[Federal Register: December 24, 2003 (Volume 68, Number 247)]
[Rules and Regulations]
[Page 74492-74504]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr24de03-18]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 54
[WC Docket No. 02-60, FCC 03-288]
Rural Health Care Support Mechanism
AGENCY: Federal Communications Commission.
ACTION: Final rule; denial of petition for reconsideration.
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SUMMARY: In this document, the Commission modifies its rules to improve
the effectiveness of the rural health care support mechanism, which
provides discounts to rural health care providers to access modern
telecommunications for medical and health maintenance purposes. Because
participation in the rural health care support mechanism has not met
the Commission's initial projections, the Commission amends its rules
to improve the program, increase participation by rural health care
providers, and ensure that the benefits of the program continue to be
distributed in a fair and equitable manner. In addition, the Commission
denies Mobile Satellite Ventures Subsidiary's petition for
reconsideration of the 1997 Universal Service Order.
DATES: Effective February 23, 2004 except for Sec. Sec. 54.609(a)(2),
54.609(A)(3)(ii), and 54.621(a) which contain information collection
requirements that have not been approved by the Office of Management
Budget (OMB). The Commission will publish a document in the Federal
Register announcing the effective date of those sections.
FOR FURTHER INFORMATION CONTACT: Shannon Lipp, Attorney, (202) 418-7400
or Regina Brown, Attorney, (202) 418-7400, Wireline Competition Bureau,
Telecommunications Access Policy Division.
SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Report
and Order and Order on Reconsideration, in WC Docket No. 02-60 released
On November 17, 2003. The full text of this document is available for
[[Page 74493]]
public inspection during regular business hours in the FCC Reference
Center, Room CY-A257, 445 12th Street, SW., Washington, DC 20554. There
was also a companion Further Notice of Proposed Rulemaking in WC Docket
No. 02-60 released on November 17, 2003.
I. Introduction
1. In this Report and Order and Order on Reconsideration, we modify
our rules to improve the effectiveness of the rural health care support
mechanism, which provides discounts to rural health care providers to
access modern telecommunications for medical and health maintenance
purposes. Because participation in the rural health care support
mechanism has not met the Commission's initial projections, we amend
our rules to improve the program, increase participation by rural
health care providers, and ensure that the benefits of the program
continue to be distributed in a fair and equitable manner.
Specifically, we expand the scope of entities eligible to receive
discounts, provide support for Internet access, and modify the way in
which we calculate discounts to offer rural health care providers more
flexibility. In addition, in the Order on Reconsideration, we deny
Mobile Satellite Ventures Subsidiary's petition for reconsideration of
the 1997 Universal Service Order, 62 FR 32862 (June 17, 1997). The
actions we take encourage the development of public/private
partnerships and other creative solutions to meet the needs of rural
communities and increase participation in the rural health care
mechanism.
2. The actions we take will also strengthen telemedicine and
telehealth networks across the nation, help improve the quality of
health care services available in rural America, and better enable
rural communities to rapidly diagnose, treat, and contain possible
outbreaks of disease. Moreover, enhancing access to an integrated
nation-wide telecommunications network for rural health care providers
will further the Commission's core responsibility to make available a
rapid nation-wide network for the purpose of the national defense,
particularly with the increased awareness of the possibility of
biological or chemical terrorist attacks. Finally, these changes will
further the Commission's efforts to improve its oversight of the
operation of the program to ensure that the statutory goals of section
254 of the Telecommunications Act of 1996 are met without waste, fraud,
or abuse.
II. Report and Order
A. Eligible Health Care Provider
3. We now further define the statutory term ``public health care
provider.'' We conclude that dedicated emergency departments of rural
for-profit hospitals that participate in Medicare should be deemed
``public'' health care providers eligible to receive prorated rural
heath care support. We agree with commenters that this clarification is
consistent with congressional intent and is necessary to give meaning
to the term ``public'' health care provider under the rural health care
program. Dedicated emergency departments in for-profit hospitals,
including the emergency departments of critical access hospitals, are
required, pursuant to the Emergency Medical Treatment and Labor Act
(EMTALA), to provide medical screening examinations to all patients who
present themselves and to stabilize or arrange for appropriate transfer
of those patients with emergency conditions. Thus, such providers are
``public'' in nature by virtue of the persons they are required,
pursuant to EMTALA, to examine and/or treat for emergency medical
conditions.
4. Moreover, we now determine that dedicated emergency departments
in for-profit rural hospitals constitute ``rural health clinics.'' As
UVA notes, in most communities, emergency departments are the only
ambulatory care entities that serve the public on a 24-hour a day, 7-
day a week basis. In many instances, emergency departments of rural
for-profit hospitals and critical access hospitals are the only health
care providers in rural areas serving the medical needs of the
community. Dedicated emergency departments typically provide the types
of medical services often provided in traditional health clinics.
Therefore, we find that dedicated emergency departments in rural for-
profit hospitals should be eligible to receive prorated discounts as
``public'' ``health providers,'' and more specifically as ``public''
``rural health clinics.'' It is necessary to clarify the definition of
``rural health clinic'' in this way to promote timely access to acute
specialty healthcare services, chronic disease management programs and
other preventive services essential to public health and safety. These
entities are generally the initial point of entry into the healthcare
system for any person suffering the consequences of a severe
catastrophe or accident and constitute a vital segment of the health
care community, particularly in the event of a national public health
emergency.
5. Additionally, as suggested by several commenters, given the
realities of rural health care providers in offering quality health
care services in rural areas, we clarify the entities listed in section
254(h)(7)(B) that qualify as rural ``health care providers.'' We
conclude that entities listed in section 254(h)(7)(B) include non-
profit entities that function as one of the listed entities on a part-
time basis. Pursuant to this modification, non-profit entities that
provide ineligible services, even on a primary basis, would be able to
receive prorated support commensurate with their provision of eligible
rural health care services. For example, if a doctor operated a rural
health clinic on a non-profit basis in a rural community one day per
week or during evenings in the local community center, that community
center would be able to receive prorated support, because it serves as
a ``rural health clinic'' on a part-time basis. Similarly, if a non-
profit community mental health center also operated as a for-profit
pharmacy, that center would also be able to receive prorated support as
a part-time ``community mental health center.'' Our goal in
implementing this proposal is two-fold--to encourage the development of
public/private partnerships and other creative solutions to meet the
needs of rural communities, and to increase participation in the rural
health care support mechanism.
6. We decline to expand the definition of health care provider to
include nursing homes, hospices, and other long-term care facilities.
Congress specifically listed seven categories of entities eligible for
support under this program in section 254(h)(7)(B). Given this specific
listing, we find that if Congress had intended to include nursing
homes, hospices, and other long-term care facilities as health care
providers, it would have explicitly done so in the statute. The
Commission is not authorized to amend the statute to add categories to
the definition, as suggested by commenters. Thus, we affirm the
Commission's previous decision that nursing homes, hospices, and other
long-term care facilities are ineligible for support, whether operated
on a for-profit or non-profit basis. However, because Congress did
specifically list seven categories of entities qualifying as health
care providers, the Commission may clarify the types of entities that
fit within those seven categories. Therefore, consistent with our
clarification that entities that serve as a non-profit rural health
care clinic on a part-time basis are ``health care providers,'' part-
time non-profit rural health care clinics are eligible for
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prorated support, even when associated with a nursing home, hospice, or
other long-term care facility.
7. In addition, at this time, we decline to expand the definition
of rural health care provider to include any rural, non-profit health
care entity with a certified Medicare and/or Medicare provider number
as proposed by commenters. The record lacks sufficient information to
identify the types of entities that would become eligible under this
proposal, as Medicare/Medicaid supports a wide range of services,
drugs, and products. We are concerned that by including such entities
within the definition of ``health care provider'' we may exceed our
statutory authority. Moreover, with the information in the record we
are unable to determine the potential impact on the demand for support.
B. Eligible Services
1. Internet Access
8. Given the rapid development of the Internet's capacities, the
proliferation of applications available on the Internet, and the
increase in the number of Internet users since the 1997 Universal
Service Order was issued, we believe that it is now appropriate to
provide funding for Internet access to rural health care providers. In
particular, we conclude that support equal to twenty-five percent of
the monthly cost for any form of Internet access reasonably related to
the health care needs of the facility should be provided to rural
health care providers. The definition for Internet access that we adopt
here is intended to provide rural health care providers considerable
flexibility to utilize the resources available over the Internet that
will assist them in fulfilling their health care needs.
9. We agree with commenters that the Internet can serve as an
invaluable resource, by providing on-line courses in health education,
medical research, follow-up care, regulatory information such as
compliance with the Health Insurance Portability and Accountability Act
of 1996, video conferencing, web-based electronic benefit claim systems
including on-line billing, and other crucial business functions. The
incredible potential of the Internet to provide access to such a
breadth of medical information may also help reduce isolation in rural
communities. In light of the development of medical applications for
the Internet since 1997, we conclude that encouraging access to this
information service will improve the level of care available in rural
areas.
10. Furthermore, health care information shared over the Internet
may enable rural health care providers to diagnose, treat, and contain
possible outbreaks of disease or respond to health emergencies. We
agree with commenters that Internet access provides a vital link to
information and instantaneous communications in times of natural
disasters and public health emergencies. National connectivity of
telehealth and telemedicine networks could also promote the national
defense by serving as vehicles for rapid, secure communications in
times of emergency, due to outbreaks of disease or biological and
chemical attacks.
11. Accordingly, for purposes of the rural health care support
mechanism only, we define ``eligible Internet access'' as ``an
information service that enables rural health care providers to post
their own data, interact with stored data, generate new data, or
communicate over the World Wide Web.'' Eligible Internet access
provides access to the world-wide information resource of the Internet,
and includes all features typically provided by Internet service
providers to provide adequate functionality and performance. To qualify
as Internet access under the definition we adopt today for the rural
health care support mechanism, transmissions must traverse the Internet
in some fashion. Internet access may provide transport of digital
communications using any Internet-based protocols, including
encapsulation of data, video, or voice.
12. We specifically decline to adopt the definition of Internet
access currently used in the schools and libraries support mechanism.
Under those rules, Internet access includes: This definition thus
specifically precludes support for features that provide the capability
to generate or alter the content of information. We believe adopting
such a limitation for the rural health care program would significantly
undercut the utility of providing support for Internet access to rural
health care providers, because the ability to alter and interact with
information over the Internet is precisely the feature that could
facilitate improved medical care in rural areas. Under the rural health
care support mechanism, we will provide support for Internet access, as
long as it is reasonably related to the health care needs of the
facility, and it is the most cost-effective method of meeting those
needs. We will not provide support, however, for the purchase of
internal connections, computer equipment or other telecommunications
equipment, even when used to access the Internet, because such items
are not information services.
13. We conclude that a flat discount percentage of twenty-five
percent off the cost of monthly Internet access will assist health care
providers seeking to purchase Internet access, while also providing
incentives for rural health care providers to make prudent economic
decisions concerning their telemedical needs. We agree with commenters
that a flat discount, analogous to the operation of the schools and
libraries support mechanism, will lead to greater predictability and
fairness among health care providers. A flat discount is consistent
with section 254(b)(5), which requires ``a specific, sufficient, and
predictable mechanism * * * because it limits the amount of support
that each health care provider may receive per month to a reasonable
level.'' A flat discount is also easy to administer. Although it is
difficult to estimate the impact of providing support for Internet
access service due to the wide range of costs between and among the
various types of Internet access services, we agree with commenters'
projections that our actions today regarding Internet access are
unlikely to result in program demand in excess of the cap. We act
conservatively by choosing a twenty-five percent flat discount
initially because it will provide an incentive for rural health care
providers to choose a level of service appropriate to their needs, will
provide more certainty that demand for Internet access support will not
exceed the annual funding cap, and will deter wasteful expenditures.
Furthermore, we find that a twenty-five percent discount is reasonable
because provision of support to health care providers under the rural
health care support mechanism is not contingent on economic need,
similar to the twenty-five percent discount provided to the least
disadvantaged rural schools and libraries. As we gain more experience
with this aspect of the support mechanism, we will determine whether an
increase in the discount is necessary or advisable. Finally, we
disagree with WorldCom that support for Internet access must be based
on the difference between urban and rural rates, because section
254(h)(2)(A) of the Act, the statutory provision dealing with
information services, makes no reference to an urban-rural comparison,
unlike section 254(h)(1)(A). The urban-rural comparison for
telecommunications services that WorldCom cites to in section
254(h)(1)(A) does not apply to information services such as Internet
[[Page 74495]]
access. Provision of Internet access and other information services is
governed by section 254(h)(2)(A).
14. Consistent with the Commission's long-standing principles of
competitive neutrality, rural health care providers may receive
discounts for the most cost-effective form of Internet access,
regardless of the platform. Thus, a provider could opt for dial-up
Internet access or broadband Internet access over wireline, cable,
wireless, or satellite platforms. Health care providers must certify,
however, that the particular Internet access service selected is the
most cost-effective way of meeting the facility's health care needs. We
believe this policy will provide flexibility to rural health care
providers to purchase the most appropriate offerings for their health
care needs and may also facilitate the deployment of facilities-based
broadband deployment in rural areas.
15. Moreover, we will continue to provide support for toll charges
incurred by health care providers that cannot obtain toll-free access
to an ISP, limited to the lesser of $180.00 or 30 hours of usage per
month. The 1997 Universal Service Order stated that the proliferation
of ISPs and the competitive marketplace ``soon should eliminate the
need for such support.'' However, we are persuaded by commenters'
showings that the need for such support still exists. Providing support
for limited toll charges will place those providers who cannot reach an
ISP without incurring toll charges on the same footing as other health
care providers with respect to Internet access.
2. Other Services
16. We decline at this time to provide support for services other
than telecommunications services, Internet access, and limited toll
charges. In the NPRM, 67 FR 34653 (May 15, 2002) the Commission sought
comment on whether we should establish new policies to enhance access
to advanced telecommunications and information services for health care
providers consistent with the scope of our authority under section
254(h)(2)(A). Commenters suggested that telecommunications equipment,
surcharges imposed by statewide or regional networks, internal
connections, and health care providers' travel costs should be eligible
for universal service support. We find that providing support for
telecommunications equipment, surcharges, and travel costs exceeds the
scope of our statutory authority under section 254(h), because these
items are neither telecommunications nor information services. In
addition, we believe there is insufficient information in the record to
provide support for internal connections. Moreover, given our
experience with the schools and libraries support mechanism, we are
concerned that providing support for internal connections may place an
undue burden on the rural health care support mechanism.
C. Calculation of Discounted Services
1. Interpretation of ``Similar Services''
17. We alter our current policy to allow rural health care
providers to compare the urban and rural rates for functionally similar
services as viewed from the perspective of the end user. We agree with
commenters that our current policy of comparing technically similar
services does not take into account that certain telecommunications
services offered in urban areas are not always available in rural
areas. In particular, new technologies are often first deployed in
urban areas, and such services may be less expensive than services in
rural areas based on older technologies. This modification to our rules
will better effectuate the mandate of Congress to ensure comparable
services for rural areas, as provided in section 254 of the Act, by
allowing rural health care providers to benefit from obtaining
telecommunications services at rates equivalent to those in urban
areas. Eligible health care providers must purchase telecommunications
services and compare their service to a functionally equivalent
telecommunications service in order to receive this discount.
18. Accordingly, we create ``safe harbor'' categories of
functionally equivalent services based on the advertised speed and
nature of the service. For purposes of the rural health care support
mechanism only, we establish the following advertised speed categories
as functionally equivalent: low--144-256 kbps; medium--257-768 kbps;
high--769-1400 kbps (1.4 mbps); T-1--1.41-8 mbps; T-3--8.1-50 mbps. We
will also consider whether a service is symmetrical or asymmetrical
when determining functional equivalencies. Telecommunications services
will be considered functionally similar when operated at advertised
speeds within the same category (low, medium, high, T-1, or T-3) and
when the nature of the service is the same (symmetrical or
asymmetrical). For example, a symmetrical fractional T-1 service
operating at an advertised speed of 144 kbps would be considered
functionally similar to a symmetrical DSL transmission service with an
advertised speed of 256 kbps. By developing ``safe harbor'' categories
of functionally equivalent speeds, we hope to minimize the disparity in
rates of services available in rural and urban areas in an
administratively easy fashion. We will update these categories, as
needed, to reflect technological developments.
2. Urban Area
19. We now revise section 54.605 of our rules to allow rural health
care providers to compare rural rates to urban rates in any city with a
population of at least 50,000 in the state, as opposed to the nearest
city with a population of 50,000. The Commission originally required
comparison to the nearest city with 50,000 people, in part, because
they believed health care providers would likely connect to a point in
that nearest large city. Based on our experience with the program and
information in the record, health care providers may not always find
the needed expertise in the nearest large city. Allowing comparison to
rates in any city in the state acknowledges that rural health care
providers may communicate with experts in other cities in the state.
Such action also should allow rural health care providers to benefit
from the lowest rates for services in the State, thereby providing
additional support to develop better telemedicine links. Verizon
asserts that, under this policy, rural health care providers may
receive better rates than those available in some urban areas of the
state. However, we believe that the public interest in providing more
flexibility in utilizing telemedicine services and quality health care
facilities outweighs any minimal advantage gained by rural health care
providers over those health care providers located in certain urban
areas. Further, we do not believe the urban rates within states differ
so significantly that revising this rule will increase demand to the
extent that we may risk exceeding the funding cap of $400 million.
3. Maximum Allowable Distance
20. We revise the Maximum Allowable Distance (MAD) to equal the
distance between the rural health care provider and the farthest point
on the jurisdictional boundary of the largest city in that State.
Accordingly, for distance-based charges actually incurred, we modify
our rules to provide support to rural health care providers to any
location that exceeds the SUD and is less than this revised MAD. As the
Commission indicated in the NPRM, our experience to date suggests that
limiting rural heath care providers to discounts for distance-based
charges to the nearest city of
[[Page 74496]]
50,000 or more may not be adequate for purposes of creating a
comprehensive telehealth and telemedicine network. Further, commenters
contend that the current MAD assumes that the rural health care
provider will connect with specialists in the nearest urban area, which
may not necessarily have the essential complement of specialists to
provide telemedicine services. We believe, in most instances,
calculating the MAD as described will provide more support for
distance-based charges than our current rules, without creating
additional administrative burdens for the Administrator. In addition,
this modification should provide rural health care providers access to
high levels of care and greater flexibility in developing appropriate
telehealth networks.
21. Although commenters generally favor eliminating the MAD, we
decline to do so at this time. We are concerned that eliminating the
MAD could result in wasteful expenditures for the program, as providers
could connect to more distant locations when a closer one would
suffice. Expanding the MAD to the largest city in a state should
provide support sufficient to enable rural health care providers to
connect with health care facilities with a wide range of medical
expertise, without introducing the potential for waste associated with
eliminating the MAD or making the MAD equal to the furthest point in
the state. Moreover, we decline to expand the MAD to equal the distance
between the health care provider and the nearest center of tertiary
care. Although this proposal may have a more direct relationship to
health care services, we agree with commenters that the nearest point
of tertiary care may not provide the required specialized expertise. In
addition, this proposal would require the identification and continued
monitoring of all tertiary care centers throughout the Nation, which
would impose significant administrative burdens upon the Administrator
of the program.
4. Satellite Services
22. We revise our policy to allow rural health care providers to
receive discounts for satellite services even where alternative
terrestrial-based services may be available. As suggested by
commenters, however, these discounts will be capped at the amount
providers would have received if they purchased functionally similar
terrestrial-based alternatives. Providers seeking discounts for
satellite services will be required to provide to the Administrator
documentation of the urban and rural rates for the terrestrial-based
alternative services. We believe imposing a cap on support for
satellite service is necessary because satellite services are often
significantly more expensive than terrestrial-based services. Thus,
pursuant to these changes, where rural health care providers opt for
more expensive satellite-based services when a cheaper terrestrial-
based alternative is available, the provider, and not the support
mechanism, will be responsible for the additional cost. For example, if
a health care provider pays $100 per month for satellite service, the
rural rate for a comparable wireline service plan is $60 per month, and
the urban rate is $40 per month, the health care provider would receive
$20 per month towards the satellite service. We conclude this approach
furthers the principle of competitive neutrality and recognizes the
role that satellite services may play in rural areas without unduly
increasing the size of the fund. We also seek further comment in the
accompanying Further Notice on whether additional rule changes should
be adopted to facilitate support for mobile rural health care
providers.
5. Insular Areas
23. Although we continue to recognize that using urban rates within
a State as the benchmark for reasonable rates may be ill-suited to
certain insular areas, we believe that the proposal of some commenters
to permit the comparison of insular rural rates to the nearest urban
area outside the State is inconsistent with the statutory language set
forth in section 254(h)(1)(A). As the Commission indicated in the
Fifteenth Order on Reconsideration, 64 FR 66778 (November 30, 1999),
Congress could have provided discounts for telecommunications services
that connect rural health care providers to the nearest major hospital
within or outside the State. Congress, however, explicitly provided
that rates should be compared to the urban rate in that State. We
continue to believe section 254(h)(1)(A) precludes us from designating
an urban area outside of the State as the benchmark for comparison for
remote, insular areas.
24. We also disagree with American Samoa Telecommunications
Authority that section 254(h)(2)(A) authorizes the Commission to
provide support for telecommunications links between American Samoa to
an urban center outside the territory, such as Honolulu, Hawaii,
without regard to the urban-rural rate difference. Section 254(h)(2)(A)
authorizes the Commission to take action to increase access to advanced
telecommunications and information services. Support for
telecommunications services, however, is provided subject to section
254(h)(1)(A) and as discussed herein, requires an urban to rural
comparison within the State. Although we do not believe we can grant
the request of providers in insular areas, we do provide support for
Internet access for all eligible rural health care providers, including
those in insular areas, which we believe will functionally provide
significant support to health care providers in insular areas.
D. Other Changes to the Rural Health Care Support Mechanism
1. Allocation Guidelines and Record-Keeping Requirements
25. Because entities that engage in both eligible and ineligible
activities or that collocate with an entity that provides ineligible
services will now be eligible for prorated support, we adopt rules
requiring such providers to allocate their discounts to prevent
discounts from flowing to ineligible activities or providers of
services. Prorated discounts will be provided commensurate only with
entities' eligible activities. The method of cost allocation chosen by
an applicant should be based on objective criteria, and reasonably
reflect the eligible usage of the facilities. Thus, if
telecommunications facilities are used jointly for eligible and
ineligible purposes, the allocation should be based on the percentage
of time the facility is used for eligible purposes or some other method
that reasonably reflects eligible usage. Health care providers must
keep documentation explaining their allocation methods for five years
and present that information to Universal Service Administrative
Company upon request. We also direct USAC to evaluate the allocation
methods selected by program participants in the course of its audit
activities to ensure program integrity. Additionally, we codify the
requirement that health care providers must maintain records for their
purchases of supported services for at least five years sufficient to
document their compliance with all Commission requirements.
26. To illustrate the general principle of discount allocation, we
provide several ``safe harbor'' examples of allocation methods. First,
if a dedicated emergency department in a for-profit rural hospital
shares access to a T-3 with the rest of the hospital, and the T-3 is
used seventy-five hours per week related to EMTALA-emergency care and
the education of health care
[[Page 74497]]
professionals who work in the dedicated emergency department and fifty
hours per week related to other hospital use, the T-3 would be used for
eligible purposes sixty percent of the time (seventy-five hours of use
by emergency department divided by 125 total hours of use by the entire
hospital). Therefore, the eligible dedicated emergency department would
receive sixty percent of the difference between the urban and rural
rate for the T-3. Second, another dedicated emergency department in a
for-profit rural hospital that shares access to a T-3 with the rest of
the hospital, might choose to allocate discounts based on employee
hours. For example, if the emergency department staff, including on-
call physicians, is staffed at 3,360 hours per week (twenty employees
covering 168 hours per week), and the rest of the hospital is staffed
at 4,000 hours per week (100 employees covering 40 hours per week), the
emergency department would receive forty-six percent of the difference
between the urban and rural T-3 rate (3,360 emergency staff hours
divided by 7,360 total staff hours). Third, if a non-profit rural
health clinic operates in a local community center for five hours one
evening per week and uses the community center's T-1 line, and the
community center's normal operating hours are 10 a.m.-10 p.m., Monday
through Saturday, the T-1 would be used for eligible purposes seven
percent of the time (five hours divided by eighty-four open hours in a
week). Therefore, the eligible non-profit rural health clinic would
receive seven percent of the difference between the urban and rural
rate for the T-1. Fourth, if a dedicated emergency department in a for-
profit rural hospital shares access to a T-1 with the rest of the
hospital, and the dedicated emergency department occupies 250 square
feet and the hospital occupies 2,500 square feet, the T-1 would be used
for eligible purposes ten percent of the time (250 square feet divided
by 2,500 square feet). Therefore, the eligible dedicated emergency
department would receive ten percent of the difference between the
urban and rural rate for the T-1. If a rural health care provider can
document that it adopted an allocation method consistent with one of
these four examples, we will consider the method compliant with our
requirements. Rural health care providers may choose a different
allocation method, but will bear the burden of demonstrating, in the
event of an audit or otherwise, that the chosen method was based on
objective criteria and reasonably reflects the eligible usage of the
facilities.
27. Conversely, when services are used solely by an eligible entity
for eligible purposes, no allocation would be necessary. For example,
if a T-1 is located solely in the dedicated emergency room and is used
only for medical or educational purposes, the dedicated emergency room
would be able to receive the full discount based on the difference
between the urban and rural rate. Similarly, if there is a phone line
in a private room at the community center that is dedicated exclusively
to a rural health care clinic, no allocation would be necessary because
the personnel staffing the part-time rural health care clinic would be
the only ones to use the phone.
2 . Streamlining the Application Process
28. Since the NPRM was released, USAC has streamlined the
application process significantly in response to the numerous comments
submitted in this proceeding on this issue. For example, USAC has
implemented electronic filing and e-certification for all forms and has
arranged for electronic forms to be filled automatically with the
previous year's information for repeat on-line filers. USAC has also
created a database of urban rates on its Web site. As a result, a
health care provider can now bypass the arduous step of having to
retrieve this information from its carrier. In addition, USAC has
significantly expanded its outreach efforts, such as by sending
mailings to carriers and health care providers to alert them to changes
in the program, holding monthly conference calls for carriers and
health care providers to ask questions and raise concerns, and setting
up a toll-free access number where carriers and health care providers
can call at their convenience. Finally, USAC has eliminated the form
submitted by service providers, FCC Form 468, by combining the relevant
information into FCC Form 466, which is submitted by applicants. This
modification to the reimbursement process has reduced to a great extent
the interval between receipt of service and payments to service
providers, thereby mitigating commenters' concerns.
29. We believe USAC's efforts to ease the burdens of applying to
the program have been exemplary, as further evidenced by the number of
completed applications received by USAC in Funding Year 2003 compared
to Funding Year 2002. Nevertheless, in the Further Notice of Proposed
Rulemaking, we seek comment on ways in which USAC could further
streamline the application process and expand outreach efforts. In
addition, we note that the Commission, through the Consumer &
Governmental Affairs Bureau, will endeavor through its educational and
outreach efforts, to ensure that those most likely affected are
informed about the actions taken in this Order. In addition to making
fact sheets and other informational materials available for
dissemination through the Commission's Web site, the Commission will
include the dissemination of such information as part of its on-going,
grassroots outreach efforts directed at rural America and undertaken in
coordination with other federal and state agencies.
3. Pro-Rata Reductions if Annual Cap Exceeded
30. Based on our estimates and the comments we have received, we
continue to believe that our current rules requiring pro-rata
distribution of funds if requests exceed the cap, are the most
effective and equitable means of distributing limited funds in
accordance with the goals and purposes of the statute. Therefore, we
agree with the majority of commenters that the current rules should be
maintained. We note that the rules adopted in this Order could increase
the level of discounts requested in a year, so applicants are
encouraged to submit applications during the filing window to secure
their universal service funding. We disagree with the commenter that
suggested we prioritize universal service support for telecommunication
services over information services. We do not think such a measure is
necessary at this time because program demand has never approached the
cap. Moreover, prioritization would add another level of unnecessary
administrative complexity to the support mechanism.
4. Ensuring the Selection of Cost-Effective Services
31. We agree with commenters that the current rules are adequate to
ensure that health care providers select the most cost-effective
services. Our certification requirements, combined with the requirement
that health care providers remain responsible for a significant portion
of service costs (i.e., the urban rate of telecommunications services
and 75% of Internet access) will ensure that rural health care
providers make prudent economic decisions. We also agree with
commenters that applicants should not be required to use the lowest-
cost technology because factors other than cost, such as reliability
and quality, may be relevant to fulfill their telemedical needs.
[[Page 74498]]
5. Other Non-Substantive Rule Changes
32. In the NECA Order, 62 FR 41294 (August 1, 1997), the Commission
directed the National Exchange Carrier Association (NECA) to establish
the Rural Health Care Corporation to administer the rural health care
support mechanism. Subsequently, the Commission directed the Rural
Health Care Corporation to be merged into a division of USAC. In light
of the Commission's prior actions, we hereby amend our rules to replace
all references to the ``Rural Health Care Corporation'' with the
``Rural Health Care Division.'' We also revise Sec. 54.609(a)(1)(i) to
conform to the Fifteenth Order on Reconsideration. We also adopt
several other non-substantive rule changes to improve the clarity of
the rules.
6. Implementation
33. Funding Year 2003 for the rural health care program ends June
30, 2003, and Funding Year 2004 begins July 1, 2004. Because we do not
wish to introduce changes to the program in the middle of a funding
year, the modifications to the program adopted in this Order will be
implemented beginning with Funding Year 2004. We direct USAC to take
the necessary operational steps to implement the improvements to the
program adopted herein for Funding Year 2004.
III. Order on Reconsideration
34. Consistent with the policy objectives underlying our decision,
we deny, to the extent indicated herein, Mobile Satellite Ventures'
(MSV) petition for reconsideration of the 1997 Universal Service Order.
We decline to revise our policy, as MSV suggests, to subsidize
satellite service at the same price as terrestrial mobile service. We
agree with Verizon that equalizing these rates could undercut
competition and competitive neutrality. Although we agree that MSV and
similar carriers provide valuable services to rural areas, particularly
insular areas unserved by wireline carriers, we are concerned that
equalizing the rates for satellite and terrestrial mobile service could
significantly increase program demand and disadvantage those carriers
already providing functionally similar services at more competitive
prices. Accordingly, we deny MSV's petition for reconsideration to the
extent indicated herein.
IV. Procedural Matters
A. Regulatory Flexibility Analysis
35. As required by the Regulatory Flexibility Act of 1980, as
amended (RFA), an Initial Regulatory Flexibility Analysis (IRFA) was
incorporated in the Notice of Proposed Rulemaking. The Commission
sought written public comments on the proposals in the NPRM, including
comment on the IRFA. The Commission received seventy-five comments,
fourteen reply comments, and six ex partes in response to the NPRM.
This present Final Regulatory Flexibility Analysis (FRFA) conforms to
the RFA.
1. Need for, and Objectives of, the Report and Order
36. The Commission is required by section 254 of the Act to
promulgate rules to implement the universal service provisions of
section 254. On May 8, 1997, the Commission adopted rules that reformed
its system of universal service support mechanisms so that universal
service is preserved and advanced as markets move toward competition.
Among other things, the Commission adopted a mechanism to provide
discounted telecommunications services to public or non-profit health
care providers that serve persons in rural areas. Over the last few
years, important changes in the rural health community prompt us to
review the rural health care universal service support mechanism. In
this Report and Order, we adopt several modifications to the
Commission's rules to improve the effectiveness of the rural health
care universal service support mechanism and increase utilization of
this mechanism by rural health care providers.
37. Specifically, in the Report and Order, we clarify the scope of
entities eligible to receive discounts. We conclude that dedicated
emergency departments of rural for-profit hospitals that participate in
Medicare should be deemed ``public'' health care providers eligible to
receive prorated rural heath care support. We believe this
clarification is necessary to give meaning to the term ``public''
health care provider under the rural health care program. Moreover, we
also determine that dedicated emergency departments in for-profit rural
hospitals constitute ``rural health clinics.'' These entities are
generally the initial point of entry into the healthcare system for any
person suffering the consequences of a severe catastrophe or accident
and constitute a vital segment of the health care community,
particularly in the event of a national public health emergency.
Additionally, we conclude that entities listed in section 254(h)(7)(B)
include non-profit entities that function as one of the listed entities
on a part-time basis. Pursuant to this modification, non-profit
entities that provide ineligible services, even on a primary basis,
would be able to receive prorated support commensurate with their
provision of eligible rural health care services. Our goal in
implementing this proposal is two-fold--to encourage the development of
public/private partnerships and other creative solutions to meet the
needs of rural communities, and to increase participation in the rural
health care support mechanism. Further, because entities that engage in
both eligible and ineligible activities or that collocate with an
entity that provides ineligible services will now be eligible for
prorated support, we also adopt rules requiring such providers to
allocate their discounts to prevent discounts from flowing to
ineligible activities or providers of services.
38. We also provide funding for Internet access for rural health
care providers. We conclude that support equal to twenty-five percent
of the monthly cost for any form of Internet access reasonably related
to the health care needs of the facility should be provided to rural
health care providers. We believe that the Internet can serve as an
invaluable resource, by providing on-line courses in health education,
medical research, follow-up care, regulatory information such as
compliance with Health Insurance Portability and Accountability Act of
1996, video conferencing, web-based electronic benefit claim systems
including on-line billing, and other crucial business functions. The
incredible potential of the Internet to access such a breadth of
medical information may also help reduce isolation in rural
communities. Furthermore, health care information shared over the
Internet may enable rural health care providers to diagnose, treat, and
contain possible outbreaks of disease or respond to health emergencies.
Thus, in light of the development of medical applications for the
Internet since 1997, we conclude that encouraging access to this
information service will improve the level of care available in rural
areas.
39. We also alter our current policy to allow rural health care
providers to compare the urban and rural rates for functionally similar
services as viewed from the perspective of the end user. This
modification to our rules will better effectuate the mandate of
Congress to ensure comparable services for rural areas, as provided in
section 254 of the Act, by allowing rural health care providers to
benefit from obtaining telecommunications services at rates equivalent
to those in urban areas.
[[Page 74499]]
40. We also revise Sec. 54.605 of our rules to allow rural health
care providers to compare rural rates to urban rates in any city with a
population of at least 50,000 in the state, as opposed to the nearest
city with a population of 50,000. Allowing comparison to rates in any
city in the state acknowledges that rural health care providers may
communicate with experts in other cities in the state. Such action also
should allow rural health care providers to benefit from the lowest
rates for services in the State, thereby providing additional support
to develop better telemedicine links.
41. Additionally, we revise the maximum allowable distance (MAD) to
equal the distance between the rural health care provider and the
farthest point on the jurisdictional boundary of the largest city in
that State. Accordingly, for distance-based charges, we modify our
rules to provide support to rural health care providers to any location
(within or outside of the state) that exceeds the SUD and is less than
this revised MAD. We believe, in most instances, calculating the MAD as
described will provide more support for distance-based charges than our
current rules, without creating additional administrative burdens for
the Administrator. In addition, this modification should provide rural
health care providers access to high levels of care and greater
flexibility in developing appropriate telehealth networks.
42. Lastly, we revise our policy to allow rural health care
providers to receive discounts for satellite services even where
alternative terrestrial-based services may be available. However, these
discounts will be capped at the amount providers would have received if
they purchased functionally similar terrestrial-based alternatives. We
conclude this approach furthers the principle of competitive neutrality
and recognizes the role that satellite services may play in rural areas
without unduly increasing the size of the fund.
2. Summary of Significant Issues Raised by Public Comments in Response
to the IRFA
43. No petitions for reconsideration or comments were filed
directly in response to the IRFA or on issues affecting small
businesses.
3. Description and Estimate of the Number of Small Entities to Which
Rules Will Apply
44. The RFA directs agencies to provide a description of, and where
feasible, an estimate of the number of small entities that may be
affected by the proposed rules, if adopted. The RFA generally defines
the term ``small entity'' as having the same meaning as the terms
``small business,'' ``small organization,'' and ``small governmental
jurisdiction.'' In addition, the term ``small business'' has the same
meaning as the term ``small business concern'' under the Small Business
Act. A ``small business concern'' is one which: (1) Is independently
owned and operated; (2) is not dominant in its field of operation; and
(3) satisfies any additional criteria established by the Small Business
Administration (SBA).
45. A small organization is generally ``any not-for-profit
enterprise which is independently owned and operated and is not
dominant in its field.'' Nationwide, as of 1992, there were
approximately 275,801 small organizations. The term ``small
governmental jurisdiction'' is defined as ``governments of cities,
counties, towns, townships, villages, school districts, or special
districts, with a population of less than fifty thousand.'' As of 1997,
there were approximately 87,453 government jurisdictions in the United
States. This number includes 39,044 counties, municipal governments,
and townships, of which 27,546 have populations of fewer than 50,000
and 11,498 counties, municipal governments, and townships have
populations of 50,000 or more. Thus, we estimate that the number of
small government jurisdictions must be 75,955 or fewer. Small entities
potentially affected by the proposals herein include small rural health
care providers, small local health departments and agencies, and small
eligible service providers offering discounted services to rural health
care providers, including telecommunications carriers and ISPs.
a. Rural Health Care Providers
46. Section 254(h)(5)(B) of the Act defines the term ``health care
provider'' and sets forth seven categories of health care providers
eligible to receive universal service support. Although SBA has not
developed a specific size category for small, rural health care
providers, recent data indicate that there are a total of 8,297 health
care providers, consisting of: (1) 625 ``post-secondary educational
institutions offering health care instruction, teaching hospitals, and
medical schools;'' (2) 866 ``community health centers or health centers
providing health care to migrants;'' (3) 1633 ``local health
departments or agencies;'' (4) 950 ``community mental health centers;''
(5) 1951 ``not-for-profit hospitals;'' and (6) 2,272 ``rural health
clinics.'' We have no additional data specifying the numbers of these
health care providers that are small entities. In addition, non-profit
entities that act as ``health care providers'' on a part-time basis
will now be eligible to receive prorated support. However, we have no
data specifying the number of potential new applicants. Consequently,
using the data we do have, we estimate that there are 8,297 or fewer
small health care providers potentially affected by the actions
proposed in this Notice.
47. As noted, non-profit businesses and small governmental units
are considered ``small entities'' within the RFA. In addition, we note
that census categories and associated generic SBA small business size
categories provide the following descriptions of small entities. The
broad category of Ambulatory Health Care Services consists of further
categories and the following SBA small business size standards. The
categories of providers with annual receipts of $6 million or less
consists of: Offices of Dentists; Offices of Chiropractors; Offices of
Optometrists; Offices of Mental Health Practitioners (except
Physicians); Offices of Physical, Occupational and Speech Therapists
and Audiologists; Offices of Podiatrists; Offices of All Other
Miscellaneous Health Practitioners; and Ambulance Services. The
category of Ambulatory Health Care Services providers with $8.5 million
or less in annual receipts consists of: Offices of Physicians; Family
Planning Centers; Outpatient Mental Health and Substance Abuse Centers;
Health Maintenance Organization Medical Centers; Freestanding
Ambulatory Surgical and Emergency Centers; All Other Outpatient Care
Centers, Blood and Organ Banks; and All Other Miscellaneous Ambulatory
Health Care Services. The category of Ambulatory Health Care Services
providers with $11.5 million or less in annual receipts consists of:
Medical Laboratories; Diagnostic Imaging Centers; and Home Health Care
Services. The category of Ambulatory Health Care Services providers
with $29 million or less in annual receipts consists of Kidney Dialysis
Centers. For all of these Ambulatory Health Care Service Providers,
census data indicate that there is a combined total of 345,476 firms
that operated in 1997. Of these, 339,911 had receipts for that year of
less than $5 million. In addition, an additional 3414 firms had annual
receipts of $5 million to $9.99 million; and additional 1475 firms had
receipts of $10 million to $24.99 million; and an additional 401 had
receipts of $25
[[Page 74500]]
million to $49.99 million. We therefore estimate that virtually all
Ambulatory Health Care Services providers are small, given SBA's size
categories. In addition, we have no data specifying the numbers of
these health care providers that are rural and meet other criteria of
the Act.
48. The broad category of Hospitals consists of the following
categories and the following small business providers with annual
receipts of $29 million or less: General Medical and Surgical
Hospitals, Psychiatric and Substance Abuse Hospitals; and Specialty
Hospitals. For all of these health care providers, census data indicate
that there is a combined total of 330 firms that operated in 1997, of
which 237 or fewer had revenues of less than $25 million. An additional
45 firms had annual receipts of $25 million to $49.99 million. We
therefore estimate that most Hospitals are small, given SBA's size
categories. In addition, we have no data specifying the numbers of
these health care providers that are rural and meet other criteria of
the Act.
49. The broad category of Nursing and Residential Care Facilities
consists of the following categories and the following small business
size standards. The category of Nursing and Residential Care Facilities
with annual receipts of $6 million or less consists of: Residential
Mental Health and Substance Abuse Facilities; Homes for the Elderly;
and Other Residential Care Facilities. The category of Nursing and
Residential Care Facilities with annual receipts of $8.5 million or
less consists of Residential Mental Retardation Facilities. The
category of Nursing and Residential Care Facilities with annual
receipts of less than $11.5 million consists of Nursing Care Facilities
and Continuing Care Retirement Communities. For all of these health
care providers, census data indicates that there are a combined total
of 18,011 firms that operated in 1997. Of these, 16,165 or fewer firms
had annual receipts of below $5 million. In addition, 1205 firms had
annual receipts of $5 million to $9.99 million, and 450 firms had
receipts of $10 million to $24.99 million. We therefore estimate that a
great majority of Nursing and Residential Care Facilities are small,
given SBA's size categories. In addition, we have no data specifying
the numbers of these health care providers that are rural and meet
other criteria of the Act.
50. The broad category of Social Assistance consists of the
category of Emergency and Other Relief Services and small business size
standard of annual receipts of $6 million or less. For all of these
health care providers, census data indicates that there are a combined
total of 37,778 firms that operated in 1997. Of these, 37,649 or fewer
firms had annual receipts of below $5 million. An additional 73 firms
had annual receipts of $5 million to $9.99 million. We therefore
estimate that virtually all Social Assistance providers are small,
given SBA's size categories. In addition, we have no data specifying
the numbers of these health care providers that are rural and meet
other criteria of the Act.
b. Providers of Telecommunications and Other Services
51. We have included small incumbent local exchange carriers in
this present RFA analysis. As noted, a ``small business'' under the RFA
is one that, inter alia, meets the pertinent small business size
standard (e.g., a telephone communications business having 1,500 or
fewer employees), and ``is not dominant in its field of operation.''
The SBA's Office of Advocacy contends that, for RFA purposes, small
incumbent local exchange carriers are not dominant in their field of
operation because any such dominance is not ``national'' in scope. We
have therefore included small incumbent local exchange carriers in this
RFA analysis, although we emphasize that this RFA action has no effect
on Commission analyses and determinations in other, non-RFA contexts.
52. Total Number of Telephone Companies Affected. The United States
Bureau of the Census (the ``Census Bureau'') reports that, at the end
of 1997, there were 6,239 firms engaged in providing telephone
services, as defined therein. This number contains a variety of
different categories of carriers, including local exchange carriers,
interexchange carriers, competitive access providers, cellular
carriers, mobile service carriers, operator service providers, pay
telephone operators, PCS providers, covered SMR providers, and
resellers. It seems certain that some of those 6,239 telephone service
firms may not qualify as small entities because they are not
``independently owned and operated.'' For example, a PCS provider that
is affiliated with an interexchange carrier having more than 1,500
employees would not meet the definition of a small business. It seems
reasonable to conclude, therefore, that 6,239 or fewer telephone
service firms are small entity telephone service firms that may be
affected by the decisions and rules adopted in this Report and Order.
53. Local Exchange Carriers, Interexchange Carriers, Competitive
Access Providers, Operator Service Providers, Payphone Providers, and
Resellers. Neither the Commission nor SBA has developed a definition
particular to small local exchange carriers (LECs), interexchange
carriers (IXCs), competitive access providers (CAPs), operator service
providers (OSPs), payphone providers or resellers. The closest
applicable definition for these carrier-types under SBA rules is for
telephone communications companies other than radiotelephone (wireless)
companies. The most reliable source of information regarding the number
of these carriers nationwide of which we are aware appears to be the
data that we collect annually on the Form 499-A. According to our most
recent data, there are 1,335 incumbent LECs, 349 CAPs, 204 IXCs, 21
OSPs, 758 payphone providers and 454 resellers. Although it seems
certain that some of these carriers are not independently owned and
operated, or have more than 1,500 employees, we are unable at this time
to estimate with greater precision the number of these carriers that
would qualify as small business concerns under SBA's definition.
Consequently, we estimate that there are fewer than 1,335 incumbent
LECs, 349 CAPs, 204 IXCs, 21 OSPs, 758 payphone providers, and 541
resellers that may be affected by the decisions and rules adopted in
this Report and Order.
54. Internet Service Providers. The SBA has developed a small
business size standard for ``On-Line Information Services,'' NAICS code
514191. This category comprises establishments ``primarily engaged in
providing direct access through telecommunications networks to
computer-held information compiled or published by others.'' Under this
small business size standard, a small business is one having annual
receipts of $18 million or less. Based on firm size data provided by
the Bureau of the Census, 3,123 firms are small under SBA's $18 million
size standard for this category code. Although some of these Internet
Service Providers (ISPs) might not be independently owned and operated,
we are unable at this time to estimate with greater precision the
number of ISPs that would qualify as small business concerns under
SBA's small business size standard. Consequently, we estimate that
there are 3,123 or fewer small entity ISPs that may be affected.
55. Satellite Service Carriers. The SBA has developed a definition
for small businesses within the category of Satellite
Telecommunications. According to SBA regulations, a small business
under the category of Satellite communications is one having annual
receipts of $12.5 million or less. According to SBA's most recent data,
[[Page 74501]]
there are a total of 371 firms with annual receipts of $9,999,999 or
less, and an additional 69 firms with annual receipts of $10,000,000 or
more. Thus, the number of Satellite Telecommunications firms that are
small under the SBA's $12 million size standard is between 371 and 440.
Further, some of these Satellite Service Carriers might not be
independently owned and operated. Consequently, we estimate that there
are fewer than 440 small entity ISPs that may be affected by the
decisions and rules of the present action.
56. Wireless Service Providers. The SBA has developed a definition
for small businesses within the two separate categories of Cellular and
Other Wireless Telecommunications or Paging. Under that SBA definition,
such a business is small if it has 1,500 or fewer employees. According
to the Commission's most recent Telephone Trends Report data, 1,495
companies reported that they were engaged in the provision of wireless
service. Of these 1,495 companies, 989 reported that they have 1,500 or
fewer employees and 506 reported that, alone or in combination with
affiliates, they have more than 1,500 employees. We do not have data
specifying the number of these carriers that are not independently
owned and operated, and thus are unable at this time to estimate with
greater precision the number of wireless service providers that would
qualify as small business concerns under the SBA's definition.
Consequently, we estimate that there are 989 or fewer small wireless
service providers that may be affected by the rules.
57. Cable and Other Subscription Programming or Other Program
Distribution and Related Entities. The SBA has developed small business
size standards which include all such companies generating $12.5
million or less in revenue annually. These standards cover two
categories of Cable Services: Cable and Other Subscription Programming;
and Cable and Other Program Distribution.
58. Cable and Other Subscription Programming. This industry
comprises establishments primarily engaged in operating studios and
facilities for the broadcasting of programs on a subscription or fee
basis. These establishments produce programming in their own facilities
or acquire programming from external sources. The programming material
is usually delivered to a third party, such as cable systems or direct-
to-home satellite systems, for transmission to viewers. According to
Census Bureau data for 1997, there were a total of 234 firms in this
category, total, that had operated for the entire year. Of this total,
188 firms had annual receipts of under $10 million. Consequently, the
Commission estimates that the majority of providers in this service
category are small businesses that may be affected by the rules and
policies adopted herein.
59. Cable and Other Program Distribution. This category includes
cable systems operators, closed circuit television services, direct
broadcast satellite services, multipoint distribution systems,
satellite master antenna systems, and subscription television services.
According to Census Bureau data for 1997, there were a total of 1,311
firms in this category, total, that had operated for the entire year.
Of this total, 1,180 firms had annual receipts of under $10 million and
an additional 52 firms had receipts of $10 million or more but less
than $25 million. Consequently, the Commission estimates that the
majority of providers in this service category are small businesses
that may be affected by the rules and policies adopted herein.
4. Description of Projected Reporting, Recordkeeping, and Other
Compliance Requirements
60. The Report and Order adopts several modifications to the
Commission's rules to improve the effectiveness of the rural health
care universal service support mechanism and increase utilization of
this mechanism by rural health care providers. As articulated, in the
Report and Order, we clarify the scope of entities eligible to receive
discounts. Specifically, because entities that engage in eligible and
ineligible activities or that collocate with an entity that provides
ineligible services will now be eligible for prorated support, we adopt
rules requiring such providers to allocate their discounts to prevent
discounts from flowing to ineligible activities or providers of
services. Health care providers are required to maintain documentation
explaining their allocation methods for five years and present that
information to USAC upon request. The method of cost allocation chosen
by an applicant should be based on objective criteria and reasonably
reflect the eligible usage of the facilities. Additionally, health care
providers must maintain for their purchases of supported services
procurement records for at least five years sufficient to document
their compliance with all Commission requirements.
5. Steps Taken To Minimize Significant Economic Impact on Small
Entities, and Significant Alternatives Considered
61. The RFA requires an agency to describe any significant
alternatives that it has considered in reaching its proposed approach
impacting small business, which may include the following four
alternatives (among others): (1) the establishment of differing
compliance and reporting requirements or timetables that take into
account the resources available to small entities; (2) the
clarification, consolidation, or simplification of compliance or
reporting requirements under the rule for small entities; (3) the use
of performance, rather than design, standards; and (4) an exemption
from coverage of the rule, or part thereof, for small entities.
62. In this Report and Order, we amend our rules to improve the
program, increase participation by rural health care providers, and
ensure that the benefits of the program continue to be distributed in a
fair and equitable manner. Specifically, we expand the scope of
entities eligible to receive discounts, provide support for Internet
access, and modify the way in which we calculate discounts to offer
rural health care providers more flexibility. The actions taken in the
Report and Order help improve the quality of health care services
available in rural America, and better enable rural communities to
rapidly diagnose, treat, and contain possible outbreaks of disease.
Thus, rural health care providers stand to benefit directly from the
modifications to our rules and policies.
6. Report to Congress
63. The Commission will send a copy of the Report and Order and
Order on Reconsideration including this FRFA, in a report to be sent to
Congress pursuant to the Congressional Review Act. In addition, the
Commission will send a copy of the Report and Order and Order on
Reconsideration including this FRFA, to the Chief Counsel for Advocacy
of the Small Business Administration. A copy of the Report and Order
and Order on Reconsideration and FRFA (or summaries thereof) will also
be published in the Federal Register.
B. Paperwork Reduction Act Analysis
64. The action contained herein has been analyzed with respect to
the Paperwork Reduction Act of 1995 and found to impose new or modified
reporting and recordkeeping requirements or burdens on the public.
Implementation of these new or
[[Page 74502]]
modified reported and recordkeeping requirements will be subject to
approval by the Office of Management and Budget (OMB) as prescribed by
the Act, and will go into effect upon announcement in the Federal
Register of OMB approval.
C. Further Information
65. Alternative formats (computer diskette, large print, audio
recording, and Braille) are available to persons with disabilities by
contacting Brian Millin at (202) 418-7426 voice, (202) 418-7365 TTY, or
bmillin@fcc.gov. This Report and Order can also be downloaded in
Microsoft Word and ASCII formats at <http://www.fcc.gov/ccb/universalservice/highcost
.
66. For further information, contact Shannon Lipp at (202) 418-7954
or Regina Brown at (202) 418-0792 in the Telecommunications Access
Policy Division, Wireline Competition Bureau.
V. Ordering Clauses
67. Pursuant to the authority contained in sections 1, 4(i), 4(j),
201-205, 214, 254, and 403 of the Communications Act of 1934, as
amended, 47 U.S.C. 151, 154(i), 154(j), 201-205, 214, 254, and 403,
this Report and Order and Order on Reconsideration is adopted.
68. Pursuant to the authority contained in section 405, of the
Communications Act of 1934, as amended, 47 U.S.C. 405, and 0.291 and
1.429 of the Commission's rules, Mobile Satellite Ventures Subsidiary's
Petition for Clarification or Reconsideration is denied to the extent
indicated herein.
69. Part 54 of the Commission's rules, is amended, effective
January 23, 2004 except for Sec. Sec. 54.609(a)(2), 54.609(A)(3)(ii),
and 54.621(a) which contain information collection requirements that
have not been approved by the Office of Management and Budget (OMB).
The Commission will publish a document in the Federal Register
announcing the effective date of those sections.
70. The Commission's Consumer and Governmental Affairs Bureau,
Reference Information Center, shall send a copy of this Report and
Order and Order on Reconsideration, including the Final Regulatory
Flexibility Analysis and Initial Regulatory Flexibility Analysis, to
the Chief Counsel for Advocacy of the Small Business Administration.
List of Subjects in 47 CFR Part 54
Libraries, Reporting and recordkeeping requirements, Schools,
Telecommunications, Telephone.
Federal Communications Commission.
Marlene H. Dortch,
Secretary.
Final Rules
0
For the reasons discussed in the preamble, the Federal Communications
Commission amends 47 CFR part 54 as follows:
PART 54--UNIVERSAL SERVICE
0
1. The authority citation for Part 54 continues to read as follows:
Authority: 47 U.S.C. 1, 4(i), 201, 205, 214, and 254 unless
otherwise noted.
0
2. Amend Sec. 54.601 by removing paragraphs (a)(3), (b)(3), and
(b)(4), redesignating paragraphs (a)(4) and (a)(5) as (a)(3) and
(a)(4), revising paragraphs (a)(1), newly designated (a)(3) and (c),
and by adding paragraph (d) to read as follows:
Sec. 54.601 Eligibility.
(a) * * *
(1) Except with regard to those services provided under Sec.
54.621(b), only an entity that is either a public or non-profit rural
health care provider, as defined in this section, shall be eligible to
receive supported services under this subpart.
* * * * *
(3) For purposes of this subpart, a rural health care provider is a
public or non-profit health care provider located in a rural area, as
defined in this subpart.
* * * * *
(c) Services. (1) Any telecommunications service that is the
subject of a properly completed bona fide request by a rural health
care provider shall be eligible for universal service support, subject
to the limitations described in this paragraph. The length of a
supported telecommunications service may not exceed the distance
between the health care provider and the point farthest from that
provider on the jurisdictional boundary of the largest city in a state
as defined in Sec. 54.625(a).
(2) Internet access and limited toll-free access to internet. (i)
For purposes of this subpart, eligible Internet access is an
information service that enables rural health care providers to post
their own data, interact with stored data, generate new data, or
communicate over the World Wide Web.
(ii) Internet access shall be eligible for universal service
support under Sec. 54.621(a).
(iii) Limited toll-free access to an Internet service provider
shall be eligible for universal service support under Sec. 54.621(b).
(d) Allocation of discounts. An eligible health care provider that
engages in eligible and ineligible activities or that collocates with
an entity that provides ineligible services shall allocate eligible and
ineligible activities in order to receive a prorated discount for
eligible activities. Health care providers shall choose a method of
cost allocation that is based on objective criteria and reasonably
reflects the eligible usage of the facilities.
Sec. 54.603 [Amended]
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3. Amend Sec. 54.603 by revising the term ``Rural Health Care
Corporation'' in paragraphs (b)(1), (b)(2), (b)(3), (b)(4), and (b)(5)
to read ``Rural Health Care Division.''
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4. Amend Sec. 54.605 by removing paragraph (c), redesignating
paragraphs (d) and (e) as paragraphs (c) and (d), and revising
paragraphs (a) and (b) to read as follows:
Sec. 54.605 Determining the urban rate.
(a) If a rural health care provider requests an eligible service to
be provided over a distance that is less than or equal to the
``standard urban distance,'' as defined in paragraph (c) of this
section, for the state in which it is located, the urban rate for that
service shall be a rate no higher than the highest tariffed or
publicly-available rate charged to a commercial customer for a
functionally similar service in any city with a population of 50,000 or
more in that state, calculated as if it were provided between two
points within the city.
(b) If a rural health care provider requests an eligible service to
be provided over a distance that is greater than the ``standard urban
distance,'' as defined in paragraph (c) of this section, for the state
in which it is located, the urban rate for that service shall be a rate
no higher than the highest tariffed or publicly-available rate charged
to a commercial customer for a functionally similar service provided
over the standard urban distance in any city with a population of
50,000 or more in that state, calculated as if the service were
provided between two points within the city.
* * * * *
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5. Revise Sec. 54.609 to read as follows:
Sec. 54.609 Calculating support.
(a) Except with regard to services provided under Sec. 54.621 and
subject to the limitations set forth in this subpart, the amount of
universal service support for an eligible service provided to a public
or non-profit rural health care provider shall be the difference, if
any,
[[Page 74503]]
between the urban rate and the rural rate charged for the service, as
defined herein. In addition, all reasonable charges that are incurred
by taking such services, such as state and federal taxes shall be
eligible for universal service support. Charges for termination
liability, penalty surcharges, and other charges not included in the
cost of taking such service shall not be covered by the universal
service support mechanisms. Rural health care providers may choose one
of the following two support options.
(1) Distance based support. The Administrator shall consider the
base rates for telecommunications services in rural areas to be
reasonably comparable to the base rates charged for functionally
similar telecommunications service in urban areas in that state, and,
therefore, the Administrator shall not include these charges in
calculating the support. The Administrator shall include, in the
support calculation, all other charges specified, and all actual
distance-based charges as follows:
(i) If the requested service distance is less than or equal to the
SUD for the state, the distance-based charges for the rural health care
provider are reasonably comparable to those in urban areas, so the
health care provider will not receive distance-based support.
(ii) If the requested service distance is greater than the SUD for
the state, but less than the maximum allowable distance, the distance-
based charge actually incurred for that service can be no higher than
the distance-based charges for a functionally similar service in any
city in that state with a population of 50,000 or more over the SUD.
(iii) ``Distance-based charges'' are charges based on a unit of
distance, such as mileage-based charges.
(iv) Except with regard to services provided under Sec. 54.621, a
telecommunications carrier that provides telecommunications service to
a rural health care provider participating in an eligible health care
consortium, and the consortium must establish the actual distance-based
charges for the health care provider's portion of the shared
telecommunications services.
(2) Base rate support. If a telecommunications carrier, health care
provider, and/or consortium of health care providers reasonably
determines that the base rates for telecommunications services in rural
areas are not reasonably comparable to the base rates charged for
functionally similar telecommunications service in urban areas in that
state, the telecommunications carrier, health care provider, and/or
consortium of health care providers may request that the Administrator
perform a more comprehensive support calculation. The requester shall
provide to the Administrator the information to establish both the
urban and rural rates consistent with Sec. 54.605 and Sec. 54.607,
and submit to the Administrator with Form 466 all of the documentation
necessary to substantiate the request.
(3) Base rate support-consortium. Except with regard to services
provided under Sec. 54.621, a telecommunications carrier that provides
telecommunications service to a rural health care provider
participating in an eligible health care consortium, and the consortium
must establish the applicable rural base rates for telecommunications
service for the health care provider's portion of the shared
telecommunications services, as well as the applicable urban base rates
for the telecommunications service.
(b) Absent documentation justifying the amount of universal service
support requested for health care providers participating in a
consortium, the Administrator shall not allow telecommunications
carriers to offset, or receive reimbursement for, the amount eligible
for universal service support.
(c) The universal service support mechanisms shall provide support
for intrastate telecommunications services, as set forth in Sec.
54.101(a), provided to rural health care providers as well as
interstate telecommunications services.
(d) Satellite services. (1) Rural public and non-profit health care
providers may receive support for rural satellite services, even when
another functionally similar terrestrial-based service is available in
that rural area. Discounts for satellite services shall be capped at
the amount the rural health care provider would have received if they
purchased a functionally similar terrestrial-based alternative.
(2) Rural health care providers seeking discounts for satellite
services shall provide to the Administrator with the Form 466
documentation of the urban and rural rates for the terrestrial-based
alternatives.
(3) Where a rural health care provider seeks a more expensive
satellite-based service when a less expensive terrestrial-based
alternative is available, the rural health care provider shall be
responsible for the additional cost.
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6. Amend Sec. 54.613 by revising paragraph (a) to read as follows:
Sec. 54.613 Limitations on supported services for rural health care
providers.
(a) Upon submitting a bona fide request to a telecommunications
carrier, each eligible rural health care provider is entitled to
receive the most cost-effective, commercially-available
telecommunications service at a rate no higher than the highest urban
rate, as defined in Sec. 54.605, at a distance not to exceed the
distance between the eligible health care provider's site and the
farthest point on the jurisdictional boundary of the city in that state
with the largest population.
* * * * *
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7. Revise Sec. 54.619 to read as follows:
Sec. 54.619 Audits and recordkeeping.
(a) Health care providers. Recordkeeping. Health care providers
shall maintain for their purchases of services supported under this
subpart documentation for five years from the end of the funding year
sufficient to establish compliance with all rules in this subpart.
Documentation must include, among other things, records of allocations
for consortia and entities that engage in eligible and ineligible
activities, if applicable.
(b) Production of records. Health care providers shall produce such
records at the request of any auditor appointed by the Administrator or
any other state or federal agency with jurisdiction.
(c) Random audits. Health care providers shall be subject to random
compliance audits to ensure that requesters are complying with the
certification requirements set forth in Sec. 54.615(c) and are
otherwise eligible to receive universal service support and that rates
charged comply with the statute and regulations.
(d) Annual report. The Administrator shall use the information
obtained under paragraphs (a), (b) and (c) of this section to evaluate
the effects of the regulations adopted in this subpart and shall report
its findings to the Commission on the first business day in May of each
year.
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8. Revise Sec. 54.621 to read as follows:
Sec. 54.621 Access to advanced telecommunications and information
services.
(a) Twenty-five percent of the monthly cost of eligible Internet
access shall be eligible for universal support. Health care providers
shall certify that the Internet access selected is the most cost-
effective method for their health care needs as defined in Sec.
54.615(c)(7), and that purchase of the Internet access is reasonably
related to the health care needs of the rural health care provider.
(b) Each eligible health care provider that cannot obtain toll-free
access to an Internet service provider shall be entitled to receive the
lesser of the toll charges incurred for 30 hours of access
[[Page 74504]]
per month to an Internet service provider or $180 per month in toll
charge credits for toll charges imposed for connecting to an Internet
service provider.
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9. Amend Sec. 54.625 by revising paragraph (a) to read as follows:
Sec. 54.625 Support for services beyond the maximum supported
distance for rural health care providers.
(a) The maximum support distance is the distance from the health
care provider to the farthest point on the jurisdictional boundary of
the city in that state with the largest population, as calculated by
the Administrator.
* * * * *
[FR Doc. 03-31683 Filed 12-23-03; 8:45 am]
BILLING CODE 6712-01-P