March 4,  1999


                    DISSENTING STATEMENT OF 
              COMMISSIONER HAROLD FURCHTGOTT-ROTH

     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. I believe there is a need for more
adequate safeguards and Commission oversight to protect against such excessive administrative
spending by this program.

     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.   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. 
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.   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.