March 4, 1999
| Re: | Proposed Second Quarter 1999 Universal Service Contribution Factors; (CC Docket No. 96-45). |
Today, the Common Carrier Bureau releases a Public Notice announcing the proposed universal service contribution factors for the second quarter of 1999 that will automatically go into effect if the Federal Communications Commission takes no action within 14 days. For the reasons described below, I object to the proposed contribution levels.
First, I continue to object to the excessive administrative expenses of the schools and libraries program. Under today's Notice, the administrative expenses of the schools and libraries program will be $6.8 million for the second quarter alone. These administrative expenses are considerably higher than the administrative expenses of any and all of the other universal service programs. For example, the high cost/low income program demand is significantly greater ($558 million which is almost twice the schools and libraries demand), but the corresponding administrative expenses are considerably smaller (only $1.6 million, more than $5 million less than the schools and libraries expenses). I cannot endorse the disparity -- and certainly not one of this magnitude -- between the administrative expenses of the schools and libraries program and those of the other universal service programs.
Indeed, section 2005(b)(2)(A) of Senate Bill 1768, which prompted several universal service corporate structural 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 this more limited administrative function, I fail to see the need for such excessive administrative expenses. I cannot help but wonder whether the overly bureaucratic structure adopted by the Commission, with its formal divisions and multiple committees overseeing them, has contributed in some way to these expenses.(1) I believe there is a need for more adequate safeguards and Commission oversight to protect against such excessive administrative spending by this program.(2)
While still excessive, I do note that these expenses are considerably less than those proposed for the first quarter of 1999. Once again, I credit Cheryl Parrino's leadership in beginning to address these issues. While further work remains, I am pleased that administrative costs seem finally to be headed in the right direction.
In addition, as I have described on several occasions, the size and scope of the current schools and libraries program is far in excess of what was envisioned by Congress and thus beyond the Commission's authority to establish.(3) I believe that the universal service contributions, at least to the extent they are providing support for non-telecommunications services to non-telecommunications carriers, may not be fairly characterized as mere "fees." Some have argued that there is only one section of the act that provides funding for universal service and that any challenge to universal service necessarily sweeps in all of the programs.(4) I point out, however, that the contributions for the schools, libraries, and rural health care support mechanisms are based not only on interstate but intrastate revenues, while the contributions for the high cost program are based solely on interstate revenues. Thus, there are separate rates to fund separate programs. As I have described on several occasions, the legality of this approach to calculating contributions is highly questionable.(5) As I read the Communications Act, it does not permit the Commission to assess contributions for universal service support mechanisms based on intrastate revenues. Rather, the Act makes clear that the power to collect charges based on such revenues rests within the exclusive province of the States
Conclusion
I reiterate my desire to reconsider some of our legal conclusions related to the implementation of this new program, as I believe we must do. At the very least, however, we must become more involved in the oversight of this program and the burden its administrative expenses are placing on the telecommunications ratepayers.
1. Dissenting Statement of Commissioner Harold Furchtgott-Roth Regarding 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), rel. November 19, 1998.
2. For example, in my statement regarding the First Quarter of 1999's contribution factor, I noted the lack of appropriate oversight for the expenditure of essentially public money. In particular I asked:
Unlike the justifications and scrutiny that all agencies undergo in the appropriations process, what public official is making sure that this . . . taxpayer money is well spent? What public official is making sure that salaries are reasonable, that "travel" does not include First Class, or that contingency does not include Holiday bonuses?
Dissenting Statement of Commissioner Harold Furchtgott-Roth Regarding First Quarter 1999 Universal Service Contribution Factors, rel. December 4, 1998 (emphasis added). In response, some people suggested that I had no basis for making such a prediction. I note that within days of my asking these questions, the Schools and Libraries Corporation approved a "merit pay award" program to provide end of the year bonuses for its employees as a percentage of their base salary. This for a company that had already exceeded its projected annual administrative expenses by millions of dollars.
3. See Testimony of Commissioner Harold Furchtgott-Roth Regarding Universal Service before the Ways and Means Committee of the House of Representatives. See also, Dissenting Statement of Commissioner Harold Furchtgott-Roth Regarding Federal State Joint Board on Universal Service, CC Docket 96-45, Third Order on Reconsideration, 12 FCC Rcd 22801 (1997); Statement of Commissioner Harold Furchtgott-Roth Regarding the Second Quarter 1998 Universal Service Contribution Factors, rel. March 20, 1998; Dissenting Statement of Commissioner Harold Furchtgott-Roth Regarding the Federal-State Joint Board Report to Congress, rel. April 10, 1998; Dissenting Statement of Commissioner Harold Furchtgott-Roth Regarding the Report to Congress in Response to Senate Bill 1768 and Conference Report on H.R. 3579, rel. May 8, 1998; Statement of Commissioner Harold Furchtgott-Roth Regarding the Common Carrier Bureau's Proposed Revisions of 1998 Collection Amounts For Schools and Libraries and Rural Health Care Universal Service Support Mechanisms, rel. May 13, 1998; Statement of Commissioner Harold Furchtgott-Roth Regarding the Common Carrier Bureau's Clarification of "Services" Eligible for Discounts to Schools and Libraries, rel. June 11, 1998; Statement of Commissioner Harold Furchtgott-Roth Regarding the Common Carrier Bureau's Third Quarter 1998 Universal Service Contribution Factors, rel. June 12, 1998.
4. See Testimony of General Counsel Chris Wright Regarding Universal Service before the Ways and Means Committee of the House of Representatives.
5. Separate Statement of Commissioner Harold Furchtgott-Roth Regarding the Second Quarter 1998 Universal Service Contribution Factors, rel. March 20, 1998; Dissenting Statement of Commissioner Harold Furchtgott-Roth Regarding the Federal-State Joint Board Report to Congress, rel. April 10, 1998.