care  facility. 
 Today  we  also  approve  funding  for  Internet  access  to  rural  health  care  providers.  We  are  directing  USAC  to  provide  to  rural  health  care  providers  twenty-  five  percent  of  the  monthly  cost 
 for  any  form  of  Internet  access  reasonably  related  to  the  health  care  needs  of  the  facility.  Internet  access  has  changed  the  world  and  our  interaction  with  it.  The  Internet  brings  the  world  to  us.  In 
 remote  rural  areas,  access  to  the  wealth  of  information  and  instruction  that  the  Internet  provides  can  mean  the  difference  between  life  and  death.  I  believe  that  a  twenty-  five  percent  discount  is 
 appropriate  at  this  time,  but  I  am  willing  to  consider  a  higher  discount  based  on  the  usage  we  see. 
 Under  our  old  rules,  we  would  allow  rural  health  care  providers  to  compare  their  rural  rates  to  urban  rates  in  the  nearest  city  with  a  population  of  50,000.  Now  we  allow  the  health  care 
 providers  to  compare  their  rates  to  any  city  in  their  state  with  a  population  of  greater  than  50,000.  We  have  learned  through  experience  that  the  rural  health  care  providers  dont  necessarily  always 
 choose  to  connect  to  a  point  in  the  nearest  largest  city,  but  may  very  well  choose  to  connect  elsewhere  where  their  needs  are  better  met.  This  improvement  that  we  make  today  will  allow  for 
 rural  health  care  providers  to  enjoy  lower  rates  and  provide  access  to  the  services  that  are  most 
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 2 
 useful  for  their  facilities. 
 I  strongly  support  the  revision  of  our  policy  to  allow  rural  health  care  providers  to  receive  discounts  for  satellite  services  even  where  alternative  terrestrial  based  services  may  be  available. 
 Different  technologies  may  be  better  suited  to  different  health  care  providers  and  the  services  that  they  wish  to  offer.  We  should  not  limit  a  health  care  providers  ability  to  make  that 
 assessment  and  subsequent  choice.  I  do  believe,  however,  that  in  order  to  appropriately  oversee  this  fund,  capping  the  discount  at  the  amount  providers  would  have  received  if  they  had 
 purchased  functionally  similar  terrestrial-  based  alternatives  is  an  important  addition  to  prevent  waste,  fraud  and  abuse. 

 I  am  also  pleased  that  we  are  continuing  to  look  at  the  myriad  of  ways  to  improve  this  program  by  asking  questions  about  the  appropriate  definition  of  a  rural  area.  In  addition,  we  are 
 requesting  comment  on  the  provision  of  support  to  mobile  rural  health  care  clinics  for  satellite  services.  These  questions  are  imperative  to  continuing  to  improve  this  program  that  has  already 
 done  so  much  good,  but  can  clearly  do  more.  I  eagerly  await  the  ideas  that  health  care  and  service  providers  will  offer  in  response  to  our  request  for  more  information. 

 Finally,  Id  like  to  thank  USAC  for  the  fine  job  it  has  done  to  help  promote  this  program  and  all  the  other  universal  service  programs  it  administers.  I  know  that  USAC  works  very 
 closely  with  our  staff  and  serves  as  a  resource  that  helps  us  make  better,  more  knowledgeable  decisions.  In  particular  Id  like  to  thank  Cheryl  Parrino  for  her  leadership  and  wish  her  well  as 
 she  moves  on  to  her  next  challenge.  She  will  be  missed. 
 I  approve  this  item  and  look  forward  to  future  advances  in  the  program  that  result  from  our  actions  today. 
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