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                           Before the
               Federal Communications Commission
                    Washington, D.C.  20554



In the Matter of                   )
                              )         CC Docket No. 96-45
Federal-State Joint Board on       )
Universal Service                  )


                             ORDER 

     Adopted:  August 7, 1998;  Released:  August 7, 1998 
     
By the Acting Chief, Common Carrier Bureau:

     1.   In this Order, we clarify the application of the Commission's "lowest
corresponding price" requirement set forth in the Universal Service Order.  We clarify that this
requirement was not intended to preempt state law, and does not obligate carriers to offer rates
that would violate state laws.

                         I.  Background

     2.   In the Universal Service Order, the Commission provided that schools and
libraries should be eligible to apply for discounted telecommunications services, Internet access,
and internal connections, subject to certain limitations and conditions.  The Universal Service
Order concluded that, to ensure that their lack of experience in dealing with telecommunications
providers does not prevent schools and libraries from receiving competitive prices, service
providers must offer services to eligible schools and libraries at prices no higher than the lowest
price the provider charges to similarly situated non-residential customers for similar services. 
The Commission clarified that, for purposes of determining the lowest corresponding price,
similar services would include those provided under contract 
as well as those provided under tariff.  The Commission established a rebuttable presumption that
rates offered within the previous three years are compensatory. 

     3.    In the Fourth Reconsideration, the Commission concluded that earlier versions of
tariffs that have been modified should be included in the comparable rates upon which the lowest
corresponding rate is determined, "[u]nless a regulatory agency has found that the tariffed rate
should be changed, and affirmatively ordered such change, or absent a showing that the rate is not
compensatory."   A question has been raised whether the lowest corresponding rate can be based
on rates not lawfully offered under state law. 

                        II.  Discussion

     4.   Although the Commission disagreed with the general assertion that the lowest
corresponding price should not reflect expired tariffs, the Commission did not expressly preempt
state laws governing what rates may lawfully be offered to eligible schools and libraries.  In the
absence of such an expressly stated intention to preempt, we conclude that the Commission did
not intend to require carriers to base the lowest corresponding rate on rates that may not lawfully
be offered under state law.  Thus, we interpret the Fourth Reconsideration as requiring only that
rates that may be offered consistent with state law must be made available as the lowest
corresponding price.

                     III.  Ordering Clause

     5.   Accordingly, IT IS ORDERED that, pursuant to section 4(i) and section 254  of
the Communications Act of 1934, as amended, 47 U.S.C.  154(i) and 254, and sections 0.91
and 0.291 of the Commission's rules, 47 C.F.R.  0.91 and 0.291, the lowest corresponding
price requirement is clarified as set forth above.

                              FEDERAL COMMUNICATION COMMISSION



                              James D. Schlichting 
                              Acting Chief, Common Carrier Bureau