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If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** Before the Federal Communications Commission Washington, D.C. 20554 ) In the Matter of ) ) ) Federal-State Joint Board ) CC Docket No. 96-45 on Universal Service ) ) TENTH ORDER ON RECONSIDERATION Adopted: March 17, 1999 Released: April 2, 1999 By the Commission: I. INTRODUCTION 1. By this Order, we take steps designed to ensure that eligible schools, libraries, and rural health care providers gain access to, and receive, discounted services throughout the first funding cycle. We note that our actions address concerns raised by various schools and libraries in light of the Commission's extension of the 1998-99 funding year. 2. Specifically, we reconsider on our own motion our previous orders relating to the limited exemption from the competitive bidding process for voluntary extensions of existing contracts that expired prior to December 31, 1998. As described below, we amend our rules to allow schools, libraries, and rural health care providers with existing contracts that expired prior to December 31, 1998 to extend or renew voluntarily these existing contracts without engaging in competitive bidding through June 30, 1999. In so allowing this limited extension, we will permit schools and libraries to be eligible for additional discounts on recurring services (primarily telecommunications and Internet access) covered by such contracts for the period from January 1, 1999 through June 30, 1999, which would coincide with the extension of the initial funding year. Although this modification of our rules will result in the provision of additional support for discounts to schools and libraries, it will not require the Commission to collect additional funds from universal service contributors. When the Administrator learned that some applicants may have been treated less favorably than other applicants, it set aside funds in its contingency fund reserve so that sufficient funds would be available in the event the Commission were to extend the exemption from competitive bidding. 3. In addition, we reconsider on our own motion our rules and decisions that require schools and libraries to use nonrecurring services for which the Universal Service Administrative Company (USAC or Administrator) has approved a request for a discount within the funding year for which the discount was approved. We amend our rules to allow schools and libraries to use nonrecurring services for which the Administrator has approved a request for a discount for this funding year, 1998-1999, through September 30, 1999. We note that this specific action will not result in increased funding amounts from the schools and libraries universal service support mechanism because this change in our rules will merely allow schools and libraries a longer period of time in which to complete receipt of non-recurring services. The non-recurring services covered by this rule change must have already been approved for discounts by the Administrator, and that amount of approved discounts will not be increased as a result of this rule change. II. LIMITED EXEMPTION FROM COMPETITIVE BIDDING A. Background 4. In the May 8, 1997 Universal Service Order, the Commission established federal universal service support mechanisms for schools and libraries, and rural health care providers. The Commission initially determined that the funding year for the schools and libraries and rural health care support mechanisms would be based on a calendar year. 5. Under section 254(h) of the Act, upon submitting a bona fide request for services, rural health care providers may receive telecommunications services at rates that are reasonably comparable to rates charged for similar services in urban areas; and schools and libraries may receive telecommunications and Internet access at discounted rates. In the Universal Service Order, the Commission adopted a recommendation of the Federal-State Joint Board on Universal Service ("Joint Board") that eligible schools, libraries, and rural health care providers should seek competitive bids for all services eligible for section 254(h) discounts. The Commission reasoned that competitive bidding would ensure fiscal responsibility and would be the best means for ensuring that eligible schools and libraries are able to receive services at the most competitive rates. Accordingly, the Commission adopted competitive bidding rules that require, inter alia, eligible schools, libraries, rural health care providers, and consortia to submit requests for services to the Administrator, listing the services requested. The rules also require that these requests be posted on the Administrator's website for at least four weeks before the school, library, rural health care provider, or consortium may sign any binding contracts for discounted services. 6. With regard to existing service contracts, the Commission decided that schools and libraries could apply discounts to their existing contracts for services that would be delivered and used after the effective date of the new rules, provided that the requested discounts were approved by the Administrator. Thus, schools and libraries would not be required to breach existing contracts to become eligible for discounted services when the funding year began. The Commission noted, however, that schools and libraries could not voluntarily extend existing contracts in order to be exempt from the competitive bidding requirements. In the Fourth Reconsideration Order, the Commission specifically concluded that a contract of any duration signed on or before July 10, 1997 would be considered an "existing contract" under our rules, and exempt from the competitive bidding rules for the life of the contract. The Commission also concluded in the Fourth Reconsideration Order that contracts signed after July 10, 1997, and before January 30, 1998, the date on which the Schools and Libraries (SLC) website was fully operational, would be eligible for support and exempt from the competitive bidding rules for services provided through December 31, 1998. The Commission designated these existing contracts as exempt from competitive bidding in order to "avoid penalizing schools and libraries that were reasonably uncertain of their rights pursuant to the [Universal Service] Order," and to allow schools and libraries to have greater flexibility with regard to their long term contracts. Finally, the Commission extended the rules regarding support for existing contracts to eligible rural health care providers. 7. On May 13, 1998, the Bureau sought additional comment in the Collection Public Notice on ways to ensure that the most economically disadvantaged schools and libraries receive adequate universal service support and on ways "to implement a gradual phase-in of the schools, libraries, and rural health care universal service support mechanisms, that takes advantage, and reflects the timing, of access charge reductions." 8. On June 22, 1998, the Commission issued the Fifth Reconsideration Order, in which the Commission reconsidered several rules with respect to the schools and libraries universal service support mechanism. Among other things, the Commission changed the funding year for schools and libraries from a calendar year (January 1 - December 31) to a fiscal year cycle (July 1 - June 30). The Commission concluded that the transition should be implemented immediately, so that applications submitted during the initial 75-day filing window and approved for funding, would be provided support for the eighteen month period of January 1, 1998 through June 30, 1999. 9. Because the first funding year was changed to end on June 30, 1999, the Commission in the Fifth Reconsideration Order also reconsidered the limited exemption from competitive bidding for voluntary extensions of existing contracts, and concluded that "existing contracts that have a termination date between December 31, 1998 and June 30, 1999 [may] be voluntarily extended [and exempt from the competitive bidding requirement] to a date no later than June 30, 1999." The Commission created this limited exemption so that applicants with existing contracts that filed during the 1998 filing window would not have to competitively bid for services to be received only during the six-month extension of the funding year, i.e., January 1, 1999 through June 30, 1999. 10. On December 31, 1998, the Commission issued the Ninth Reconsideration Order, changing the funding year for the rural health care universal service support mechanism from a calendar year cycle to a fiscal year cycle. Consistent with the Fifth Reconsideration Order, the Commission concluded that the transition to a fiscal year cycle should be implemented immediately. The Commission likewise concluded that applications submitted during the initial 75-day filing window, and approved for discounts, will be funded through June 30, 1999, within the funding limitations adopted in the Ninth Reconsideration Order. As in the Fifth Reconsideration Order, the Commission found that it would be in the public interest to amend the exemption from the competitive bidding requirements in section 54.604 of our rules, to allow rural health care providers that filed applications within the 75-day initial filing window to extend voluntarily, without engaging in competitive bidding, to a date no later than June 30, 1999, existing contracts that otherwise would terminate between December 31, 1998 and June 30, 1999. 11. On October 16, 1998, the Council of Chief State School Officers (CCSSO) filed a letter with the Chairman of the Commission, requesting reconsideration of the Fifth Reconsideration Order's decision that only existing contracts that terminate between December 31, 1998 and June 30, 1999 may be voluntarily extended, without engaging in competitive bidding, to a date no later than June 30, 1999. The CCSSO states that "the Commission decision did not take into account that eligible and successful applicants with contracts that expired prior to the December 31, 1998 date might experience a loss of any discounts in the period January 1 through June 30, 1999." That is, applicants could not have anticipated that their existing contracts, if set to expire prior to December 31, 1998, would leave them without discounted services for the balance of the funding year, i.e., January 1, 1999 through June 30, 1999. As CCSSO notes, the Commission's decision to change to a fiscal year funding cycle was made too late for an applicant to change its competitive bidding process to reflect the new schools and libraries funding year and requests the Commission to reconsider the decision to allow applicants "the ability to receive discounts for the balance of the first round period, January 1, 1999 through June 30, 1999." While the Commission's decision to extend the funding year was made in July 1998, the filing window for the 1998 funding year had closed in April 1998. B. Discussion 12. On our own motion, we find that it is in the public interest to reconsider the portion of the Fifth Reconsideration Order and the Ninth Reconsideration Order relating to the limited exemption from competitive bidding. After further reflection, informed by the CCSSO's letter, we conclude that it is necessary to modify sections 54.511 and 54.604 of our rules, so that eligible applicants that filed during the initial filing window and were approved for discounts, are exempt from our competitive bidding rules for voluntary extensions or renewals of existing contracts to a date no later than June 30, 1999. This modification is necessary in light of the Commission's decision in the Fifth Reconsideration Order to change the funding year from a calendar year to a fiscal year that begins July 1st and ends June 30th of each year. The modification applies only to the 1998 funding year. 13. When the Commission changed the funding cycle for schools and libraries on June 22, 1998, and for rural health care providers on December 31, 1998, the initial filing windows had already closed, and some schools, libraries, and rural health care providers had existing contracts that were set to end before December 31, 1998. We decided in the Fifth Reconsideration Order and the Ninth Reconsideration Order to allow exemption from our competitive bidding requirements for voluntary extensions of existing contracts expiring between December 31, 1998 and June 30, 1999, because it would be "administratively and financially unworkable" for them to participate in competitive bidding for only a six month service period. The Commission did not foresee, however, that some applicants that were approved to receive universal service discounts had existing contracts that would expire before December 31, 1998, and would consequently be unable, without engaging in competitive bidding for only a six month period, to receive discounts for the following six months from January 1, 1999 through June 30, 1999. For example, applicants that filed during the filing window and had existing contracts expiring between the 1998 filing window closing date and December 31, 1998 may have been willing, under the old calendar year funding cycle, to forego a month or two of discounts in anticipation of discounts for the following year (starting in January). Under the new fiscal year funding cycle (starting in July) implemented in our orders, however, these applicants would be required to engage in competitive bidding for only a six-month period or be left without discounts for a period of greater than six months. An unintended consequence of the two orders, therefore, was that applicants with contracts expiring before December 31, 1998 were treated less favorably than applicants with contracts expiring between December 31, 1998 and June 30, 1999. 14. We further note that the policy interest we articulated in the Fifth Reconsideration Order and the Ninth Reconsideration Order (i.e., eliminating the administrative burden of bidding for only a six-month period) exists equally for applicants with existing contracts expiring between the closing dates of their filing windows and December 31, 1998, and those with existing contracts expiring between December 31, 1998 and June 30, 1999. In light of these considerations, and those raised by the CCSSO and various schools, we reconsider our holding in the Fifth Reconsideration Order and the Ninth Reconsideration Order, and find herein that all schools, libraries, and rural health care providers that have applied and been approved for discounts for eligible services subject to existing contracts that expire between the respective closing dates of their 1998 filing window and June 30, 1999, are exempt from our competitive bidding requirements for voluntary extensions or renewals of these contracts to a date no later than June 30, 1999. As we noted previously in the Fifth Reconsideration Order, it would be administratively and financially unworkable for schools, libraries, and rural health care providers to participate in competitive bidding for only a six-month service period. 15. In extending this exemption from our competitive bidding requirements, we make clear that additional discounts for these contracts will only be available for recurring services for the period January 1, 1999 through June 30, 1999. With respect to the limited time period, we recognize that parties to these contracts were unintentionally treated differently from those applicants with existing contracts expiring after December 31, 1998, but we do not intend to place them in a better position than they would have been had we not changed the funding year. That is, if applicants were willing to forego a month or two of discounted services, in anticipation of a funding year beginning on January 1, 1998, we will not now provide discounts for that period in which the applicant made such a conscious decision. Therefore, recurring services in these approved existing contracts expiring between the closing dates of the 1998 filing window and June 30, 1999, will be eligible for universal service discounts only for the period from January 1, 1999 through June 30, 1999, pursuant to sections 54.501, 54.511(c) and (d), 54.601, and 54.611 of our rules. Consistent with our decision in the Fifth Reconsideration Order and the Ninth Reconsideration Order, additional discounts will be funded at the monthly level approved by the Administrator, as established by letters sent to eligible schools and libraries, and rural health care providers, through June 30, 1999. We conclude that this approach is reasonable because telecommunications services and Internet access are generally provided at regular, monthly intervals and are billed on a monthly, recurring basis. III. NONRECURRING SERVICES A. Background 16. Section 54.507(d) of the Commission's rules requires schools and libraries "to file new funding requests for each funding year." Section 54.507(e) limits the availability of discounts for a long-term contract covering eligible services to the funding year for which discounts are sought. Moreover, section 54.507(b) states that, for the 1998-1999 funding year, "[s]chools and libraries filing applications within the initial 75-day filing window shall receive funding for requested services through June 30, 1999." These provisions, along with the Commission's orders, require schools and libraries to use services for which discounts have been committed by the Administrator within the funding year for which the discounts were sought. B. Discussion 17. We also reconsider on our own motion, for the 1998-1999 funding year, the requirement that schools and libraries use nonrecurring, discounted services within the funding year for which the discounts were received. Specifically, we amend our rules to allow schools and libraries to use nonrecurring services for which discounts have been committed by the Administrator until September 30, 1999, three months beyond the end of this first funding year. 18. As previously explained, in June 1998, we changed the funding year for the schools and libraries universal services support mechanism to begin July 1 of a given year and to end June 30 of the following year. In addition, we extended our first funding year to coincide with this new funding year rule, resulting in an eighteen-month implementation funding year (January 1, 1998 - June 30, 1999). When we changed this first funding year, we explicitly noted that this change would ameliorate concerns by applicants that they would be unable to receive services of a nonrecurring nature, such as internal connections, prior to the close of the funding year. Indeed, we recognized that the delay in providing schools and libraries with information on the discounts that they were approved to receive from service providers pursuant to their requests under section 254 could contribute to applicants' inability to receive discounted services within the original funding year deadline. We note that this rule change applies only to the 1998-99 funding year, and is not applicable to subsequent funding cycles. 19. Since that time, the Administrator has begun to inform schools and libraries about their eligibility to receive discounted services and the availability of funds to cover such discounted services. Although the Administrator proceeded at a reasonable pace, we are concerned that some schools and libraries that will be approved to receive discounted services may have been informed by the Administrator rather late in the funding year. Because the schools and libraries support mechanism was first implemented in this 1998-99 funding year, we did not anticipate these initial delays. Indeed, the Administrator continued to notify schools of their eligibility to receive discounted services and the availability of funds to cover the provision of such services through February of this year. 20. As recently highlighted by the CCSSO, such schools and libraries quite reasonably may not be able to complete the prerequisites necessary to receive nonrecurring discounted services by June 30, 1999, the end of this funding year. For example, some schools and libraries may have been reluctant to initiate the installation of internal connections without first being notified by the Universal Service Administrator of approval of their requested discounts for these nonrecurring services. We believe it would be unduly harsh to insist that those schools and libraries forego these nonrecurring discounted services, solely because they were not notified of their eligibility for such discounted services, within a time frame that would allow them to take advantage of such services. Such schools and libraries should not be penalized for merely being cautious about taking such services without full information as to how they would pay for the services. 21. In addition, as we noted in the Fifth Reconsideration Order, many nonrecurring services may need to be performed while children are not in school. Thus, schools notified in February of their qualification for these discounted services have little opportunity to receive such services between now and the end of this funding year. Indeed, for many schools, the only time available to receive nonrecurring services may be at the close of school, which may run close to the end of the funding year. Moreover, although schools and libraries should have contracts in place to begin the work necessary to ensure service can be taken, actually having the necessary personnel on site to complete the contract by June 30, 1999, could prove difficult, if not impossible. Giving schools and libraries additional time in which to complete delivery of nonrecurring services will address these concerns. We note that, with respect to this change, we are not increasing the amount of discounts that schools and libraries may receive for nonrecurring services in 1998-99 beyond those already anticipated by the Administrator; we are merely providing schools and libraries with additional time in which to complete their receipt of these discounted nonrecurring services. Such nonrecurring services must have been requested within the initial filing window and approved by the Administrator for this funding year, 1998-1999. 22. In order to ensure equitable treatment for recipients of discounts for nonrecurring services, we also adopt a limited extension of our exemption from competitive bidding for existing contracts with respect to these nonrecurring services. Contracts exempt from competitive bidding that will expire by June 30, 1999, may be voluntarily extended with respect to nonrecurring services for which discounts have been approved by the Administrator for the funding year 1998-1999, until September 30, 1999. This extension applies only to the period during which schools and libraries may receive nonrecurring services for which discounts have been approved by the Administrator for the first funding year; it does not provide additional discount funds. Thus, parties to such contracts may extend to September 30, 1999 the date by which nonrecurring services approved for discounts may be received without complying with the competitive bidding process. Parties may not, however, extend other provisions beyond the dates established by our rules without complying with the competitive bidding process. 23. We believe these actions will ensure that schools and libraries are provided the ability to access "advanced telecommunications and information services." At the same time, these changes will not undermine the efficacy of the schools and libraries universal service support mechanism, because they will not adversely affect the administration of that mechanism. Nor will these actions financially overburden the schools and libraries universal support mechanism because they require no additional funding; rather, they merely allow collected funds to be used within a reasonable time period. IV. EFFECTIVE DATE OF RULES 24. In this Order, as noted, we adopt amendments to our exemption from competitive bidding requirements (sections 54.511 and 54.604 of our rules) so that schools, libraries, and rural health care providers that filed applications within the 75-day initial filing window may be exempt from competitive bidding requirements for voluntary extensions or renewals of existing contracts to a date no later than June 30, 1999. The limited exemption from competitive bidding for voluntary extensions or renewals of existing contracts that would otherwise expire between the closing dates of the 1998 filing window and June 30, 1999, will be available only through June 30, 1999. Further, we adopt amendments to sections 54.507 (b) and 54.511(d), with respect to nonrecurring services. These rule changes will make it less difficult for schools and libraries to receive eligible, discounted services pursuant to section 254 of the Communications Act of 1934, as amended. Pursuant to the Administrative Procedure Act, we find that we should depart from the general requirement that final rules take effect not less than thirty days after their publication in the Federal Register, because these substantive rule changes grant an exemption and "relieve[. . .] a restriction." We conclude that these new rules will take effect upon the date of their publication in the Federal Register. V. CONCLUSION 25. In conclusion, we reconsider our limited exemption from competitive bidding. In this Order, we find that all schools, libraries, and rural health care providers that have applied and been approved for discounts in this initial funding cycle, may be exempt from competitive bidding for voluntary extensions or renewals of existing contracts to a date no later than June 30, 1999, where such contracts otherwise would expire between the closing date of their 1998 filing windows and June 30, 1999. As we noted previously in the Fifth Reconsideration Order, it would be administratively and financially unworkable for schools, libraries, and rural health care providers to participate in competitive bidding for only a six-month service period. In so allowing this limited extension, we will permit schools and libraries to be eligible for additional discounts on recurring services covered by such contracts for the period from January 1, 1999 through June 30, 1999, and therefore coincide with the extension of the initial funding year. 26. In addition, we also amend our rules to allow schools and libraries to receive nonrecurring services for which they applied and have received approval for discounts from the Administrator for the funding year 1998-1999, through September 30, 1999. Consistent with this change, we also adopt a limited extension of our exemption from competitive bidding for existing contracts with respect to these nonrecurring services. Contracts exempt from competitive bidding that will expire by June 30, 1999 may be voluntarily extended with respect to nonrecurring services for which discounts have been approved by the Administrator until September 30, 1999. This extension applies only to the period during which such services must be received. Thus, parties to such contracts may extend to September 30, 1999 the date by which nonrecurring services approved for discounts may be received without complying with the competitive bidding process, but may not extend other provisions beyond the dates established by our rules without complying with the competitive bidding process. VI. SUPPLEMENTAL FINAL REGULATORY FLEXIBILITY ANALYSIS 27. In compliance with the Regulatory Flexibility Act (RFA), and the Initial Regulatory Flexibility Analysis (IRFA) that accompanied the Collection Public Notice in the Federal Register, this Supplemental Final Regulatory Flexibility Analysis (SFRFA) supplements the Final Regulatory Flexibility Analysis (FRFA) included in the Universal Service Order, and the Supplemental Final Regulatory Flexibility Analyses in the Fifth Reconsideration Order and the Ninth Reconsideration Order, only to the extent that changes to the Order adopted here on reconsideration require changes in the conclusions reached in the FRFA in the Universal Service Order and the Supplemental Final Regulatory Flexibility Analyses in the Fifth Reconsideration Order and Ninth Reconsideration Order. This FRFA was preceded by an Initial Regulatory Flexibility Analysis (IRFA) incorporated in the Notice of Proposed Rulemaking and Order Establishing the Joint Board (NPRM), prepared in connection with the Recommended Decision, which sought written public comment on the proposals in the NPRM and the Recommended Decision. 28. To the extent that any statement contained in this Supplemental Final Regulatory Flexibility Analysis is perceived as creating ambiguity with respect to our rules or statements made in preceding sections of this Order, the rules and statements set forth in those preceding sections shall be controlling. A. Need for and Objectives of this Report and Order 29. The Commission is required by section 254 of the Act to promulgate rules to implement promptly the universal service provisions of section 254. On May 8, 1997, the Commission adopted rules intended, inter alia, to reform our system of universal service support mechanisms so that universal service is preserved and advanced as markets move toward competition. In this Order, we reconsider one aspect of those rules. Specifically, in order to give consistent treatment to all schools, libraries, and rural health care providers that applied for discounts during the 75-day initial filing window, we amend sections 54.511(d) and 54.604 of our rules, so that all applicants that filed for support during the initial filing window may be exempt from our competitive bidding rules for voluntary extensions or renewals of existing contracts to a date no later than June 30, 1999. This, we find, is in the public interest. 30. In addition, in order to avoid penalizing schools and libraries for any caution they exhibited in using nonrecurring services without full information as to how they would pay for them, we amend section 54.507 of our rules to allow schools and libraries for which the Administrator approved discounts on eligible nonrecurring services to receive such services through September 30, 1999. To provide equitable treatment, we amend section 54.511(d) of our rules to allow a limited extension of our exemption from the competitive bidding rules for voluntary extensions on existing contracts with respect to nonrecurring services. Contracts exempt from competitive bidding that will expire by June 30, 1999 may be voluntarily extended with respect to nonrecurring services for which discounts have been approved by the Administrator for the funding year 1998-1999 until September 30, 1999. As explained above, we find these actions will ensure that schools and libraries are provided the ability to access "advanced telecommunications and information services," consistent with section 254. B. Summary and Analysis of the Significant Issues Raised by Public Comments in Response to the IRFA 31. The Commission received several letters from various small governmental entities encouraging us to reconsider our rules regarding the exemption of contracts from competitive bidding, and the application of discounts to nonrecurring services beyond the first funding period. As a result, in this Order, we have reconsidered our limited exemption from competitive bidding and have determined that all schools, libraries, and rural health care providers that have applied and been approved for discounts in this initial funding cycle, may be exempt from competitive bidding for voluntary extensions or renewals of existing contracts to a date no later than June 30, 1999, where such contracts otherwise would expire between the closing date of their 1998 filing windows and June 30, 1999. We further amend our rules to allow schools and libraries to receive nonrecurring services for which they applied and have received approval for discounts from the Administrator for the funding year 1998-1999, through September 30, 1999. C. Description and Estimates of the Number of Small Entities to Which the Rules Adopted in This Order will Apply 32. The RFA directs agencies to provide a description of and, where feasible, an estimate of the number of small entities that may be affected by the proposed rules, if adopted. The RFA generally defines the term "small entity " as having the same meaning as the terms "small business," "small organization," and "small governmental jurisdiction." In addition, the term "small business" has the same meaning as the term "small business concern" under the Small Business Act. A small business concern is one which: (1) is independently owned and operated; (2) is not dominant in its field of operation; and (3) satisfies any additional criteria established by the Small Business Administration (SBA). A small organization is generally "any not-for-profit enterprise which is independently owned and operated and is not dominant in its field." Nationwide, as of 1992, there were approximately 275,801 small organizations. "Small governmental jurisdiction" generally means "governments of cities, counties, towns, townships, villages, school districts, or special districts, with a population of less than 50,000." As of 1992, there were approximately 85,006 such jurisdictions in the United States. This number includes 38,978 counties, cities, and towns; of these, 37,566, or 96 percent, have populations of fewer than 50,000. The Census Bureau estimates that this ratio is approximately accurate for all governmental entities. Thus, of the 85,006 governmental entities, we estimate that 81,600 (91 percent) are small entities. 33. As noted in the FRFA at paragraphs 890-925 of the Universal Service Order, there are a number of small entities that would be affected by the new universal service rules. The rules adopted in this Order, however, would affect primarily only schools, libraries, and rural health care providers. Moreover, because the rules would relieve restrictions on these entities, we believe these rules would not have a significant impact on these small entities. We further describe and estimate, however, the number of small governmental jurisdictions, small businesses, and small organizations that may potentially be affected by the rules adopted in this Order. 34. The Commission specifically noted in the Universal Service Order that the SBA defined small elementary and secondary schools and small libraries as those with under $5 million in annual revenues. The Commission further estimated that there are fewer than 86,221 public and 26,093 private schools and fewer than 15,904 libraries that may be affected by the decisions and rules adopted in the Universal Service Order. We believe that these same small entities may be affected potentially by the rules adopted in this Order. 35. In addition, the Commission noted in the Universal Service Order that neither the Commission nor the SBA has developed a definition of small, rural health care providers. Section 254(h)(5)(B) defines the term "health care provider" and sets forth the seven categories of health care providers eligible to receive universal service support. We estimated that there are fewer than 12,296 health care providers potentially affected by the rules in the Universal Service Order. We note that these small entities may potentially be affected by the rules adopted in this Order. D. Summary Analysis of the Projected Reporting, Recordkeeping, and Other Compliance Requirements. 36. In the FRFA to the Universal Service Order, we described the projected reporting, recordkeeping, and other compliance requirements associated with the Schools and Libraries section, the Rural Health Care Provider section, and the Administration section of the Universal Service Order. Below, we provide the following analysis of the new requirements adopted in this present Order. 37. Under the rule changes adopted herein, those schools, libraries, and rural health care providers that filed applications within the 75-day initial filing window, are exempt through June 30, 1999 from our competitive bidding rules for voluntary extensions or renewals of their existing contracts for telecommunications and Internet access services. This revised rule is in the public interest because it provides consistent treatment to all applicants that filed during the 75- day initial filing window, regardless of when their existing contracts were set to expire. Further, as noted, this revised rule also eliminates the administrative burden for schools, libraries, and rural health care providers, of bidding for only a six month period. This change will not have a significant impact on the reporting, recordkeeping, and other compliance requirements for the schools, libraries, and rural health care support mechanisms, and may reduce paperwork for some schools, libraries, rural health care providers, and other entities. 38. In addition, we adopt rule changes to allow schools and libraries for which the Administrator approved discounts on eligible nonrecurring services to receive such services through September 30, 1999. We also allow a limited extension of our exemption from the competitive bidding rules for voluntary extensions on existing contracts with respect to nonrecurring services. Contracts exempt from competitive bidding that will expire by June 30, 1999 may be voluntarily extended with respect to nonrecurring services for which discounts have been approved by the Administrator for the funding year 1998-1999 until September 30, 1999. These rule changes will allow schools and libraries additional time in which to receive discounted, nonrecurring services. These changes also will not have a significant impact on the reporting, recordkeeping, and other compliance requirements for the schools and libraries, and may reduce paperwork for some schools and libraries, and other entities. E. Steps Taken to Minimize Significant Economic Impact on Small Entities, and Significant Alternatives Considered. 39. In the FRFA to the Universal Service Order, the Commission described the steps taken to minimize the significant economic impact on a substantial number of small entities consistent with stated objectives associated with the Schools and Libraries section, the Rural Health Care Provider section, and the Administration section of the Universal Service Order. As described above, our current action to amend our rules regarding exemptions from competitive bidding will benefit schools, libraries, and rural health care providers, by eliminating the administrative burden of bidding for services for only a six-month period through June 30, 1999. In addition, our decision to amend our rules to allow schools and libraries for which the Administrator approved discounts on eligible nonrecurring services to receive such services through September 30, 1999 will benefit schools and libraries because it will provide them additional time in which to receive such services. Moreover, our decision to allow a limited extension of our exemption from the competitive bidding rules for voluntary extensions on existing contracts with respect to nonrecurring services will also provide additional time in which to receive such services without the potential administrative burden of bidding for such services. We believe that these amended rules fulfill the statutory mandate to enhance access to telecommunications services for schools, libraries, and rural health care providers, and fulfill the statutory principle of providing quality services at "just, reasonable, and affordable rates," without imposing unnecessary burdens on schools, libraries, rural health care providers, or service providers, including small entities. VII. ORDERING CLAUSES 40. Accordingly, IT IS ORDERED that, pursuant to the authority contained in sections 1-4, 201-205, 254, 303(r), 403, and 405 of the Communications Act of 1934, as amended, 47 U.S.C.  151-154, 201-205, 254, 303(r), 403, and 405, and section 1.108 of the Commission's rules, 47 C.F.R.  1.108, the TENTH ORDER ON RECONSIDERATION IN CC DOCKET NO. 96-45 IS ADOPTED. 41. IT IS FURTHER ORDERED that, pursuant to the authority contained in sections 1-4, 201-205, 254, 303(r), 403, and 405 of the Communications Act of 1934, as amended, 47 U.S.C.  151-154, 201-205, 254, 303(r), 403, and 405, and section 1.108 of the Commission's rules, 47 C.F.R.  1.108, and Part 54 of the Commission's rules, 47 C.F.R. Part 54, ARE AMENDED, as set forth in Appendix A attached hereto. 42. IT IS FURTHER ORDERED that, because the rule changes set forth in Appendix A grant an exemption and relieve a restriction, the rule changes ARE EFFECTIVE immediately upon publication in the Federal Register. 43. IT IS FURTHER ORDERED that the Commission's Office of Public Affairs, Reference Operations Division, SHALL SEND a copy of this Tenth Order on Reconsideration, including the Supplemental Final Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy of the Small Business Administration. FEDERAL COMMUNICATIONS COMMISSION Magalie Roman Salas Secretary Appendix A-- RULE CHANGES Part 54 of Title 47 of the Code of Federal Regulations is amended as follows: Part 54 -- UNIVERSAL SERVICE 1. The authority for part 54 continues to read as follows: Authority: 47 U.S.C. Secs. 1, 4(i), 201, 205, 214, and 254, unless otherwise noted. 54.507(b) Cap 2. Revise section 54.507 to read as follows: * * * * * * 54.507(b): A funding year for purposes of the schools and libraries cap shall be the period July 1 through June 30. For the initiation of the mechanism only, the eighteen month period from January 1, 1998 to June 30, 1999 shall be considered a funding year. For the 1998-99 funding year: (1) schools and libraries filing applications within the initial 75-day filing window, and receiving approval for discounts on recurring services, shall receive funding for requested recurring services through June 30, 1999; and (2) schools and libraries filing applications within the initial 75-day filing window, and receiving approval for discounts on eligible nonrecurring services, may receive those nonrecurring services subject to the approved discount amounts through September 30, 1999. * * * * * * 54.511 Ordering Services 3. Revise section 54.511 to read as follows: * * * * * * 54.511(d)(1): The exemption from the competitive bid requirements set forth in paragraph (c) shall not apply to voluntary extensions or renewals of existing contracts, with the exception that an eligible school or library as defined under  54.501 or consortium that includes an eligible school or library, that filed an application within the 75-day initial filing window for 1998 (January 30, 1998 -April 15, 1998), may voluntarily extend or renew, to a date no later than June 30, 1999, an existing contract that otherwise would terminate between April 15, 1998 and June 30, 1999. 54.511(d)(2): For the 1998-1999 funding year, a contract exempt from the competitive bid requirement, as described in subsection (c), may be voluntarily extended to September 30, 1999 only to the extent necessary to permit delivery of the nonrecurring services subject to that contract and for which discounts have been approved. 54.604 Existing Contracts 4. Revise section 54.604 as follows: * * * * * * 54.604(d): The exemption from competitive bid requirements set forth in paragraph (a) shall not apply to voluntary extensions or renewals of existing contracts, except to the extent that an eligible rural health care provider as defined in  54.601 or consortium that includes an eligible health care provider, and that filed an application within the 75-day initial filing window for 1998 (May 1, 1998 - July 14, 1998), may voluntarily extend or renew, to a date no later than June 30, 1999, an existing contract that otherwise would terminate between July 14, 1998 and June 30, 1999.