41294 Federal Register / Vol. 62, No. 148 / Friday, August 1, 1997 / Rules and Regulations

b. In paragraph (e)(1) add the words

‘‘and associated funerary objects’’ after

‘‘inventory of culturally affiliated

human remains’’ and before ‘‘, including

all information’’.

9. In § 10.10, revise paragraphs

(a)(1)(i), (a)(3) and (b)(1)(i) as follows:

§ 10.10 Repatriation.

(a) * * *

(1) * * *

(i) The object meets the definitions

established in § 10.2 (d)(2)(ii), (d)(3), or

(d)(4); and

* * * * *

(3) Notification. Repatriation must

take place within ninety (90) days of

receipt of a written request for

repatriation that satisfies the

requirements of paragraph (a)(1) of this

section from a lineal descendent or

culturally affiliated Indian tribe or

Native Hawaiian organization, provided

that the repatriation may not occur until

at least thirty (30) days after publication

of the notice of intent to repatriate in the

Federal Register as described in § 10.8.

(b) * * *

(1) * * *

(i) The human remains or associated

funerary object meets the definitions

established in § 10.2 (d)(1) or (d)(2)(i);

and

* * * * *

§ 10.15 [Amended]

10. Amend § 10.15 as follows:

a. In the section heading, remove

‘‘Repatriation limitations’’ and add, in

its place, ‘‘Limitations’’; and

b. In paragraph (a)(1), remove the

word ‘‘transfer’’ and add, in its place,

‘‘disposition’’; and c. In paragraph (a)(2),

remove the words ‘‘having custody’’,

‘‘has custody’’ and ‘‘in the custody’’ and

add, in their place, ‘‘in possession’’, ‘‘is

in custody’’ and ‘‘in the possession’’,

respectively.

Dated: July 18, 1997.

Donald J. Barry,

Deputy Assistant Secretary for Fish and

Wildlife and Parks.

[FR Doc. 97– 20319 Filed 7–31–97; 8:45 am]

BILLING CODE 4310–70–F

FEDERAL COMMUNICATIONS

COMMISSION

47 CFR Parts 54 and 69

[CC Docket No. 96–45; 97–21; FCC 97–253]

Changes to the Board of Directors of

the National Exchange Carrier

Association, Inc. and Federal-State

Board on Universal Service

AGENCY: Federal Communications

Commission.

ACTION: Final rule.

SUMMARY: The Report and Order

released July 18, 1997, promulgates

rules directing the National Exchange

Carrier Association, Inc. (NECA) to

create an independently functioning

not-for-profit subsidiary through which

it will administer temporarily certain

portions of the federal universal service

support mechanisms. We also direct

that NECA create an unaffiliated, notfor-profit corporation to manage the

application and other processes relating

to administering the schools and

libraries program. We further direct that

NECA create another unaffiliated, notfor-profit corporation to manage

specified portions of the rural health

care program. To ensure continuity in,

and efficient administration of, the

schools and libraries and rural health

care programs, we also conclude that

these corporations should continue to

perform their designated functions even

after the date on which the permanent

administrator is appointed. We also

direct NECA’s independent subsidiary

to create a special committee of that

subsidiary’s Board of Directors with the

power and authority to make binding

decisions on designated issues relating

to the universal service support

mechanisms for high cost areas and lowincome consumers. Finally, in this

Order we establish requirements by

which the temporary and permanent

administrators will calculate, and the

Commission will approve, the quarterly

universal service contribution factors.

EFFECTIVE DATES: August 1, 1997 except

for §§ 54.709, 54.711, 54.713, and

69.614(c) which are effective September

2, 1997.

FOR FURTHER INFORMATION CONTACT:

Valerie Yates, Legal Counsel, Common

Carrier Bureau, (202) 418–1500, or

Sheryl Todd, Common Carrier Bureau,

(202) 418–7400.

SUPPLEMENTARY INFORMATION: This is a

summary of the Commission’s Report

and Order adopted July 17, 1997, and

released July 18, 1997. The full text of

the Report and Order is available for

inspection and copying during normal

business hours in the FCC Reference

Center (Room 239), 1919 M St., NW,

Washington, DC. Pursuant to the

Telecommunications Act of 1996, the

Commission released a Notice of

Proposed Rulemaking and Order

Establishing a Joint Board, Federal-State

Board on Universal Service, CC Docket

96–45, on March 8, 1996 (61 FR 10499

(March 14, 1996)), a Recommended

Decision on November 8, 1996 (61 FR

63778 (December 2, 1996)), a Public

Notice on November 18, 1996 (61 FR

63778 (December 2, 1996)) seeking

comment on rules to implement

sections 254 and 214(e) of the Act

relating to universal service, and a

Notice of Proposed Rulemaking, CC

Docket 97–21, on January 10, 1997 (62

FR 2636 (January 17, 1997)). As required

by the Regulatory Flexibility Act (RFA),

the Report and Order contains a Final

Regulatory Flexibility Analysis.

Pursuant to section 604 of the RFA, the

Commission performed a

comprehensive analysis of the Report

and Order with regard to small entities

and small incumbent local exchange

carriers.

Summary of Report and Order:

A. Appointment of NECA as Temporary

Administrator

1. Appointment of NECA as

Temporary Administrator. In the

Universal Service Order, we adopted the

Joint Board’s recommendation to

appoint NECA the temporary

administrator of the universal service

support mechanisms, subject to the

condition that NECA make certain

changes to its governance that would

make it more representative of non-ILEC

interests.

2. Adoption of the January 10th

Proposal. We conclude that, as modified

below, NECA’s January 10th proposal to

establish a subsidiary with a separate

board of directors will satisfy the

condition established in the Universal

Service Order that NECA must comply

with the Joint Board’s directive to

provide ‘‘significant, meaningful

representation’’ for non-ILEC interests

in the temporary administration of the

new universal service support

mechanisms. We direct NECA to

establish USAC in such a way that

USAC will be permitted to advocate

positions before the Commission and its

staff only on administrative matters

relating to the universal service support

mechanisms. We further conclude that,

until January 1, 1998, NECA will

continue to administer the current

universal service, Lifeline Assistance,

and LTS programs. USAC shall prepare

for and administer the revised lowincome and high cost programs. We

therefore direct NECA to establish

USAC, in accordance with the January

10 proposal as modified by the specific

requirements of this Order, to

administer temporarily the universal

service support mechanisms for high

cost areas and low-income consumers,

as well as to perform certain designated

functions pertaining to the universal

service support mechanisms for schools

and libraries and rural health care

providers. We direct that USAC be
Federal Register / Vol. 62, No. 148 / Friday, August 1, 1997 / Rules and Regulations 41295

incorporated under the laws of

Delaware, as an independent, not-forprofit subsidiary corporation of NECA.

We further direct NECA to submit to the

Commission for approval proposed

articles of incorporation, bylaws, and

any documents necessary to incorporate

USAC, within 14 calendar days of

release of this Order, in order to ensure

prior to USAC’s incorporation that all

requirements of this Order have been

satisfied. The Commission will approve

or modify the proposed documents in a

Public Notice.

B. USAC Board of Directors

3. Size and Composition of USAC

Board. We direct NECA to establish the

USAC Board with 17 directors that will

represent a cross-section of industry and

beneficiary interests. The USAC Board

shall be comprised of: Three directors

representing ILECs; two directors

representing IXCs; one director

representing commercial mobile radio

service (CMRS) providers, which

includes cellular, Personal

Communications Services (PCS), paging,

and Specialized Mobile Radio (SMR)

companies; one director representing

CLECs; one director representing cable

operators; one director representing

information service providers; three

directors representing eligible schools;

one director representing eligible

libraries; one director representing

eligible rural health care providers; one

director representing low-income

consumers; one director representing

state telecommunications regulators;

and one director representing state

consumer advocates. The group of three

ILEC directors will consist of one

director representing the BOCs and

GTE, one director representing other

ILECs having annual operating revenues

in excess of $40 million, and one

director representing small ILECs

having annual operating revenues of $40

million or less to ensure fair

representation of the diversity of ILEC

interests. We conclude that any

individual, including a current member

of NECA’s Board of Directors, who is

nominated and appointed in accordance

with the procedures set forth below,

should be entitled to serve on the USAC

Board. Of the two IXC directors, one

director will represent IXCs with more

than $3 billion in annual operating

revenues, and one director will

represent IXCs with annual operating

revenues of $3 billion or less.

4. Selection and Appointment of

USAC Board Members. Members of the

industry or non-industry groups that

will be represented on the Board are

directed to submit their nominees

selected by consensus for USAC

directors to the Chairman of the Federal

Communications Commission within 14

calendar days of the publication of this

Order in the Federal Register. A copy of

nominations also should be filed with

the Secretary of the Commission. In

order for us to be able to confirm the

identity and credentials of the board

member nominees, each nomination

should be accompanied by professional

and biographical information, such as

the nominee’s resume or professional

biography. Only members of the

industry or non-industry groups that a

Board member will represent may

submit a nomination for that position

(e.g., only CMRS providers may submit

nominations for the CMRS position on

the Board and only IXCs with more than

$3 billion in annual operating revenues

may submit nominations for the IXC

Board member who will represent IXCs

of that size). In order to minimize

controversy surrounding the selection

and appointment of Board members and

to expedite the appointment process, we

strongly urge members of the industry

and other groups represented on the

Board (e.g., IXCs, CMRS providers,

schools) to nominate, by consensus, a

candidate for each position on the Board

who possesses substantial experience

in, and knowledge of,

telecommunications issues.

5. The Chairman of the Federal

Communications Commission will

review the nominations submitted to the

Commission by industry and nonindustry groups and select the members

of the USAC Board of Directors. If a

group fails to reach consensus on a

candidate to serve on the USAC Board

and instead submits the names of more

than one nominee for a single Board

member position, the Chairman of the

Federal Communications Commission

will select an individual or individuals

who will serve on the USAC Board.

Similarly, if an industry or beneficiary

group fails to submit even a single

nomination for a USAC Board member

position, the Chairman of the Federal

Communications Commission will

select an individual from the

appropriate industry or non-industry

group to serve on the USAC Board for

the duration of the board member’s

term.

6. We direct that, within 14 calendar

days of the Chairman’s selection of

USAC Board members, all USAC Board

members be appointed to the USAC

Board, and the USAC Board hold its

first meeting. Members of the USAC

Board will be appointed for two-year

terms. Board members may be reappointed for subsequent terms

pursuant to the initial nomination and

appointment process described above.

In the event that a Board member

vacates his or her seat prior to the

completion of his or her term, USAC

will notify the Chief, Common Carrier

Bureau (Bureau) of such vacancy and a

successor will be chosen pursuant to the

initial nomination and appointment

process described above.

C. Functions of USAC

7. In General. In connection with the

temporary administration of the

universal service support mechanisms

for schools and libraries and rural

health care providers, USAC will be

directly responsible for billing

contributors, collecting contributions to

the universal service support

mechanisms, and disbursing universal

service support funds. USAC also will

be responsible for administering the

universal service support mechanisms

for high cost areas and low-income

consumers. In addition, as discussed

below, the High Cost and Low Income

Committee of the USAC Board will be

responsible for implementing and

overseeing designated aspects of the

support mechanisms for high cost areas

and low-income consumers. USAC,

including members of the High Cost and

Low Income Committee, will be directly

accountable to the Commission for the

performance of their respective

responsiblities. Thus, the Commission

may take appropriate action including,

for example, directing the removal of

one or more directors or recommending

the performance of an audit by an

independent auditor, if the Commission

finds that USAC or the High Cost and

Low Income Committee is not

performing its functions in accordance

with Commission rules or if it is

determined that USAC’s administrative

expenses are unreasonable.

8. Billing and Collection. The billing

and collection process, for which USAC

will be solely responsible, involves

several steps: (1) Collection of

information regarding contributing

entities’ end-user telecommunications

revenues; (2) calculation of quarterly

universal service contribution factors;

(3) calculation of individual entities’

contributions; (4) billing of contributors;

and (5) receipt of universal service

contributions. USAC will perform these

functions for all of the universal service

support programs (i.e., high cost, lowincome, schools and libraries, and rural

health care providers).

9. For purposes of collecting

information regarding contributing

entities’ end-user telecommunications

revenues, USAC will distribute, receive,

and process the Universal Service

Worksheet (Worksheet), which directs

each contributing carrier or entity to
41296 Federal Register / Vol. 62, No. 148 / Friday, August 1, 1997 / Rules and Regulations

provide identification information and

information regarding end-user

telecommunications revenues on a

semi-annual basis. Following receipt of

the Worksheets, USAC will calculate the

total of all of contributing entities’

interstate, intrastate, and international

end-user telecommunications revenues.

This sum will represent the total

universal service contribution base and

will be used to calculate the quarterly

contribution factors.

10. Consistent with our

determinations in the Universal Service

Order, we conclude that during each

funding year, there will be four

quarterly sets of universal service

contribution factors. Universal service

contribution factors shall be based on

the ratio of quarterly projected costs of

the support mechanisms, including

administrative expenses, to the

applicable revenue base. USAC will

adjust the contribution factors for each

quarter based on quarterly demand for

services and administrative costs,

subject to any funding caps established

in the Universal Service Order.

11. Based on historic demand, the

High Cost and Low Income Committee

will determine quarterly projected

demand for support for the high cost

and low-income programs and submit

those projections, as well as the

underlying data used to calculate the

projections, to the Commission for

review at least 60 days before the start

of each quarter. Once these figures are

approved by the Commission, USAC

shall use these projections to calculate

the interstate and international end-user

telecommunications revenues

contribution factor. Similarly, the

Schools and Libraries and Rural Health

Care Corporations shall submit all

quarterly projections of demand for

their respective programs, including the

underlying data used to calculate the

projections, to the Commission for

review at least 60 days before the start

of each quarter. Once these figures are

approved by the Commission, USAC

shall use these projections to calculate

the quarterly interstate, intrastate, and

international end-user

telecommunications revenues

contribution factor.

12. At least 60 days before the start of

each quarter, USAC also will project its

administrative costs and submit those

projected costs to the Commission for

review for reasonableness. USAC shall

not allocate all of its administrative

costs to the high cost and low-income

programs’ quarterly cost projections.

USAC’s costs that can be directly

attributed to the schools and libraries or

rural health care programs should be

identified so that they can be included

in the projected administrative expenses

of the relevant programs. USAC’s joint

and common costs associated with

billing and collection of contributions or

disbursement of funds also should be

identified. One-fourth of USAC’s joint

and common costs should be included

in the projected administrative expenses

of the high cost, low-income, schools

and libraries, and rural health care

programs, respectively. Once these

figures are approved by the

Commission, USAC shall use the

projections of its costs to administer the

high cost and low-income programs

along with the approved High Cost and

Low Income Committee’s projections of

demand to calculate the interstate and

international end-user

telecommunications revenues

contribution factor. Similarly, at least 60

days before the start of each quarter, the

Schools and Libraries and Rural Health

Care Corporations will project their

quarterly administrative costs for the

respective Corporations and submit

those projected costs to the Commission

for review. Once these figures are

approved by the Commission, USAC

shall use these projections, USAC’s

projected administrative costs allocated

to the schools and libraries and to rural

health care programs, and the

Corporations’ approved projections of

demand to calculate the quarterly

interstate, intrastate, and international

end-user telecommunications revenues

contribution factor for the schools and

libraries and rural health care support

programs. In addition to the actual

projections of administrative expenses,

USAC and the Corporations must

submit to the Commission and the

Common Carrier Bureau the underlying

data used to calculate their projections.

By receiving USAC’s and the

Corporations’ projections of

administrative expenses and the data

supporting those projections, the

Commission will be able to determine

whether USAC’s and the Corporations’

administrative expenses are reasonable

and take appropriate action if it is

determined that their projected

expenses are unreasonable. In addition,

USAC will submit the latest total

revenue base information that it has

collected from the Worksheets to the

Commission at least 60 days before the

start of each quarter.

13. USAC must obtain Commission

approval of all projections of demand

and administrative expenses before

using them to calculate the contribution

factors and before applying the factors

to calculate individual contributions.

The quarterly projections of demand

and administrative expenses, total

revenue base information submitted by

USAC, the Committee, and the

Corporations, and the proposed

quarterly contribution factors will be

announced by the Commission in a

Public Notice and will be made

available on the Commission’s website.

If the Commission takes no action

within 14 days of the date of the Public

Notice announcing the projections of

demand and administrative expenses

and the contribution factors, then the

projections and contribution factors will

be deemed approved by the

Commission. The Commission reserves

the right to set projections of demand or

administrative expenses at amounts that

the Commission determines will serve

the public interest at any time within

the 14-day period following release of

the Commission’s Public Notice.

14. After the Commission approves

the projections of demand by the

Schools and Libraries and Rural Health

Care Corporations and the High Cost

and Low Income Committee and the

projected administrative expenses of the

Schools and Libraries and Rural Health

Care Corporations and USAC, USAC

will calculate and apply the quarterly

contribution factors to determine each

entity’s contribution and bill and collect

contributions from contributors. To

calculate an individual entity’s

quarterly contribution, USAC will

multiply the entity’s universal service

contribution base (i.e., its interstate,

intrastate, and international end-user

telecommunications revenues or its

interstate and international end-user

telecommunications revenues) by the

relevant universal service contribution

factor. USAC then will bill each

contributor for the amount of its

contribution. Contributors must remit

all contributions to USAC by the

contribution due date. USAC will file

with the Commission and the Bureau

periodic reports regarding the status of

contributors’ payments and failure to

make payments.

15. If, in any quarter, contributions

exceed universal service support

payments and administrative costs,

contributions for the following quarter

will be reduced by an amount that takes

into account the unused funds from the

previous quarter. Similar to our rules

governing NECA’s administration of the

TRS fund, if contributions in one

quarter are inadequate to meet demand,

USAC may request authority from the

Commission to borrow funds

commercially subject to any spending or

collection caps, with such debt secured

by future universal service

contributions. In such event,

contributions for subsequent quarters

will be increased by an amount to cover
Federal Register / Vol. 62, No. 148 / Friday, August 1, 1997 / Rules and Regulations 41297

the added costs associated with

borrowing funds.

16. Disbursements. In disbursing

universal service support in connection

with the support mechanisms for high

cost areas and low-income consumers,

USAC will review and process data

submitted by service providers and

disburse payments to eligible service

providers, as directed by the High Cost

and Low Income Committee. In

disbursing universal service support in

connection with the support

mechanisms for schools, libraries, and

rural health care providers, USAC will

be directed by the Schools and Libraries

and Rural Health Care Corporations to

disburse payments to service providers.

Eligible schools, libraries, and rural

health care providers will be instructed

to provide to USAC and the Schools and

Libraries Corporation or Rural Health

Care Corporation copies of a form

designating the services provided to the

school, library or health care provider

and the support amount due to the

service provider. We direct the Schools

and Libraries and Rural Health Care

Corporations to authorize USAC to

disburse the appropriate payment

amounts as quickly as possible, but no

later than 20 days following receipt of

the forms. We direct USAC to distribute

universal service support to eligible

service providers as quickly as possible,

but no later than 20 days following

receipt by USAC of the Corporations’

authorization to disburse funds under

the schools, libraries and rural health

care programs.

D. Creation and Functions of High Cost

and Low Income Committee

17. Consistent with Delaware law, we

direct the USAC Board to adopt bylaws

providing for the creation of a special

committee of its Board to be designated

the High Cost and Low Income

Committee, which will have the power

and authority to bind the USAC Board

on issues relating specifically to the

universal service support mechanisms

for high cost areas and low-income

consumers.

18. The Committee will consist of 10

USAC Board members, including seven

service provider representatives (i.e., the

three representatives of ILECs, two

representatives of IXCs, one

representative of CMRS providers, and

one representative of CLECs) and the

low-income, state consumer advocate,

and state telecommunications regulator

representatives described above.

19. The High Cost and Low Income

Committee will have the power and

authority to make binding decisions on

issues related to the administration of

the high cost and low-income support

mechanisms, as specifically delineated

in USAC’s bylaws, except on issues

related to USAC’s billing, collection,

and disbursement functions discussed

above. For example, the Committee will

have binding authority to make

decisions related to how USAC projects

demand for the high cost and lowincome programs, any forms needed for

the programs, and processing of such

forms. The Committee also will have

binding authority to set the amounts of

high cost and low-income support that

USAC will disburse to eligible

telecommunications carriers.

20. Based on the authority granted to

the administrator under Commission

universal service rules to audit

contributors and carriers that report data

to the administrator, we conclude that

the Committee should have the

authority to recommend the

performance of such audits of

telecommunications carriers receiving

universal service support, when its

members find it necessary to do so. We

note that the Commission

independently may direct the

performance of audits of

telecommunications carriers receiving

high cost or low-income universal

service support. In the event that a

majority of the members of the

Committee is unable to reach a decision,

the Chairman of the Committee is

authorized to cast an additional vote to

resolve the deadlock.

E. Creation of Schools and Libraries and

Rural Health Care Corporations

21. As noted above, we reconsider, on

our own motion, our decision to require

the administrator to select a

subcontractor to manage the application

process for eligible schools and libraries

and instead direct NECA to incorporate

two not-for-profit, unaffiliated

corporations that will be responsible for

administering the schools and libraries

and rural health care programs, except

with regard to those matters directly

related to billing, collection, and

disbursement of funds. Accordingly, as

soon as possible following release of

this Order, NECA shall incorporate the

Corporations as unaffiliated, not-forprofit corporations under the laws of

Delaware. The Corporations shall be

designated the Schools and Libraries

Corporation and Rural Health Care

Corporation. NECA initially shall

establish the Schools and Libraries and

Rural Health Care Corporations and

then take such steps as are necessary

and appropriate under Delaware and

federal law to make the Corporations

independent of, and unaffiliated with,

NECA and USAC. We direct NECA to

submit to the Commission for approval

the proposed articles of incorporation,

bylaws, and any documents necessary to

incorporate the Corporations, by July 31,

1997, in order to permit us to determine

prior to NECA’s establishing the

Corporations whether the requirements

of this Order have been satisfied.

22. To ensure continuity in, and

efficient administration of, the schools

and libraries and rural health care

programs, we conclude that the

Corporations should continue to

perform their designated functions even

after the date on which the permanent

administrator is appointed. In making

this determination, we reconsider the

scope of the functions that will be

performed by the temporary

administrator and by the permanent

administrator, which will be selected

pursuant to the FACA. Specifically, we

provide that both USAC and,

subsequently, the permanent

administrator will share responsibility

with the Corporations for administering

the schools and libraries and rural

health care programs as detailed in

section G herein. As reflected in those

sections, we assign to the Corporations

responsibility for administering

significant portions of the schools and

libraries and rural health care programs,

respectively, and assign to both USAC

and the permanent administrator

responsibility for collection and

disbursement functions associated with

the schools and libraries and rural

health care programs.

23. To the extent that we are

modifying the scope of the functions to

be performed by the temporary and

permanent administrators in connection

with the administration of the schools

and libraries and rural health care

programs in a manner that differs from

the scope defined in our Universal

Service Order, we also modify our

charge to the federal advisory committee

that will be recommending to the

Commission a permanent administrator.

Its task will now be to identify and

recommend as permanent administrator

the candidate that is best suited to

perform the functions that we have set

out in section C above. As a condition

of the appointment of a permanent

administrator, we also require that the

entity selected as the permanent

administrator take whatever steps as are

necessary or ordered by the Commission

to maintain the relationship and

division of responsibilities with the

Corporations as described in this Order.

F. Boards of Directors of Schools and

Libraries and Rural Health Care

Corporations

24. The Board of Directors of the

Schools and Libraries Corporation will
41298 Federal Register / Vol. 62, No. 148 / Friday, August 1, 1997 / Rules and Regulations

consist of seven members, including

three schools representatives, one

libraries representative, one service

provider representative, one

independent director, and the CEO of

the corporation. The three directors

representing schools and one director

representing libraries will be the same

directors as those representing schools

and libraries on the USAC Board. The

Chairman of the Federal

Communications Commission will

select, simultaneously with selection of

the USAC Board members, an

individual not affiliated with schools,

libraries, or service providers to serve as

an independent director of the Schools

and Libraries Corporation Board. An

individual not affiliated with schools,

libraries, or service providers is one

who, for example, does not have a direct

financial interest in schools, libraries, or

service providers and/or who is not

employed by one of these entities. The

USAC Board will select the service

provider representative who will serve

on the Schools and Libraries

Corporation Board from among the

service provider representatives on the

USAC Board within seven calendar days

of the USAC Board’s first meeting. Once

the service provider representative has

been appointed to the Schools and

Libraries Corporation Board, those six

Board members (including the

independent director and the schools

and libraries representatives) will

submit a CEO candidate to the

Chairman for approval. The chosen CEO

also will serve on the Board of the

Schools and Libraries Corporation. We

note that, unlike the other directors on

the Schools and Libraries Corporation’s

Board, the independent director and

CEO will not serve on the USAC Board.

25. The Board of Directors of the

Rural Health Care Corporation will

consist of five members, including two

rural health care representatives, one

service provider representative, one

independent director, and a CEO. One

of the rural health care provider

representatives also will be the director

representing rural health care providers

on the USAC Board. In a forthcoming

public notice soliciting nominations for

the USAC Board of Directors, interested

parties also will be instructed to

nominate a second rural health care

provider representative to serve only on

the Board of Directors of the Rural

Health Care Corporation. The Chairman

of the Federal Communications

Commission will select the second

representative of rural health care

providers who will serve only on the

Board of the Rural Health Care

Corporation simultaneously with the

selection of the members of the USAC

Board. The Chairman of the Federal

Communications Commission also will

select, simultaneously with the

selection of the USAC Board members,

an individual not affiliated with rural

health care providers or service

providers to serve as an independent

director of the Rural Health Care

Corporation Board. An individual not

affiliated with rural health care

providers or service providers is one

who, for example, does not have a direct

financial interest in rural health care

providers or service providers and/or

who is not employed by one of these

entities. The USAC Board will select a

service provider representative to serve

on the Rural Health Care Corporation’s

Board from among the service provider

representatives on the USAC Board

within seven calendar days of the USAC

Board’s first meeting. Once the service

provider representative has been

appointed to the Rural Health Care

Corporation Board, the four Board

members (including the independent

director and the rural health care

provider representatives) will submit a

CEO candidate to the Chairman for

approval. The chosen CEO also will

serve on the Board of the Rural Health

Care Corporation. We note that the

independent director, CEO, and one

rural health care provider representative

will not serve on the USAC Board.

26. We conclude that, with the

exceptions discussed above, the

Corporations’ directors representing

schools, libraries, health care providers,

and telecommunications service

providers should be the same directors

as those on the USAC Board

representing schools, libraries, rural

health care providers, and

telecommunications service providers.

Therefore, the four USAC Board

members representing schools and

libraries and the one USAC Board

member representing rural health care

providers will be appointed to the

Boards of Directors of the Schools and

Libraries and Rural Health Care

Corporation, respectively,

contemporaneously with their

appointment to the USAC Board.

27. Like the members of the USAC

Board, all of the Corporations’ Board

members shall be appointed for twoyear terms. Board members may be

reappointed for subsequent terms

pursuant to the appointment process

used initially to select the Corporations’

Board members, as discussed above. In

the event that a Corporation’s Board

member vacates his or her seat prior to

the completion of his or her term, the

Corporations will notify the Bureau of

such vacancy and a successor will be

chosen pursuant to the process used

initially to select the Corporation’s

Board members. Removal of members of

the Corporations’ Board must be

consistent with Delaware law and may

only occur with the approval of the

Chairman of the Federal

Communications Commission.

G. Functions of Schools and Libraries

and Rural Health Care Corporations

28. The Schools and Libraries and

Rural Health Care Corporations will

perform all functions relating to

administering the support mechanisms

for eligible schools and libraries and

rural health care providers, except those

directly related to billing and collecting

contributions and disbursing support, as

discussed above. In administering the

support mechanisms for eligible schools

and libraries and rural health care

providers, the Corporations must

comply with all Commission rules. The

Corporations’ functions will include,

but will not be limited to: (1)

administering the application process

for eligible schools, libraries, and rural

health care providers, including the

dissemination, processing, and review

of applications for service from schools,

libraries, and rural health care

providers; (2) creating and maintaining

a website on which applications for

services will be posted on behalf of

schools, libraries, and rural health care

providers seeking to attract the

competitive bids of service providers;

(3) performing outreach and public

education functions, by, for example,

communicating with interested parties

about the availability of, and

requirements for receiving, universal

service support for schools, libraries,

and rural health care providers; (4)

reviewing bills for services that are

submitted by schools, libraries, and

rural health care providers on which

service providers designate the amount

of universal service support they should

receive for services rendered and on

which schools, libraries, and rural

health care providers confirm that they

have received such services; (5)

submitting all quarterly projections of

demand and their own administrative

expenses to the Commission; (6)

informing USAC, based on the

information contained in the bills for

services provided, of the amount of

universal service support to be

disbursed to service providers; (7)

authorizing the performance of audits of

schools and libraries and rural health

care provider beneficiaries of universal

service support; (8) and any other

function relating to the administration

of the schools and libraries and rural

health care programs that is not
Federal Register / Vol. 62, No. 148 / Friday, August 1, 1997 / Rules and Regulations 41299

specifically assigned to USAC. With

regard to authorizing the performance of

audits of schools and libraries, we

clarify our decision in the Universal

Service Order that the Commission, in

consultation with the Department of

Education, should engage and direct an

independent auditor to conduct audits

of schools and libraries. Because it will

assume many of the functions related to

the administration of schools and

libraries program and will work closely

with eligible schools and libraries, we

conclude that the Schools and Libraries

Corporation, rather than the

Commission in consulation with

Department of Education, is better

suited to determine when the

performance of audits of schools and

libraries should occur. For this reason,

we conclude that the Schools and

Libraries Corporation, rather than the

Department of Education, should be

authorized, in consultation with us, to

engage and direct the individual audit

of schools and libraries.

29. Furthermore, we clarify our

provision in the Universal Service Order

that the administrator should project

school, library, and rural health care

provider demand for funds for the

purpose of calculating the universal

service contribution factors, and

monitor such demand for the purpose of

determining when, in the case of the

schools and libraries program, the $2

billion trigger has been reached, and

when, in the case of the rural health

care program, the $400 million annual

cap has been reached. We specify that

the Corporations, rather than USAC or

the permanent administrator, will

monitor demand for the purpose of

determining when the $2 billion trigger

has been reached in the case of the

schools and libraries program and when

the $400 million cap has been reached

in the case of the rural health care

providers program. Once the $2 billion

trigger has been reached, the Schools

and Libraries Corporation will be

responsible for implementing the rules

of priority under which it will

determine, consistent with our

Universal Service rules, the procedures

by which the remaining funds will be

disbursed under the schools and

libraries program. In addition, we clarify

that the Schools and Libraries and Rural

Health Care Corporations’

administrative expenses shall be

applied to their respective programs’

annual funding caps.

30. We also conclude that the Schools

and Libraries Corporation may review

and certify schools’ and libraries’

technology plans when a state agency

has indicated that it will be unable to

review such plans within a reasonable

time. We anticipate that consistent with

the Universal Service Order, the

Department of Education and the

Institute for Museum and Library

Services will recommend to the

Commission alternative review

measures. Upon receipt of such

recommendations, the Commission will

determine whether to adopt alternative

review measures. Furthermore, we

clarify our statement in the Universal

Service Order that the administrator

should classify schools and libraries as

urban or rural and use the discount

matrix adopted in the Universal Service

Order to set the discount rate that will

be applied to eligible interstate services

purchased by schools and libraries.

H. Implementation Issues

31. Creation and Scope of Authority

of USAC. As noted above, we direct

NECA to establish USAC as a separate

subsidiary. This separate subsidiary will

have separate directors, pursuant to the

requirements set forth above, and will

maintain separate books of account from

those of NECA’s other operations. We

direct that the appointment of NECA as

the temporary administrator will

become effective coincident with

NECA’s incorporation of the USAC

subsidiary and the Corporations. We

direct USAC to develop the necessary

database systems, hire and train

personnel, and discuss with

contributors the assessment of universal

service support requirements. We

emphasize that, in its role as the

temporary administrator, USAC may

engage only in activities directly related

to administration of the universal

service support mechanisms. We further

find that USAC Board and High Cost

and Low Income Committee meetings

shall be open to the public and shall be

held in Washington, DC., because this

city is easily accessible and also may be

particularly convenient for the many

interested parties that have offices or

representatives in the Washington, DC.

area. We also conclude that USAC

Board members shall be entitled to

receive reimbursement for expenses

directly incurred as a result of their

participation on the USAC Board.

32. Creation and Scope of Authority

of Schools and Libraries and Rural

Health Care Corporations. We direct

NECA to incorporate the Schools and

Libraries and Rural Health Care

Corporations and to take such steps as

are necessary to ensure that the

Corporations are unaffiliated with either

NECA or USAC once the Corporations

begin to perform their universal service

functions. We assign to the Schools and

Libraries Corporation and the Rural

Health Care Corporation the authority to

perform the functions designated in

section G. above. We anticipate that the

Corporations may need to engage in

transactions with either NECA or USAC

to enable them to begin operations as

quickly as possible. Such transactions

may include contracts for services of

NECA and/or USAC employees, loans

for the administration of the universal

service support mechanisms, and

transfers of assets. Start-up funds for the

Corporations may not come from the

TRS Fund or from TRS administrative

accounts. We expect, however, that the

Corporations will hire individuals other

than NECA or USAC employees to

perform functions unrelated to USAC’s

functions as described in section IV.H.,

such as reviewing schools’ and libraries’

technology plans. We also anticipate

that the Corporations may seek to

borrow start-up funds directly from

commercial lenders.

33. We emphasize that, in

administering the schools and libraries

and rural heath care programs, the

Corporations may engage only in

activities directly related to

administration of the program for which

each was created. We further find that

the Corporations’ Board meetings shall

be open to the public and shall be held

in Washington, DC, because this city is

easily accessible and also may be

particularly convenient for the many

interested parties that have offices or

representatives in the Washington, DC

area. We also conclude that the

Corporations’ Board members shall be

entitled to receive reimbursement for

expenses directly incurred as a result of

their participation on that Corporation’s

Board.

34. Intercorporate Transactions. As

noted above, we anticipate that USAC

and the Corporations may engage in

transactions with NECA. We expect that

NECA, USAC, and the Corporations will

engage in such transactions whenever

doing so would minimize expenses. We

direct NECA and USAC to provide such

services, including loaning start-up

funds, upon the request of the

Corporations on reasonable terms. As

with the Corporations’ start-up funds,

mentioned above, start-up funds for

USAC may not come from the TRS fund

or from TRS administrative expense

accounts. All transactions that occur

between NECA and USAC must be

conducted on an arm’s length basis. For

transactions between NECA and USAC,

NECA will be subject to the

Commission’s affiliate transaction rules.

We also direct NECA to revise its cost

allocation manual (CAM) to reflect the

formation of USAC.

35. Accounting and Auditing

Requirements. Concerns about fraud,
41300 Federal Register / Vol. 62, No. 148 / Friday, August 1, 1997 / Rules and Regulations

waste, and abuse occurring in universal

service support programs lead us to

impose specific accounting and auditing

requirements for USAC and the Schools

and Libraries and Rural Health Care

Corporations. Thus, USAC will

maintain books of account in

accordance with generally accepted

accounting principles (GAAP) that are

separate from NECA’s books of account.

Similarly, the Corporations will

maintain books of account in

accordance with GAAP that are separate

from USAC’s books of account and

separate from each other. We direct that

an audit be performed of USAC’s and

the Corporations’ books on an annual

basis by an independent auditor. In our

Accounting Safeguards Order, 62 FR

2918 (January 21, 1997), we established

specific audit procedures applicable to

separate subsidiaries of the BOCs under

section 272(d) of the Act. Because we

conclude that oversight of the

administration of the universal service

support mechanisms is necessary to

ensure the integrity of the support

mechanisms, we apply to USAC and the

Corporations audit requirements similar

to those contained in § 53.209 et seq. of

our rules. Before selecting the

independent auditor, USAC and the

Corporations shall submit to the staff of

the Bureau preliminary audit

requirements, including the proposed

scope of the audit and the extent of the

compliance and substantive testing. The

Bureau will review the preliminary

audit requirements to determine

whether they are adequate to meet the

audit objectives. The Bureau will make

any modifications that it deems

necessary to the audit requirements.

After the audit requirements have been

approved by the Bureau, USAC and the

Corporations each shall engage an

independent auditor to conduct an

agreed-upon procedures audit following

the procedures determined by the

Bureau. In making its selection, neither

USAC nor the Corporations shall engage

an independent auditor that has been

involved in designing the accounting or

reporting systems under review in the

audit. In addition, USAC and the

Corporations each shall require the

independent auditor selected to develop

a detailed audit program based on the

final audit requirements and submit

such audit program to the Bureau staff,

which will determine whether any

modifications are necessary for

purposes of incorporating the proposed

audit program into the final audit

program.

36. Because the audit program is an

agreed-upon procedures audit that will

be conducted to assure that USAC’s and

the Corporations’ administration of the

support mechanisms serves the public

interest, USAC and the Corporations

each shall require the independent

auditor it selects to inform the Bureau,

during the course of an audit, of any

revisions the auditor makes to the final

audit program or scope of the audit.

USAC shall require the independent

auditor to notify the Bureau of any

meetings with USAC or NECA in which

audit findings are discussed, so that the

Bureau can be kept apprised of audit

results and can ensure that the audit

program is conducted in accordance

with Commission rules. Similarly, the

Corporations shall require the

independent auditor to notify the

Bureau of any meetings with the

Corporations in which audit findings

are discussed. In addition, USAC and

the Corporations each shall require the

independent auditor selected to submit

to the Bureau any accounting or rule

interpretations that either USAC or the

Corporations find necessary to make to

complete the audit. By receiving the

above information, the Bureau will be

able to ensure that the auditor examines

areas the Bureau has determined require

review and that the Commission’s rules

are being followed.

37. USAC and the Corporations each

shall require the independent auditor

selected, within 60 days after the end of

the audit period, but prior to discussing

the audit findings with USAC, NECA, or

the Corporations, to submit a draft of the

audit report to the Bureau. We conclude

that submission of the audit report to

the Bureau in this time period will

permit an orderly release of the report

while also allowing the Bureau to assess

the validity of the report’s findings and

the adequacy of the work product. The

independent auditor may request

additional time to perform additional

audit work as recommended by the

Bureau staff. USAC and the

Corporations each shall require the

independent auditor selected to submit

the audit to USAC and the Corporations,

respectively, for their response to the

audit findings. Within 30 days after

receiving the audit report, USAC and

the Corporations each shall respond to

the audit findings and send a copy of

their response to the Bureau staff. USAC

and the Corporations also shall submit

to the Bureau staff any reply that the

independent auditor may provide

relating to USAC’s and the

Corporations’ response. In addition to

the annual audit, we direct that a closeout audit of USAC’s and the

Corporations’ operations should be

performed within six months of the

permanent administrator’s beginning

operations.

38. Recovery of Administrative

Expenses. The permanent

administrator’s, USAC’s, Schools and

Libraries Corporation’s, and Rural

Health Care Corporation’s annual

administrative expenses, which may

include, but are not limited to, salaries,

equipment costs, costs associated with

borrowing funds, operating expenses,

directors’ reimbursement for expenses,

and costs associated with auditing

contributors or support recipients,

should be commensurate with the

administrative expenses of programs of

similar size. Once projections of the

next quarter’s administrative expenses

have been approved by the Commission,

USAC shall disburse funds to the

Schools and Libraries and Rural Health

Care Corporations for administrative

expenses for the next quarter. The

Corporations shall submit to the

Commission projected quarterly budgets

at least 60 days prior to the start of every

quarter. The Corporations’ first

projected budgets will include

administrative expenses, including any

interest, incurred prior to the first

budget filing deadline. USAC will

disburse payments to the Corporations

on a quarterly basis. Each of the

Corporations will receive such

payments from the permanent

administrator under the same terms as

payments will be received from USAC

pursuant to this Order.

39. Nondisclosure of Information. The

Commission will have full access to all

data received by the permanent

administrator, USAC, and the

Corporations. Requests for Commission

nondisclosure can be made under

§ 0.459 of the Commission’s rules at the

time that the subject data is submitted

to USAC or the Corporations. As

required by our rules, such requests for

nondisclosure must contain a statement

of the reasons for withholding the

materials from disclosure (e.g.,

competitive harm) and the facts

supporting that statement. In any event,

all decisions regarding disclosure of

company-specific information will be

made by the Commission. Therefore, we

will require the administrator, USAC,

and the Corporations to keep

confidential all data obtained from

universal service contributors, not to

use such data except for purposes of

administering the universal service

support mechanisms, and not to

disclose such data in company-specific

form unless directed to do so by the

Commission.

40. Universal Service Worksheet. The

Universal Service Worksheet, which

directs each contributing carrier or
Federal Register / Vol. 62, No. 148 / Friday, August 1, 1997 / Rules and Regulations 41301

entity to provide, on a semi-annual

basis, identification information and

information regarding end-user

telecommunications revenues. After the

Worksheet has been approved by the

Office of Management and Budget

pursuant to the Paperwork Reduction

Act of 1995, copies of the Worksheet

may be obtained from USAC or the FCC

website. Carriers and contributing

entities are required to provide on the

Worksheet gross, end-user interstate,

intrastate, and international

telecommunications revenues

information. An officer of the

contributing carrier or entity must

certify to the truth and accuracy of the

Worksheet. The Worksheet will be

subject to verification by the

Commission, the permanent

administrator, or USAC at the discretion

of the Commission. Failure to file the

Worksheet or to submit required

contributions may subject the

contributor to the enforcement

provisions of the Act and any other

applicable law. The permanent

administrator or USAC will advise the

Commission of any enforcement issues

that arise and provide any suggested

response.

41. Bureau Authority to Modify

Reporting Requirements. Because it is

difficult to determine in advance

precisely the information that will be

needed to administer the new universal

service programs, the Bureau will have

delegated authority to waive, reduce, or

eliminate contributor reporting

requirements that may prove

unnecessary. The Bureau also will have

delegated authority to require any

additional contributor reporting

requirements necessary to the sound

and efficient administration of the

universal service programs.

42. Transition to Permanent

Administrator. We emphasize that our

appointment of NECA as the temporary

administrator of the universal service

support mechanisms subject to its

establishment of USAC and the

Corporations does not suggest that

NECA or USAC will be selected as the

permanent administrator, nor does it

suggest that NECA or USAC will receive

special consideration in the selection of

a permanent administrator. We

condition NECA’s appointment as

temporary administrator on NECA’s and

USAC’s agreeing to the requirements of

this Order, including making available,

if NECA is not appointed permanent

administrator, any and all intellectual

property, including, but not limited to,

all records and information generated by

or resulting from its performance as

temporary administrator, to whomever

the Commission directs, free of charge.

Similarly, although the Corporations

will continue to have the same role in

administering the schools and libraries

and rural health care programs once a

permanent administrator has been

appointed as they will have with the

temporary administrator, we

nevertheless require the Corporations,

as a condition of their role in the

administration process, to make

available to whomever the Commission

may direct, free of charge, any and all

intellectual property, including, but not

limited to, all records and information

generated by or resulting from their role

in administering the universal service

support mechanisms if their

participation in administering the

schools and libraries and rural health

care programs should discontinue at any

time. NECA, USAC, and the

Corporations must specify any property

they propose to exclude from the

foregoing category of property based on

the existence of such property prior to

NECA’s assumption of duties pursuant

to this Order. We note that a federal

advisory committee will be established

to recommend to the Commission a

permanent administrator of the

universal service support mechanisms.

Under the circumstances just described,

we also direct NECA, USAC, and the

Corporations to cooperate fully with the

permanent administrator’s efforts to

assume its duties.

Procedural Matters

I. Final Regulatory Flexibility Analyses

43. This Order achieves two main

goals. First, we amend our rules to

direct NECA to establish an

independently functioning subsidiary

(USAC) so that, as required by the

Universal Service Order, non-ILEC

interests are represented in the

administration of the universal service

support mechanisms. We further direct

NECA to create two unaffiliated

corporations to administer specific

aspects of the universal service support

mechanisms for schools and libraries

and rural health care providers,

respectively. For purposes of the

Regulatory Flexibility Act (RFA), we

certify, pursuant to 5 U.S.C.605 that

these actions will not have a significant

impact on a substantial number of small

entities. Second, in this Order, we set

forth the procedures that the permanent

administrator and temporary

administrator will follow to determine

the amount of required universal service

contributions and to collect such

contributions from carriers and other

affected entities. For this part of the

Order, we have prepared a Final

Regulatory Flexibility Analysis (FRFA),

as required by 5 U.S.C. 603.

Certification

44. In the NECA NPRM, the

Commission tentatively certified that

the rules it proposed to adopt in this

proceeding would not have a significant

economic impact on a substantial

number of small entities because the

proposed rules did not pertain to small

entities. We did not receive any

comments concerning our proposed

certification. For the reasons stated

below, we certify that the rules directing

NECA to create USAC to administer

temporarily certain aspects of the

universal service support mechanisms

and directing NECA to establish two

unaffiliated corporations to administer

specific aspects of the schools and

libraries and rural health care programs,

will not have a significant economic

impact on a substantial number of small

entities. This certification conforms to

the RFA, as amended by the Small

Business Regulatory Fairness Act of

1996 (SBREFA).

45. The NECA NPRM certified that no

regulatory flexibility analysis was

required because the proposed rule

changes applied only to NECA, and

NECA is not a small organization within

the meaning of the RFA. NECA is a nonprofit, quasi-governmental association

created to administer the Commission’s

interstate access tariff and revenue

distributions processes and is not

dominant in its field. Furthermore, we

found that the amendments to our rules

proposed in the NECA NPRM did not

apply to other ‘‘small business

concerns’’ because they proposed to

modify the composition of NECA’s

Board of Directors.

46. In the NECA NPRM, we

tentatively concluded that NECA’s

governance structure needed to become

more representative of the industry as

whole in order for NECA to be

appointed the temporary administrator.

In the Universal Service Order, we

appointed NECA temporary

administrator on the condition that

NECA make changes in its governance

that would render it more representative

of non-ILEC interests. This Order adopts

rules directing NECA to create an

independently functioning subsidiary

(i.e.., USAC) to temporarily administer

certain aspects of the universal service

support mechanisms and directing

NECA to create two unaffiliated

corporations to administer certain

aspects of the schools and libraries and

rural health care programs. We have not

received any comments requesting that

we modify our initial certification that

this rule change will not have a
41302 Federal Register / Vol. 62, No. 148 / Friday, August 1, 1997 / Rules and Regulations

significant economic impact on a

substantial number of small entities. We

therefore certify pursuant to section

605(b) of the RFA that the rules adopted

in this Order directing NECA to create

an independent subsidiary to administer

temporarily certain aspects of the

universal service support mechanisms

and directing NECA to create two

unaffiliated corporations to administer

certain aspects of the schools and

libraries and rural health care programs,

will not have a significant impact on a

substantial number of small entities.

Final Regulatory Flexibility Analysis

47. As required by section 603 of the

RFA, an Initial Regulatory Flexibility

Analysis (IRFA) was incorporated in the

254 NPRM. The Commission also

prepared an IRFA in conjunction with

the Recommended Decision, seeking

written public comment on the

proposals in the 254 NPRM and

Recommended Decision and included a

FRFA in the Universal Service Order. In

our NECA NPRM, we tentatively

certified that the rule amendments

under consideration would not have a

significant economic impact on a

substantial number of small entities. We

did not receive any comments

concerning the proposed certification.

The Commission’s FRFA in this Order

conforms to the RFA, as amended.

Need for and Objectives of This Order

and the Rules Adopted Herein.

48. The Commission is required by

sections 254(a)(2) and 410(c) of the Act,

as amended by the 1996 Act, to

promulgate these rules to implement

promptly the universal service

provisions of section 254. In the

Universal Service Order, we adopted

rules whose principal goal is to reform

our system of universal service support

mechanisms so that universal service is

preserved and advanced as markets

move toward competition. The rules

adopted in this Order clarify the

structure and responsibilities of the

temporary administrator and

unaffiliated corporations and describe

the steps these three entities must

undertake in administering the

universal service support mechanisms

adopted in the Commission’s Universal

Service Order.

Summary and Analysis of the

Significant Issues Raised by Public

Comments in Response to the IRFA.

49. No comments in response to the

IRFA in addition to those described in

the Universal Service Order were filed.

Description and Estimates of the

Number of Small Entities to Which the

Rules Adopted in This Report and Order

Will Apply.

50. In the FRFA to the Universal

Service Order, we described and

estimated the number of small entities

that would be affected by the new

universal service rules, including the

rule requiring telecommunications

carriers and other entities to contribute

to the universal service support

mechanisms. The rules adopted here,

which set forth the procedures by which

contributions will be made to the

universal service support mechanisms,

will apply to the same

telecommunications carriers and

entities affected by the universal service

rules. We therefore incorporate by

reference paragraphs 890–922 of the

Universal Service Order, which describe

and estimate the number of affected

telecommunications carriers and

entities.

Summary Analysis of the Projected

Reporting, Recordkeeping, and Other

Compliance Requirements and

Significant Alternatives and Steps

Taken to Minimize the Significant

Economic Impact on a Substantial

Number of Small Entities Consistent

with Stated Objectives

Summary of Projected Reporting,

Recordkeeping and Other Compliance

Requirements. 51. Section 254(d) states

‘‘that all telecommunications carriers

that provide interstate

telecommunications services shall make

equitable and nondiscriminatory

contributions’’ toward the preservation

and advancement of universal service.

The Universal Service Order FRFA

describes the obligation of

telecommunications carriers and other

providers of telecommunications

services to contribute to the universal

service support mechanisms and the

concomitant requirement that they

provide information regarding their enduser telecommunications revenues. This

Order establishes the specific

procedures that telecommunications

carriers and other providers of

telecommunications services will follow

in providing such information to the

administrator and temporary

administrator. To compute carrier

contributions, contributors must submit

a semi-annual universal service

Worksheet. The Worksheet will require

all contributors to submit information

relating to revenues derived from end

users for telecommunications or

telecommunications services to the

administrator and temporary

administrator of the support

mechanisms. Contributors also will be

required to submit a quarterly payment

to the administrator or temporary

administrator of the support

mechanisms. Contributors that provide

services to schools, libraries, and rural

health care providers may be eligible to

receive a credit against their

contributions. Contributors seeking a

credit must submit to the administrator

or temporary administrator additional

information regarding the services

provided at less than their pre-discount

price to receive the credit.

Approximately 5,000

telecommunications carriers and

providers will be required to submit

revenue information and payments. We

sought to limit the information

requirements to the minimum necessary

for evaluating and processing the

application and to deter possible abuse

of process. These tasks may require

some legal and accounting skills.

Significant Alternatives and Steps

Taken to Minimize Significant

Economic Impact on a Substantial

Number of Small Entities Consistent

with Stated Objectives. 52. Pursuant to

section 254(d), we concluded in the

Universal Service Order that carriers

with annual contributions of less than

$100 will be exempt from universal

service contribution and reporting

requirements. Nothing in this

proceeding leads us to alter our

conclusion in the FRFA of the Universal

Service Order that the de minimis

exception in section 254(d) may not

properly be interpreted to except, on the

basis of their size, small carriers and

other telecommunications providers

from the obligation to contribute to the

universal service support mechanisms

or to decrease the relative amount that

they must contribute.

Report to Congress

53. The Commission shall send a copy

of the FRFA and certification, along

with the Report and Order, in a report

to Congress pursuant to the SBREFA, 5

U.S.C. 801(a)(1)(A). A copy of the

certification also will be sent to the

Chief Counsel for Advocacy of the SBA.

Finally, a copy or a summary of this

FRFA and certification also will be

published in the Federal Register.

J. Effective Date

54. With respect to the rules adopted

herein that are not subject to the PRA,

we find good cause to depart from the

general requirement of 5 U.S.C. 553(d)

that final rules take effect not less than

30 days after their publication in the

Federal Register. We find good cause to

make the rules effective upon
Federal Register / Vol. 62, No. 148 / Friday, August 1, 1997 / Rules and Regulations 41303

publication in the Federal Register for

the reasons described below.

55. First, the speedy establishment of

both the USAC subsidiary and the

Corporations, is crucial to the

Commission’s effort to implement

promptly and effectively the new

universal service program mandated by

section 254 of the Act. The

Commission’s Universal Service Order

requires that the program begin by

January 1, 1998. To initiate the program,

and most notably the schools and

libraries program by that date, the USAC

subsidiary and the Corporations must

complete quickly a number of

administrative functions. USAC and the

Corporations may not begin to perform

these functions until certain preliminary

tasks, some of which may require

substantial, time-consuming

deliberations among interested parties,

are completed. Such preliminary tasks

include the incorporation of both USAC

and the Corporations and the

appointment of these entities’ Boards of

Directors.

56. We also find good cause to make

the rules governing establishment of the

USAC subsidiary and the Corporations

and appointment of these entities’

Boards of Directors effective upon

publication in the Federal Register. We

make this determination because the

rules adopted here are based, at least in

part, on the reform proposal that NECA

filed with the Commission on January

10, 1997, in which NECA expressed

willingness to immediately begin

establishing a subsidiary corporation to

administer temporarily the universal

service support mechanisms.

Furthermore, NECA has had notice of its

appointment as temporary administrator

since the release of the Universal

Service Order on May 8, 1997,

designating NECA as the temporary

administrator. Under these

circumstances, the purpose of 5 U.S.C.

§ 553(d), to ensure an adequate period

in which regulated entities may prepare

to comply with new rules, can be met

without affording the usual 30-day

period prior to the rules’ effective date.

For this and the other reasons described

above, we find good cause to make the

rules regarding the establishment of the

USAC subsidiary and the appointment

of its Board members effective upon

publication in the Federal Register.

Ordering Clauses

57. Accordingly, it is ordered that,

pursuant to sections 1, 4(i), 218–220,

254 and 403 of the Communications Act

of 1934, as amended, 47 U.S.C. 151,

154(i), 201–05, 218–20, 254 and 403,

that parts 54 and 69 of the

Commission’s rules, 47 CFR parts 54

and 69, are amended, as specified

below. The collections of information

contained within sections are

contingent upon approval by the Office

of Management and Budget.

58. It is further ordered that, pursuant

to section 553(d)(3) of the

Administrative Procedures Act, 5 U.S.C.

553(d)(3), except for §§ 54.709, 54.711,

54.713, and 69.614(c) subject to the

Paperwork Reduction Act (PRA), the

rules adopted in this order shall, for

good cause shown, become effective

August 1, 1997.

59. It is further ordered That,

pursuant to section 5(c)(1) of the

Communications Act of 1934, as

amended, 47 U.S.C. 155(c)(1), authority

is delegated to the Chairman of the

Commission to perform the following

functions: (1) To review nominations to

the USAC Board and select USAC Board

members; (2) to review the nomination

for the rural health care representative

and select the representative who will

serve only on the Rural Health Care

Board; (3) to select the independent

directors who will serve on the Schools

and Libraries and Rural Health Care

Corporation’s Boards; and (4) to review

and approve candidates for Corporation

CEO positions.

60. It is further ordered that, pursuant

to section 5(c)(1) of the Communications

Act of 1934, as amended, 47 U.S.C.

155(c)(1), authority is delegated to the

Chief, Common Carrier Bureau to

perform the following functions: (1) To

waive, reduce, or eliminate any

contributor reporting requirements that

prove to be unnecessary or to require

contributors to submit any additional

reporting requirements that the Bureau

deems necessary to the efficient

administration of the universal service

support mechanisms; and (2) to oversee

and to modify, as necessary, the annual

audit of USAC and the Schools and

Libraries and Rural Health Care

Corporations.

61. It is further ordered that, pursuant

to sections 1 and 4(i) of the

Communications Act of 1934, as

amended, 47 U.S.C. 151, 154(i), the

members of the industry or nonindustry groups that will be represented

on the Board are directed to submit their

nominees selected by consensus for

USAC directors to the Chairman of the

Federal Communications Commission

within 14 calendar days of the

publication of this Order in the Federal

Register.

List of Subjects

47 CFR Part 54

Universal service.

47 CFR Part 69

Communications common carriers.

Federal Communications Commission.

William F. Caton,

Acting Secretary.

Rule Changes

Parts 54 and 69 of title 47 of the Code

of Federal Regulations (CFR) are

amended 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, 214, and

254 unless otherwise noted.

2. Section 54.5 is amended by revising

the definition of ‘‘Administrator’’ and

adding the following new definitions in

alphabetical order to read as follows:

§ 54.5 Terms and Definitions.

* * * * *

Administrator. The term

‘‘Administrator’’ shall refer to the

National Exchange Carrier Association,

Inc. until the date that an independent

subsidiary of the National Exchange

Carrier Association, Inc. is incorporated

and has commenced the administration

of the universal service support

mechanisms. On that date and until the

permanent Administrator has

commenced the permanent

administration of the universal service

support mechanisms, the term

‘‘Administrator’’ shall refer to the

independent subsidiary established by

the National Exchange Carrier

Association, Inc. for the purpose of

temporarily administering the portions

of the universal service support

mechanisms described in § 69.616. On

the date that the entity selected to

permanently administer the universal

service support mechanisms

commences operations and thereafter,

the term ‘‘Administrator’’ shall refer to

such entity.

* * * * *

Contributor. The term ‘‘contributor’’

shall refer to an entity required to

contribute to the universal service

support mechanisms pursuant to

§ 54.703.

* * * * *

High Cost and Low Income

Committee. The term ‘‘High Cost and

Low Income Committee’’ shall refer to a

committee of the Board of Directors of

the Administrator’s independent

subsidiary that will have the power and

authority to bind the independent

subsidiary’s Board of Directors on issues

relating to the administration of the high
41304 Federal Register / Vol. 62, No. 148 / Friday, August 1, 1997 / Rules and Regulations

cost and low-income support

mechanisms, as described in § 69.615.

* * * * *

Rural Health Care Corporation. The

term ‘‘Rural Health Care Corporation’’

shall refer to the corporation created

pursuant to § 69.617 that shall

administer specified portions of the

universal service support mechanisms,

as described in § 69.618.

* * * * *

Schools and Libraries Corporation.

The term ‘‘Schools and Libraries

Corporation’’ shall refer to the

corporation created pursuant to § 69.617

that shall administer specified portions

of the universal service support

mechanisms, as described in § 69.619.

* * * * *

3. Section 54.504 is amended by

revising the first sentence of paragraph

(b)(1), revising paragraph (b)(2)(vii), and

revising the first sentence of paragraph

(b)(3) to read as follows:

§ 54.504 Requests for service.

* * * * *

(b) * * *

(1) Schools, libraries, and consortia,

including those entities wishing to

receive discounts for eligible services

under this subpart, shall submit

requests for services to the Schools and

Libraries Corporation. * * *

(2) * * *

(vii) The school, library, or

consortium including those entities has

a technology plan that has been certified

by its state, the Schools and Libraries

Corporation, or an independent entity

approved by the Commission.

(3) After posting a description of

services from a school, library, or

consortium of these entities on the

school and library website, the Schools

and Libraries Corporation shall send

confirmation of the posting to the entity

requesting services. * * *

* * * * *

4. Section 54.505 is amended by

revising introductory paragraphs (b)(3)

and (c) to read as follows:

§ 54.505 Discounts.

* * * * *

(b) * * *

(3) The Schools and Libraries

Corporation shall classify schools and

libraries as ‘‘urban’’ or ‘‘rural’’ based on

location in an urban or rural area,

according to the following designations.

* * * * *

(c) Matrix. The Schools and Libraries

Corporation shall use the following

matrix to set a discount rate to be

applied to eligible interstate services

purchased by eligible schools, school

districts, libraries, or library consortia

based on the institution’s level of

poverty and location in an ‘‘urban’’ or

‘‘rural’’ area.

* * * * *

5. Section 54.507 is amended by

revising the first sentence of paragraph

(a), the second sentence of paragraph

(c), removing the word ‘‘administrator’’

and adding, in its place, the word

‘‘Administrator’’ in paragraph (e), and

revising paragraphs (f)(1), and (f)(4) to

read as follows:

§ 54.507 Cap.

(a) Amount of the annual cap. The

annual cap on federal universal service

support for schools and libraries shall

be $2.25 billion per funding year, and

all funding authority for a given funding

year that is unused shall be carried

forward into subsequent years for use in

accordance with demand, with two

exceptions. * * *

* * * * *

(c) * * * The Schools and Libraries

Corporation shall maintain a running

tally of the funds already committed for

the existing funding year on the school

and library website.

* * * * *

(f) * * *

(1) The Schools and Libraries

Corporation shall post a message on the

school and library website, notify the

Commission, and take reasonable steps

to notify the educational and library

communities that commitments for the

remaining $250 million of support will

only be made available to the most

economically disadvantaged schools

and libraries (those in the two most

disadvantaged categories) for the next

30 days or the remainder of the funding

year, whichever is shorter.

* * * * *

(4) The Administrator shall notify the

Schools and Libraries Corporation of

any funds still remaining after all

requests submitted by schools and

libraries described in paragraphs (f)(2)

and (f)(3) of this section during the 30-

day period have been met. The Schools

and Libraries Corporation shall direct

the Administrator to allocate the

remaining available funds to all other

eligible schools and libraries in the

order in which their requests have been

received by the Schools and Libraries

Corporation, until the $250 million is

exhausted or the funding year ends.

6. Section 54.509 is amended by

removing the word ‘‘administrator’’ in

paragraph (a) and adding, in its place,

the word ‘‘Administrator,’’ and revising

paragraphs (b) and (c) to read as follows:

§ 54.509 Adjustments to the discount

matrix.

* * * * *

(b) Reduction in percentage discounts.

If the estimates schools and libraries

make of their future funding needs lead

the Schools and Libraries Corporation to

predict that total funding requests for a

funding year will exceed the available

funding, the Schools and Libraries

Corporation shall calculate the

percentage reduction to all schools and

libraries, except those in the two most

disadvantaged categories, necessary to

permit all requests in the next funding

year to be fully funded.

(c) Remaining funds. If funds remain

under the cap at the end of the funding

year in which discounts have been

reduced below those set in the matrices

above, the Administrator shall inform

the Schools and Libraries Corporation of

such remaining funds. The Schools and

Libraries Corporation then shall consult

with the Commission to establish the

best way to distribute those funds.

7. Section 54.516 is amended by

revising paragraph (b) to read as follows:

§ 54.516 Auditing.

* * * * *

(b) Production of records. Schools and

libraries shall produce such records at

the request of any auditor appointed by

a state education department, the

Schools and Libraries Corporation, or

any state or federal agency with

jurisdiction.

* * * * *

8. Section 54.603 is amended by

revising paragraph (b)(2), the first

sentence of paragraph (b)(3), paragraph

(b)(4), and paragraph (b)(5) to read as

follows:

§ 54.603 Competitive bidding.

* * * * *

(b) * * *

(2) The Rural Health Care Corporation

shall post each request for eligible

services that it receives from an eligible

health care provider on the

corporation’s website designated for this

purpose.

(3) After posting a description of

services from a health care provider on

the website, the Rural Health Care

Corporation shall send confirmation of

the posting to the entity requesting

services. * * *

(4) After selecting a

telecommunications carrier, the health

care provider shall certify to the Rural

Health Care Corporation that the

provider is selecting the most costeffective method of providing the

requested service or services, where the

most cost-effective method of providing

a service is defined as the method that

costs the least after consideration of the

features, quality of transmission,

reliability, and other factors that the
Federal Register / Vol. 62, No. 148 / Friday, August 1, 1997 / Rules and Regulations 41305

health care provider deems relevant to

choosing a method of providing the

required health care services. The health

care provider shall submit to the Rural

Health Care Corporation paper copies of

the responses or bids received in

response to the requested services.

(5) The confirmation from the Rural

Health Care Corporation shall include

the date after which the requester may

sign a contract with its chosen

telecommunications carrier(s).

9. Section 54.609 is amended by

revising the second sentence of

paragraph (b) to read as follows:

§ 54.609 Calculating support.

* * * * *

(b) * * * Absent documentation

justifying the amount of universal

service support requested for health care

providers participating in a consortium,

the Rural Health Care Corporation shall

not allow telecommunications carriers

to offset, or receive reimbursement for,

the amount eligible for universal service

support.

§ 54.701 Administrator of universal service

support mechanisms. [Amended]

10. Section 54.701 is amended by

removing the words ‘‘Temporary

Administrator’’ wherever they occur.

11. Sections 54.709, 54.711, 54.713,

and 54.715 are added to subpart H to

read as follows:

§ 54.709 Computations of required

contributions to universal service support

mechanisms.

(a) Contributions to the universal

service support mechanisms shall be

based on contributors’ end-user

telecommunications revenues and

contribution factors determined

quarterly by the Administrator.

(1) For funding the schools and

libraries and rural health care programs,

the subject revenues will be

contributors’ interstate, intrastate, and

international revenues derived from

domestic end users for

telecommunications or

telecommunications services. For

funding the high cost and low-income

programs, the subject revenues will be

contributors’ interstate and international

revenues derived from domestic end

users for telecommunications or

telecommunications services.

(2) The quarterly universal service

contribution factors shall be based on

the ratio of total projected quarterly

expenses of the universal service

support programs to total end-user

telecommunications revenues. The

Commission shall determine two

contribution factors, one of which shall

be applied to interstate and

international end-user

telecommunications revenues and the

other of which shall be applied to

interstate, intrastate, and international

end-user telecommunications revenues.

The Commission shall approve the

Administrator’s, the Schools and

Libraries Corporation’s, and the Rural

Health Care Corporation’s quarterly

projected costs of universal service

support programs, taking into account

demand for support and administrative

expenses. The total subject revenues

shall be compiled by the Administrator

based on information contained in the

Universal Service Worksheets described

in § 54.711(a)

(3) Total projected expenses for

universal service support programs for

each quarter must be approved by the

Commission before they are used to

calculate the quarterly contribution

factors and individual contributions.

For each quarter, the High Cost and Low

Income Committee or the permanent

Administrator once the permanent

administrator is chosen and the Schools

and Libraries and Rural Health Care

Corporations must submit their

projections of demand for the high cost

and low-income programs, the schools

and libraries program, and rural health

care program, respectively, and the basis

for those projections, to the Commission

and the Common Carrier Bureau at least

60 calendar days prior to the start of that

quarter. For each quarter, the

Administrator and the Schools and

Libraries and Rural Health Care

Corporations must submit their

projections of administrative expenses

for the high cost and low-income

programs, the schools and libraries

program and the rural health care

program, respectively, and the basis for

those projections to the Commission

and the Common Carrier Bureau at least

60 calendar days prior to the start of that

quarter. The projections of demand and

administrative expenses and the

contribution factors shall be announced

by the Commission in a Public Notice

published in the Federal Register and

shall be made available on the

Commission’s website. The Commission

reserves the right to set projections of

demand and administrative expenses at

amounts that the Commission

determines will serve the public interest

at any time within the 14-day period

following publication of the

Commission’s Public Notice. If the

Commission takes no action within 14

days of the date of the Public Notice

announcing the projections of demand

and administrative expenses, the

projections of demand and

administrative expenses, and

contribution factors shall be deemed

approved by the Commission. Once the

projections are approved, the

Administrator shall apply the quarterly

contribution factors to determine

individual contributions.

(4) The Administrator shall bill

contributors and collect contributions

on a quarterly basis.

(b) If the contributions received by the

Administrator in a quarter exceed the

amount of universal service support

program contributions and

administrative costs for that quarter, the

excess payments will be carried forward

to the following quarter. The

contribution factors for the following

quarter will take into consideration the

projected costs of the support

mechanisms for that quarter and the

excess contributions carried over from

the previous quarter.

(c) If the contributions received by the

Administrator in a quarter are

inadequate to meet the amount of

universal service support program

payments and administrative costs for

that quarter, the Administrator shall

request authority from the Commission

to borrow funds commercially, with

such debt secured by future

contributions. Subsequent contribution

factors will take into consideration the

projected costs of the support

mechanisms and the additional costs

associated with borrowing funds.

(d) If a contributor fails to file a

Universal Service Worksheet by the date

on which it is due, the Administrator

shall bill that contributor based on

whatever relevant data the

Administrator has available, including,

but not limited to, the number of lines

presubscribed to the contributor and

data from previous years, taking into

consideration any estimated changes in

such data.

§ 54.711 Contributor reporting

requirements.

(a) Contributions shall be calculated

and filed in accordance with the

Universal Service Worksheet. The

Universal Service Worksheet sets forth

information that the contributor must

submit to the Administrator on a semiannual basis. The Commission shall

announce by Public Notice published in

the Federal Register and on its website

the manner of payment and dates by

which payments must be made. An

officer of the contributor must certify to

the truth and accuracy of the Universal

Service Worksheet, and the Commission

or the Administrator may verify any

information contained in the Universal

Service Worksheet at the discretion of

the Commission. Inaccurate or

untruthful information contained in the

Universal Service Worksheet may lead
41306 Federal Register / Vol. 62, No. 148 / Friday, August 1, 1997 / Rules and Regulations

to prosecution under the criminal

provisions of Title 18 of the United

States Code. The Administrator shall

advise the Commission of any

enforcement issues that arise and

provide any suggested response.

(b) The Commission shall have access

to all data reported to the Administrator,

Rural Health Care Corporation, and

Schools and Libraries Corporation.

Contributors may make requests for

Commission nondisclosure of companyspecific information under § 0.459 of

this chapter at the time that the subject

data are submitted to the Administrator.

The Commission shall make all

decisions regarding nondisclosure of

company-specific information. The

Administrator, Rural Health Care

Corporation, and Schools and Libraries

Corporation shall keep confidential all

data obtained from contributors, shall

not use such data except for purposes of

administering the universal service

support programs, and shall not disclose

such data in company-specific form

unless directed to do so by the

Commission.

(c) The Bureau may waive, reduce, or

eliminate contributor reporting

requirements that prove unnecessary

and require additional reporting

requirements that the Bureau deems

necessary to the sound and efficient

administration of the universal service

support mechanisms.

§ 54.713 Contributors’ failure to report or

to contribute.

A contributor that fails to file a

Universal Service Worksheet and

subsequently is billed by the

Administrator shall pay the amount for

which it is billed. The Administrator

may bill a contributor a separate

assessment for reasonable costs incurred

because of that contributor’s filing of an

untruthful or inaccurate Universal

Service Worksheet, failure to file the

Universal Service Worksheet, or late

payment of contributions. Failure to file

the Universal Service Worksheet or to

submit required quarterly contributions

may subject the contributor to the

enforcement provisions of the Act and

any other applicable law. The

Administrator shall advise the

Commission of any enforcement issues

that arise and provide any suggested

response. Once a contributor complies

with the Universal Service Worksheet

filing requirements, the Administrator

may refund any overpayments made by

the contributor, less any fees, interest, or

costs.

§ 54.715 Administrator’s functions.

The Administrator shall have the

same functions as the independent

subsidiary set out in § 69.616 of this

chapter.

PART 69—ACCESS CHARGES

12. The authority citation for part 69

is revised to read as follows:

Authority: 47 U.S.C. 154, 201, 202, 203,

205, 218, 220, 254, 403.

13. Section 69.600 is added to read as

follows:

§ 69.600 Definitions.

High Cost and Low Income

Committee. The term ‘‘High Cost and

Low Income Committee’’ shall refer to a

committee of the Board of Directors of

the Administrator’s independent

subsidiary that will have the power and

authority to bind the independent

subsidiary’s Board of Directors on issues

relating to the administration of the high

cost and low-income support

mechanisms, as described in § 69.615.

Rural Health Care Corporation. The

term ‘‘Rural Health Care Corporation’’

shall refer to the corporation created

pursuant to § 69.617 that shall

administer specified portions of the

universal service support mechanisms,

as described in § 69.618.

Schools and Libraries Corporation.

The term ‘‘Schools and Libraries

Corporation’’ shall refer to the

corporation created pursuant to § 69.617

that shall administer specified portions

of the universal service support

mechanisms, as described in § 69.619.

14. Section 69.603 is amended by

revising paragraphs (c), (d), and (e),

removing paragraph (f), and

redsignating paragraphs (g), (h), and (i)

as (f), (g), and (h) to read as follows:

§ 69.603 Association functions.

* * * * *

(c) Upon the incorporation and

commencement of operations by the

association’s independent subsidiary

that, pursuant to § 69.613(a), will

administer temporarily specified

portions of the universal service support

mechanisms, the association shall no

longer administer the Universal Service

charge, including the direct billing to

and collection of associated revenues on

a monthly basis from interexchange

carriers pursuant to § 60.116 of this

chapter and the distribution of these

revenues to qualified telephone

companies based on their share of

expenses assigned to the Universal

Service Factor portion of the interstate

allocation pursuant to § 36.631 of this

chapter. Such functions shall be

assumed by the independent subsidiary

of the association as provided in

§ 69.613. Commencing on January 1,

1998, the billing and collection of

universal service support for high cost

areas shall be performed in a manner

consistent with § 54.709 of this chapter.

(d) Upon the incorporation and

commencement of operations by the

association’s independent subsidiary

that, pursuant to § 69.613, will

administer temporarily specified

portions of the universal service support

mechanisms, the association shall no

longer administer the Lifeline

Assistance charge, including the direct

billing to and collection of associated

revenues on a monthly basis from

interexchange carriers pursuant to

§ 69.117, and the distribution of these

revenues to qualified telephone

companies based on their share of

expenses assigned to the Lifeline

Assistance Fund pursuant to § 36.741 of

this chapter and of End User Common

Line charges associated with the

operation of § 69.104(j) through (l). Such

functions shall be assumed by the

independent subsidiary of the

association as provided in § 69.613.

Commencing on January 1, 1998, the

billing and collection of Lifeline support

shall be performed in a manner

consistent with § 54.709 of this chapter.

(e) Upon the incorporation and

commencement of operations by the

association’s independent subsidiary

that, pursuant to § 69.613, will

administer temporarily specified

portions of the universal service support

mechanisms, the association shall no

longer compute, in accordance with

§§ 69.105 and 69.612, the mandatory

Long Term Support payment of

telephone companies that are not

association Common Line tariff

participants, bill or collect the

appropriate amounts on a monthly basis

from such telephone companies, or

distribute Long Terms Support revenue

among association Carrier Common Line

tariff participants. Such functions shall

be assumed by the independent

subsidiary of the association as

provided in § 69.613. Commencing on

January 1, 1998, the computation,

billing, and collection of Long Term

Support shall be performed in a manner

consistent with § 54.303 of this chapter.

* * * * *

15. Sections 69.613 through 69.622

are added to subpart G to read as

follows:

§ 69.613 Temporary administrator of

universal service support mechanisms.

(a) The association shall establish an

independent subsidiary through which

the association shall administer

temporarily the portions of the universal

service support mechanisms described

in § 69.616 until the permanent

Administrator is established and ready
Federal Register / Vol. 62, No. 148 / Friday, August 1, 1997 / Rules and Regulations 41307

to commence operations. The

independent subsidiary shall be

incorporated under the laws of

Delaware and shall be designated the

Universal Service Administrative

Company. The association shall submit

the independent subsidiary’s proposed

articles of incorporation, bylaws, and

any other documents necessary to

incorporate the independent subsidiary

to the Commission by August 1, 1997

for review prior to the independent

subsidiary’s incorporation.

(b) As a condition of its appointment

as the temporary Administrator of the

universal service support mechanisms,

the association shall agree to make

available, if the association or its

independent subsidiary is not appointed

permanent Administrator, any and all

intellectual property, including, but not

limited to, all records and information

generated by or resulting from the

independent subsidiary’s temporary

administration of the universal service

support mechanisms, and to make such

property available to whomever the

Commission directs, free of charge.

Such property includes, but is not

limited to, databases, processing

systems, computer software programs,

lists, records, information, or equipment

created or purchased and used in the

temporary administration of the

universal service support mechanisms.

The association must specify any

property it proposes to exclude from the

foregoing types of property based on the

existence of such property prior to the

effective date of the association’s

appointment as the temporary

Administrator.

(c) As a further condition of its

appointment as the temporary

Administrator of the universal service

support mechanisms, the association

and the independent subsidiary must

provide services to the Corporations,

such as contracting for the services of

association or independent subsidiary

employees, loans or transfers of assets,

upon the request of the Corporations

and on reasonable terms.

§ 69.614 Independent subsidiary Board of

Directors.

(a) The independent subsidiary

described in § 69.613(a) shall have a

Board of Directors separate from the

association’s Board of Directors. Except

as expressly permitted, the association’s

Board of Directors shall be prohibited

from participating in the functions of

the independent subsidiary.

(b) The independent subsidiary’s

Board of Directors shall consist of 17

directors:

(1) Three directors shall represent

incumbent local exchange carriers, with

one director representing the Bell

Operating Companies and GTE, one

director representing ILECs (other than

the Bell Operating Companies) with

annual operating revenues in excess of

$40 million, and one director

representing ILECs (other than the Bell

Operating Companies) with annual

operating revenues of $40 million or

less;

(2) Two directors shall represent

interexchange carriers, with one director

representing interexchange carriers with

more than $3 billion in annual operating

revenues and one director representing

interexchange carriers with annual

operating revenues of $3 billion or less;

(3) One director shall represent

commercial mobile radio service

(CMRS) providers;

(4) One director shall represent

competitive local exchange carriers;

(5) One director shall represent cable

operators;

(6) One director shall represent

information service providers;

(7) Three directors shall represent

schools that are eligible to receive

discounts pursuant to § 54.501 of this

chapter;

(8) One director shall represent

libraries that are eligible to receive

discounts pursuant to § 54.501 of this

chapter;

(9) One director shall represent rural

health care providers that are eligible to

receive supported services pursuant to

§ 54.601 of this chapter;

(10) One director shall represent lowincome consumers;

(11) One director shall represent state

telecommunications regulators; and

(12) One director shall represent state

consumer advocates.

(c) The industry and non-industry

groups that will be represented on the

independent subsidiary’s Board of

Directors as specified in § 69.614(b)(1)

through (12) shall nominate by

consensus the independent subsidiary’s

directors. Each of these industry and

non-industry groups shall submit the

name of its nominee for a seat on the

independent subsidiary’s Board of

Directors, along with relevant

professional and biographical

information about the nominee, to the

Chairman of the Federal

Communications Commission within 14

calendar days of the publication of these

rules in the Federal Register. Only

members of the industry or nonindustry group that a Board member

will represent may submit a nomination

for that position.

(d) The Chairman of the Federal

Communications Commission shall

review the nominations submitted by

industry and non-industry groups and

shall select the independent

subsidiary’s Board of Directors. If an

industry or non-industry group does not

reach consensus on a nominee or fails

to submit a nomination for a position on

the independent subsidiary’s Board of

Directors, the Chairman of the Federal

Communications Commission shall

select an individual to represent such

group on the independent subsidiary’s

Board of Directors.

(e) The directors on the independent

subsidiary’s Board shall be appointed

for two-year terms and may be

reappointed for subsequent terms

pursuant to the initial nomination and

appointment process described in

paragraph (d) of this section. If a Board

member vacates his or her seat prior to

the completion of his or her term, the

independent subsidiary will notify the

Common Carrier Bureau of such

vacancy, and a successor will be chosen

pursuant to the initial nomination and

appointment process described in

paragraph (d) of this section

(f) The independent subsidiary’s

Board of Directors shall convene its first

meeting within 14 calendar days of the

appointment of the directors to the

independent subsidiary’s Board.

(g) All meetings of the independent

subsidiary’s Board of Directors shall be

open to the public and held in

Washington, D.C.

(h) Each member of the independent

subsidiary’s Board of Directors shall be

entitled to receive reimbursement for

expenses directly incurred as a result of

his or her participation on the

independent subsidiary’s Board of

Directors.

§ 69.615 High Cost and Low Income

Committee.

The independent subsidiary’s Board

of Directors shall require in its bylaws

the creation of a High Cost and Low

Income Committee with the power and

authority to bind the independent

subsidiary’s Board of Directors on issues

relating to the administration of the high

cost and low-income support

mechanisms, as specifically delineated

in the independent subsidiary’s bylaws.

The High Cost and Low-Income

Committee will consist of ten members:

the seven service provider

representatives (i.e., the representatives

listed in § 69.614(b)(1) through (4)) and

the low-income, state consumer

advocate, and state telecommunications

regulator representatives. In the event

that a majority of the members of the

Committee is unable to reach a decision,

the Chairman of the Committee is

authorized to cast an additional vote to

resolve the deadlock.
41308 Federal Register / Vol. 62, No. 148 / Friday, August 1, 1997 / Rules and Regulations

§ 69.616 Independent subsidiary

functions.

(a) The independent subsidiary shall

be solely responsible for administering

the universal service support

mechanisms for high-cost areas and

low-income consumers, including

billing contributors, collecting

contributions to the universal service

support mechanisms, and disbursing

universal service support funds. The

independent subsidiary also shall be

required to perform any other duties of

the Administrator that relate to the

billing, collection, and disbursement of

funds that are specified elsewhere in the

Commission’s universal service rules.

(b) With respect to the universal

service support mechanisms for schools,

libraries, and rural health care

providers, the independent subsidiary

shall be responsible for billing

contributors to the universal service

support mechanisms, collecting

contributions to the universal service

support mechanisms, and disbursing

universal service support funds within

20 days following receipt of

authorization to disburse such funds

from the Schools and Libraries

Corporation and Rural Health Care

Corporation.

(c) The independent subsidiary may

advocate positions before the

Commission and its staff only on

administrative matters relating to the

universal service support mechanisms.

(d) The independent subsidiary shall

maintain books of account separate from

those of the association. The

independent subsidiary’s books of

account shall be maintained in

accordance with generally accepted

accounting principles. The independent

subsidiary may borrow start-up funds

from NECA. Such funds may not be

drawn from the Telecommunications

Relay Services (TRS) fund or TRS

administrative expense accounts.

§ 69.617 Schools and Libraries

Corporation and Rural Health Care

Corporation.

(a) Schools and Libraries and Rural

Health Care Corporations. The

association shall incorporate two

unaffiliated corporations. The two

corporations shall be not-for-profit, nonstock corporations incorporated in the

state of Delaware. The corporations

shall be designated the Schools and

Libraries Corporation and the Rural

Health Care Corporation. After

incorporating the Schools and Libraries

Corporation and the Rural Health Care

Corporation, the association shall take

such steps as are necessary to make the

Corporations independent of, and

unaffiliated with, the association and

independent subsidiary. The association

shall submit to the Commission for

approval the proposed articles of

incorporation, bylaws, and any

documents necessary to incorporate the

Schools and Libraries Corporation and

Rural Health Care Corporation by

August 1, 1997. The Schools and

Libraries Corporation and Rural Health

Care Corporation should continue to

perform their designated functions, as

described in §§ 69.618 and 69.619, after

the date on which the permanent

Administrator is selected and

commences operations.

(b) Schools and Libraries

Corporation’s Board of Directors. The

Board of Directors of the Schools and

Libraries Corporation shall consist of

seven directors and will be composed as

follows:

(1) The three directors representing

eligible schools on the independent

subsidiary’s Board of Directors also

shall serve on the Board of Directors of

the Schools and Libraries Corporation;

(2) The director representing eligible

libraries on the independent

subsidiary’s Board of Directors also

shall serve on the Board of Directors of

the Schools and Libraries Corporation.

(3) One director representing one of

the categories of telecommunications

service providers on the independent

subsidiary’s Board of Directors also

shall serve on the Schools and Libraries

Corporation’s Board of Directors. The

independent subsidiary’s Board of

Directors shall select the

telecommunications service provider

representative who will serve on the

Schools and Libraries Corporation’s

Board of Directors within seven

calendar days of the first meeting of the

independent subsidiary’s Board of

Directors;

(4) One independent director who

does not represent schools, libraries, or

service providers shall be selected by

the Chairman of the Federal

Communications Commission to serve

on the Schools and Libraries

Corporation’s Board of Directors. The

Chairman of the Federal

Communications Commission will

select such an independent director

simultaneously with selection of the

independent subsidiary’s Board

members.

(5) The directors representing schools,

libraries, and service providers and the

independent director on the Schools

and Libraries Corporation’s Board of

Directors shall submit to the Chairman

of the Federal Communications

Commission a candidate to serve as the

Chief Executive Officer (CEO) of the

Schools and Libraries Corporation. The

chosen CEO shall serve on the Schools

and Libraries Corporation’s Board of

Directors.

(c) Rural Health Care Corporation’s

Board of Directors. The Board of

Directors of the Rural Health Care

Corporation shall consist of five

directors and will be composed as

follows:

(1) The director representing rural

health care providers on the

independent subsidiary’s Board of

Directors also shall serve on the Rural

Health Care Corporation’s Board of

Directors;

(2) An additional director

representing rural health care providers

also shall serve on the Rural Health Care

Corporation’s Board of Directors.

Interested parties shall submit

nominations for the additional director

representing rural health care providers

simultaneously with submitting

nominations for the independent

subsidiary’s Board of Directors, as

described in § 69.614(c). The Chairman

of the Federal Communications

Commission will select the additional

rural health care provider representative

simultaneously with the selection of the

members of the independent

subsidiary’s Board of Directors.

(3) One director representing one of

the categories of telecommunications

service providers on the independent

subsidiary’s Board of Directors also

shall serve on the Rural Health Care

Corporation’s Board of Directors. The

independent subsidiary’s Board of

Directors shall select the

telecommunications service provider

representative who will serve on the

Rural Health Care Corporation’s Board

within seven calendar days of the first

meeting of the independent subsidiary’s

Board of Directors;

(4) One independent director who

does not represent rural health care

providers or service providers shall be

selected by the Chairman of the Federal

Communications Commission to serve

on the Rural Health Care Corporation’s

Board of Directors. The Chairman will

select, simultaneously with selection of

the independent subsidiary’s Board of

Directors, the independent director to

serve on the Rural Health Care

Corporation’s Board of Directors;

(5) The directors representing rural

health care providers and service

providers and the independent director

on the Rural Health Care Corporation’s

Board of Directors shall submit to the

Chairman of the Federal

Communications Commission a

candidate to serve as the chief executive

officer (CEO) of the Rural Health Care

Corporation. The chosen CEO shall

serve on the Rural Health Care

Corporation’s Board of Directors.
Federal Register / Vol. 62, No. 148 / Friday, August 1, 1997 / Rules and Regulations 41309

(d) All of the Board members of the

Schools and Libraries Corporation and

Rural Health Care Corporation shall be

appointed for two-year terms. Directors

may be reappointed for subsequent

terms pursuant to the appointment

process used initially to select the

Corporations’ Boards of Directors

described in § 69.617 (b) and (c). In the

event that a director vacates his or her

seat prior to the completion of his or her

term, the Corporation will notify the

Common Carrier Bureau of such

vacancy and a successor will be chosen

pursuant to the initial nomination and

appointment process described in

§ 69.617(b) and (c). Removal of members

from the Board of the Schools and

Libraries Corporation or Rural Health

Care Corporation may only occur with

the approval of the Chairman of the

Federal Communications Commission.

(e) All Board of Directors meetings of

the Rural Health Care Corporation and

the Schools and Libraries Corporation

shall be open to the public and held in

Washington, D.C.

(f) Each member of the Board of

Directors of the Rural Health Care

Corporation and Schools and Libraries

Corporation shall be entitled to receive

reimbursement for expenses directly

incurred as a result of his or her

participation on such Board of

Directors.

§ 69.618 Rural Health Care Corporation

functions.

(a) The Rural Health Care Corporation

shall perform the following functions as

they relate to the support mechanisms

for eligible rural health care providers:

(1) Administering the application

process for rural health care providers,

including the dissemination, processing,

and review of applications for service

from rural health care providers;

(2) Creating and maintaining a

website on which applications for

services will be posted on behalf of rural

health care providers;

(3) Performing outreach and public

education functions;

(4) Reviewing bills for services that

are submitted by rural health care

providers on which service providers

designate the amount of universal

service support they should receive for

services rendered and on which rural

health care providers and confirm that

they have received such services;

(5) Monitoring demand for the

purpose of determining when the $400

million cap has been reached in the case

of the rural health care providers

program;

(6) Submitting to the Commission all

quarterly projections of demand and

administrative expenses, as described in

§ 54.709(a)(3) of this chapter;

(7) Informing the independent

subsidiary, as quickly as possible, but

no later than 20 days following the

Rural Health Care Corporation’s receipt

of the bills for services, of the amount

of universal service support to be

disbursed to service providers;

(8) Authorizing the performance of

audits of rural health care provider

beneficiaries of universal service

support; and

(9) Any other function relating to the

administration of the rural health care

program that is not specifically assigned

to the independent subsidiary.

(b) The Rural Health Care Corporation

shall maintain books of account separate

from those of the association, the

independent subsidiary, and the

Schools and Libraries Corporation. The

Rural Health Care Corporation’s books

of account shall be maintained in

accordance with generally accepted

accounting principles.

(c) The Rural Health Care Corporation

may borrow start-up funds from the

association or the independent

subsidiary, but such funds may not

come from the Telecommunications

Relay Services (TRS) fund or TRS

administrative expense accounts.

(d) The Rural Health Care Corporation

shall make available to whomever the

Commission directs, free of charge, any

and all intellectual property, including,

but not limited to, all records and

information generated by or resulting

from its role in administering the rural

health care program, if its participation

in administering the rural health care

program ends. The Rural Health Care

Corporation must specify any property

it proposes to exclude from the

foregoing types of property based on the

existence of such property prior to the

incorporation of the Rural Health Care

Corporation.

§ 69.619 Schools and Libraries

Corporation functions.

(a) The Schools and Libraries

Corporation shall perform the following

functions as they relate to the support

mechanisms for eligible schools and

libraries:

(1) administering the application

process for schools and libraries

including the dissemination, processing,

and review of applications for service

from schools and libraries;

(2) creating and maintaining a website

on which applications for services will

be posted on behalf of schools and

libraries;

(3) performing outreach and public

education functions;

(4) reviewing bills for services that are

submitted by schools and libraries and

on which service providers designate

the amount of universal service support

they should receive for services

rendered and on which schools and

libraries confirm that they have received

such services;

(5) monitoring demand for the

purpose of determining when the $2

billion trigger has been reached in the

case of the schools and libraries

program;

(6) submitting to the Commission all

quarterly projections of demand and

administrative expenses, as described in

§ 54.709(a)(3) of this chapter;

(7) informing the independent

subsidiary, as quickly as possible, but

no later than 20 days following the

Schools and Libraries Corporation’s

receipt of the bills for services, of the

amount of universal service support to

be disbursed to service providers;

(8) authorizing the performance of

audits of schools and libraries

beneficiaries of universal service

support; and

(9) any other function relating to the

administration of the schools and

libraries programs that is not

specifically assigned to the independent

subsidiary.

(b) The Schools and Libraries

Corporation shall implement the rules

of priority in accordance with

§ 54.507(f) of this chapter.

(c) The Schools and Libraries

Corporation may review and certify

schools’ and libraries’ technology plans

when a state agency has indicated that

it will be unable to review such plans

within a reasonable time.

(d ) The Schools and Libraries

Corporation shall classify schools and

libraries as urban or rural and use the

discount matrix established in

§ 54.505(c) of this chapter to set the

discount rate to be applied to services

purchased by eligible schools and

libraries.

(e) The Schools and Libraries

Corporation shall maintain books of

account separate from those of the

association, the independent subsidiary,

and the Rural Health Care Corporation.

The Schools and Libraries Corporation’s

books of account shall be maintained in

accordance with generally accepted

accounting principles.

(f ) The Schools and Libraries

Corporation may borrow start-up funds

from the association or the independent

subsidiary, but such funds may not

come from the Telecommunications

Relay Services (TRS) fund or TRS

administrative expense accounts.

(g) The Schools and Libraries

Corporation shall make available to
41310 Federal Register / Vol. 62, No. 148 / Friday, August 1, 1997 / Rules and Regulations

whomever the Commission directs, free

of charge, any and all intellectual

property, including, but not limited to,

all records and information generated by

or resulting from its role in

administering the schools and libraries

program, if its participation in

administering the schools and libraries

program ends. The Schools and

Libraries Corporation must specify any

property it proposes to exclude from the

foregoing types of property based on the

existence of such property prior to the

incorporation of the Schools and

Libraries Corporation.

§ 69.620 Administrative expenses of

independent subsidiary, Schools and

Libraries Corporation, and Rural Health

Care Corporation.

(a) The annual administrative

expenses of the independent subsidiary,

Schools and Libraries Corporation, and

Rural Health Care Corporation should

be commensurate with the

administrative expenses of programs of

similar size and may include, but are

not limited to, salaries of officers and

operations personnel, the costs of

borrowing funds, equipment costs,

operating expenses, directors’ expenses,

and costs associated with auditing

contributors or support recipients.

(b) The independent subsidiary,

Schools and Libraries Corporation, and

Rural Health Care Corporation shall

submit to the Commission projected

quarterly budgets at least 60 days prior

to the start of every quarter. The

Commission must approve the projected

quarterly budgets before the

independent subsidiary disburses funds

for administrative expenses to the

Schools and Libraries Corporation and

Rural Health Care Corporation. The

Schools and Libraries Corporation’s and

Rural Health Care Corporation’s

administrative expenses shall be paid

from the universal support mechanisms.

The administrative expenses of the

Schools and Libraries Corporation and

Rural Health Care Corporation shall be

deducted from their respective

programs’ annual funding, which is

capped at $2.25 billion in the case of the

schools and libraries program, as

established in § 54.507 of this chapter,

and capped at $400 million in the case

of the rural health care providers

program, as established in § 54.623 of

this chapter. The Schools and Libraries

Corporation and Rural Health Care

Corporation shall receive payments for

administrative expenses from the

permanent Administrator under the

same terms as they shall receive

payments pursuant to this paragraph.

§ 69.621 Audits of independent subsidiary,

Schools and Libraries Corporation, and

Rural Health Care Corporation.

The independent subsidiary, the

Schools and Libraries Corporation, and

the Rural Health Care Corporation shall

obtain and pay for annual audits

conducted by independent auditors to

examine their operations and books of

account to determine, among other

things, whether they are properly

administering the universal service

support mechanisms to prevent fraud,

waste, and abuse:

(a) Before selecting an independent

auditor, the independent subsidiary,

Schools and Libraries Corporation, and

Rural Health Care Corporation shall

submit preliminary audit requirements,

including the proposed scope of the

audits and the extent of compliance and

substantive testing, to the Common

Carrier Bureau Audit Staff;

(b) The Common Carrier Bureau Audit

Staff shall review the preliminary audit

requirements to determine whether they

are adequate to meet the audit

objectives. The Common Carrier Bureau

Audit Staff shall prescribe modifications

that shall be incorporated into the final

audit requirements;

(c) After the audit requirements have

been approved by the Common Carrier

Bureau Audit Staff, the independent

subsidiary, Schools and Libraries

Corporation, and Rural Health Care

Corporation each shall engage within 30

calendar days an independent auditor to

conduct the annual audit required by

this subsection. In making their

selections, the independent subsidiary,

Schools and Libraries Corporation, and

Rural Health Care Corporation shall not

engage any independent auditor who

has been involved in designing any of

the accounting or reporting systems

under review in the audit;

(d) The independent auditors selected

by the independent subsidiary, Schools

and Libraries Corporation, and Rural

Health Care Corporation to conduct the

annual audits shall develop detailed

audit programs based on the final audit

requirements and submit them to the

Common Carrier Bureau Audit Staff.

The Common Carrier Bureau Audit Staff

shall review the audit programs and

make modifications, as needed, that

shall be incorporated into the final audit

programs. During the course of the

audits, the Common Carrier Bureau

Audit Staff may direct the independent

auditors to take any actions necessary to

ensure compliance with the audit

requirements;

(e) During the course of the audits, the

independent auditors shall:

(1) Inform the Common Carrier

Bureau Audit Staff of any revisions to

the final audit programs or to the scope

of the audits;

(2) Notify the Common Carrier Bureau

Audit Staff of any meetings with the

independent subsidiary, the association,

Schools and Libraries Corporation, or

Rural Health Care Corporation in which

audit findings are discussed;

(3) Submit to the Chief of the

Common Carrier Bureau, any

accounting or rule interpretations

necessary to complete the audit.

(f) Within 60 calendar days after the

end of the audit period, but prior to

discussing the audit findings with the

independent subsidiary, the association,

Schools and Libraries Corporation, or

Rural Health Care Corporation, the

independent auditors shall be instructed

to submit drafts of the audit reports to

the Common Carrier Bureau Audit Staff;

(g) The Common Carrier Bureau Audit

Staff shall review the audit findings and

audit workpapers and offer its

recommendations concerning the

conduct of the audits or the audit

findings to the independent auditors.

Exceptions of the Common Carrier

Bureau Audit Staff to the findings and

conclusions of the independent auditors

that remain unresolved shall be

included in the final audit reports;

(h) Within 15 calendar days after

receiving the Common Carrier Bureau

Audit Staff’s recommendations and

making any revisions to the audit

reports, the independent auditors shall

submit the audit reports to the

respective audit subjects for their

responses to the audit findings. At this

time they must also send copies of their

audit findings to the Common Carrier

Bureau Audit Staff. The independent

auditors shall be provided additional

time to perform additional audit work

recommended by the Common Carrier

Bureau Audit Staff;

(i) Within 30 calendar days after

receiving the audit reports, the audit

subjects shall respond to the audit

findings and send copies of their

responses to the Common Carrier

Bureau Audit Staff. Any reply that the

independent auditors wish to make to

the audit subjects’ responses shall be

sent to the Common Carrier Bureau

Audit Staff as well as the audit subjects.

The audit subjects’ responses and the

independent auditors’ replies shall be

included in the final audit reports;

(j) Within 10 calendar days after

receiving the responses of the audit

subjects, the independent auditors shall

file with the Commission the final audit

reports;

(k) Based on the final audit reports,

the Chief of the Common Carrier Bureau

may take any action necessary to ensure

that the universal service support
Federal Register / Vol. 62, No. 148 / Friday, August 1, 1997 / Rules and Regulations 41311

mechanisms operate in a manner

consistent with the requirements of part

54 of this chapter, as well as such other

action as is deemed necessary and in the

public interest.

§ 69.622 Transition to the permanent

Administrator.

(a) If the association or the

independent subsidiary is not appointed

the permanent Administrator, the

association, independent subsidiary,

Schools and Libraries Corporation, and

Rural Health Care Corporation shall

cooperate fully in making the

permanent Administrator operational.

(b) The association and independent

subsidiary shall take all steps necessary

to maintain the division of

responsibilities between the association,

independent subsidiary, Schools and

Libraries Corporation, and Rural Health

Care Corporation as set forth in parts 54

and 69 of this chapter or such other

steps that the Commission may order.

[FR Doc. 97–20017 Filed 7–31–97; 8:45 am]

BILLING CODE 6712–01–U

DEPARTMENT OF TRANSPORTATION

Research and Special Programs

Administration

49 CFR Part 193

[Docket No. PS–151; Amdt. 193–14]

RIN 2137–AC 88

Liquefied Natural Gas Regulations—

Miscellaneous Amendments

AGENCY: Research and Special Programs

Administration (RSPA), DOT.

ACTION: Direct final rule.

SUMMARY: This direct final rule

incorporates safety requirements for

mobile and temporary Liquefied Natural

Gas (LNG) facilities by referencing the

National Fire Protection Association

(NFPA) Standard 59A (1996 edition),

Standard for the Production, Storage

and Handling of Liquefied Natural Gas

(LNG). This rule will reduce the burden

on the industry and state and federal

governments by eliminating waiver

requirements for mobile and temporary

LNG facilities. In this rule RSPA is

responding to the adverse comment

received on the mobile LNG facilities

requirements in the previously

published direct final rule [62 FR 8402;

2/25/97] by addressing a commenter’s

main concern that states in which

mobile LNG equipment is located must

be notified two weeks in advance. The

remainder of the requirements for

mobile LNG facilities are unchanged.

EFFECTIVE DATES: This direct final rule

takes effect October 15, 1997. The

incorporation by reference of certain

publications listed in the rule is

approved by the Director of the Federal

Register as of October 15, 1997. If RSPA

does not receive any adverse comment

or notice of intent to file an adverse

comment by September 2, 1997 the rule

will become effective on the date

specified. RSPA will issue a subsequent

notice in the Federal Register by

September 30, 1997 after the close of the

comment period to confirm that fact and

reiterate the effective date. If an adverse

comment or notice of intent to file an

adverse comment is received, RSPA will

issue a timely notice in the Federal

Register to confirm that fact and RSPA

would withdraw the direct final rule in

whole or in part. RSPA may then

incorporate the adverse comment into a

subsequent direct final rule or may

publish a notice of proposed

rulemaking.

ADDRESSES: Send comments in

duplicate to the Dockets Unit, Room

8421, Research and Special Programs

Administration, U.S. Department of

Transportation, 400 Seventh Street, SW,

Washington, DC 20590. Identify the

docket and notice number stated in the

heading of this notice. All comments

and docketed material will be available

for inspection and copying in Room

8421 between 8:30 a.m. and 5:00 p.m.

each business day.

FOR FURTHER INFORMATION CONTACT:

Mike Israni, telephone (202) 366–4571,

or e-mail: mike.israni@rspa.dot.gov,

regarding the subject matter of this

document, or the Dockets Unit (202)

366-4453, for copies of this document or

other information in the docket.

SUPPLEMENTARY INFORMATION:

Background

On February 25, 1997, RSPA

published a direct final rule (62 FR

8402) titled. ‘‘ Liquefied Natural Gas

Regulations—Miscellaneous

Amendments.’’ In that rule RSPA

updated the Liquefied Natural Gas

(LNG) regulations by replacing the

current ‘Flammable vapor-gas

dispersion protection’ method with a

method based on the ‘dense gas

dispersion (DEGADIS)’ model, and

replacing the current ‘Thermal radiation

protection’ method with a method based

on the ‘‘LNGFIRE’’ program model. In

addition, that final rule incorporated

safety requirements for mobile and

temporary LNG facilities by referencing

to the National Fire Protection

Association (NFPA) Standard 59A (1996

edition).

RSPA did not receive any comments

relative to the direct final rule

provisions for § 193.2057, Thermal

radiation protection, and § 193.2059,

Flammable vapor-gas dispersion

protection. Therefore, a separate

document [62 FR 36465; July 8, 1997]

confirming that the changes to Sections

193.2057 and 193.2059 in the direct

final rule became effective on June 25,

1997, was sent to the Federal Register.

RSPA received two comments on the

requirements for mobile and temporary

LNG facilities. One comment was from

the industry and a second was from an

individual employed by a state utility

commission. The industry comment,

from the largest independent natural gas

distribution company in New England,

applauded RSPA’s incorporation by

reference of the safety requirements for

mobile and temporary LNG facilities in

the NFPA standard 59A. This

commenter stated that the waiver

approval process for temporary LNG

facilities was burdensome because a

separate waiver request to state

regulators was required for each facility.

However, the commenter praised RSPA

for issuing a direct final rule which

would no longer require a waiver from

Part 193 requirements for these LNG

facilities if they comply with NFPA

59A.

The commenter from the state utility

commission expressed concern over

adopting the NFPA standard 59A by

reference for the mobile and temporary

LNG facilities. This commenter noted

that the specific provisions of the 16

alternative requirements for mobile LNG

facilities that were jointly developed by

New England area state representatives

were missing or were inadequately

addressed in the NFPA standard 59A.

This commenter stated that RSPA

should review the requirements in

greater detail, and ensure all 16 items

were addressed before adopting NFPA

59A.

RSPA, prior to initiating this

rulemaking, reviewed all 16 alternative

requirements and, with the exception of

one issue (namely, requiring an operator

to notify the State agency having

jurisdiction at least 2 weeks in advance),

determined that all requirements are

adequately addressed in NFPA standard

59A. The NFPA did not include this

requirement in standard 59A because it

is beyond the NFPA’s scope. RSPA did

not include it in the previous direct

final rule. However, RSPA is adding that

requirement in this direct final rule.

As described in the direct final rule

(February 25, 1997; 62 FR 8402), RSPA

is amending 49 CFR Part 193 by adding

a section 193.2019 on mobile and

temporary LNG facilities. Mobile and