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November 19, 1998


Re: Changes to the Board of Directors of the National Exchange Carrier Association, Inc; Federal-State Joint Board on Universal Service; (CC Docket Nos 97-21, 96-45) .

I dissent from today's order reorganizing the universal service corporate structure. While consolidating the three corporations into one is a good first step in reaching a more rational and efficient structure to administer universal service, I have reservations about the details of today's plan, including the specific functions of the consolidated entity and the procedures for Commission oversight. I fear that the consolidated organization retains an overly bureaucratic structure that artificially binds the USAC Board of Directors to decisions made by the programming committees and has insufficient supervision from the FCC.

Section 2005(b)(2)(A) of Senate Bill 1768, which prompted these revisions, provides for an extremely limited administrative entity:

[T]he entity proposed by the Commission to administer the programs -- (i) is limited to implementation of the FCC rules for applications for discounts and processing the applications necessary to determine eligibility for discounts under section 254(h) of the Communications ct of 1934 (47 U.S.C. 254(h)) as determined by the Commission; (ii) may not administer the program in any manner that requires that entity to interpret the intent of Congress in establishing the programs or interpret any rule promulgated by the Commission in carrying out the programs, without appropriate consultation and guidance from the Commission.

In light of such limited administrative functions, I fail to see the need for the bureaucratic structure adopted today, with its formal divisions and multiple committees overseeing them. Even more importantly, I fail to understand the importance of allowing an oversight committee to overrule a majority of the USAC Board. If the overall entity is prohibited from setting policy and limited to the function of processing applications, then any subcommittee must be similarly constrained. But what kinds of decisions will any subcommittee be making that would be of such paramount interest to the program that it would be necessary to bind the full USAC board absent a supermajority?

In establishing an entity to review and process the applications, the Commission is merely contracting out administrative functions. All decisions regarding where the money should be going and how it should be distributed should -- indeed must -- be made by the Commission. I am concerned, however, that the Commission itself is insufficiently involved in the decision-making process under this plan. For example, an affected party would file a petition for review first with the Common Carrier Bureau, who would have specific delegated authority to rule on the petitions with possible appeal to the full Commission. Moreover, this process allows for Bureau approval of USAC decisions without even an order explaining their reasoning if the Bureau fails to act within 90 days.. I would prefer that the full Commission be more actively involved in overseeing the administration of these new programs.

My concerns regarding appropriate Commission oversight are heightened by the limitations placed on the USAC Board. First, the proposed committees of USAC would have the power to bind the USAC Board regarding matters within their expertise, absent a supermajority of the full USAC Board voting to override the committee's actions. Second, the USAC Board is prohibited form modifying the power or authority of these committees without Commission approval. This structure is of special concern for the Schools and Libraries Committee where, unlike the Rural Health Care Committee, a majority of the committee members are themselves recipients. Matters within the Schools and Libraries Committee's expertise, for example, include "the development and implementation of other distinctive functions." I cannot endorse such open-ended authority for a decision-making body comprised mostly of beneficiaries, especially in light of the protracted procedure for Commission review.

I believe that the full Commission should take a more active role in the direct oversight of these quasi-public companies. Congress clearly favors a more efficient organization of only limited administrative functions, without the ability to "interpret the intent of Congress" or "any rule promulgated by the Commission."(1) While a good start, today's plan fails to ensure meaningful and early Commission involvement in budgetary decisions and the policy-making process.(2)

Finally, I remain concerned that the report fails to address fully the issues raised by the GAO report regarding the legality of the Commission creating any new corporations without specific statutory authority. After GAO's conclusions regarding the illegality of establishing corporations without specific authorization, I fail to see how the Commission can direct that even a single corporation continue to act without first receiving the requisite authorization from Congress.

1. Section 2005(b) of Senate Bill 1768.

2. For example, I am concerned about the degree of oversight that is being exercised regarding administrative and start-up costs. In their latest filing, the Schools and Libraries Corporation indicates that it paid NECA $3.9 million in operating costs, more than $1.2 million over the original estimate, and its actual expenses were $6.9 million, more than $2.7 million over the original estimate for its administrative costs for the second quarter. First Quarter 1999 Program Size Projections for the Schools and Libraries Universal Service Program, dated November 2, 1998.