FCC Press Release on Schools and Libraries Fund.
Re: Universal Service Support for Schools and Libraries; CC Docket No. 96-45, CC Report No. 98-17.
Date: June 12, 1998.
Source: FCC.

FCC Reforms Universal Service Support Mechanism for Schools and Libraries
(CC Docket No. 96-45)

The Commission has modified the mechanism by which schools and libraries will receive discounts on communications services. In an Order adopted today, the Commission revised the funding year for the schools and libraries support mechanism; froze the amount of funding at current rates; revised the disbursement rules to ensure that the most disadvantaged schools and libraries get priority for support; and made other administrative changes consistent with the intent of Congress.

Today's decision changes the funding year for the schools and libraries discount mechanism from a calendar year cycle (January 1 - December 31) to a fiscal year cycle (July 1 - June 30). In order for the transition to take effect immediately, the first funding cycle will be extended by six months. Applications submitted by schools and libraries during the initial 75-day filing window and approved for funding will, therefore, be funded through June 30, 1999. This approach will synchronize the schools and libraries support mechanism with the budgetary and planning cycles of most schools and libraries. In addition, it will align changes in universal service contribution levels with local telephone companies' annual access tariff filing schedule, thereby providing carriers with information needed to file tariffs.

Today's decision freezes the amount of funding for schools and libraries and rural health care providers at current rates. With regard to the schools and libraries support mechanism, the Commission directed the Universal Service Administrative Company (USAC) to collect and disperse no more than $325 million per quarter for the third and fourth quarters of 1998 and the first and second quarters of 1999. Funding collected for schools and libraries will be assessed, therefore, at a rate of 0.0075 -- that is, three-quarters of one percent of total telecommunications revenues. The Commission also directed USAC to collect and disperse no more than $25 million per quarter for the third and fourth quarters of 1998 for the rural health care mechanism. Although these revised funding amounts will not fully satisfy the estimated demand by the schools and libraries that completed applications during the first filing window, the Commission anticipates that its revised rules of priority will ensure that all eligible schools and libraries will receive full support for telecommunications services and Internet access, and the neediest applicants will receive support for internal connections. Schools and libraries had submitted approximately 30,000 completed applications, requesting an estimated $2.02 billion in discounts.

The rules of priority adopted today will allow for substantial and predictable support for schools and libraries and give preference to the most economically disadvantaged applicants. In cases where demand by schools and libraries exceeds the level of funding available, the Commission concluded that the best approach is to provide full support for recurring services, such as telecommunications services and Internet access, and to direct support for internal connections to the most disadvantaged schools and libraries. In addition, distribution of support to health care providers will be pro-rated if demand exceeds the support available for a given funding year.

Also in the Order, the Commission reiterated changes it is making to the administration of universal service, consistent with the will of Congress. In its May 8, 1998 Report to Congress, the Commission proposed that a single entity, USAC, administer all forms of universal service support. Today's Order notes that the Schools and Libraries Corporation (SLC), the Rural Health Care Corporation (RHCC), and USAC are directed to file with the Commission, for its approval, a joint plan of reorganization by July 1, 1998. The Commission also lowered the level of compensation for the officers and employees of SLC and RHCC, effective July 1, 1998.  The caps on annual collection for the schools and libraries and rural health care mechanisms remain unchanged at $2.25 billion and $400 million, respectively. During the first half of 1998, USAC was directed to collect $625 million for the schools and libraries mechanism and $50 million for the rural health care mechanism. Schools and libraries should begin to receive discounts this summer, and rural health care providers should begin to receive discounts later this year.

In a related action, the Common Carrier Bureau today announced the collection rates for the components of universal service that keep telephone rates affordable for low income consumers and those who live in rural and other high cost areas. The Bureau directed USAC to collect no more than $414.2 million for the high cost mechanism and no more than $124.7 million for the low income mechanism during the third quarter of 1998. During the first half of 1998, USAC was directed to collect no more than $865.2 million and $247.7 million for the high cost and low income mechanisms, respectively.

Action by the Commission, June 12, 1998, by Fifth Order on Reconsideration and Fourth Report and Order (FCC 98-120). Chairman Kennard, Commissioners Ness and Tristani, with Commissioner Furchtgott-Roth dissenting, Commissioner Powell dissenting in part, and Commissioners Ness, Furchtgott-Roth, Powell, and Tristani issuing separate statements.

News Media contact: Rochelle Cohen at (202) 418-0253.
Common Carrier Bureau contact: Irene Flannery at (202) 418-7383.