Divided FCC Reports to Congress On Schools & Libraries Plans

(May 11, 1998)  The Federal Communications Commission, in a partisan vote on Friday, issued a report to Congress on universal service and the Schools & Libraries Corporation.  The FCC proposed to merge the SLC and RHCC into the FCC's Universal Service Administration Company.  The Report also claimed that only $1.67 Billion of the planned $2.25 Billion would be raised this year without further increases in universal service contributions.

The Report came in response to criticism from Congress, and a GAO Report, that the FCC exceeded its legal authority by creating the Schools & Libraries Corporation, and the Rural Health Care Corporation, to administer the universal service provisions of Section 254 of the Telecommunications Act of 1996.

If the FCC has its way, this new combined corporation will be beyond the oversight of Congress, outside of the budgetary process, immune from the laws that apply to other government agencies, and free from public scrutiny.

The three Democrats on the Commissioner voted in favor of the Report (Chairman Kennard, Ness, and Tristani), while the two Republicans voted against it (Furchtgott-Roth and Powell).

Restructuring of FCC Corporations

The FCC Report proposed that the Schools & Libraries Corporation (SLC) and the Rural Health Care Corporation (RHCC) be merged with the FCC's Universal Service Administration Company (USAC).  The merger would result in the USAC being "the single entity responsible for the administration of the universal service support mechanisms for schools, libraries, and rural health care providers."  (See, Report, ¶ 8.)

The Universal Service Administration Company (USAC) is currently part of the National Exchange Carrier Association (NECA).  The NECA is run by local exchange carriers.   Hence, the FCC Report proposes that the "USAC be divested from NECA."   (See, Report, ¶ 13.)

The new consolidated USAC will be "accountable to the Commission."   (See, Report, ¶ 9.)  Moreover, "the functions, assets, employees, rights, and liabilities of SLC and RHCC (would) be transferred to USAC by January 1, 1999."  (See, Report, ¶ 10.)

The combined corporation would carry on with the old SLC as one of its divisions.   This would include "the transfer of employees' contractual rights, benefits, and obligations of SLC and RHCC, including the assumption of contracts for services that SLC and RHCC have entered into with subcontractors in connection with the performance of their administrative responsibilities.  (See, Report, ¶ 11.)

The new USAC would be responsible to the FCC.  The Report proposes that "administrative decisions made by USAC would be reviewable by the Commission."    Decisions of the USAC could be reviewed by the FCC either if "appealed by affected parties" or "at any time on the Commission's own motion."   (See, Report, ¶ 14.)

Finally, the Report asked for statutory authority to do what the Report proposes, and further that the USAC be given immunity from laws that apply to other government agencies, such as open meetings laws, and the Freedom of Information Act.  The Report requests that the USAC, "as well as NECA, would not be considered governmental agencies, government owned corporations, or government controlled corporations, subject to the requirements of federal laws governing the conduct and operations of federal agencies."  (See, Report, ¶ 15.)

Billing Information

The FCC Report also suggests that carriers should not include in their customers' bills information about the funding of universal service and the SLC.  In FCC doublespeak, this would be part of a requirement that "carriers provide clear and accurate information to subscribers." (See, Report, ¶ 20.)

This section drew criticism from dissenting Commissioners Powell and Furchtgott-Roth.   The later wrote that:

I am concerned with the report's suggestion that carriers should conceal their universal service contributions from consumers. ...  no carrier should have its billing information restricted or limited by the Commission. The Commission has explicitly provided carriers with the flexibility to decide how to recover their payments, including as charges on consumers bills, and I am concerned by implications that such charges are fraudulent or misrepresentations. Indeed, section 254(e) requires that funding mechanisms for universal service be explicit. Consumers have a right to know what federal charges they are paying; the Commission should not discourage companies from placing universal service charges on their bills.

Funding Status

The FCC's May 7, 1997 Report established $2.25 Billion as total annual amount of universal service subsidies under the Schools & Libraries Program.  The FCC reported on May 1, and again in this May 8 Report, that requests totalling $2.02 Billion had been received as of the end of April.  The Report also asserts that only $1.67 Billion will be raised without further increasing universal service payments.

The Report states that: "schools and libraries could be funded at approximately $1.67 billion for the 1998 calendar year without increasing total access and universal service payment by long distance carriers.  (See, Report, ¶ 26.)  The Report also states that the FCC intends "to seek comment on whether the amount collected for universal service support for schools and libraries in 1998 should equal the demand reported by SLC or be limited to an amount that does not cause long distance rates to increase."   (See, Report, ¶ 25.)

The Report's discussion of funding also drew criticism from the dissenting Commissioners.  Furchtgott-Roth asserted that the FCC was simply raising universal services charges by the amount that access charges were reduced.  "The promise of the 1996 Act was that rates would come down, not that they would remain the same as the result of secret deals in which one set of federal taxes goes down and another goes up, while citizens are none the worse for the regulatory sleight of hand."

Further resources

• FCC Press Release, 5/8/98.
• Statement of William Kennard, 5/8/98.
• Schools & Libraries Corp. website.
• Universal Service Report of Congress, 4/10/98.
• Universal Service Report, 5/7/97.