================================================================= ALAWON Volume 7, Number 1 ISSN 1069-7799 January 5, 1998 American Library Association Washington Office Newsline In this issue: (217 lines) *UNIVERSAL SERVICE: 1997 HIGHLIGHTS *PRELIMINARY SUMMARY OF THE FOURTH ORDER ON RECONSIDERATION _________________________________________________________________ UNIVERSAL SERVICE: 1997 HIGHLIGHTS In 1997 the Federal Communications Commission took a number of actions dealing with universal service. Below is a look back at the highlights and a preliminary summary of the fourth Reconsideration Order released December 30, 1997. *In May, the FCC released the Order on universal service, establishing discounts ranging from 20-90% and a $2.25 billion annual fund. * In July, the Commission dealt with the issues surrounding the contracts question raised by the May Order. * In August, the FCC created the Universal Service Administration Company (USAC), the Schools and Libraries Corporation (SLC), and the Rural Health Care Corporation (RHCC) to administer the funds for universal service. * In September, the board of the SLC was named and met for the first time. * In October, the Commission created a filing window of 75 days, within which all applications will be treated equally. * In mid-December, the Commission determined the funding schedule for the first six months of the universal service program. _________________________________________________________________ SUMMARY OF THE FOURTH ORDER ON RECONSIDERATION NOTE: Most FCC orders are available electronically from the FCC (www.fcc.gov/ccb/universal_service/); additional information is also available from OITP (www.ala.org/oitp/univserv.html). This summary is also available from the OITP web site (www.ala.org/oitp/4threcon.html) On December 30, 1997, the Federal Communications Commission released its Fourth Order on Reconsideration dealing with universal service. This long-awaited order addresses many of the questions that libraries and schools have had about the functioning of the program. TECHNOLOGY PLAN AND REVIEW REVIEW OF TECHNOLOGY PLANS: The Fourth Order on Reconsideration ("the Order") does give some clarification on a number of issues surrounding the technology plans and review. An approved technology plan will still be required, because the FCC believes that such a plan is in the "public interest." (Para. 148) The approval of technology plans can be done pursuant to either the procedures of the appropriate state agency or the Schools and Libraries Corporation (SLC), provided that seeking approval from the SLC does not circumvent state or local law. (Para. 157) The FCC also recognized that the SLC will be structuring a plan approval process, which is expected to be released shortly. ELIGIBLE SERVICES ADMINISTRATIVE FACILITIES/"EDUCATIONAL PURPOSES": The FCC decided that the discounts would not cover internal connections in non-instructional school and library administrative buildings unless the internal connections are necessary to deliver services to an instructional building or library. (Para. 209-210) The Order is silent on whether Internet and telecommunications services delivered to these facilities are eligible. DEFINITION OF INTERNAL CONNECTIONS: Internal connections are defined as "connections between or among multiple instructional buildings that comprise a single school campus or multiple non-administrative buildings that comprise a single library branch, but do not include connections that extend beyond that single school campus or library branch." (Para. 210) WIDE AREA NETWORKS: The Order states that wide area networks which are built and purchased by libraries and schools are not eligible for discounts because they are not "telecommunications services." (Para. 193). This does not preclude schools and libraries from receiving universal service discounts on a WAN run over leased lines because such an arrangement constitutes a telecommunications service. STATE NETWORKS: The Order also clarifies the eligibility of state networks to receive discounts. For telecommunications services, a state network is only able to receive discounts in the same fashion that a consortium is eligible to receive discounts. It can apply on behalf of the schools and libraries, but cannot receive reimbursement directly from the universal service fund because state networks are not telecommunications service providers. (Para.183) However, for Internet access and internal connections, a state network may either secure discounts on the purchase of such services or can receive direct reimbursement from the universal service fund, since the state network can be a non-telecommunications provider of Internet access and internal connections services. (Para. 190) AGGREGATION SHARED AND SITE SPECIFIC SERVICES: The Order specifies that, for services which will only be used by a single school or library, the individual discount rate for that school or library should be used. (Para. 205) The Commission declined to specify a mechanism for how libraries and schools will calculate a discount for "shared" services, although they expect some guidance will come from the Schools and Libraries Corporation. Consortia will need to "certify that each individual institution listed as a member of a consortium and included in determining the discount rate will receive a proportionate share of the shared services within each year in which the institution is used to calculate the aggregate discount rate." (Para. 206) (Shared services are described as "those [services] that cannot, without substantial difficulty, be identified with particular users or be allocated directly to particular entities.") (Para. 206) CONTRACTS GRANDFATHERING OF CONTRACTS: The Order makes a number of changes to the rules regarding "pre-existing" contracts. The Commission changed the "grandfathering" date for contracts. Under the new rules, all contracts signed on or before July 10, 1997 will be exempted from the competitive bidding requirement for the entire duration of the contract. Services provided under contracts signed after July 10, 1997 but before the SLC web site becomes operational (and begins accepting applications) will only be eligible for discounts for the period in which the discounts first apply through December 31, 1998. All contracts signed after the web site becomes operational and begins accepting applications will not be eligible for support unless the applicant has gone through the SLC competitive bidding process. (Para. 217) MASTER CONTRACTS: A number of issues surrounding master contracts were also clarified. First, the same grandfathering rules that apply to the eligibility of normal contracts apply to master contracts. (Para. 233) Services provided under master contracts signed on or prior to July 10, 1997 will be eligible for discounts and exempt from the SLC's competitive bidding requirements for the entire duration of the contract. Services provided under master contracts signed after July 10, 1997 but before the SLC web site becomes available will be eligible for discounts for the period in which the discounts first apply through December 31, 1998. (Para. 218) Second, the operative date for determining master contract eligibility is the date that the master contract was signed, not the date that the eligible school or library signed a service agreement with the service provider. (Para. 234) Finally, the competitive bidding requirement can be satisfied by either the entity signing the master contract or by the applicant. (Para. 233) If a master contract does not qualify as a "pre-existing" contract and was not subject to the SLC's competitive bidding process, an applicant must engage in the SLC's competitive bidding process on its own before signing on to the master contract. MINOR MODIFICATIONS TO CONTRACTS: Finally, the Order specifies that, for "minor modifications" to existing contracts, libraries and schools will not be required to re-bid the contract. (Para. 224) The definition of "minor modifications" is to be determined by state law or, if there is no applicable state definition, by the cardinal change doctrine. (Para. 226-8) Regardless of the definition used, applicants will be required to file a new Form 471 in order to make a minor modification. (Para. 229) OTHER ISSUES COSTS COVERED: The Order clarifies that the discounts apply to "all reasonable charges, including federal and state taxes, that are incurred by obtaining an eligible telecommunications services. Charges for termination liability, penalty surcharges, and other charges not included in the cost of obtaining the eligible service will not be covered." (Para. 243) CONTRIBUTION TO THE UNIVERSAL SERVICE FUND: The Commission ruled that schools, libraries, colleges, universities, and health care providers that are selling telecommunications services will not be required to contribute to the fund. (Para. 284) However, remember that services purchased with universal service funds cannot be resold. STATE DISCOUNTS AND THE FEDERAL FUND: The federal universal service discounts will be applied to the price of services "prior to the application of any state-provided support for schools or libraries." (Para. 196) _________________________________________________________________ ALAWON is a free, irregular publication of the American Library Association Washington Office. To subscribe, send the message: subscribe ala-wo [your_firstname] [your_lastname] to listproc @ala.org. To unsubscribe, send the message: unsubscribe ala-wo to listproc@ala.org. ALAWON archives at http://www.ala.org/ washoff/alawon. Visit our Web site at http://www.alawash.org. ALA Washington Office 202.628.8410 (V) 1301 Pennsylvania Ave., NW, #403 202.628.8419 (F) Washington, DC 20004-1701 800.941.8478 (V) Lynne E. Bradley, Editor Deirdre Herman, Managing Editor Contributors: Aleck Johnson Andrew Magpantay All materials subject to copyright by the American Library Association may be reprinted or redistributed for noncommercial purposes with appropriate credits. =================================================================