[Federal Register Volume 73, Number 199 (Tuesday, October 14, 2008)]
[Notices]
[Pages 60689-60695]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-24300]


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FEDERAL COMMUNICATIONS COMMISSION

[WC Docket No. 05-195; FCC 08-189]


Comprehensive Review of the Universal Service Fund Management, 
Administration, and Oversight

AGENCY: Federal Communication Commission.

ACTION: Notice of Inquiry.

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SUMMARY: In this document, we seek comment on ways to further 
strengthen

[[Page 60690]]

management, administration, and oversight of the Universal Service Fund 
(``USF'' or ``Fund''), how to define more clearly the goals of the USF, 
and to identify any additional quantifiable performance measures that 
may be necessary or desirable. We also seek comment on whether and, if 
so, to what extent the Commission's oversight of the USF can be 
improved. In conducting this inquiry, we plan to build upon the 
comprehensive audit oversight conducted by the Commission's Inspector 
General in 2007.

DATES: Submit comments on or before November 13, 2008; reply comments 
on or before December 15, 2008.

ADDRESSES: You may submit comments, identified by WC Docket No. 05-195, 
by any of the following methods:
    <bullet> Federal eRulemaking Portal: http://www.regulations.gov. 
Follow instructions for submitting comments.
    <bullet> Federal Communications Commission's Web Site: http://www.fcc.gov/cgb/ecfs/. Follow instructions for submitting comments.
    <bullet> U.S. Postal Service first class, Express, and priority 
mail should be addressed to 445 12th Street, SW., Washington, DC 20554.
    <bullet> People with Disabilities: Contact the FCC to request 
reasonable accommodations (accessible format documents, sign language 
interpreters, CART, etc.) by e-mail: <a href="/cdn-cgi/l/email-protection#a3e5e0e0969397e3c5c0c08dc4ccd5"><span class="__cf_email__" data-cfemail="89cfcacabcb9bdc9efeaeaa7eee6ff">[email protected]</span></a> or phone: 202-418-
0530 or TTY: 202-418-0432.
    For detailed instructions for submitting comments, see the 
SUPPLEMENTARY INFORMATION section of this document.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Notice 
of Inquiry, WC Docket No. 05-195, adopted August 15, 2008 and released 
September 12, 2008. The complete text of this document is available for 
public inspection and copying during regular business hours at the FCC 
Reference Information Center, Portals II, 445 12th Street, SW., Room 
CY-A257, Washington, DC 20554. In addition, the complete text of this 
document is available at http://www.fcc.gov/headlines.html. The text 
may also be purchased from the Commission's duplicating inspection and 
copying during regular business hours at the contractor, Best Copy and 
Printing, Inc., Portals II, 445 12th Street, SW., Room CY-B402, 
Washington, DC 20554, telephone (202) 488-5300 or (800) 378-3160, 
facsimile (202) 488-5563, or via e-mail http://www.bcpiweb.com.

I. Introduction

    1. In this Notice of Inquiry (``NOI''), we seek comment on ways to 
further strengthen management, administration, and oversight of the 
Universal Service Fund (``USF'' or ``Fund''), how to define more 
clearly the goals of the USF, and to identify any additional 
quantifiable performance measures that may be necessary or desirable. 
We also seek comment on whether and, if so, to what extent the 
Commission's oversight of the USF can be improved. In conducting this 
inquiry, we plan to build upon the comprehensive audit oversight 
conducted by the Commission's Inspector General in 2007.
    2. Our primary goal in initiating this NOI is to ensure sufficient 
safeguards are in place for the USF to operate as Congress intended. In 
recent years, the Commission has undertaken a series of steps to 
improve and strengthen oversight, including support of the Inspector 
General's audit program. Still, we are concerned about the error rates 
the Inspector General identified. The Commission has already taken a 
number of steps to address the problems identified by the Inspector 
General and others, for example, implementing program-wide debarment 
measures in 2007, initiating recovery of any improperly disbursed 
funds, and executing a Memorandum of Understanding (``MOU'') with the 
USF Administrator. These recent steps have provided tangible benefits. 
For example, an independent auditor audited the Commission's finance 
and accounting activities and issued a positive opinion that identified 
no material weaknesses in these activities in fiscal years 2006 or 
2007. The independent auditor's opinion expressly covers the 
Commission's financial controls over the USF and represents a marked 
improvement over the period covering fiscal years 1999 through 2005. 
The importance and size of the USF demands constant scrutiny and 
assessment of the Commission's oversight efforts. We are initiating 
this NOI to continue our assessment, solicit input from the public, and 
develop additional rules and safeguards to protect the Fund.

II. Background

    3. As set forth in section 254 of the Communications Act of 1934, 
as amended (the ``Act''), universal service policy is intended to 
ensure the availability of affordable telecommunications services to 
consumers living in high-cost areas, low-income consumers, eligible 
schools and libraries, and rural health care providers. Section 254 
also required explicit federal universal service mechanisms and 
enlarged the scope of the universal service program. The universal 
service programs are funded by contributions remitted by 
telecommunications carriers providing interstate and international 
telecommunications services and from certain other providers of 
interstate telecommunications. The Universal Service Administrative 
Company (``USAC'' or ``USF Administrator''), a subsidiary of the 
National Exchange Carrier Association (``NECA'') and a private not-for-
profit corporation, was created to serve as the Administrator of the 
USF. The USF consists of four programs: (1) High-cost, providing 
financial support to eligible telecommunications carriers (``ETCs'') 
serving high-cost areas; (2) schools and libraries (``E-Rate''), 
providing discounted telecommunications services, Internet access, and 
internal connections to eligible schools and libraries; (3) low-income, 
assisting low-income customers with discounted installation and monthly 
telephone services; and (4) rural health care, providing discounted 
telecommunications and information services to rural health care 
providers.
    4. Many observers, including the Government Accountability Office 
(``GAO''), have recommended that the Commission take steps to improve 
oversight of the USF. In response, the Commission has taken action in 
previous proceedings to detect and deter waste, fraud, and abuse of the 
Fund. In addition, schools and libraries participating in the E-rate 
program have been subject to audits to determine compliance with 
program rules and requirements. Audits and investigations have 
uncovered issues ranging from poor program design to improper use of 
funds, including intentional efforts to defraud the program by 
unscrupulous actors. In many instances these audits and investigations 
have resulted in the referral of fraud cases to the Department of 
Justice (``DOJ''), and in settlements favorable to the Government and/
or criminal convictions or civil judgments against the wrongdoers. In 
addition, where wrongdoers have been convicted or subject to civil 
judgments, the Commission has debarred or proposed debarment of the 
wrongdoers consistent with our rules.
    5. More recently, the Commission has taken a series of steps to 
further bolster oversight of the USF. First, the Inspector General 
initiated 459 audits of beneficiaries and contributors. Based on the 
results of those audits, the Inspector General is now overseeing a 
second round of 650 audits (beneficiaries of Schools and Libraries and 
High Cost Fund programs only) that build upon experience from the first 
round. The

[[Page 60691]]

results of the Inspector General's audits have resulted in both 
recoveries of USF monies and enforcement action against entities that 
apparently violated Commission rules.
    6. Second, the Commission has strengthened its oversight and 
management of the USF Administrator. In June 2007, the Commission 
established an MOU with the USF Administrator to ensure greater clarity 
in administrative and management functions. The MOU established 
reporting requirements of key performance measurement data to the 
Commission, instructed the Administrator to take corrective action on 
all audit findings including recovery of all funds identified as 
improperly disbursed, and directed the Administrator to maintain 
effective internal controls over its operations. Specifically, the MOU 
directs the Administrator to implement an internal controls structure 
consistent with the requirements of Office of Management and Budget 
(``OMB'') Circular A-123. The Administrator is in the process of re-
assessing its internal controls framework. The results of this effort 
should enable the Administrator to develop and implement corrective 
action plans for any identified internal control weaknesses, which will 
help to prevent and reduce improper payments across all USF programs. 
As noted above, the improved internal control structure over the USF 
has helped the Commission receive unprecedented high marks from the 
outside independent auditor over the Commission's finance and 
accounting activities, including those governing the USF. More 
recently, the Commission directed the USF Administrator to establish an 
incentive-based system for its executives to reduce and prevent 
improper payments. Specifically, any bonuses the USF Administrator pays 
to its executives must be based at least in part on the USF 
Administrators' success at reducing and preventing improper payments.
    7. Third, the Commission established performance measures and goals 
for the USF and the USF Administrator. These performance measures and 
goals will be reported at least annually by the USF Administrator and 
will be summarized in the Commission's budget and financial submissions 
to Congress. In addition, the Commission required the USF Administrator 
to develop customer service standards and to prepare, review, and 
report data concerning the quality of service the USF Administrator 
provides to USF stakeholders. Like the USF Administrator's efforts to 
reduce and prevent improper payments, the quality of service it 
provides its stakeholders will also help form the basis for executive 
compensation.
    8. Fourth, in August 2007, the Commission adopted rules that 
address many of the problems previously identified with the USF 
program. The Commission's new rules establish rigorous document 
retention requirements for program participants and establish 
performance measurements to better manage the Administrator and the 
USF. These measurements, among other things, require the Administrator 
to provide specific performance metrics such as the number of program 
beneficiaries, rates of telephone subscribership in urban versus rural 
areas, and the average dollar amount of support. The Commission's new 
rules also create additional penalties for bad actors--specifically, 
the Commission can now debar from continued participation in the 
program, any party that defrauds any of the four disbursement programs.
    9. Fifth, the Commission has followed up on investigations by 
taking strong enforcement action against bad actors. Since January 
2007, the Commission has suspended or debarred 14 individuals or 
companies and proposed or issued 19 forfeitures or consent decrees 
against violators and other targets of our investigations. We expect 
that strong enforcement action and the deterrent effect of the 
Inspector General's comprehensive audit program will encourage 
compliance among program participants.
    10. Finally, although not the subject of this Notice of Inquiry, 
the Commission has taken steps toward more fundamental reform of the 
USF. For example, the Commission recently took action to rein in the 
explosive growth in high-cost universal service support disbursements 
by adopting an interim, emergency cap on the amount of high-cost 
support that competitive ETCs may receive. Further, on January 29, 
2008, the Commission released three notices of proposed rulemaking 
addressing proposals for comprehensive reform of the high-cost program. 
In the Identical Support Rule NPRM, the Commission tentatively 
concludes that it should eliminate the Commission's current ``identical 
support'' rule, which provides competitive ETCs with the same per-line 
high-cost support amounts that incumbent LECs receive. In the Reverse 
Auctions NPRM, the Commission tentatively concludes that reverse 
auctions offer several potential advantages over the current high-cost 
support distribution mechanisms. In the Joint Board Comprehensive 
Reform NPRM, the Commission is considering the recommendations of the 
Joint Board to establish three separate funds with distinct budgets and 
purposes: A broadband fund; a mobility fund; and a provider of last 
resort fund, and to adopt an overall cap on high-cost funding. The 
Commission is also considering all the principles in section 254(b) of 
the Act, including reasonable comparability, in the Tenth Circuit 
Remand proceeding. Further, building on the progress made by the 
Commission in the Comprehensive Review Order, the Commission is 
continuing to consider comprehensive USF reform proposals raised in, or 
in response to, the Comprehensive Review NPRM, including ways to 
simplify the E-Rate program.
    11. These oversight improvements have built upon the earlier 
measures taken by the Commission. In 1999, in the Commitment Adjustment 
Order, the Commission directed the USF Administrator to recover E-Rate 
funds committed in violation of the Act. In 2003, the Commission 
adopted a debarment rule and other measures for the E-Rate program to 
safeguard the Fund. In addition, as mentioned above, the Commission has 
taken other actions to detect and deter waste, fraud, and abuse of the 
Fund.

Summary of Audit Findings

    12. In the Comprehensive Review NPRM, we asked whether we should 
require audits of program participants. In the Comprehensive Review 
Order, we concluded that the Inspector General's compliance audits of 
contributions to the USF and distributions from the USF would provide 
appropriate audit oversight of the USF programs and that an additional 
annual audit requirement was unnecessary. Working under the Inspector 
General's supervision, independent auditors audited distributions from 
and contributions to the USF that occurred during the 2005 funding 
year. The auditors tested compliance with the Commission's rules and 
provided the basis for the Inspector General's statistical estimates of 
erroneous payments as defined in the Improper Payments Information Act 
of 2002 (``IPIA''). Under the IPIA, a program is at risk if the 
erroneous payment rate exceeds 2.5 percent and the total amount of 
erroneous payment is greater than $10 million. Under those criteria, 
the low-income, schools and libraries, and high-cost fund distributions 
were determined to be at risk. These audits represent the most rigorous 
review of USF beneficiaries and contributors since the Fund's 
inception. The auditors performed a random sample of 459 audits of

[[Page 60692]]

beneficiaries from all USF programs, as well as contributors, from 
2005. The Inspector General released a preliminary analysis on October 
3, 2007. The Office of Managing Director (``OMD'') subsequently 
directed the USF Administrator to propose steps it could take to reduce 
future improper payments based on the information gained from the 
Inspector General's audits. The USF Administrator submitted a report on 
December 31, 2007, and a follow-up report on February 28, 2008. In its 
reports, the USF Administrator proposes additional steps that it could 
take to enhance oversight.
    13. Contributors. Section 254 of the Act and the Commission's rules 
require all telecommunications carriers providing interstate and 
international telecommunications services and certain other providers 
of interstate telecommunications to contribute to the USF. Ninety 
contributors were randomly selected for the audits. The contribution 
improper payment rate was 5.50 percent. The independent auditors found 
noncompliance with the following rules: Rules associated with 
contributor ID; regulatory contact information; agent for service of 
process; Commission registration number; company's reported interstate 
revenues; company's reported interstate estimate; certification, and 
records maintained to support data.
    14. Low-income program. The low-income program provides discounts 
to qualified consumers by reducing installation fees and monthly 
charges for basic telephone service. Additional discounts are available 
to qualified consumers living on tribal lands. The estimated improper 
payment rate was 9.5 percent. Areas of noncompliance included 
violations of the following: Advertising supported services; rates; 
link up discount; support of toll election; no deposit for lifeline; 
determination of consumer qualification; eligibility verification; 
officer certification; procedures for qualification; accurate 
submission of Form 497; record keeping; and certification from 
resellers.
    15. Schools and libraries program. The E-Rate program provides 
discounts to schools and libraries for telecommunications services, 
Internet access, and internal connections. The auditors estimated the 
improper payment rate at 12.9 percent. The auditors found non-
compliance in several areas, such as recordkeeping; eligible services; 
using the correct discount; and entering into a contract too early in 
the application process.
    16. High-cost program. The high-cost program provides support for 
ETCs to ensure that consumers in all rural, insular, and high-cost 
areas have access to telecommunications services at rates that are 
reasonably comparable to those paid in urban areas. The estimated 
improper payment rate was 16.6 percent. The auditors found 
noncompliance with various rules, e.g., failure to accurately report 
historical revenue; failure to report the number of working loops; 
failure to submit forms; and failure to submit data.
    17. Rural health care program. The rural health care program 
provides discounts to rural health care providers to ensure they pay no 
more than their urban counterparts for their telecommunications needs 
in the provision of health care services. In addition, the program 
provides support to rural health care providers for access to the 
Internet. The estimated improper payment rate was 20.64 percent which 
was mainly due to record keeping and record production problems.
    18. In the Comprehensive Review Order, the Commission adopted rules 
that addressed many of the audit findings. For example, the audits 
disclosed widespread failure of beneficiaries to retain appropriate 
documentation to justify USF support. The document retention 
requirements adopted in the Comprehensive Review Order should remedy 
these problems. Other concerns raised by the audits, such as rule 
violations, may be prevented by better outreach by the USF 
Administrator, or other methods of educating program beneficiaries.

III. Discussion

    19. At the outset, we seek comment broadly on ways to further 
strengthen the administration, management, and oversight of the Fund. 
For example, we seek comment on what additional measures the Commission 
can implement to prevent improper USF payments, to safeguard the USF 
from waste, fraud, and abuse, to ensure that all providers are properly 
contributing the amounts they have collected from their subscribers to 
the USF, and to help operate the program in a more efficient, effective 
manner. Commenters should propose measures that the USF Administrator 
could take to prevent improper payments and collect all sums that 
should be paid to the fund and address the error rates identified in 
the Inspector General's audit results. Commenters should also propose 
measures that the Commission could take to prevent improper payments 
and address error rates, as well as measures that program participants 
can take to prevent improper payments and address error rates. We seek 
comment on whether the Commission should adopt an independent audit 
requirement for program beneficiaries and contributors. Commenters 
should address whether safeguards should be adopted uniquely for 
certain USF programs and contributions or if the safeguards should 
remain more or less uniform, and if so, why. Commenters should discuss 
the costs versus benefits of their proposals in specific, rather than 
general, terms. We recognize that the four USF disbursement programs 
and the contribution mechanism have many differences and perhaps need 
different, more closely tailored requirements to prevent waste, fraud, 
and abuse efficiently and effectively. In summary, we seek comment on 
whether different safeguards are necessary for the different aspects of 
the universal service program. We also use this as an opportunity to 
request that parties refresh the record on these issues in response to 
the Commission's 2005 Comprehensive Review NPRM.
    20. We expect to continue to rely on the expert oversight of the 
Commission's Inspector General to conduct and maintain a sufficient 
audit program. As noted above, the Commission's Inspector General 
completed the most comprehensive round of audits of the USF ever 
conducted. Based on these initial results, the Inspector General has 
initiated plans to significantly expand the audit program going-forward 
in order to provide more precise estimates of the error rates and more 
detailed information on the underlying causes of any high error rates. 
In Fiscal Year 2008, the Commission requested and received from 
Congress $21.48 million for the Inspector General's USF oversight 
efforts. The Commission has requested an additional $25.48 million in 
USF oversight funding for the Inspector General in Fiscal Year 2009. As 
the Inspector General completes audits of the program, we will continue 
to recover any improperly disbursed monies and work to implement 
appropriate corrective action in light of the audit results.
    21. We seek comment on whether the Commission should establish 
additional rules pertaining to document retention and enforcement. We 
note that most problems identified in the audit results were related to 
lack of documentation by program participants. In August 2007, the 
Commission adopted specific document retention rules for each USF 
mechanism. We seek comment on whether the audit results suggest that 
the Commission should take additional

[[Page 60693]]

steps related to document retention in order to help verify that USF 
monies are used for their intended purposes. If so, what steps should 
be taken? Should recipients of universal service funding be required to 
retain documents that they are currently not required to retain? 
Currently, the rules require that records be retained for five years 
for all aspects of the USF, except for the low-income program for which 
documents must be retained for as long as the recipient continues to 
receive supported service plus three additional years. Should 
applicants and service providers be required to retain records for a 
longer period? Should the Commission embrace additional enforcement 
methods, or adopt additional enforcement rules, to address these issues 
and, if so, what should they be?
    22. As part of our examination into enhancing our oversight and 
management of the USF, we seek comment on whether the Commission should 
take steps to more clearly define the goals of the federal universal 
service programs. We seek comment on whether we should adopt specific 
qualitative or quantitative goals beyond those policy objectives 
enumerated in section 254 of the Act. We ask parties that advocate 
additional goals to identify with specificity the goals they recommend 
we apply.
    23. In 2005 we sought comment on the utility of a permanent 
administrator of the USF. We specifically solicited comment from 
stakeholders on the option of eliminating USAC as the permanent 
administrator of the USF and thereby using a contractor (obtained using 
the FAR) to perform the administration of the USF. As a general matter, 
commenters either did not address this proposal or filed comments in 
support of retaining the status quo. We use this opportunity to refresh 
the record in this regard. Should the Commission continue to use a 
permanent administrator of the USF? Alternatively, the Commission could 
obtain the services of a contractor or contractors to perform the USF 
Administrator's functions. We seek comment on this option.
    24. Earlier this year, the Commission required the USF 
Administrator to establish customer service standards and to report 
regularly on the quality of service provided to USF stakeholders. At 
this time, the USF Administrator collects and reports the number and 
type of complaints received, the number of inquiries, the average 
number of business days to resolve complaints, and the percentage of 
complaints resolved within 20 business days. These specific data 
elements are currently under review and may change. We note that the 
USF Administrator is now required to base its executive compensation in 
part on the quality of service it provides stakeholders. In the 
meantime, we seek comment from USF stakeholders on additional metrics 
the USF Administrator should collect and report to illustrate the 
quality of service it provides stakeholders.
    25. We seek comment on what additional performance management 
techniques the Commission could adopt to improve the administration and 
operation of the USF. In August 2007, the Commission took initial steps 
to improve the performance management of the USF by adopting 
performance measures to help ensure the program operates in an 
efficient, effective manner. Most of these performance measures were 
``output measures.'' OMB and GAO have written extensively on the use of 
performance management techniques and the use of performance goals and 
measures in Federal programs. OMB and GAO have recommended greater 
reliance on other types of performance goals and measures, including 
``outcome'' and ``efficiency'' measures. Because we are committed to 
ensuring the USF operates in the manner intended by Congress, we seek 
comment on whether the Commission should establish additional 
performance goals and measures, or delete or revise any previously 
established performance goals and measures, and, more fundamentally, if 
the Commission has the authority to set long-term goals for the USF 
programs. If so, what additional performance goals and measures should 
be established, deleted, or modified, and, if so, why? Should 
performance measures be oriented toward the implicit social welfare 
objectives of the USF programs or tied only to accomplishment of the 
explicit requirements of the Act? If and when long-term program goals 
are met, does the Commission have the authority to terminate or 
significantly modify a USF program, without explicit Congressional 
direction?
    26. The GAO recently concluded that the internal control mechanisms 
over the High Cost program, including the use of audits, have 
``weaknesses.'' However, the GAO declined to make any specific 
recommendations for strengthening or improving the internal control 
structure over the program beyond recommending that the Commission 
``should identify areas of risk in its internal control environment and 
implement mechanisms that will help ensure compliance with program 
rules and produce cost-effective use of program funds.'' Nor did the 
GAO identify any specific internal control weaknesses beyond concluding 
that the existing internal controls ``may not fully address'' the 
concerns the GAO identified about cost-effectiveness, accuracy of cost 
and line count data, and the appropriateness of high cost support. We 
invite program stakeholders to identify areas of risk in the program's 
internal control environment and to propose mechanisms that will help 
ensure compliance with program rules and produce cost-effective use of 
program funds. We seek comment on additional measures we can take to 
enhance the internal control structure of the entire USF, including all 
four beneficiary support mechanisms and the contributions program. We 
seek comment on whether we should establish an independent audit 
requirement such as the one discussed in the 2005 NPRM. We note that 
the Commission's OIG may exercise its discretion to evaluate the 
accuracy of cost and line count data, which the GAO identified as a 
concern. We seek comment on whether the Commission should establish any 
additional measures to provide better guarantees in this area.
    27. Commenters should describe the costs and benefits of any such 
proposals, including the costs associated with any information 
collection effort. Commenters should address how the Commission should 
gather, process, and report on performance measures. Should the funds 
for such data collection and processing come from the USF? If so, how 
much USF money should be spent on an information collection effort for 
performance measurements?
    28. Commenters should also discuss whether short-term goals should 
flow from explicitly stated long-term goals and if the Commission has 
the responsibility to set short-term operational goals based upon the 
requirements in the Act. Should performance measurements of 
accomplishment of the long and short-term goals be at least in part the 
responsibility of the USF Administrator?
    29. We seek comment on any specific long-term and short-term goals 
of the USF programs. With respect to the high-cost program, we seek 
comment on any quantifiable measures that can be used in determining 
the program's success in meeting its goals. Commenters should discuss 
whether the Commission has the authority to adopt goals that are not 
specifically part of section 254 of the Act. Commenters should address 
whether high-cost program goals should

[[Page 60694]]

focus exclusively on broadband connections or develop a defined mix of 
support for broadband and traditional voice telecom. Commenters should 
discuss appropriate long-term goals for the schools and libraries 
program and what the Commission should do with respect to the schools 
and libraries program after such goals have been met. For example, if 
an appropriate long-term goal is a certain level of connectivity in the 
Nation's schools and libraries, what should the Commission do, and what 
authority does the Commission have, with respect to the program after 
that level of connectivity is met? With respect to the high-cost 
program, should the Commission create a low, mid, and high range set of 
options regarding services that could be provided by the program under 
current rules with less, the same, or more funding?
    30. We recognize that a specific rule may never be specific enough 
to adequately address all situations. In addition, a specific rule may 
not remain perfectly up-to-date, especially in such a dynamic industry 
as telecommunications, e.g., changes in technology, corporate 
structures, etc. We recognize the need of an administrator to be able 
to effectively implement our rules in such a fast-changing environment. 
Under Part 54 of our rules, USAC, as the administrator, is not 
permitted to make policy decisions without bureau guidance. Any party, 
including USAC and NECA, can file for such guidance at any time. Timely 
guidance would be important to the efficient and effective 
administration of the USF programs. We seek comment on the efficiency 
and effectiveness of this process for obtaining timely guidance with 
interpretation of our rules, especially with regard to the 
administration of the USF programs. Commenters are encouraged to 
provide specifics to the extent possible. For example, comments on 
actual experience(s) in receiving timely guidance on the interpretation 
of our rules would be most helpful. Commenters are also asked to state 
how any identified problem area can be improved.
    31. We seek comment on whether the Commission should establish 
additional rules pertaining to internal control requirements for 
program participants. For example, OMB Circular A-123 describes the 
internal control requirements applicable to Federal agencies. In this 
circular, OMB describes internal control, consisting of organization, 
policies, and procedures, as a method to help program and financial 
managers achieve results and safeguard the integrity of their programs. 
We seek comment on what steps, if any, the Commission should take with 
respect to the establishment of internal control measures for program 
participants. We also seek comment on whether the Commission's internal 
control measures should be improved with respect to the Universal 
Service Fund. Commenters should describe any internal control 
recommendations in detail, as well as the estimated costs and benefits 
of any such requirements. Commenters should discuss whether the 
Commission needs to have more direct oversight of the USF 
Administrator, with respect to the internal controls of the USF.
    32. We note that, under the Commission's rules, NECA performs 
certain activities and functions related to the USF. For example, NECA 
is the sole shareholder of the current USF Administrator, USAC. In 
addition, NECA collects certain data used to administer the high cost 
program. On a related note, NECA performs comparable administrative 
functions over the TRS fund. We seek comment on whether we should take 
additional measures concerning NECA's relationship to the current USF 
Administrator and its activities in the program. For example, should 
the Commission adopt any specific conflict of interest or other 
requirements pertaining to NECA (or its successors or assigns) and its 
relations with the USF Administrator? Should the Commission establish 
any requirements specifically designed to create greater transparency 
in the relationship between NECA and the USF Administrator? We seek 
comment on whether we should establish any rules governing the NECA 
board with respect to its relations with the USF Administrator, such as 
the sharing of information or the possibility of shared board members. 
USAC has proposed that the Commission consider whether USAC should be 
divested from NECA ownership. We seek comment on USAC's proposal.
    33. Since 2005, the Commission has required USAC to conduct its 
procurements consistent with the Federal Acquisition Regulation 
(``FAR''). We seek comment on ways that we can improve our oversight of 
the Administrator's procurement function. For example, should the 
Commission adopt rules that apply fully the socio-economic goals 
incorporated into the FAR, such as veteran's preferences and small 
business set-asides? We note that the USF Administrator is currently 
subject to an annual audit as specified in Part 54 of the Commission's 
rules and that, while this audit may cover the USF Administrator's 
procurement activities, such reviews and evaluations are not 
guaranteed. We therefore seek comment on the extent to which we should 
establish additional oversight of the USF Administrator's compliance 
with the FAR. We note that the MOU requires the USF Administrator to 
take greater steps to use performance-based contracting in its 
procurements. We seek comment on whether we should mandate a percentage 
of the USF Administrator's procurements to be performance-based. We 
also seek comment on other ways to ensure fairness and transparency in 
the USF Administrator beyond those provided for the in FAR. 
Alternatively, the Commission could handle certain or all procurements 
on behalf of the USF Administrator. We seek comment on whether the 
Commission should take a more active role in the USF Administrator's 
procurements, such as by handling all aspects of the procurement 
process for contracts exceeding $250,000. Commenters should discuss 
whether the Commission should impose additional substantive or 
reporting requirements on the Administrator.
    34. We seek comment on what additional measures, if any, the 
Commission should undertake with respect to the application process for 
each of the USF programs. For example, should the Commission revise any 
of the existing procedures or forms to help safeguard the process for 
obtaining program benefits? In particular, should additional 
information be required of program participants in the application 
process that would improve the detection of waste, fraud, or abuse, or 
that would enable the Commission to evaluate whether or how universal 
service goals are being met? We seek comment on these issues for each 
of the universal service mechanisms.
    35. We seek comment on ways in which we could ensure better 
accuracy in the certification and verification requirements in the low-
income program. In 2004, the Commission adopted federal verification 
and certification procedures and required states, under certain 
circumstances, to establish verification and certification procedures 
to minimize potential abuse in the low-income program. Each year, ETCs 
are required to verify the continued eligibility of a statistically 
valid sample of their Lifeline subscribers. ETCs in states that do not 
have state-based low-income programs must follow the certification and 
verification procedures set out in the Lifeline Order. ETCs in states 
with their own state-based low-income programs must follow the state-
established

[[Page 60695]]

verification procedures. We are concerned about the possibility of 
waste, fraud, and abuse in this program by consumers and 
telecommunications carriers, in federal default states as well as in 
other states. We therefore seek comment on how to improve the 
certification and verification requirements. Commenters should suggest 
ways in which the USF Administrator can better ensure that Lifeline and 
Link-Up low-income consumers are eligible for such programs after their 
initial enrollment. Commenters should also discuss whether different 
methods should be used to prevent waste, fraud, and abuse in federal 
default states and in states that are not federal default states.

IV. Procedural Matters

A. Initial Paperwork Reduction Act Analysis

    36. This NOI does not contain proposed or modified information 
collections subject to the Paperwork Reduction Act of 1995 (``PRA''), 
Public Law 104-13. This NOI does not contain any new or modified 
``information collection burden for small business concerns with fewer 
than 25 employees,'' pursuant to the Small Business Paperwork Relief 
Act of 2002, Public Law 107-198.

B. Ex Parte Rules

    37. This is as a ``permit-but-disclose'' proceeding subject to the 
requirements under section 1.1206(b) of the Commission's rules. Ex 
parte presentations are permissible if disclosed in accordance with 
Commission rules, except during the Sunshine Agenda period when 
presentations, ex parte or otherwise, are generally prohibited. Persons 
making oral ex parte presentations are reminded that a memorandum 
summarizing a presentation must contain a summary of the substance of 
the presentation and not merely a listing of the subjects discussed. 
More than a one- or two-sentence description of the views and arguments 
presented is generally required. Additional rules pertaining to oral 
and written presentations are set forth in section 1.1206(b).

C. Filing Requirements

    38. Comments and Replies. Pursuant to sections 1.415 and 1.419 of 
the Commission's rules, interested parties may file comments on or 
before the dates indicated on the first page of this document. Comments 
may be filed using: (1) The Commission's Electronic Comment Filing 
System (``ECFS''), (2) the Federal Government's eRulemaking Portal, or 
(3) procedures for filing paper copies.
    39. Electronic Filers: Comments may be filed electronically using 
the Internet by accessing the ECFS: http://www.fcc.gov/cgb/ecfs or the 
Federal eRulemaking Portal: http://www.regulations.gov. Filers should 
follow the instructions provided on the Web site for submitting 
comments. For ECFS filers, if multiple docket or rulemaking numbers 
appear in the caption of this proceeding, filers must transmit one 
electronic copy of the comments for each docket or rulemaking number 
referenced in the caption. In completing the transmittal screen, filers 
should include their full name, U.S. Postal Service mailing address, 
and the applicable docket or rulemaking number. Parties may also submit 
an electronic comment by Internet e-mail. To get filing instructions, 
filers should send an e-mail to <a href="/cdn-cgi/l/email-protection#e287818491a2848181cc858d94"><span class="__cf_email__" data-cfemail="fc999f9a8fbc9a9f9fd29b938a">[email protected]</span></a>, and include the following 
words in the body of the message, ``get form.'' A sample form and 
directions will be sent in response.
    40. Paper Filers: Parties who choose to file by paper must file an 
original and four copies of each filing. If more than one docket or 
rulemaking number appears in the caption of this proceeding, filers 
must submit two additional copies for each additional docket or 
rulemaking number. Filings can be sent by hand or messenger delivery, 
by commercial overnight courier, or by first-class or overnight U.S. 
Postal Service mail (although we continue to experience delays in 
receiving U.S. Postal Service mail). All filings must be addressed to 
the Commission's Secretary, Office of the Secretary, Federal 
Communications Commission.
    <bullet> The Commission's contractor will receive hand-delivered or 
messenger-delivered paper filings for the Commission's Secretary at 236 
Massachusetts Avenue, NE., Suite 110, Washington, DC 20002. The filing 
hours at this location are 8 a.m. to 7 p.m. All hand deliveries must be 
held together with rubber bands or fasteners. Any envelopes must be 
disposed of before entering the building.
    <bullet> Commercial overnight mail (other than U.S. Postal Service 
Express Mail and Priority Mail) must be sent to 9300 East Hampton 
Drive, Capitol Heights, MD 20743.
    <bullet> U.S. Postal Service first-class, Express, and Priority 
mail should be addressed to 445 12th Street, SW., Washington, DC 20554.
    41. Availability of Documents. Comments, reply comments, and ex 
parte submissions will be available for public inspection during 
regular business hours in the Commission Reference Center, Federal 
Communications Commission, 445 12th Street, SW., CY-A257, Washington, 
DC 20554. These documents will also be available free online, via ECFS. 
Documents will be available electronically in ASCII, Word, and/or Adobe 
Acrobat.
    42. Accessibility Information. To request information in accessible 
formats (computer diskettes, large print, audio recording, and 
Braille), send an e-mail to <a href="/cdn-cgi/l/email-protection" class="__cf_email__" data-cfemail="fb9d9898cecbcfbb9d9898d59c948d">[email protected]</a> or call the Commission's 
Consumer and Governmental Affairs Bureau at (202) 418-0530 (voice), 
(202) 418-0432 (TTY). This document can also be downloaded in Word and 
Portable Document Format (``PDF'') at: http://www.fcc.gov.

V. Ordering Clauses

    43. Accordingly, it is ordered that, pursuant to sections 1, 4(i) 
and (j), 9, 205, and 303(r) of the Communications Act of 1934, as 
amended, 47 U.S.C. 151, 154(i), 154(j), 159, 205, and 303(r), this 
Notice of Inquiry is hereby adopted.

Federal Communications Commission.
Marlene H. Dortch,
Secretary.
 [FR Doc. E8-24300 Filed 10-10-08; 8:45 am]
BILLING CODE 6712-01-P


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