Before the
FEDERAL COMMUNICATIONS COMMISSION
Washington, D.C. 20554
Schools and Libraries Fund
Fund Size Requirements for Third Quarter 1998
CC Docket Nos. 96-45, 97-21
I. Introduction
| 1 47 C.F.R. § 54.709 (a)(3). |
The Schools and Libraries Corporation (SLC or Corporation) hereby submits this filing in accordance with section 54.709(a)(3) of the Federal Communications Commission's (FCC or Commission) rules.1 This filing details fund size requirements for Third Quarter 1998 for the Schools and Libraries Fund.
II. Schools and Libraries Fund
| 2 Federal-State Joint Board on Universal Service, CC Docket No. 96-45, Report and Order, 12 FCC Rcd 8776 (1997) (Universal Service Order). |
| 3 The term "school" includes individual schools, school districts, and consortia of schools and/or school districts. The term "library" includes individual library branches, library facilities, library systems, and library consortia. |
| 4 See 47 C.F.R. § 54.507(a). |
The Commission's May 7, 1997, Universal Service Order2 outlined a plan to ensure that all eligible schools, libraries3 and rural health care providers have affordable connections to the global telecommunications network. The plan created a fund to provide telecommunications services and to wire schools and libraries for access to the Internet. Pursuant to the Commission's rules,4 this fund is capped at $2.25 billion per [begin page 2] funding year. The Commission appointed the National Exchange Carrier Association (NECA) to temporarily administer, through an independent, non-profit subsidiary, billing and collection for support mechanisms which will fund the universal service programs. The Commission ordered NECA to incorporate an independent, non-profit subsidiary to perform these duties, Universal Service Administrative Company (USAC), and two, non-profit, unaffiliated corporations, the Schools and Libraries Corporation and the Rural Health Care Corporation (RHCC).
USAC will administer, temporarily, the universal service support mechanisms for high cost areas and low-income consumers, as well as billing, collection and disbursement functions for schools, libraries and rural health care providers. The SLC will provide all other functions for the schools and libraries program, such as administering the application process, creating and maintaining a Web Site to post services requested applications, and performing outreach and public education.
III. Projected Demand
The SLC has undertaken a statistically valid sampling of applications filed for the 1998 Funding Year in order to project the total amount of discounts requested in those applications. There is a 95 percent confidence level that the projection of total requests is within 5 percent of the actual total requests in the more than 30,000 applications that have been received. Based upon the analysis of this sample, we project that $2.02 billion in discounts have been requested by applicants who have filed through April 28th.
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IV. Estimates of SLC Expenses
A. Third Quarter 1998
In the Third Quarter of 1998, the SLC will begin processing the second round of applications -- for Funding Year 1999. Expenses for the SLC staff itself will be lower than the Second Quarter estimate because staffing remains below earlier budget projections. Start-up costs also will be lower as the largest initial phase of Web Site development and formulation of operating procedures will be completed in the Second Quarter. On the other hand, other contractor costs will be higher than the January Second Quarter estimate because the SLC will be processing both 1998 vendor invoices and 1999 funding applications.
There are some significant assumptions underlying our expense estimates. They include the following:
With these assumptions, expenses and interest income for the Third Quarter 1998 are estimated as follows (amounts in millions):
| 3Q 1998 Expenses | $4.2 |
| Expenses from USAC | .2 |
| Interest Income | -05 |
| Total | $4.4 |
| 5 Interest earned in the Third Quarter will depend on the size of collections and on the amount and rate of disbursements in July. Therefore, this represents a very conservative assumption. |
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As noted above, the SLC will be supporting two complete application cycles in 1998 - for Funding Years 1998 and 1999. The Web Site opened for applications for 1998 funding on January 30, 1998, and the 75-day window closed on April 15. Applications can continue to be filed after the close of the window, but we are seeing a significant decline in the volume of applications for 1998 funding since the close of the window. On July 1, 1998, we will begin receiving applications for funding for 1999. We expect to have funding commitments made before December 31, 1998 for 1999 funding requests for those who file within the first three to four months after July 1. Therefore, our Client Service Bureau will handle a new round of questions for 1999 later this year, as well as data entry for 1999 applications. Our Program Integrity Assurance unit is beginning pre-commitment review now of applications for 1998 funding and will begin review of applications for 1999 funding in the fall of 1998.
We have analyzed how our estimated Third Quarter expenses split out between support for the 1998 Funding Year and the 1999 Funding Year. We estimate that 35 percent of the $4.2 million we project to need for expenses in the Third Quarter will be for 1998 Funding Year-related activities and 65 percent for 1999 Funding Year. That proportion will be even more heavily weighted to Funding Year 1999 in the Fourth Quarter, and, of course, there will be additional costs for funding 1999 next year.
Exhibit I shows more detail behind the Third Quarter estimate.
B. Prior Period Adjustment
In the First Quarter 1998 filing that NECA did on SLC's behalf, there was an estimate of $564,000 for start-up expenses for 1997 to be paid to NECA in that quarter. The actual payment was $1.86 million. That filing also estimated SLC's First Quarter [begin page 5] 1998 expenses at $1.942 million. As we explained in our Second Quarter filing, NECA produced the First Quarter estimate (and the 1997 expenses as well) without a good sense of the likely demand for the program and without a detailed plan for program implementation. We are reviewing invoices submitted to the SLC by NECA and will provide final First Quarter expenses in a supplementary filing.
V. Next Filing
| 6 See 47 C.F.R. § 69,620(b). |
Pursuant to the Commission's ruler,6 the next filing will be on or before August 1, 1998.
Respectfully submitted,
___________________
Ira Fishman
Chief Executive Officer
Schools and Libraries Corporation
1023 15th Street, N.W., Suite 200
Washington, DC 20005
May 1, 1998
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Exhibit I
Schools & Libraries Corporation
Third Quarter 1998 Budget Estimate
(Amounts in thousands)
| SLC Operating | |
| Labor Costs | $450 |
| Travel, Supplies, Other | 100 |
| Contingency | 50 |
| Total | $600 |
| Non-Recurring Start-Up | $600 |
| NECA Operating | $3,000 |
| Total | $14,000 |
| Expenses SLC | $4,200 |
| Expenses from USAC | 200 |
| Interest Income SLC | (0)7 |
| Total | $4,400 |
| 7 Interest earned in the Third Quarter will depend on the size of collections and on the amount and rate of disbursements in July. Therefore, this represents a very conservative assumption. |
CERTIFICATE OF SERVICE
I hereby certify that a copy of the foregoing filing was served this 1st day of May 1998, by mailing copies thereof by United States Mail, first class postage paid or by hand delivery, to the persons listed below.
By:__________________
Matthew Harcourt
SLC
The following parties were served:
| Magalie Roman Salas* Secretary Federal Communications Commission 1919 M Street, N.W., Room 222 Washington, D.C. 20554 (Original and four copies) |
Cheryl Todd* Common Carrier Bureau Federal Communications Commission 2100 M Street, N.W., 8th Floor Washington, D.C. 20554 |
| International Transcription Service (ITS)* 1231 20th Street, N.W. Washington, D.C. 20037 |
Tim Peterson* Common Carrier Bureau Federal Communications Commission 2100 M Street, N. W., 8th floor Washington, D.C. 20554 |
| Chairman William E. Kennard* Federal Communications Commission 1919 M Street, N.W., Room 814 Washington, D.C, 20554 (2 copies) |
Maryanne McCormick* Common Carrier Bureau Federal Communications Commission 1919 M Street, N.W., 5th floor Washington, D.C. 20554 |
| Commissioner Susan Ness* Federal Communications Commission 1919 M Street, N.W., Room 832 Washington, D.C. 20554 (2 copies) |
Lisa Gelb* Common Carrier Bureau Federal Communications Commission 2100 M Street, N. W., 8th floor Washington, D.C. 20554 |
| Commissioner Harold Furchtgott-Roth* Federal Communications Commission 1919 M Street, N.W., Room 802 Washington, D.C. 20554 (2 copies) |
Irene Flannery* Common Carrier Bureau Federal Communications Commission 2100 M Street, N.W., 8th floor Washington, D.C. 20554 |
| Commissioner Michael Powell* Federal Communications Commission 1919 M Street, N.W., Room 844 Washington, D.C. 20554 (2 copies) |
Julia Johnson Chair, Florida Public Service Commission 2540 Shumard Oak Blvd. Gerald Gunter Building Tallahassee, FL 32399-0850 |
| Commissioner Gloria Tristani* Federal Communications Commission 1919 M Street, N.W., Room 826 Washington, D.C. 20554 (2 copies) |
|
| A. Richard Metzger* Chief, Common Carrier Bureau 1919 M Street, N.W., Room 500 Federal Communications Commission Washington, D.C. 20554 |
* - Hand delivered