U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

1 

39–010 

" ! SENATE 108TH CONGRESS

2d Session 

REPORT

2004

108–422 

Calendar No. 809 

RURAL UNIVERSAL SERVICE EQUITY ACT 

OF 2003 

R E P O R T 

OF THE

COMMITTEE ON COMMERCE, SCIENCE, AND 

TRANSPORTATION 

ON

S. 1380 

DECEMBER 7, 2004.—Ordered to be printed 


congress.#13
(II) 

SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION 

ONE HUNDRED EIGHTH CONGRESS

SECOND SESSION

JOHN MCCAIN, Arizona, Chairman 

TED STEVENS, Alaska 

CONRAD BURNS, Montana 

TRENT LOTT, Mississippi 

KAY BAILEY HUTCHISON, Texas 

OLYMPIA J. SNOWE, Maine 

SAM BROWNBACK, Kansas 

GORDON SMITH, Oregon 

PETER G. FITZGERALD, Illinois 

JOHN ENSIGN, Nevada 

GEORGE ALLEN, Virginia 

JOHN E. SUNUNU, New Hampshire 

ERNEST F. HOLLINGS, South Carolina 

DANIEL K. INOUYE, Hawaii 

JOHN D. ROCKEFELLER IV, West Virginia 

JOHN F. KERRY, Massachusetts 

JOHN B. BREAUX, Louisiana 

BYRON L. DORGAN, North Dakota 

RON WYDEN, Oregon 

BARBARA BOXER, California 

BILL NELSON, Florida 

MARIA CANTWELL, Washington 

FRANK LAUTENBERG, New Jersey 

JEANNE BUMPUS, Staff Director and General Counsel 

ROB FREEMAN, Deputy Staff Director 

SAMUEL WHITEHORN, Democratic Staff Director and Chief Counsel 

MARGARET SPRING, Democratic Senior Counsel 

1Section 1, Communications Act of 1934 (47 U.S.C. 151). 

Calendar No. 809 

108TH CONGRESS REPORT " ! SENATE 2d Session 108–422 

RURAL UNIVERSAL SERVICE EQUITY ACT OF 2003 

DECEMBER 7, 2004.—Ordered to be printed 

Mr. MCCAIN, from the Committee on Commerce, Science, and 

Transportation, submitted the following 

R E P O R T 

[To accompany S. 1380] 

The Committee on Commerce, Science, and Transportation, to 

which was referred the bill (S. 1380) to distribute universal service 

support equitably throughout rural America, and for other purposes, having considered the same, reports favorably thereon with 

an amendment (in the nature of a substitute) and recommends that 

the bill (as amended) do pass. 

PURPOSE OF THE BILL

The primary objective of this legislation is to require the Federal 

Communications Commission (FCC) to distribute certain universal 

service funding based on the per line costs in a specific area of 

service, rather than the current State-by-State basis. 

BACKGROUND AND NEEDS

The Communications Act of 1934 requires the FCC to ‘‘make 

available, so far as possible, to all the people of the United States, 

. . . a rapid, efficient, Nation-wide, and world-wide wire and radio 

communications service with adequate facilities at reasonable 

charges . . .’’ 1 From 1934 until 1996, the FCC developed this general mandate into a body of regulations which came to be known 

as ‘‘universal service.’’ The original concept of universal service was 

to create Federal rules ensuring that telecommunications services 

would be affordable to all Americans, even those in rural and high 

cost areas. 

2 

The Telecommunications Act of 1996 (the ‘‘1996 Act’’) codified 

this concept by creating a Federal universal service fund (USF), 

that supports the widespread availability of eligible telecommunications services. The 1996 Act also extended the scope of Federal 

universal service beyond its traditional focus on low-income consumers and those in rural and high cost areas to also include eligible schools, libraries, and rural health care providers. The total 

amount of universal service support disbursed from the USF for 

Fiscal Year (FY) 2003 was over $5 billion. 

NON-RURAL CARRIER SUPPORT

One of the funds established by the FCC within the USF is the 

Federal high-cost universal service support mechanism for nonrural telephone companies. Non-rural carriers are generally the 

largest local exchange companies serving greater than 100,000 access lines. The FCC’s distribution mechanism for support from this 

fund compares the statewide average cost per line for non-rural 

carriers to a nationwide cost benchmark. The FCC has found that, 

since States set intrastate telephone rates and hold the primary responsibility of ensuring comparability of these rates within their 

borders, the Federal mechanism should operate by shifting money 

from relatively low-cost States to relatively high-cost States. As a 

result, non-rural carriers receive support in only ten states (Alabama, Kentucky, Maine, Mississippi, Montana, Nebraska, South 

Dakota, Vermont, West Virginia, and Wyoming). In 2004, carriers 

in these States received over $200 million in support from this 

fund. 

In 2001, the 10th Circuit Court of Appeals remanded the FCC’s 

decision on how to distribute support from this fund to the FCC directing it to explain how this program satisfied the statutory requirement to achieve reasonably comparable phone rates among 

rural and urban areas. In October 2003, the FCC adopted an order 

reaffirming its conclusion that comparing statewide average costs 

is an appropriate means to determine high-cost support for nonrural carriers. 

Although non-rural carriers in many different States serve highcost areas, their statewide average costs, under the FCC’s rules, 

are often not high enough to receive support. This bill would require the FCC to change the current formula to distribute the 

funding by basing it on a specific area of service, rather than the 

current State-by-State basis. 

LEGISLATIVE HISTORY

This bill was introduced by Senator Smith on July 9, 2003, and 

is co-sponsored by 32 Senators. 

On September 22, 2004, the Committee voted to report the bill 

favorably without amendment to the full Senate. 

ESTIMATED COSTS

In accordance with paragraph 11(a) of rule XXVI of the Standing 

Rules of the Senate and section 403 of the Congressional Budget 

Act of 1974, the Committee provides the following cost estimate, 

prepared by the Congressional Budget Office: 

3 

OCTOBER 21, 2004. 

Hon. JOHN MCCAIN, 

Chairman, Committee on Commerce, Science, and Transportation, 

U.S. Senate, Washington, DC. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for S. 1380, the Rural Universal 

Service Equity Act of 2003. 

If you wish further details on this estimate, we will be pleased 

to provide them. The CBO staff contact is Melissa E. Zimmerman. 

Sincerely, 

DOUGLAS HOLTZ-EAKIN, 

Director. 

Enclosure. 

S. 1380—Rural Universal Service Equity Act of 2003 

S. 1380 would make changes to the formula used by the Universal Service Fund (USF) program to calculate funding levels for 

states with high-cost telecommunications services. As a result, 

more states would be eligible for funding; however, USF funds collected for high-cost services would not change, so total expenditures 

under this program would not change. 

Universal Service is a program intended to promote the availability of telecommunications services at affordable rates. Charges 

imposed by the federal government on telecommunications services 

to support Universal Service are recorded in the federal budget as 

revenues. Because the bill would not make any changes to the total 

amount of funding collected and distributed for high-cost services, 

CBO estimates that enacting S. 1380 would not affect revenues or 

direct spending. The bill would not have a significant effect on 

spending subject to appropriation. 

S. 1380 contains no intergovernmental mandates as defined in 

the Unfunded Mandates Reform Act (UMRA), but the change in 

the formula for part of the Universal Service Fund would alter the 

distribution of money among the states. The bill contains no new 

private-sector mandates as defined in UMRA. 

The CBO staff contacts for this estimate are Melissa E. Zimmerman (for federal costs), Sarah Puro (for the state and local impact), 

and Jean Talarico (for the private-sector impact). The estimate was 

approved by Peter H. Fontaine, Deputy Assistant Director for 

Budget Analysis. 

REGULATORY IMPACT STATEMENT

In accordance with paragraph 11(b) of rule XXVI of the Standing 

Rules of the Senate, the Committee provides the following evaluation of the regulatory impact of the legislation, as reported: 

NUMBER OF PERSONS COVERED

The legislation affects the calculations for disbursement of funds 

from the Universal Service Fund under its Non-Rural Carrier support mechanism. The number of persons covered by this legislation 

should be consistent with current levels of individuals affected by 

this program. 

4 

ECONOMIC IMPACT

This bill would adjust calculations for disbursement of Federal 

Universal Service funds. 

PRIVACY

This legislation will not have any adverse impact on the personal 

privacy of the individuals affected. 

PAPERWORK

S. 1380 would require the Comptroller General to submit to Congress a report on the need to reform the high cost support mechanism for rural, insular and high cost areas. 

SECTION-BY-SECTION ANALYSIS

Section 1. Short title 

Section 1 would set forth the short title of the bill as the ‘‘Rural 

Universal Service Equity Act of 2003.’’ 

Section 2. Findings 

Section 2 would make certain findings related to the FCC’s high 

cost fund. 

Section 3. Comptroller general report on need to reform high cost 

support mechanism 

Section 3 would require the Comptroller General to submit a report to Congress on the need to reform the high cost support mechanism for rural, insular, and high cost areas. 

Section 4. Eligibility for universal service support for high cost 

areas 

Section 4 would require the FCC to change its current mechanism for calculating high cost areas to provide support to each wire 

center in which an incumbent telephone company’s average cost 

per line exceed the national average cost per line by an amount to 

be defined by the FCC. Currently the FCC provides support to 

large telephone companies based on their average cost per line 

throughout an entire State. Thus, the new mechanism would have 

the effect of distributing the high cost fund in a manner that is different than today. 

This section would also keep the total amount of support for the 

high cost fund the same as it is at the time of enactment. The section would also require the FCC to hold harmless any State that 

would receive less support under the new mechanism than it would 

under the old mechanism, up to 10 percent of the total support distributed. Finally, this section would require the FCC to implement 

the bill within 180 days. 

Section 5. No effect on rural telephone companies 

Section 5 would state that nothing in the legislation shall be construed to affect the support provided to rural telephone companies. 

5 

ROLLCALL VOTES IN COMMITTEE

On a rollcall vote of 13 yeas and 9 nays, the Committee ordered 

S. 1380 favorably reported. 

YEAS—13 NAYS—9 

Mr. Burns Mr. Stevens1

Mrs. Hutchison Mr. Lott 

Mr. Brownback Ms. Snowe 

Mr. Smith Mr. Ensign 

Mr. Fitzgerald1 Mr. Inouye1

Mr. Allen Mr. Rockefeller 

Mr. Sununu Mr. Breaux 

Mr. Hollings Mr. Nelson 

Mr. Dorgan Mr. Lautenberg 

Mr. Wyden 

Mrs. Boxer 

Ms. Cantwell 

Mr. McCain 

1By proxy 

CHANGES IN EXISTING LAW

In compliance with paragraph 12 of rule XXVI of the Standing 

Rules of the Senate, changes in existing law made by the bill, as 

reported, are shown as follows (existing law proposed to be omitted 

is enclosed in black brackets, new material is printed in italic, existing law in which no change is proposed is shown in roman): 

COMMUNICATIONS ACT OF 1934 

SEC. 254. UNIVERSAL SERVICE 

[47 U.S.C. 254]

(a) PROCEDURES TO REVIEW UNIVERSAL SERVICE REQUIRE- MENTS.— 

(1) FEDERAL-STATE JOINT BOARD ON UNIVERSAL SERVICE.— Within one month after the date of enactment of the Telecommunications Act of 1996, the Commission shall institute 

and refer to a Federal-State Joint Board under section 410(c) 

a proceeding to recommend changes to any of its regulations in 

order to implement sections 214(e) and this section, including 

the definition of the services that are supported by Federal 

universal service support mechanisms and a specific timetable 

for completion of such recommendations. In addition to the 

members of the Joint Board required under section 410(c), one 

member of such Joint Board shall be a State-appointed utility 

consumer advocate nominated by a national organization of 

State utility consumer advocates. The Joint Board shall, after 

notice and opportunity for public comment, make its recommendations to the Commission 9 months after the date of 

enactment of the Telecommunications Act of 1996. 

(2) COMMISSION ACTION.—The Commission shall initiate a 

single proceeding to implement the recommendations from the 

Joint Board required by paragraph (1) and shall complete such 

proceeding within 15 months after the date of enactment of the 

6 

Telecommunications Act of 1996. The rules established by such 

proceeding shall include a definition of the services that are 

supported by Federal universal service support mechanisms 

and a specific timetable for implementation. Thereafter, the 

Commission shall complete any proceeding to implement subsequent recommendations from any Joint Board on universal 

service within one year after receiving such recommendations. 

(b) UNIVERSAL SERVICE PRINCIPLES.—The Joint Board and the 

Commission shall base policies for the preservation and advancement of universal service on the following principles: 

(1) QUALITY AND RATES.—Quality services should be available at just, reasonable, and affordable rates. 

(2) ACCESS TO ADVANCED SERVICES.—Access to advanced telecommunications and information services should be provided in 

all regions of the Nation. 

(3) ACCESS IN RURAL AND HIGH COST AREAS.—Consumers in 

all regions of the Nation, including low-income consumers and 

those in rural, insular, and high cost areas, should have access 

to telecommunications and information services, including 

interexchange services and advanced telecommunications and 

information services, that are reasonably comparable to those 

services provided in urban areas and that are available at 

rates that are reasonably comparable to rates charged for similar services in urban areas. 

(4) EQUITABLE AND NONDISCRIMINATORY CONTRIBUTIONS.—All 

providers of telecommunications services should make an equitable and nondiscriminatory contribution to the preservation 

and advancement of universal service. 

(5) SPECIFIC AND PREDICTABLE SUPPORT MECHANISMS.—There 

should be specific, predictable and sufficient Federal and State 

mechanisms to preserve and advance universal service. 

(6) ACCESS TO ADVANCED TELECOMMUNICATIONS SERVICES

FOR SCHOOLS, HEALTH CARE, AND LIBRARIES.—Elementary and 

secondary schools and classrooms, health care providers, and 

libraries should have access to advanced telecommunications 

services as described in subsection (h). 

(7) ADDITIONAL PRINCIPLES.—Such other principles as the 

Joint Board and the Commission determine are necessary and 

appropriate for the protection of the public interest, convenience, and necessity and are consistent with this Act. 

(c) DEFINITION.— 

(1) IN GENERAL.—Universal service is an evolving level of 

telecommunications services that the Commission shall establish periodically under this section, taking into account advances in telecommunications and information technologies 

and services. The Joint Board in recommending, and the Commission in establishing, the definition of the services that are 

supported by Federal universal service support mechanisms 

shall consider the extent to which such telecommunications 

services— 

(A) are essential to education, public health, or public 

safety; 

(B) have, through the operation of market choices by 

customers, been subscribed to by a substantial majority of 

residential customers; 

7 

(C) are being deployed in public telecommunications networks by telecommunications carriers; and 

(D) are consistent with the public interest, convenience, 

and necessity. 

(2) ALTERATIONS AND MODIFICATIONS.—The Joint Board may, 

from time to time, recommend to the Commission modifications 

in the definition of the services that are supported by Federal 

universal service support mechanisms. 

(3) SPECIAL SERVICES.—In addition to the services included 

in the definition of universal service under paragraph (1), the 

Commission may designate additional services for such support 

mechanisms for schools, libraries, and health care providers for 

the purposes of subsection (h). 

(d) TELECOMMUNICATIONS CARRIER CONTRIBUTION.—Every telecommunications carrier that provides interstate telecommunications services shall contribute, on an equitable and nondiscriminatory basis, to the specific, predictable, and sufficient mechanisms established by the Commission to preserve and advance universal service. The Commission may exempt a carrier or class of 

carriers from this requirement if the carrier’s telecommunications 

activities are limited to such an extent that the level of such carrier’s contribution to the preservation and advancement of universal service would be de minimis. Any other provider of interstate telecommunications may be required to contribute to the 

preservation and advancement of universal service if the public interest so requires. 

(e) UNIVERSAL SERVICE SUPPORT.—After the date on which Commission regulations implementing this section take effect, only an 

eligible telecommunications carrier designated under section 214(e) 

shall be eligible to receive specific Federal universal service support. A carrier that receives such support shall use that support 

only for the provision, maintenance, and upgrading of facilities and 

services for which the support is intended. Any such support 

should be explicit and sufficient to achieve the purposes of this section. 

(f) STATE AUTHORITY.—A State may adopt regulations not inconsistent with the Commission’s rules to preserve and advance universal service. Every telecommunications carrier that provides 

intrastate telecommunications services shall contribute, on an equitable and nondiscriminatory basis, in a manner determined by the 

State to the preservation and advancement of universal service in 

that State. A State may adopt regulations to provide for additional 

definitions and standards to preserve and advance universal service within that State only to the extent that such regulations adopt 

additional specific, predictable, and sufficient mechanisms to support such definitions or standards that do not rely on or burden 

Federal universal service support mechanisms. 

(g) INTEREXCHANGE AND INTERSTATE SERVICES.—Within 6 

months after the date of enactment of the Telecommunications Act 

of 1996, the Commission shall adopt rules to require that the rates 

charged by providers of interexchange telecommunications services 

to subscribers in rural and high cost areas shall be no higher than 

the rates charged by each such provider to its subscribers in urban 

areas. Such rules shall also require that a provider of interstate 

interexchange telecommunications services shall provide such servVerDate Aug 04 2004 22:59 Dec 09, 2004 Jkt 039010 PO 00000 Frm 00009 Fmt 6659 Sfmt 6601 E:\HR\OC\SR422.XXX SR422
8 

ices to its subscribers in each State at rates no higher than the 

rates charged to its subscribers in any other State. 

(h) TELECOMMUNICATIONS SERVICES FOR CERTAIN PROVIDERS.— (1) IN GENERAL.— (A) HEALTH CARE PROVIDERS FOR RURAL AREAS.—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. A telecommunications carrier providing service under this paragraph 

shall be entitled to have an amount equal to the difference, 

if any, between the rates for services provided to health 

care providers for rural areas in a State and the rates for 

similar services provided to other customers in comparable 

rural areas in that State treated as a service obligation as 

a part of its obligation to participate in the mechanisms to 

preserve and advance universal service. 

(B) EDUCATIONAL PROVIDERS AND LIBRARIES.—All telecommunications carriers serving a geographic area shall, 

upon a bona fide request for any of its services that are 

within the definition of universal service under subsection 

(c)(3), provide such services to elementary schools, secondary schools, and libraries for educational purposes at 

rates less than the amounts charged for similar services to 

other parties. The discount shall be an amount that the 

Commission, with respect to interstate services, and the 

States, with respect to intrastate services, determine is appropriate and necessary to ensure affordable access to and 

use of such services by such entities. A telecommunications 

carrier providing service under this paragraph shall— 

(i) have an amount equal to the amount of the discount treated as an offset to its obligation to contribute to the mechanisms to preserve and advance 

universal service, or 

(ii) notwithstanding the provisions of subsection (e) 

of this section, receive reimbursement utilizing the 

support mechanisms to preserve and advance universal service. 

(2) ADVANCED SERVICES.—The Commission shall establish 

competitively neutral rules— 

(A) to enhance, to the extent technically feasible and economically reasonable, access to advanced telecommunications and information services for all public and nonprofit elementary and secondary school classrooms, health 

care providers, and libraries; and 

(B) to define the circumstances under which a telecommunications carrier may be required to connect its network to such public institutional telecommunications 

users. 

(3) TERMS AND CONDITIONS.—Telecommunications services 

and network capacity provided to a public institutional teleVerDate Aug 04 2004 22:59 Dec 09, 2004 Jkt 039010 PO 00000 Frm 00010 Fmt 6659 Sfmt 6601 E:\HR\OC\SR422.XXX SR422
9 

communications user under this subsection may not be sold, 

resold, or otherwise transferred by such user in consideration 

for money or any other thing of value. 

(4) ELIGIBILITY OF USERS.—No entity listed in this subsection 

shall be entitled to preferential rates or treatment as required 

by this subsection, if such entity operates as a for-profit business, is a school described in paragraph (7)(A) with an endowment of more than $50,000,000, or is a library or library consortium not eligible for assistance from a State library administrative agency under the Library Services and Technology 

Act. 

(5) REQUIREMENTS FOR CERTAIN SCHOOLS WITH COMPUTERS

HAVING INTERNET ACCESS.— 

(A) INTERNET SAFETY.— 

(i) IN GENERAL.—Except as provided in clause (ii), 

an elementary or secondary school having computers 

with Internet access may not receive services at discount rates under paragraph (1)(B) unless the school, 

school board, local educational agency, or other authority with responsibility for administration of the 

school— 

(I) submits to the Commission the certifications 

described in subparagraphs (B) and (C); 

(II) submits to the Commission a certification 

that an Internet safety policy has been adopted 

and implemented for the school under subsection 

(l); and 

(III) ensures the use of such computers in accordance with the certifications. 

(ii) APPLICABILITY.—The prohibition in clause (i) 

shall not apply with respect to a school that receives 

services at discount rates under paragraph (1)(B) only 

for purposes other than the provision of Internet access, Internet service, or internal connections. 

(iii) PUBLIC NOTICE; HEARING.—An elementary or 

secondary school described in clause (i), or the school 

board, local educational agency, or other authority 

with responsibility for administration of the school, 

shall provide reasonable public notice and hold at 

least 1 public hearing or meeting to address the proposed Internet safety policy. In the case of an elementary or secondary school other than an elementary or 

secondary school as defined in section 14101 of the Elementary and Secondary Education Act of 1965 (20 

U.S.C. 8801), the notice and hearing required by this 

clause may be limited to those members of the public 

with a relationship to the school. 

(B) CERTIFICATION WITH RESPECT TO MINORS.—A certification under this subparagraph is a certification that the 

school, school board, local educational agency, or other authority with responsibility for administration of the 

school— 

(i) is enforcing a policy of Internet safety for minors 

that includes monitoring the online activities of minors and the operation of a technology protection 

10 

measure with respect to any of its computers with 

Internet access that protects against access through 

such computers to visual depictions that are— 

(I) obscene; 

(II) child pornography; or 

(III) harmful to minors; and 

(ii) is enforcing the operation of such technology protection measure during any use of such computers by 

minors. 

(C) CERTIFICATION WITH RESPECT TO ADULTS.—A certification under this paragraph is a certification that the 

school, school board, local educational agency, or other authority with responsibility for administration of the 

school— 

(i) is enforcing a policy of Internet safety that includes the operation of a technology protection measure with respect to any of its computers with Internet 

access that protects against access through such computers to visual depictions that are— 

(I) obscene; or 

(II) child pornography; and 

(ii) is enforcing the operation of such technology protection measure during any use of such computers. 

(D) DISABLING DURING ADULT USE.—An administrator, 

supervisor, or other person authorized by the certifying authority under subparagraph (A)(i) may disable the technology protection measure concerned, during use by an 

adult, to enable access for bona fide research or other lawful purpose. 

(E) TIMING OF IMPLEMENTATION.— 

(i) IN GENERAL.—Subject to clause (ii) in the case of 

any school covered by this paragraph as of the effective date of this paragraph under section 1721(h) of 

the Children’s Internet Protection Act, the certification 

under subparagraphs (B) and (C) shall be made— 

(I) with respect to the first program funding 

year under this subsection following such effective 

date, not later than 120 days after the beginning 

of such program funding year; and 

(II) with respect to any subsequent program 

funding year, as part of the application process for 

such program funding year. 

(ii) PROCESS.— 

(I) SCHOOLS WITH INTERNET SAFETY POLICY AND

TECHNOLOGY PROTECTION MEASURES IN PLACE.—A 

school covered by clause (i) that has in place an 

Internet safety policy and technology protection 

measures meeting the requirements necessary for 

certification under subparagraphs (B) and (C) 

shall certify its compliance with subparagraphs 

(B) and (C) during each annual program application cycle under this subsection, except that with 

respect to the first program funding year after the 

effective date of this paragraph under section 

1721(h) of the Children’s Internet Protection Act, 

11 

the certifications shall be made not later than 120 

days after the beginning of such first program 

funding year. 

(II) SCHOOLS WITHOUT INTERNET SAFETY POLICY

AND TECHNOLOGY PROTECTION MEASURES IN

PLACE.—A school covered by clause (i) that does 

not have inplace an Internet safety policy and 

technology protection measures meeting the requirements necessary for certification under subparagraphs (B) and (C)— 

(aa) for the first program year after the effective date of this subsection in which it is 

applying for funds under this subsection, shall 

certify that it is undertaking such actions, including any necessary procurement procedures, to put in place an Internet safety policy 

and technology protection measures meeting 

the requirements necessary for certification 

under subparagraphs (B) and (C); and 

(bb) for the second program year after the 

effective date of this subsection in which it is 

applying for funds under this subsection, shall 

certify that it is in compliance with subparagraphs (B) and (C). Any school that is unable 

to certify compliance with such requirements 

in such second program year shall be ineligible for services at discount rates or funding 

in lieu of services at such rates under this 

subsection for such second year and all subsequent program years under this subsection, 

until such time as such school comes into 

compliance with this paragraph. 

(III) WAIVERS.—Any school subject to subclause 

(II) that cannot come into compliance with subparagraphs (B) and (C) in such second year program may seek a waiver of subclause (II)(bb) if 

State or local procurement rules or regulations or 

competitive bidding requirements prevent the 

making of the certification otherwise required by 

such subclause. A school, school board, local educational agency, or other authority with responsibility for administration of the school shall notify 

the Commission of the applicability of such subclause to the school. Such notice shall certify that 

the school in question will be brought into compliance before the start of the third program year 

after the effective date of this subsection in which 

the school is applying for funds under this subsection. 

(F) NONCOMPLIANCE.— 

(i) FAILURE TO SUBMIT CERTIFICATION.—Any school 

that knowingly fails to comply with the application 

guidelines regarding the annual submission of certification required by this paragraph shall not be eligible 

12 

for services at discount rates or funding in lieu of services at such rates under this subsection. 

(ii) FAILURE TO COMPLY WITH CERTIFICATION.—Any 

school that knowingly fails to ensure the use of its 

computers in accordance with a certification under 

subparagraphs (B) and (C) shall reimburse any funds 

and discounts received under this subsection for the 

period covered by such certification. 

(iii) REMEDY OF NONCOMPLIANCE.— (I) FAILURE TO SUBMIT.—A school that has failed 

to submit a certification under clause (i) may remedy the failure by submitting the certification to 

which the failure relates. Upon submittal of such 

certification, the school shall be eligible for services at discount rates under this subsection. 

(II) FAILURE TO COMPLY.—A school that has 

failed to comply with a certification as described 

in clause (ii) may remedy the failure by ensuring 

the use of its computers in accordance with such 

certification. Upon submittal to the Commission of 

a certification or other appropriate evidence of 

such remedy, the school shall be eligible for services at discount rates under this subsection. 

(6) REQUIREMENTS FOR CERTAIN LIBRARIES WITH COMPUTERS HAV- ING INTERNET ACCESS.— (A) INTERNET SAFETY.— (i) IN GENERAL—Except as provided in clause (ii), a library having one or more computers with Internet access 

may not receive services at discount rates under paragraph (1)(B) unless the library— 

(I) submits to the Commission the certifications described in subparagraphs (B) and (C); and 

(II) submits to the Commission a certification that 

an Internet safety policy has been adopted and implemented for the library under subsection (l); and 

(III) ensures the use of such computers in accordance with the certifications. 

(ii) APPLICABILITY.—The prohibition in clause (i) shall 

not apply with respect to a library that receives services 

at discount rates under paragraph (1)(B) only for purposes 

other than the provision of Internet access, Internet service, or internal connections. 

(iii) PUBLIC NOTICE; HEARING.—A library described in 

clause (i) shall provide reasonable public notice and hold 

at least 1 public hearing or meeting to address the proposed Internet safety policy. 

(B) CERTIFICATION WITH RESPECT TO MINORS.—A certification 

under this subparagraph is a certification that the library— 

(i) is enforcing a policy of Internet safety that includes 

the operation of a technology protection measure with respect to any of its computers with Internet access that protects against access through such computers to visual depictions that are— 

(I) obscene; 

(II) child pornography; or 

13 

(III) harmful to minors; and 

(ii) is enforcing the operation of such technology protection measure during any use of such computers by minors. 

(C) CERTIFICATION WITH RESPECT TO ADULTS.—A certification 

under this paragraph is a certification that the library— 

(i) is enforcing a policy of Internet safety that includes 

the operation of a technology protection measure with respect to any of its computers with Internet access that protects against access through such computers to visual depictions that are— 

(I) obscene; or 

(II) child pornography; and 

(ii) is enforcing the operation of such technology protection measure during any use of such computers. 

(D) DISABLING DURING ADULT USE.—An administrator, supervisor, or other person authorized by the certifying authority 

under subparagraph (A)(i) may disable the technology protection measure concerned, during use by an adult, to enable access for bona fide research or other lawful purpose. 

(E) TIMING OF IMPLEMENTATION.— 

(i) IN GENERAL.—Subject to clause (ii) in the case of any 

library covered by this paragraph as of the effective date 

of this paragraph under section 1721(h) of the Children’s 

Internet Protection Act, the certification under subparagraphs (B) and (C) shall be made— 

(I) with respect to the first program funding year 

under this subsection following such effective date, not 

later than 120 days after the beginning of such program funding year; and 

(II) with respect to any subsequent program funding 

year, as part of the application process for such program funding year. 

(ii) PROCESS.— (I) LIBRARIES WITH INTERNET SAFETY POLICY AND

TECHNOLOGY PROTECTION MEASURES IN PLACE.—A library covered by clause (i) that has in place an Internet safety policy and technology protection measures 

meeting the requirements necessary for certification 

under subparagraphs (B) and (C) shall certify its compliance with subparagraphs (B) and (C) during each 

annual program application cycle under this subsection, except that with respect to the first program 

funding year after the effective date of this paragraph 

under section 1721(h) of the Children’s Internet Protection Act, the certifications shall be made not later 

than 120 days after the beginning of such first program funding year. 

(II) LIBRARIES WITHOUT INTERNET SAFETY POLICY

AND TECHNOLOGY PROTECTION MEASURES IN PLACE.—A 

library covered by clause (i) that does not have in 

place an Internet safety policy and technology protection measures meeting the requirements necessary for 

certification under subparagraphs (B) and (C)— 

(aa) for the first program year after the effective 

date of this subsection in which it is applying for 

14 

funds under this subsection, shall certify that it is 

undertaking such actions, including any necessary 

procurement procedures, to put in place an Internet safety policy and technology protection measures meeting the requirements necessary for certification under subparagraphs (B) and (C); and 

(bb) for the second program year after the effective date of this subsection in which it is applying 

for funds under this subsection, shall certify that 

it is in compliance with subparagraphs (B) and 

(C). Any library that is unable to certify compliance with such requirements in such second program year shall be ineligible for services at discount rates or funding in lieu of services at such 

rates under this subsection for such second year 

and all subsequent program years under this subsection, until such time as such library comes into 

compliance with this paragraph. 

(III) WAIVERS.—Any library subject to subclause (II) 

that cannot come into compliance with subparagraphs 

(B) and (C) in such second year may seek a waiver of 

subclause (II)(bb) if State or local procurement rules or 

regulations or competitive bidding requirements prevent the making of the certification otherwise required 

by such subclause. A library, library board, or other 

authority with responsibility for administration of the 

library shall notify the Commission of the applicability 

of such subclause to the library. Such notice shall certify that the library in question will be brought into 

compliance before the start of the third program year 

after the effective date of this subsection in which the 

library is applying for funds under this subsection. 

(F) NONCOMPLIANCE.— (i) FAILURE TO SUBMIT CERTIFICATION.—Any library 

that knowingly fails to comply with the application 

guidelines regarding the annual submission of certification required by this paragraph shall not be eligible 

for services at discount rates or funding in lieu of services at such rates under this subsection. 

(ii) FAILURE TO COMPLY WITH CERTIFICATION.—Any 

library that knowingly fails to ensure the use of its 

computers in accordance with a certification under 

subparagraphs (B) and (C) shall reimburse all funds 

and discounts received under this subsection for the 

period covered by such certification. 

(iii) REMEDY OF NONCOMPLIANCE.— 

(I) FAILURE TO SUBMIT.—A library that has 

failed to submit a certification under clause (i) 

may remedy the failure by submitting the certification to which the failure relates. Upon submittal 

of such certification, the library shall be eligible 

for services at discount rates under this subsection. 

(II) FAILURE TO COMPLY.—A library that has 

failed to comply with a certification as described 

15 

in clause (ii) may remedy the failure by ensuring 

the use of its computers in accordance with such 

certification. Upon submittal to the Commission of 

a certification or other appropriate evidence of 

such remedy, the library shall be eligible for services at discount rates under this subsection. 

(7) DEFINITIONS.—For purposes of this subsection: 

(A) ELEMENTARY AND SECONDARY SCHOOLS.—The term 

‘‘elementary and secondary schools’’ means elementary 

schools and secondary schools, as defined in section 9101 

of the Elementary and Secondary Education Act of 1965. 

(B) HEALTH CARE PROVIDER.—The term ‘‘health care provider’’ means— 

(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 clauses (i) through 

(vi). 

(C) PUBLIC INSTITUTIONAL TELECOMMUNICATIONS USER.— The term ‘‘public institutional telecommunications user’’ 

means an elementary or secondary school, a library, or a 

health care provider as those terms are defined in this 

paragraph. 

(D) MINOR.—The term ‘‘minor’’ means any individual 

who has not attained the age of 17 years. 

(E) OBSCENE.—The term ‘‘obscene’’ has the meaning 

given such term in section 1460 of title 18, United States 

Code. 

(F) CHILD PORNOGRAPHY.—The term ‘‘child pornography’’ 

has the meaning given such term in section 2256 of title 

18, United States Code. 

(G) HARMFUL TO MINORS.—The term ‘‘harmful to minors’’ 

means any picture, image, graphic image file, or other visual depiction that— 

(i) taken as a whole and with respect to minors, appeals to a prurient interest in nudity, sex, or excretion; 

(ii) depicts, describes, or represents, in a patently offensive way with respect to what is suitable for minors, an actual or simulated sexual act or sexual contact, actual or simulated normal or perverted sexual 

acts, or a lewd exhibition of the genitals; and 

(iii) taken as a whole, lacks serious literary, artistic, 

political, or scientific value as to minors. 

(H) SEXUAL ACT; SEXUAL CONTACT.—The terms ‘‘sexual 

act’’ and ‘‘sexual contact’’ have the meanings given such 

terms in section 2246 of title 18, United States Code. 

(I) TECHNOLOGY PROTECTION MEASURE.—The term ‘‘technology protection measure’’ means a specific technology 

16 

that blocks or filters Internet access to the material covered by a certification under paragraph (5) or (6) to which 

such certification relates. 

(i) CONSUMER PROTECTION.—The Commission and the States 

should ensure that universal service is available at rates that are 

just, reasonable, and affordable. 

(j) LIFELINE ASSISTANCE.—Nothing in this section shall affect the 

collection, distribution, or administration of the Lifeline Assistance 

Program provided for by the Commission under regulations set 

forth in section 69.117 of title 47, Code of Federal Regulations, and 

other related sections of such title. 

(k) SUBSIDY OF COMPETITIVE SERVICES PROHIBITED.—A telecommunications carrier may not use services that are not competitive to subsidize services that are subject to competition. The Commission, with respect to interstate services, and the States, with respect to intrastate services, shall establish any necessary cost allocation rules, accounting safeguards, and guidelines to ensure that 

services included in the definition of universal service bear no more 

than a reasonable share of the joint and common costs of facilities 

used to provide those services. 

(l) INTERNET SAFETY POLICY REQUIREMENT FOR SCHOOLS AND LI- BRARIES. 

(1) IN GENERAL.—In carrying out its responsibilities under 

subsection (h), each school or library to which subsection (h) 

applies shall— 

(A) adopt and implement an Internet safety policy that 

addresses— 

(i) access by minors to inappropriate matter on the 

Internet and World Wide Web; 

(ii) the safety and security of minors when using 

electronic mail, chat rooms, and other forms of direct 

electronic communications; 

(iii) unauthorized access, including so-called ‘‘hacking’’, and other unlawful activities by minors online; 

(iv) unauthorized disclosure, use, and dissemination 

of personal identification information regarding minors; and 

(v) measures designed to restrict minors’ access to 

materials harmful to minors; and 

(B) provide reasonable public notice and hold at least 

one public hearing or meeting to address the proposed 

Internet safety policy. 

(2) LOCAL DETERMINATION OF CONTENT.—A determination regarding what matter is inappropriate for minors shall be made 

by the school board, local educational agency, library, or other 

authority responsible for making the determination. No agency 

or instrumentality of the United States Government may— 

(A) establish criteria for making such determination; 

(B) review the determination made by the certifying 

school, school board, local educational agency, library, or 

other authority; or 

(C) consider the criteria employed by the certifying 

school, school board, local educational agency, library, or 

other authority in the administration of subsection 

(h)(1)(B). 

17 

(3) AVAILABILITY FOR REVIEW.—Each Internet safety policy 

adopted under this subsection shall be made available to the 

Commission, upon request of the Commission, by the school, 

school board, local educational agency, library, or other authority responsible for adopting such Internet safety policy for purposes of the review of such Internet safety policy by the Commission. 

(4) EFFECTIVE DATE.—This subsection shall apply with respect to schools and libraries on or after the date that is 120 

days after the date of the enactment of the Children’s Internet 

Protection Act. 

‘‘(m) UNIVERSAL SERVICE SUPPORT FOR HIGH COST AREAS.— 

(1) CALCULATING SUPPORT.—In calculating Federal universal 

service support for eligible telecommunications carriers that 

serve rural, insular, and high cost areas, the Commission shall, 

subject to paragraphs (2) and (3), revise the Commission’s support mechanism for high cost areas to provide support to each 

wire center in which the incumbent local exchange carrier’s average cost per line for such wire center exceeds the national average cost per line by such amount as the Commission determines appropriate for the purpose of ensuring the equitable distribution of universal service support throughout the United 

States. 

(2) HOLD HARMLESS SUPPORT.—In implementing this subsection, the Commission shall ensure that no State receives less 

Federal support calculated under paragraph (1) than the State 

would have received, up to 10 percent of the total support distributed, under the Commission’s support mechanism for high 

cost areas as in effect on the date of the enactment of this subsection. 

(3) LIMITATION ON TOTAL SUPPORT TO BE PROVIDED.—The 

total amount of support for all States, as calculated under 

paragraphs (1) and (2), shall be equivalent to the total support 

calculated under the Commission’s support mechanism for high 

cost areas as in effect on the date of the enactment of this subsection. 

(4) CONSTRUCTION OF LIMITATION.—The limitation in paragraph (3) shall not be construed to preclude fluctuations in support on the basis of changes in the data used to make such calculations. 

(5) IMPLEMENTATION.—Not later than 180 days after the date 

of the enactment of this subsection, the Commission shall complete the actions (including prescribing or amending regulations) necessary to implement the requirements of this subsection. 

(6) DEFINITION.—In this subsection, the term ‘‘Commission’s 

support mechanism for high cost areas’’ means sections 54.309 

and 54.311 of the Commission’s regulations (47 CFR 54.309, 

54.311), and regulations referred to in such sections. 

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