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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 ) AAD/ USB File No. 98-37 DECLARATORY RULING Adopted: January 29, 1999 Released: February 18, 1999 By the Commission: Commissioner Furchtgott-Roth dissenting and issuing a statement. I. INTRODUCTION 1. In this Declaratory Ruling, we address a petition by the Iowa Telecommunications and Technology Commission ("ITTC"), operating the Iowa Communications Network ("ICN"), seeking a declaration that ICN is a "telecommunications carrier" eligible to receive direct universal service support for the provision of discounted telecommunications services to schools, libraries, and rural health care providers under sections 254(h)(1)(A) and (B) of the Communications Act of 1934, as amended ("Act"). 2. As we observed in the Universal Service Order and reiterated in the Fourth Reconsideration Order, the Act permits only "telecommunications carriers" to receive direct reimbursement from universal service support mechanisms for the provision of discounted telecommunications services, and the term "telecommunications carrier" includes only carriers that offer telecommunications on a common carriage basis. As we explain below, it is clear that ICN is not offering telecommunications on a common carrier basis and, therefore, is not within the category of providers defined by Congress as being eligible to receive direct reimbursement for the provision of discounted telecommunications services to schools, libraries, and rural health care providers under section 254(h)(1) of the Act. 3. While ICN is statutorily barred from receiving direct reimbursement for discounted telecommunications that it provides over its own network, we reiterate, nonetheless, that the Act does provide other avenues by which schools, libraries, and rural health care providers may receive discounts for services obtained through a state network. We note that state telecommunications networks may receive support for providing two types of services to eligible schools, libraries, and rural health care providers: (1) discounted telecommunications obtained by the state network acting as a consortium; and (2) non-telecommunications services. First, schools, libraries, and rural health care providers are specifically eligible to receive discounted telecommunications services from a state network that acts as a consortium in aggregating and purchasing discounted telecommunications from a telecommunications carrier that provides services over its network (as opposed to ICN's network) to the schools, libraries, and rural health care providers that make up the consortium. The state network must distribute the discounts between all of the participating recipients of the services. 4. Second, we emphasize, consistent with the Fourth Reconsideration Order, that state telecommunications networks, such as ICN, may secure direct reimbursements for their provision of eligible discounted non-telecommunications services (i.e., Internet access and internal connections) to schools and libraries. Alternatively, a state network may act as a consortium in obtaining these non-telecommunciations services, and thus pass the discounts through to the participating schools and libraries as described above. II. BACKGROUND 5. Section 254(e) generally provides that only an "eligible telecommunications carrier" under section 214(e) is eligible to receive universal service support. An entity must, therefore, be an "eligible telecommunications carrier" for purposes of receiving universal service support under section 254(h)(1)(A) for providing telecommunications services to rural health care providers. Congress carved out an exception in the case of schools and libraries, however, by specifying that any "telecommunications carrier," even one that did not qualify as an "eligible telecommunications carrier," is eligible for direct reimbursement for providing discounted telecommunications services to schools and libraries. Notwithstanding this distinction, Congress clearly provided that an entity be a "telecommunications carrier" of some sort in order to receive universal service support for the provision of discounted telecommunications services to either rural health care providers or to schools and libraries. 6. Section 153(44) of the Act defines a "telecommunications carrier" to be any provider of "telecommunications services." The Act states that "telecommunications services" are the "offering of telecommunications for a fee directly to the public, or to such classes of users as to be effectively available directly to the public, regardless of the facilities used." This definition mirrors the common law definition of a "common carrier," and thus the Commission in the Universal Service Order determined that the term "telecommunications services" encompasses only telecommunications provided on a common carrier basis. Accordingly, consistent with the Act, a telecommunications carrier is an entity that provides telecommunications on a common carrier basis. 7. The Commission's rules define a common carrier as "any person engaged in rendering communications services for hire to the public." The Act requires common carriers to furnish services upon "reasonable request therefor." As the Commission noted in the Universal Service Order, and the D.C. Circuit Court of Appeals has held, a carrier may be a common carrier if it holds itself out "to service indifferently all potential users," and that a "carrier will not be a common carrier `where its practice is to make individualized decisions in particular cases whether and on what terms to serve.'" The court determined that "holding oneself out to serve indiscriminately appears to be an essential element, if one is to draw a coherent line between common and private carriers." In contrast, a carrier that serves clients on an individualized basis, determines whether and on what terms to serve each client, and is under no regulatory compulsion to serve all indifferently, is a private carrier for that particular service. 8. As the foregoing discussion reveals, to achieve the goal of allowing schools and libraries to obtain telecommunications services at discounted rates, Congress designed a system by which common carriers, in the course of providing service to the public generally, are required to offer discounted rates to those eligible entities. Prior to the creation of this federal scheme by Congress, a number of states had likewise sought to ensure that certain entities, often including schools, libraries, and state agencies, could receive telecommunications and related services at discounted rates. While pursuing the same goal as Congress, a number of these states adopted an approach significantly different than the one ultimately selected by Congress. Rather than designing a system under which private entities, independently engaged in the provision of telecommunications services to the public, would be reimbursed for giving discounts to eligible beneficiaries, many of the states created government agencies and stand-alone state networks that offer service solely to state agencies, schools, and other beneficiaries specifically designated by the state legislature, at rates subsidized by the state. Some state networks own and operate their own facilities, while others aggregate demand for telecommunications services by eligible entities throughout the state and obtain volume discounts from independent carriers that actually provide the services directly to the eligible entities. 9. In the petition before us, ITTC seeks to secure for ICN the benefits of both the federal and state support mechanisms. As a subsidized state network, ICN allows schools and other beneficiaries to obtain telecommunications and related services at steep discounts. For example, according to a 1998 memorandum to Iowa school district superintendents from the Iowa Department of Education, ICN charges its schools and libraries only $5.00 per hour for video rates, even though the cost of that service was represented to be approximately $75. ITTC seeks a declaration that ICN, in addition to being a state network, is also a telecommunications carrier eligible for further support, or reimbursement of the state subsidy. 10. In the Fourth Reconsideration Order, the Commission addressed, inter alia, several petitions by state telecommunications networks, including ICN, concerning their eligibility under section 254(h)(1)(B) for direct reimbursement from universal service support mechanisms for provision of discounted telecommunications services to schools and libraries. If a state network qualified as a "telecommunications carrier," an eligible school, library, or rural health care provider could obtain service directly from the state telecommunications network at a discounted rate; the state network could then seek reimbursement from the universal service support mechanism for the discounted portion of the service. In its pleadings in the Fourth Reconsideration Order proceeding, ITTC specifically argued that ICN is a telecommunications carrier and "therefore eligible for direct reimbursement from the support mechanisms," because ICN owns and operates its own network, and provides services to "a wide variety of users, not just schools and libraries." 11. The Commission decided in the Fourth Reconsideration Order that state telecommunications networks are not eligible for direct reimbursement from the support mechanisms pursuant to section 254(h)(1), because the record showed that state telecommunications networks do not offer service "for a fee directly to the public," or "indifferently [to] all potential users," and instead, "offer services to specified classes of entities." Because there was no credible evidence that state telecommunications networks "offer service indifferently to any requesting party," the Commission concluded that these networks were not "telecommunications carriers," and thus would "not be eligible for reimbursement from the support mechanisms pursuant to section 254(h)(1)." 12. As we have noted, the Act does not entirely prevent state telecommunications networks from receiving discounted telecommunications services under universal service support mechanisms. To the extent that a state telecommunications network procures supported telecommunications services for schools and libraries, the network would be eligible, as a consortium, to secure discounts on telecommunications services on behalf of eligible schools and libraries and would be required to pass those discounts along to the schools and libraries they serve. Moreover, pursuant to section 254(h)(2), state telecommunications networks may secure discounts on Internet access and internal connections in their capacity as consortia, or may receive direct reimbursement, as non-telecommunications carriers, from universal service support mechanisms for providing such services to eligible schools and libraries. 13. On February 4, 1998, ITTC, operating ICN, filed a petition seeking a determination from the Commission that ICN is eligible under section 254 of the Act, and the Commission's rules, to receive direct reimbursement from universal service mechanisms for the provision of telecommunications services to schools, libraries, and rural health care providers. ITTC argues that ICN is different from the state telecommunications networks described in the Fourth Reconsideration Order because it in fact provides telecommunications on a common carrier basis. On February 13, 1998, the Common Carrier Bureau ("Bureau") requested public comment on ICN's petition. Several parties filed comments and reply comments. III. ICN'S PETITION 14. ICN is authorized by the state legislature to provide high-speed, high-quality telecommunications and Internet services, and is operated by the ITTC. The state legislature provides funds to ITTC and subsidizes ICN's rates for its services. Some parts of the network are state-owned and other portions are leased from private entities. For the most part, ITTC leases the network to provide services to schools and libraries. ITTC asserts that ICN offers a variety of services, including long distance, distance learning, telemedicine, and Internet services to "authorized users." 15. Under Iowa statute, only entities that are "private or public agencies" may be included in the category of "authorized users" of ICN. The Iowa statute divided the universe of private and public agencies into three categories, and treated each category differently for purposes of determining eligibility to take services from the ICN. First, certain private or public agencies, including state and federal agencies, local school districts and nonpublic schools, local libraries, judicial departments, hospitals and physician clinics, and certain United States post offices, were automatically "authorized" by Iowa statute to receive ICN's services as of May 18, 1994. Second, private or public agencies that were not in the first group could certify their eligibility for the network by making the appropriate filing no later than July 1, 1994. Third, a public or private agency that was not deemed authorized as of May 18, 1994, and that did not certify its eligibility by July 1, 1994, is prohibited from obtaining service from the ICN absent an act of the legislature. As noted, entities that do not qualify as private or public entities are absolutely barred from obtaining services from the state network. By Iowa law, a private or public agency that "certified" to purchase services from the network must use the network for all of its video, data, and voice requirements, and may not purchase any services from other carriers. A certified user may decide unilaterally to terminate its relationship with the ICN in favor of another provider with 60 days' prior written notice, but will then have to seek permission of the Iowa General Assembly to recertify. 16. In the petition, ITTC argues that ICN is a "telecommunications carrier," offering telecommunications on a common carrier basis, for the following reasons: (1) "it holds itself out to all of its potential customers for those services" or it serves indifferently its "chosen class of customers;" (2) it offers its services on generally available terms and conditions and does not negotiate individually with any of its customers; and (3) it serves a large number of customers and, accordingly, is different from private carriers that have contracts with a small number of customers. Moreover, ITTC argues that the Commission should defer to the comments of the Iowa Utilities Board (IUB), in which the IUB supports a finding that ICN is a common carrier. Finally, ITTC argues that the public interest compels a finding that ICN is a telecommunications carrier because such a ruling would "ensure that all Iowa schools, libraries and rural health care facilities have access to the advanced services contemplated by section 254(h) on equitable terms and conditions." 17. Two parties, in addition to the IUB, provided comments in support of ICN's request, noting that ICN "provides valuable services to Iowa [s]chools," and that, in order to prevent inequities among schools, "all schools served by the ICN [should] be eligible to receive" universal service support for telecommunications services. 18. Several commenters argue that ICN does not meet the definition of a telecommunications carrier because it does not offer telecommunications on a common carrier basis by holding itself out indifferently to all potential customers. The Iowa Telephone Association notes that the "Iowa legislature has had ample opportunity to revise the charter of ICN since the adoption of section 254(h)(1)(A) if it wanted ICN to be a common carrier." To date, the legislature has not yet done so. GTE noted that ITTC intends to "have users of the network proffer bills not for the expenses which they actually incur but rather based upon ICN's purported overall cost structure," adding that Iowa's Department of Education stated in a memorandum to Iowa's schools that "[u]sing the non-subsidized rate [on the school and libraries application form] will help the State of Iowa recoup some of its ICN operating costs." Commenters also assert that the Commission should dismiss ICN's request because it simply seeks a repetitive reconsideration of the Commission's previous determination in the Fourth Reconsideration Order that state telecommunications networks are not "telecommunications carriers" under section 254(h)(1)(B) of the Act. IV. DISCUSSION 19. As a preliminary matter, we address comments by some parties that ICN's petition is simply a repetitive petition for reconsideration that should be dismissed because it presents no new facts or arguments. We find that ICN's request for a "determination from the Commission," however, should be treated as a petition for a declaratory ruling under section 1.2 of the Commission's rules. We are persuaded by ICN's contention that the Fourth Reconsideration Order does not entirely preclude the possibility that, under certain circumstances a state telecommunications network might qualify as a "telecommunications carrier." 20. The primary issue before us is whether ICN is a "telecommunications carrier" within the meaning of the Act and is, therefore, eligible to receive direct reimbursement from universal service support mechanisms for the provision of discounted telecommunications services to schools, libraries, and rural health care providers pursuant to section 254(h)(1). We conclude that ICN does not meet the statutory definition of a "telecommunications carrier" because it does not offer telecommunications on a common carrier basis. 21. Generally, the test of common carriage, as set forth in the NARUC cases, analyzes the following factors: (1) whether the carrier "holds himself out to serve indifferently all potential users;" and (2) whether the carrier allows "customers to transmit intelligence of their own design and choosing." Consistent with the D.C. Circuit's statement that the first requirement of holding oneself out to serve indifferently is a "key factor" in determining common carrier status, our analysis focuses on that first prong of the NARUC test. We conclude that ICN fails to hold itself out to serve indifferently all potential users because of the particular facts and circumstances surrounding ICN's operation. 22. The evidence shows that ICN fails to "hold itself out" at all, contrary to a common carrier's duty to hold itself out "to the public" or to a party upon "reasonable request." ICN does not offer its services to the public, nor does it even offer its services to any requesting party. In fact, ICN serves only an established and stable clientele that has been previously selected by the Iowa legislature. ICN's customer base is closed, except for those public or private agencies that could request approval from the Iowa legislature to be an "authorized" user. Both case law and Commission precedent establish that an entity with such a pre-selected and stable customer base is a private carrier that does not make "any sort of holding out to the public at all." 23. Further, ICN does not even "hold [itself] out indiscriminately to the clientele [it] is suited to serve," because it does not serve indifferently the class of private or public agencies that comprises its clientele. As noted, the universe of private and public agencies is divided into three subcategories, each of which is treated differently for eligibility purposes. Only a select group of private or public agencies were designated as "authorized" as of May 18, 1994. This group apparently did not need to certify to ICN that it wished to use the network. A second group, comprised of remaining private or public agencies that were not deemed "authorized" in the first group, were required to make the appropriate filing and certify to ITTC by July 1, 1994 that they intended to use the network. Those private and public agencies that failed to certify to ITTC by July 1, 1994 to be "authorized" could only use the network by thereafter petitioning the state legislature. There are further distinctions even within these subcategories. By law, for example, ICN serves only federal post offices that have federal grants for demonstration projects, but not other federal post offices. Moreover, ICN treats its "certified users" differently from its "authorized" users, in that its "certified users," unlike ICN's other users, are bound by an exclusive statutory arrangement, in which they must purchase all their telecommunications services from ICN, and must specifically petition the ITTC in order to be released from taking some of their services from ICN. These requirements clearly indicate that ICN differentiates among various private and public agencies in the state. For all intents and purposes, ICN appears to be a private carrier, because it is under no regulatory compulsion to serve indifferently, and in fact, is under compulsion by state law to discriminate and serve only a highly restricted, individualized group of users. 24. We reject ITTC's argument reciting the D.C. Circuit's holding that "a specialized carrier whose service is of possible use to only a fraction of the population may nonetheless be a common carrier, if he holds himself out to serve indifferently all potential users." As noted, ICN does not hold itself out at all to any group whatsover. At best, the only remaining category of "potential users" consists of public and private agencies not previously authorized (either directly by Iowa statute or by the certification process that terminated on July 1, 1994). ICN does not, however, hold itself out to serve these potential users and must, in fact, deny service requests from them, absent an act of the legislature. More broadly, ICN clearly fails to hold itself out indifferently to furnish its services to many other individuals or entities that could potentially use these services, that is, to those that are not private or public agencies. We find unpersuasive ITTC's argument in a written ex parte that ICN's distance learning services are so specialized as to be potentially useful to only those agencies to whom ICN offers service. Elsewhere, ICN concedes that its distance learning services are "pure transmission services," which undermines its assertion that the services are so specialized as to be of use to only its authorized users. Businesses, individuals, and other associations not falling within ICN's select group of authorized users could use ICN's distance learning and telecommunications services, yet they are denied access to those services. We conclude that ICN fails to show how it serves indifferently all users that could potentially use its services. 25. We also find no merit in ITTC's contention that there have previously been instances in which the Commission recognized service to limited groups as common carriage. ITTC cites, for instance, telephone companies' provision of "common carrier channel service" to franchised cable operators. In the channel service cases, local telephone companies were allowed to build out video distribution facilities and services to provide channel service, which links "a cable operator's headend to subscriber premises." The Commission required the carriers to provide the channel service on "an indiscriminate basis . . . to any and all similarly-situated companies or members of the public." A programmer, however, that wished to deliver video and cable services to subscribers via the channel service, had to obtain a Title VI cable franchise, as required of all cable operators providing cable service over a cable system. The channel service cases are distinguishable from ICN's case because the Commission did not restrict the class of users that could receive the underlying channel service, and in fact, required carriers offering the channel service to provide it on an "indiscriminate basis." Thus, although the Commission required entities that received the channel service and provided the cable services that channel service supports to obtain a cable franchise, the carrier offering the underlying channel service could not discriminate among potential users. In contrast, in ICN's case, state law clearly requires ICN's services to be provided on a discriminatory basis, and restricts the group of customers for the services. 26. ITTC's reliance on the IUB's comments asserting that ICN is a common carrier is misplaced. The IUB's support of ICN's position that it is a "common carrier" is not controlling or legally dispositive. As the D.C. Circuit stated in NARUC I, the "common law definition of common carrier is sufficiently definite as not to admit of agency discretion in the classification of operating communications entities. . . . [an entity] is a common carrier by virtue of its functions, rather than because it is declared to be so." Moreover, IUB's assertion that ICN is a common carrier because it provides services on its network and does not simply buy or lease facilities from underlying carriers is irrelevant to the determination of common carrier status. As case law states, a "common carrier is one which undertakes indifferently to provide communications service to the public for hire, regardless of the actual ownership or operation of the facilities involved." 27. Finally, ITTC contends that the public interest would be harmed by an unfavorable ruling to ICN because there would be: (1) inequitable treatment between Iowa's schools and libraries and other states' schools and libraries; and (2) inequitable treatment among ICN's own schools and libraries since some of ICN's services are provided over its own facilities (and not eligible for direct reimbursement) and other ICN services are provided over resold facilities (and potentially discounted from other common carriers). We reject ITTC's argument that the public interest compels a conclusion that ICN is eligible to receive direct reimbursement from universal service support mechanisms under section 254(h)(1) of the Act. The Act explicitly provides that only "telecommunications carriers" are eligible for direct reimbursement pursuant to section 254(h)(1)(B) and for universal service support pursuant to section 254(h)(1)(A). Congress did not give the Commission discretion to allow non-common carriers to receive direct reimbursement or universal service support pursuant to section 254(h)(1). Iowa's schools and libraries, therefore, are treated no differently from other states' schools and libraries, in that the Act provides for direct reimbursement of discounted telecommunications services under section 254(h)(1) to eligible common carriers. Although the efforts of Iowa and other states that have established state telecommunications networks to ensure affordable telecommunications services for schools and libraries are laudable, Congress did not create the federal universal service support mechanism for schools and libraries specifically in order to support or supplement these state networks, and in fact, state programs such as Iowa's are incompatible with the federal program. We note, however, that under the Commission's rules, ICN may receive direct reimbursement for the provision of the non-telecommunications services of Internet and internal connections to schools and libraries, and that ICN may act as a consortium in purchasing and passing along discounted telecommunications services to the schools and libraries that it serves. 28. Moreover, ICN's schools and libraries currently receive low rates, which are subsidized by funding to ICN from the General Assembly of Iowa. For example, we note that ICN's schools and libraries are charged only $5.00 per hour for video rates, even though the cost of that service is represented to be approximately $75.00. Therefore, we find that there is nothing in the record to indicate that an unfavorable ruling to ICN would create unaffordable telecommunications services or inequitable conditions for Iowa's and ICN's schools and libraries. ICN itself has noted that the competitive bidding process required by the Commission's rules will ensure that its schools and libraries take their services from the most competitive providers. Finally, we note that our ruling on this issue is consistent with the Commission's commitment to maintaining a support mechanism that is no larger than necessary to accomplish Congress' goal in enacting section 254(h)(1)(B) of the Act. 29. Based on the above analysis, we find that ICN does not meet the test of common carriage and, therefore, is not a "telecommunications carrier." Specifically, ICN does not hold itself out at all, let alone offer its services indifferently to its potential users or the clientele it is suited to serve. Our conclusion is supported by the fact that ICN: (1) serves a limited and stable group of entities; (2) does not serve additional entities that may seek to obtain service, absent specific legislative authorization; and (3) treats its customers differently. Because we find that ICN fails an essential element of common carriage and is not acting as a "telecommunications carrier," we need not consider ITTC's additional arguments that ICN offers services on generally available terms and conditions and serves a large number of customers. We do note that the D.C. Circuit has specifically found that even a tariff filing with the Commission was not dispositive of whether a service was a common carrier offering, and thus ITTC's contention that it offers services on generally available terms and conditions is not probative of its common carrier status. Moreover, ITTC's assertion regarding the size of ICN's customer base is irrelevant. Finally, because ICN has failed to satisfy the first element of common carriage, we need not consider whether ICN meets the second element of the test of common carriage, of allowing its "customers to transmit intelligence of their own design and choosing." V. CONCLUSION 30. We conclude that ICN is not a "telecommunications carrier" under Section 254(h) because ICN does not offer telecommunications on a common carrier basis. We find, therefore, that ICN is not eligible for direct reimbursement from universal service support mechanisms for the provision of discounted telecommunications services to schools and libraries under section 254(h)(1)(B)(ii), nor is it eligible to receive a credit against its contribution obligation for the provision of telecommunications services to rural health care providers under section 254(h)(1)(A). VI. ORDERING CLAUSE 31. Accordingly, IT IS ORDERED, pursuant to sections 4(i), (j), 254, and 403 of the Act, 47 U.S.C.  154(i), (j), 254, and 403, and section 1.2 of the Commission's rules, 47 C.F.R.  1.2, that the relief sought in the Petition for Declaratory Ruling filed by the Iowa Telecommunications and Technology Commission, is DENIED. FEDERAL COMMUNICATIONS COMMISSION Magalie Roman Salas Secretary DISSENTING STATEMENT OF COMMISSIONER HAROLD FURCHTGOTT-ROTH Re: Declaratory Ruling Regarding the Iowa Communications Network in Federal-State Joint Board on Universal Service, CC Docket 96-45. I dissent from today's decision finding that the Iowa Communications Network is ineligible for receiving direct universal service support for the provision of discounted telecommunications services to schools, libraries, and rural health care providers under sections 254(h)(1)(A) and (B). I cannot support such a strict interpretation of our rules that disadvantages state-based networks while the Commission continues to allow non-carriers, such as large computer companies, to receive money for providing other services under Section 254. I believe that such state telecommunications networks are closer to the kinds of eligible receivers that Congress had envisioned than many of the numerous beneficiaries of the fund today. The history of the Commission's interpretation of Section 254 is not a happy one. For almost two years, the Commission has established programs and promulgated rules under the guise of Section 254. But these programs and rules, while perhaps engendered with noble intent, have not met the exacting requirements of Section 254. Indeed, many of these programs and rules are clearly outside of Section 254, and clearly outside of Commission authority. I have noted just a few of these many peculiar circumstances in several statements over the past year. Many parties come before the Commission with disputes about how best to interpret for specific circumstances Commission rules under Section 254. Iowa has presented the Commission with an issue that, at least on the surface, seems have substantial merit: that it would be inequitable to disallow Iowa's schools and libraries from receiving universal service support for telecommunications services just because those services are being provided by a state telecommunications network. The majority's responds that "The Act explicitly provides that only 'telecommunications carriers' are eligible for direct reimbursement pursuant to 254(h)(1)(B) and for universal service support pursuant to section 254(h)(1)(A)." Usually I would applaud such a straightforward reading of the statute's requirements. But these are the same requirements that have been ignored by this Commission on repeated occasions. For example, the Commission acknowledges that Section 254(e)'s requirement that only "eligible telecommunications carriers" receive universal service support applies to Section 254(h) generally. Indeed, it limits the recipients of support for providing telecommunications service to rural health care providers under section 254(h)(1)(A) to those eligible carriers under 254(e). But then that provision should also apply to the other provisions of 254(h), at least unless specifically excepted. Thus, Section 254(h)(1)(B), which expressly permits recipients to be "telecommunications carriers," is more specific than 254(e) and could take precedence. But the provisions of section 254(e) -- which require that only eligible telecommunications carriers be able to receive federal universal service support -- apply fully to section 254(h)(2). Thus, the requirements for being able to receive funds in conjunction with section 254(h)(2) are actually stricter -- a recipient would have to be designated an eligible telecommunications carrier. But the Commission has ignored this restriction. As one can see, to form an opinion about this issue, one must suspend disbelief in the legality of the underlying programs and rules. That is, how does one best interpret a statute for a particular circumstance under a rule that appears to be inconsistent with the statute? If I were able to suspend disbelief, I would applaud the strict statutory construction: only telecommunications carriers, which must be common carriers, appear to be eligible to receive discounts under Section 254(h)(1)(B). The unfortunate result under this program, however, is that states that had been more forward-looking than most and that had invested substantial resources into developing education networks are disadvantaged. And, more importantly, it is only now in this circumstance that we are applying the actual requirements of Section 254. I, for one, believe that these state educational networks, are closer to being eligible telecommunications carriers than many of those receiving universal service support today. Moreover, they are at least as close as the computer companies that are receiving support. Thus, I do not agree with the majority that "state programs such as Iowa's are incompatible with the federal program." Indeed, I find it ironic that it is only now that some advocate a strict interpretation of Section 254. Finally, I note that several Congressional leaders have called on the FCC to reconsider its universal service programs and to start anew in a manner consistent with Section 254. Any such renewed effort on universals should consider block grants to States and thereby allow State rather than federal officials, to make final determinations about the assignment of universal service funds. Such a system would remove FCC Commissioners from having to repeat the awkward process -- not only of assigning funds among many competing private companies -- but of resolving disputes in those assignments brought by State governments and their agencies. Such a system would also allow states to provide support to the forward-looking educational efforts that they have put in place.