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In this Public Notice, we seek comment from interested parties on issues raised by the Plan and theN!, ,,,XX %_ !|?1=ݾ}@g!Xh`ooo~ {# Ho }{2K RHCC Statement. We also seek comment on other issues regarding the administration of the federal universal service support mechanisms, including processes for Commission review of actions by USAC, RHCC and SLC, divestiture of USAC from the National Exchange Carrier Association (NECA), and compensation limitations.  X4 < Issues for Comment ă  Vv4  V_4Revised Administrative Structure USAC, SLC, and RHCC have proposed a plan to merge SLC and RHCC into USAC as the single entity responsible for administering the universal service support mechanisms for schools, libraries and rural health care providers by January 1, 1999. As described more fully in the Plan, USAC would consist of three divisions the High Cost & Low Income Division,  X 4the Schools and Libraries Division, and the Rural Health Care Division.V  {ON'ԍSee Appendix A3 to Plan at 25.V The current USAC Board consists of seventeen members representing a crosssection of industry and beneficiary interests. Under the revised administrative structure, the USAC Board of Directors (the  X4Board) would consist of seventeen members plus the USAC Chief Executive Officer (CEO).VZ {O'ԍSee Appendix A2 to Plan at 22.V In addition, the Plan proposes that two new committees of the USAC Board would be  Xb4established to oversee the schools and libraries and rural health care support mechanisms.Yb {O'ԍSee Appendix A2 to Plan at 2324.Y Any action taken by the Rural Health Care, Schools and Libraries, and High Cost and Low Income committees with regard to their respective support mechanisms would be binding on the Board, unless such action is presented for review to the full Board by the USAC CEO and  X4the Board disapproves of such action by a twothirds vote of a quorum of directors."~ {O5'ԍId. at 2324. We note, however, that all committee budgetary matters would be presented to the full USAC Board and could be disapproved by a twothirds vote of a quorum of directors. Id. at 23. In addition, the committees would not have the power or authority to bind the Board on matters related to billing, collection and disbursement functions, which are performed separately by USAC. Under  X4the Plan, the USAC CEO would manage all three universal service support mechanisms.F h  {O 'ԍSee Plan at 11.F " 0*(($" We seek comment on whether vesting the consolidated USAC with the administrative responsibilities for all of the universal service support mechanisms would best further the goals of efficient administration and accountability. We also seek comment on whether the Plan fulfills the goal of administrative efficiency while preserving the distinct missions of the three universal service support mechanisms. We seek comment on any other administrative structures the Commission could adopt. To the extent that parties suggest alternative structures, we urge them to provide as much detail as possible, and to evaluate fully the benefits and disadvantages of such structure in comparison to USAC's Plan. We also seek comment on the proposed functions and composition of the three committees of the Board, as described in the Plan. Although the Plan is silent on the selection process for the USAC CEO, we seek comment on whether the Commission should adopt the procedure that currently applies to the selection of a CEO for SLC and RHCC. Under that procedure, the consolidated USAC Board would submit to the Chairman of the Commission a candidate to serve as the USAC CEO. Final selection of that individual would be subject to the approval of the Chairman of the Commission. In the RHCC Statement, RHCC proposes three modifications to the proposed Plan. First, RHCC proposes that two additional rural health care representatives serve on the USAC Board and that the Plan identify the individuals who initially would serve on the combined  X4Board and the individuals who would serve on the initial Rural Health Care Committee.O  {O'ԍSee RHCC Statement at 5.O Second, RHCC proposes that the RHCC Committee have the authority to bind the full USAC Board with regard to all of the Committee's programmatic functions and that Committee  X4decisions not be subject to disapproval by a twothirds vote of a quorum of the Board.@ Z {O'ԍId.@ Third, while RHCC agrees that the CEO should have the authority to hire and fire the division heads, RHCC proposes that the RHCC division head be granted the authority to hire  X4and fire division staff.:  {O0'ԍId.: We seek comment on RHCC's proposals.  Ve4Compensation Limitations In the Commission's recent order regarding funding for the schools and libraries universal service support mechanism, the Commission concluded that the Administrator must, as a condition of its continued service, compensate all officers and employees of SLC and RHCC at an annual rate of pay, including any nonregular payments, bonuses, or other compensation, that does not exceed the rate of basic pay in effect for Level I of the Executive"~ 0*(("  X4Schedule under section 5312 of Title 5 of the United States Code.  {Oy'ԍSee FederalState Joint Board on Universal Service, Fifth Order on Reconsideration and Fourth Report  {MC'and Order in CC Docket No. 9645 (rel. June 22, 1998)  46. The Commission further stated that such level of compensation would apply, effective July 1, 1998, to all officers and employees of SLC and RHCC, as currently organized, as well as to all such officers and employees in the consolidated administrative corporation following reorganization on January  X41, 1999.;" {Ow'ԍId. ; We seek comment on whether compensation limitations also should apply to all USAC officers and employees, including, for example, those responsible for administering the support mechanisms for high cost areas and low income consumers as well as those responsible for performing the billing and collection functions for all of the support mechanisms. We also seek comment on whether such compensation limitations should apply to officers and employees of NECA.  V 4USAC's Permanence and Divestiture from NECA  X 4In the Report to Congress, the Commission proposed that the revised administrative structure be made permanent, subject to the Commission's review and determination after one year that the new structure is administering the distribution of universal service support and  X4benefits to eligible entities in an efficient, effective and competitively neutral manner.\ {O'ԍSee Report to Congress  12.\ We seek comment on the Commission's proposal to designate USAC as the permanent  Xd4Administrator. In the Report to Congress, the Commission further proposed that, pending Commission review of USAC's performance after one year, USAC should be divested from  X84NECA.V8F {O/'ԍSee Report to Congress  13.V The Plan proposes to divest USAC from NECA as soon as possible._8 {O'ԍSee Appendix A1 to Plan at 2021._ We seek comment on the proposed divestiture of USAC from NECA and the timing of such divestiture.  V4FCC Oversight The Commission has always retained ultimate control over the operation of the federal universal service support mechanisms through its authority to establish the rules governing the support mechanisms and to review all decisions concerning administration of the support mechanisms. The consolidated USAC would continue to be accountable to the Commission  XR4pursuant to the procedures that currently apply to USAC, SLC, and RHCC.URj  {Om&'ԍSee 47 C.F.R. Parts 54 and 69.U SLC and RHCC have the authority to direct the performance of audits of schools and libraries and rural health"; 0*((E"  X4care provider beneficiaries of universal service support.\ {Oy'ԍSee 47 C.F.R.  69.618(a)(8) and 69.619(a)(8); see also Changes to the Board of Directors of the National Exchange Carrier Association, Inc., FederalState Joint Board on Universal Service, Report and Order  {O 'and Second Order on Reconsideration, 12 FCC Rcd 18400, 18434 (1997) (NECA Governance Order). The Commission also oversees the structure and content of the annual independent audit that USAC, SLC and RHCC are  X4required to undertake.G yOo'ԍ47 C.F.R.  69.621.G The Commission will levy a forfeiture for a violation of the Act under section  X4503(b)(1)(B) and (2)(C) of the Act.]| yO 'ԍ47 U.S.C.  503(b)(1)(B) and (2)(C). ] Furthermore, persons found willfully to have made false statements to the Commission may be subject to criminal penalties under Title 18 of the  X_4United States Code.F_  {O'ԍ18 U.S.C.  1001. Section 54.711(a) of the Commission's rules, 47 C.F.R.  54.711(a), provides, inter  {O'alia, that "[i]naccurate or untruthful information contained in the Universal Service Worksheet may lead to prosecution under the criminal provisions of Title 18 of the United States Code." Similarly, section 54.713 of  {Ox'the Commission's rules, 47 C.F.R.  54.713, provides, inter alia, that "[f]ailure to file the Universal Service Worksheet or to submit required quarterly contributions may subject the contributor to the enforcement provisions of the Act and any other applicable law." In addition, FCC Form 457, "Universal Service Worksheet," provides that "[p]ersons making willful, false statements in the worksheet can be punished by fine or imprisonment under Title 18 of the United States Code, 18 U.S.C.  1001."  We note that parties already have asked the Commission what procedures will be used  X 4to review decisions by SLC, RHCC, and USAC.+\  {O'ԍSee Letter to Magalie Roman Salas from Integrated Systems & Internet Solutions, Inc., dated May 14,  {O'1998. See also Broadband Networks, Inc., Objection to Application, CC Docket No. 96-45 (dated April 24, 1998). + Any affected party may seek review from  X 4the Commission using existing Commission procedures.O > {O'ԍSee 47 C.F.R.  1.41.O However, until a revised administrative structure is adopted, we strongly encourage parties seeking relief from a decision of USAC, SLC, or RHCC to seek initial reconsideration from SLC, RHCC or the High Cost and Low Income Committee, as appropriate.  X4In the Report to Congress, the Commission proposed to establish specific appeal procedures under which administrative decisions made by USAC would be reviewable by the  Xd4Commission.Rd {O$'ԍReport to Congress  14.R We seek comment on the following proposal: An affected party would be permitted to file with the Common Carrier Bureau (the Bureau), within sixty days of an action taken by USAC, a petition for Commission review. The Bureau would have delegated authority to rule on such petition and if the Bureau took no action within sixty days, USAC's"b0*((" decision would be deemed approved by the Bureau. As with other decisions made by the Bureau acting pursuant to its delegated authority, parties could seek Commission review of the  X4Bureau's decision.P {OK'ԍSee 47 C.F.R.  1.115.P The Bureau also would have the authority to review the decisions of  X4USAC at any time on the Bureau's own motion. The Bureau would conduct de novo review of appeals from USAC decisions. If an application for discounted services or support is approved, and that approval is appealed to the Commission, the pendency of that appeal would not affect the eligibility of the applicant to receive discounted services, nor would it prevent reimbursement of carriers for discounted services provided to such applicants. We seek comment on all aspects of this proposal. At the same time, we propose to limit the Bureau's authority to issues that are not novel questions of fact, law or policy. We seek comment on this proposal. We also seek comment on whether state procurement rules or other state experiences may serve as useful models in addressing appeals of USAC's decisions. In addition, we seek comment on whether a party affected by a decision made by the division staff should be required to seek relief from the appropriate committee of the Board before filing an appeal with the Commission. Similarly, if the relief sought pertains to a matter that is solely within the jurisdiction of the full USAC Board, we seek comment on whether the affected party should be required to seek relief from the full USAC Board before  XM4filing an appeal with the Commission. We also seek comment on the timing issues that would be raised if the USAC CEO chose to bring the matter before the full USAC Board under the supermajority procedure. In addition, we seek comment on other ways in which the appeals process may be made as fair and efficient as possible. To foster greater accountability of the consolidated USAC entity, the Commission  X4proposed in the Report to Congress that, in connection with its annual audit, USAC prepare and file with Congress and the Commission an annual report describing all significant aspects  X4of its structure and operations for the preceding year.RZ {O'ԍReport to Congress  14.R We seek comment on this proposal and on ways to structure such a report to enhance the Commission's oversight of USAC's administration and operations. We seek comment on whether there are any additional enforcement mechanisms that the Commission should invoke. Furthermore, we seek comment on what action the Commission should take if it is determined that an application was approved and funds subsequently disbursed erroneously.  X ' " 0*((H"  X'Regulatory Flexibility Analysis Đ\  X4The Regulatory Flexibility Act (RFA)Z {OK'ԍ#Xw PE37 |XP## C\  P6QɒP#See 5 U.S.C.  604. The Regulatory Flexibility Act, 5 U.S.C.  601, et seq., was amended by the Small Business Regulatory Enforcement Act of 1996 (SBREFA), Title II of the Contract with American Advancement Act of 1996, Pub. L. No. 104121, 110 Stat. 847 (1996) (CWAAA). requires that a regulatory flexibility analysis be prepared for notice and comment rulemaking proceedings, unless the agency certifies that "the rule will not, if promulgated, have a significant economic impact on a substantial number of  X4small entities."F yO( 'ԍ5 U.S.C.  605(b).F The RFA generally defines "small entity" as having the same meaning as the  Xv4terms "small business," "small organization," and "small governmental jurisdiction."Fvz yO 'ԍ5 U.S.C.  601(6).F A small organization is generally "any notforprofit enterprise which is independently owned and  XH4operated and is not dominant in its field."LH  yO'ԍ5 U.S.C.  601(4).L This regulatory flexibility analysis supplements our prior certification and analyses.  X 4Supplemental Regulatory Flexibility Certification. In the NECA Governance Order, the Commission directed NECA, as a condition of its service as temporary Administrator of the universal service support mechanisms, to create an independent subsidiary, USAC, to administer temporarily certain aspects of the universal service support mechanisms and to establish SLC and RHCC to administer specific aspects of the universal service mechanisms  X4for schools and libraries and rural health care providers.e  {O'ԍNECA Governance Order, 12 FCC Rcd at 1844445.e In that Order, the Commission concluded that NECA is not a small organization within the meaning of the RFA, finding that NECA is a non-profit association that was created to administer the Commission's interstate  XO4access tariff and revenue distribution processes.!"O,  {O,'ԍId. See also 47 C.F.R.  69.601, 69.603. NECA subsequently assumed responsibility for administering the existing universal service fund (47 C.F.R.  69.116, 69.603), the Lifeline Assistance program (47 C.F.R.  69.117, 69.603), the Long Term Support program (47 C.F.R.  69.2(y), 69.612), and the Telecommunications Relay Services fund (47 C.F.R.  64.604(c)(4)(iii)). On this basis, the Commission certified  X84pursuant to the RFA that the rules adopted in the NECA Governance Order would not have a  X#4significant economic impact on a substantial number of small entities.e"# {O"'ԍNECA Governance Order, 12 FCC Rcd at 1844445.e This Public Notice seeks comment on the proposed plan to merge SLC and RHCC into USAC as the single entity responsible for the administration of the universal service support mechanisms for schools, libraries and rural health care providers. We also seek comment on a proposal to require USAC to prepare and file with Congress and the Commission an annual""0*(((" report describing all significant aspects of its structure and operations for the preceding year.  X4For the same reasons stated in the NECA Governance Order, we find that NECA is not a small organization within the meaning of the RFA. Similarly, USAC, as a whollyowned, nonprofit subsidiary of NECA, is not a small organization. SLC and RHCC are nonprofit corporations created by NECA as a condition of its service as temporary Administrator. Even if NECA, USAC, SLC and RHCC are small entities, we certify that the reorganization of SLC, RHCC, and USAC proposed here will affect directly only those four entities and thus will not have a direct, significant impact on a substantial number of small entities. We therefore certify, pursuant to RFA, 5 U.S.C.  605(b), that this action will not have a significant economic impact on a substantial number of small entities.  X 4Supplemental Regulatory Flexibility Analysis. This public notice seeks comment on the proposed procedures under which administrative decisions made by USAC would be reviewable by the Commission. This notice also seeks comment on the enforcement mechanisms the Commission should invoke in connection with the universal service support mechanisms. We previously performed a regulatory flexibility analysis regarding the  X4implementation of the universal service support mechanisms.#^ {O 'ԍSee FederalState Joint Board on Universal Service, First Report and Order, CC Docket No. 9645, 12  {O'FCC Rcd 8776, 92199260 (1997), appeal pending sub nom. in Texas Office of Util. Counsel, No. 9760421 (5th  {O'Cir. filed June 25, 1997) (Universal Service Order). This supplemental regulatory flexibility analysis addresses possible changes to our previous analyses that might result from our proposal here. The Commission is required by sections 254(a)(2) and 410(c) of the Act to propose rules to implement properly the universal service support mechanisms. In this public notice, the Commission proposes procedures under which administrative decisions made by USAC would be reviewable by the Commission. This public notice also seeks comment on whether a party affected by a decision made by the division staff of USAC should be required to seek relief from the appropriate committee of the USAC Board before filing an appeal with the Commission. Specific appeal procedures are necessary to ensure that the Commission retains ultimate authority over the implementation of universal service support mechanisms. The description of the small entities to which the proposed rules would apply is set forth in the  Xi4Universal Service Order$i {O 'ԍSee Universal Service Order, 12 FCC Rcd at 92419243. and continues to apply to our analysis. The Commission proposes a twolevel appeal process. We do not believe that such a requirement will have a significant economic impact on the small entities affected by the process. Affected parties will benefit from review by the appropriate committee of the full USAC Board instead of having to resort to full Commission review in the first instance. We seek comment on these tentative conclusions. The Commission will publish this Public Notice in the Federal Register. In addition, the Commission's Office of Public Affairs Reference Operations Division, will send a copy of"!$0*((% " this Public Notice, including this certification, to the Chief Counsel for Advocacy of the  X4Small Business Administration.F% yOb'ԍ5 U.S.C.  605(b).F  X'gm Ex Parte Đ\ Pursuant to 47 C.F.R.  1.1206, this proceeding will be conducted as a permitbut Xv4disclose proceeding in which ex parte communications are permitted subject to disclosure.  XJ'  Deadlines and Instructions for Filing Comments Đ\ Interested parties may file comments in support of, or in opposition to, the proposed  X 4plan of reorganization on or before August 5, 1998 and reply comments on or before August  X 412 . All filings should refer to USAC Plan of Reorganization, CC Docket Nos. 97-21 and  X 496-45 , and DA 98-1336 . One original and six copies of all filings must be sent to the Commission's Secretary, Magalie Roman Salas, Office of the Secretary, Federal Communications Commission, 1919 M Street, N.W., Room 222, Washington, D.C. 20554. Parties also may file comments electronically via the Internet at: . Only one copy of an electronic submission must be submitted. In completing the transmittal screen, commenters should include their full name, Postal Service mailing address, and the lead docket number for this proceeding, which is Docket No. 97-21. Parties not submitting their comments via the Internet are also asked to submit their comments on diskette. Parties submitting diskettes should submit them to Sheryl Todd, Accounting Policy Division, 2100 M Street, N.W., Room 8606, Washington, D.C. 20554. Such a submission should be on a 3.5 inch diskette formatted in an IBM compatible format using WordPerfect 5.1 for Windows or compatible software. The diskette should be accompanied by a cover letter and should be submitted in "read only" mode. The diskette should be clearly labelled with the party's name, proceeding (including the lead docket number in this case, Docket No. 97-21), type of pleading (comment or reply comment), date of submission, and the name of the electronic file on the diskette. Each diskette should contain only one party's pleadings, preferably in a single electronic file. In addition, parties must send copies to the Commission's copy contractor, International Transcription Service, Inc., 1231 20th Street, N.W., Washington, D.C. 20037. For information regarding this Public Notice, contact Sharon Webber at (202) 4187400. s Action by the Chief, Common Carrier Bureau.\  X#4q FCC