Rules and Regulations. Final rule

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BILLING CODE 4120-01-P FEDERAL COMMUNICATIONS COMMISSION 47 CFR Part 54 [FCC 06-89] Amend the Commission's Rules To Align Oversight of the Universal Service Fund

(USF)AGENCY: Federal Communications Commission. ACTION: Final rule. SUMMARY: In this document, we amend our rules to align oversight of the Universal Service Fund

(USF)with the responsibilities of the Office of the Inspector General

(OIG)and the Office of the Managing Director (OMD). Specifically, we assign certain audit activities formerly assigned to the Wireline Competition Bureau (WCB), including oversight of the annual part 54 audit of the Universal Service Administrative Corporation (USAC), to the OIG and assign calculation of the quarterly USF contribution factor to OMD. The Commission has in place a number of mechanisms to oversee the USF and its current Administrator, USAC. In this document, we shift responsibility for two of these mechanisms, the annual audit of USAC and calculation of the USF contribution factor, to the OIG and OMD, respectively. These changes better align these USF oversight functions with the divisions within the Commission that can execute them most effectively. DATES: Effective August 7, 2006. FOR FURTHER INFORMATION CONTACT: Mika Savir, Office of the Managing Director at

(202)418-0384. SUPPLEMENTARY INFORMATION: Adopted: June 20, 2006; Released: June 23, 2006 By the Commission: 1. By this Order, we amend our rules to align oversight of the Universal Service Fund (“USF”) with the responsibilities of the Office of the Inspector General (“OIG”) and the Office of the Managing Director (“OMD”). Specifically, we assign certain audit activities formerly assigned to the Wireline Competition Bureau (“WCB”), including oversight of the annual part 54 audit of the Universal Service Administrative Corporation (“USAC”), to the OIG and assign calculation of the quarterly USF contribution factor to OMD. 2. The Commission has in place a number of mechanisms to oversee the USF and its current Administrator, USAC. In this Order, we shift responsibility for two of these mechanisms, the annual audit of USAC and calculation of the USF contribution factor, to the OIG and OMD, respectively. These changes better align these USF oversight functions with the divisions within the Commission that can execute them most effectively. 3. First, we amend § 54.717 of our rules to give the OIG oversight of the annual USAC audit. Section 54.717 of the Commission's rules requires USAC “to obtain and pay for an annual audit conducted by an independent auditor to examine its operations and books of account to determine, among other things, whether [USAC] is properly administering the universal service support mechanisms to prevent fraud, waste, and abuse.” 1 Under the Commission's part 54 rules, the Wireline Competition Bureau (“WCB”) has been the staff unit responsible for overseeing the conduct of the audit. The purpose of this annual audit has been to oversee the operations of the USF Administrator and to safeguard the USF from potential waste, fraud, and abuse. Because a principle purpose of this audit is to deter waste, fraud, and abuse, we amend the Commission's rules to delegate oversight authority to the OIG. This amendment is consistent with the OIG's responsibility to conduct audits of Commission programs 2 and detect and prevent fraud and abuse. 3 As an essential part of this responsibility, we also amend the audit requirements applicable to the part 54 audit of USAC to allow the OIG to determine the type of audit to examine USAC's administration. The Commission's decision adopting the part 54 independent audit requirement specified an agreed upon procedures (“AUP”) form of audit. 4 Although the codified Commission rules do not specify the type of audit, the order establishing the annual independent audit requires the use of an “agreed-upon procedures” engagement. 5 We recognize that the OIG may conclude that other types of audits would better assist in carrying out its mission to detect potential waste, fraud, and abuse in the USF. We therefore clarify that, going-forward, the OIG may use whatever type of audit it concludes would be better suited to evaluating USAC and its operations. We also clarify that the OIG may require the use of government auditing standards for these audits. 6 1 47 CFR 54.717. 2 47 CFR 0.13(a). 3 47 CFR 0.13(c). 4 *USAC Order,* 12 FCC Rcd at 18440, paragraph 76. In an agreed-upon procedures attestation engagement, the auditors perform testing to issue a report of findings based on specific procedures performed on subject matter. *See “Government Auditing Standards,”* section 6.02(c), GAO-03-673G, June 2003. 5 *See* 47 CFR 54.717(a)-(k). 6 *See* Application of Generally Accepted Accounting Principles for Federal Agencies and Generally Accepted Government Auditing Standards to the Universal Service Fund, *Order* , 18 FCC Rcd 19911, paragraph 5 ( *GovGAAP Order* ) (requiring the use of government auditing standards for audits of USF beneficiaries and contributors); *see also* General Accounting Office, Government Auditing Standards: 2003 Revision, GAO-03-673G (June 2003) (“GAGAS Handbook”) (specifying government auditing standards). We note that government auditing standards incorporate the auditing standards of the American Institute of Certified Public Accountants (AICPA). *Id.* at 6.01, 6.05. 4. Finally, we revise section 54.709 of our rules to require USAC to submit to the OMD projections of demand for USF support mechanisms, projections of revenue, projections of administrative expenses, and the contribution base. Contributions to the universal service support mechanisms are determined using a quarterly contribution factor calculated by the Commission. 7 We now revise our internal processes to require the OMD, instead of the Wireline Competition Bureau, to calculate the contribution factor and release the public notices pertaining to the contribution factor, consistent with the OMD's general responsibility over the Commission's financial matters. 8 We are therefore revising § 54.709(a)(3) to require USAC to submit the above information to the OMD. 7 47 CFR 54.709(a). We release a public notice quarterly, *see,* e.g., “ *Proposed First Quarter 2006 Universal Service Contribution Factor* ,” CC Docket No. 96-45, Public Notice, 20 FCC Rcd 19933 (2005). 8 47 CFR 0.11(a)(8). 5. The rule amendments adopted in this Order involve rules of agency organization, procedure, or practice. The notice and comment and effective date provisions of the Administrative Procedure Act are therefore inapplicable. 9 9 5 U.S.C. 553(b)(3)(A). 6. Accordingly, *it is ordered,* that pursuant to sections 4(i), 4(j), 5(c), 303(r), 47 U.S.C. 154(i), 154(j), 155(c), 303(r) of the Communications Act of 1934, as amended, 47 CFR part 54 is amended, as set forth below, effective August 7, 2006. Federal Communications Commission. William F. Caton, Deputy Secretary. Final Rule For the reasons discussed in the preamble, the Federal Communications Commission amends 47 CFR part 54 as follows: PART 54—UNIVERSAL SERVICE 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. § 54.709 [Amended] 2. In 47 CFR 54.709 (a)(3) remove the words “Wireline Competition Bureau” and add in their place, the words “Office of the Managing Director” each place it appears. § 54.717 [Amended] 3. In 47 CFR 54.717 (a), (b), (c), (d), (e)(1), (e)(2), (f), (g),

(h)and

(i)remove the words “Wireline Competition Bureau” and add in their place, the words “Office of Inspector General” each place it appears and in paragraph

(k)remove the words “Chief of the Wireline Competition Bureau” and add in their place, the words “Inspector General”. [FR Doc. E6-10481 Filed 7-5-06; 8:45 am] BILLING CODE 6712-01-P FEDERAL COMMUNICATIONS COMMISSION 47 CFR Part 64 [CG Docket No. 03-123; DA 06-1100] Telecommunications Relay Services and Speech-to-Speech Services for Individuals With Hearing and Speech Disabilities AGENCY: Federal Communications Commission. ACTION: Final rule; petition for reconsideration. SUMMARY: In this document, the Commission, on its own motion, reconsiders a petition for declaratory ruling ( *Petition* ) filed by Telco Group, Inc. (Telco Group) requesting that the Commission either exclude international revenues from the end-user revenue base used to calculate payments due to the Interstate Telecommunications Relay Service

(TRS)Fund (Fund), or in the alternative, waive the portion of Telco Group's contribution based on its international end-user revenues. This action is necessary because the May 2006 Declaratory Ruling addressing Telco Group's *Petition* did not contain an analysis of the complete record. DATES: Effective May 25, 2006. ADDRESSES: Federal Communications Commission, 445 12th Street, SW., Washington, DC 20554. FOR FURTHER INFORMATION CONTACT: Thomas Chandler, Consumer & Governmental Affairs Bureau, Disability Rights Office at

(202)418-1475 (voice),

(202)418-0597 (TTY), or e-mail at *Thomas.Chandler@fcc.gov* . SUPPLEMENTARY INFORMATION: This document does not contain new or modified information collection requirements subject to the PRA of 1995, Public Law 104-13. In addition, it does not contain any new or modified “information collection burden for small business concerns with fewer than 25 employees,” pursuant to the Small Business Paperwork Relief Act of 2002, Public Law 107-198, *see* 44 U.S.C. 3506(c)(4). This is a summary of the Commission's document DA 06-1100, *Telecommunications Relay Services and Speech-to-Speech Services for Individuals with Hearing and Speech Disabilities* , Declaratory Ruling on Reconsideration, CG Docket No. 03-123, DA 06-1100, adopted May 25, 2006, released May 25, 2006, reconsidering issues raised in Telco Group's Petition for Declaratory Ruling, or in the Alternative, Petition for Waiver ( *Petition* ), filed July 26, 2004. The full text of document DA 06-1100 and copies of any subsequently filed documents in this matter will be available for public inspection and copying during regular business hours at the FCC Reference Information Center, Portals II, 445 12th Street, SW., Room CY-A257, Washington, DC 20554. Document DA 06-1100 and copies of subsequently filed documents in this matter may also be purchased from the Commission's duplicating contractor at Portals II, 445 12th Street, SW., Room CY-B402, Washington, DC 20554. Customers may contact the Commission's duplicating contractor at its Web site *http://www.bcpiweb.com* or by calling 1-800-378-3160. To request materials in accessible formats for people with disabilities (Braille, large print, electronic files, audio format), send an e-mail to *fcc504@fcc.gov* or call the Consumer & Governmental Affairs Bureau at

(202)418-0530 (voice),

(202)418-0432 (TTY). Document DA 06-1043 can also be downloaded in Word or Portable Document Format

(PDF)at: *http://www.fcc.gov/cgb/dro* . Synopsis Background In its *Petition* , Telco Group requests that the Commission exclude international revenues from the revenue base used to calculate payments due to the Interstate TRS Fund, “at least for those carriers whose international revenues comprise a significant portion of their total interstate and international revenues,” or in the alternative, find good cause to waive Telco Group's obligations to the Fund that are based on its international revenues. *Petition* at 1. Telco Group maintains that such relief is warranted because, in what Telco Group argues is an analogous case involving the Universal Service Fund (USF), the United States Court of Appeals for the Fifth Circuit required the Commission to revisit the USF assessment on the international services revenue of a provider of primarily international services and *de minimis* interstate services. *Petition* at 3 (citing *Texas Office of the Public Utility Counsel* v. *FCC* , 183 F.3d 393 (5th Cir. 1999) ( *TOPUC* )). The Court found that requiring a carrier to pay an assessment on its international services revenue that exceeded the carrier's total interstate revenue violated the equitable and nondiscriminatory contribution requirement of the Universal Service statute, Section 254 of the Communications Act, as amended. *TOPUC* , 183 F.3d at 434-435; *see* 47 U.S.C. 254(b)(4). Although the Interstate TRS Fund is governed by Section 225 of the Communications Act, rather than Section 254 of the Communications Act, Telco Group argues that the Interstate TRS Fund contribution rules also are “designed to be equitable and nondiscriminatory” and, therefore, the relief afforded in *TOPUC* should be extended to TRS. *Petition* at 4. Telco Group argues that its circumstance is comparable to the *TOPUC* plaintiff because the “vast majority” of Telco Group's revenues “ approximately 96 percent “ are derived from international services. *Petition* at 3. Moreover, Telco Group argues the public interest will be served by granting the requested relief because it will ensure Telco Group “remains as a viable competitor in the market for interstate services.” *Petition* at 9. Telco Group adds that the “high payment obligations also hinder Telco Group's ability to compete outside the United States, and so contradict the Commission's efforts to promote and encourage competition in the international and interstate markets.” *Petition* at 9-10 (citing *2000 Biennial Regulatory Review* — *Policies and Procedures Concerning the International, Interexchange Marketplace* , IB Docket No. 02-202, Report and Order, 16 FCC Rcd 10647 (March 20, 2001)), published at 66 FR 16874, March 28, 2001. On October 25, 2004, the Telco Group Petition was place on Public Notice. *Telco Group, Inc. Files Petition for Declaratory Ruling or Waiver to Exclude International Revenues from the Revenue Base Used to Calculate Payment to the Interstate TRS Fund* , CC Docket No. 98-67, Public Notice, 19 FCC Rcd 20965 (October 25, 2004); published at 69 FR 64573, November 5, 2004. Two oppositions were filed, one from a carrier and one from an organization representing the deaf community. Comments were filed by MCI

(MCI)(November 26, 2004) and Telecommunications for the Deaf, Inc.

(TDI)(November 24, 2004). Late filed comments were filed by Globecomm Systems, Inc. (“GSI”) on February 14, 2006. On that same date, GSI also filed a petition for declaratory ruling that there is no obligation to pay into the Interstate TRS Fund based on revenues arising from traffic that does not originate or terminate in the United States. Globecomm Systems, Inc., Petition for Declaratory Ruling (filed February 14, 2006). Because the issue in the GSI petition—whether certain calls should be considered international calls—is distinct from the issue raised in Telco Group's *Petition* , the Commission will address GSI's petition in a separate order. Telco Group filed reply comments. Reply of Telco Group, Inc. to Oppositions to Telco Group's Petition for Declaratory Ruling, or in the Alternative, Petition for Waiver (filed December 10, 2004, in CC Docket No. 98-67). Discussion Telco Group's *Petition* is premised on the congruence between Section 254 of the Communications Act, which establishes Universal Service requirements, and Section 225 of the Communications Act, which establishes requirements for the provision of TRS. Sections 254 and 225 of the Communications Act, however, differ in fundamental and, in this case, dispositive ways. Unlike USF assessments, contributions to the Interstate TRS Fund are used, in part, to reimburse international relay calls. Therefore, in this case, the public interest lies in ensuring adequate funding for interstate TRS—including international TRS—by assessing contributions on as broad a revenue base as can be justified. Accordingly, Telco Group's request that the Commission exclude international revenues from the end-user revenue base used to calculate payments due to the Interstate TRS Fund is denied. Because Telco Group has not demonstrated why individualized relief is appropriate, the company's request for waiver of the interstate TRS assessment on international services revenue is also denied. Unlike the Universal Service Fund, which does not directly support international services but only may be used only to support domestic services, the Interstate TRS Fund is used to support *international* TRS. *See Telecommunications Relay Services for Individuals with Hearing and Speech Disabilities, and the Americans with Disabilities Act of 1990* , CC Docket No. 90-571, Report and Order and Request for Comments, ( *TRS I Order* ), 6 FCC Rcd at 4660-4661, paragraph 18, published at 56 FR 36729, August 1, 1991 (discussing comments that relay services should relay international calls that originate or terminate in the United States provided that equipment of the foreign country is compatible with U.S. equipment); *See Telecommunications Relay Services for Individuals with Hearing and Speech Disabilities, and the Americans with Disabilities Act of 1990* , Order on Reconsideration, Second Report and Order, and Further Notice of Proposed Rulemaking, ( *TRS III Order* ), 8 FCC Rcd at 5301, paragraph 9, note14, published at 58 FR 12204, March 3, 1993 and 58 FR 12175, March 3, 1993 (in adopting rule requiring contributions to the Fund to be based on, *inter alia* , international services, Commission notes Sprint's argument “that international services should be included because TRS providers will be compensated by the administrator for international TRS minutes of use”). IP Relay service is an exception to this rule. *See, e.g., Telecommunications Relay Services and Speech-to-Speech Services for Individuals with Hearing and Speech Disabilities* , CC Docket No. 98-67, Order, 19 FCC Rcd 12224, 12242, at paragraph 48, note 121 (June 30, 2004) (noting that the Fund “does not currently reimburse providers for the costs of providing international calls via IP Relay”); *Telecommunications Relay Services and Speech-to-Speech Services for Individuals with Hearing and Speech Disabilities* , CC Docket No. 98-67, Order, 18 FCC Rcd 12823, 12837, at paragraph 42 (June 30, 2003) (noting that in March 2003 NECA was directed to suspend payment to TRS providers for international IP Relay service minutes); *see also 2004 TRS Report and Order* , 19 FCC Rcd at 12525, paragraph 129, published at 69 FR 53346, September 1, 2004 and 69 FR 53382, September 1, 2004 (noting that although Fund does not pay for international IP Relay service calls, it does pay for international Video Relay Service calls). Therefore, unlike the USF assessments at issue in *TOPUC* , excluding international revenues from the revenue base used for calculating TRS contributions would not serve the public interest. With the TRS Fund, it is not the case—as in *TOPUC* —that a provider of only *de minimis* interstate service may be required to bear a disproportionately heavy burden in subsidizing the provision of such services by other carriers. Contributions to the Interstate TRS Fund based on Telco Group's international services revenue can, in turn, be used to subsidize international TRS. Moreover, Telco Group is required to contribute the same percentage of its interstate and international revenues to the Interstate TRS Fund as other carriers that provide both interstate and international services. Therefore, this approach is both equitable and nondiscriminatory, even as applied to an entity like Telco Group that may largely have international revenues. As MCI notes, “it would be discriminatory if Telco Group, and other internationally-oriented carriers, were allowed to exclude international revenues from the TRS contribution base. Companies such as MCI, who also earn international revenues by providing international prepaid calling services, as well as other international services, would be required to compete against companies who would have been granted a discriminatory cost advantage were the Commission to grant Telco Group's request.” Opposition of MCI at 3. *See also* Telco Reply Comments at 2-3 (arguing that the TRS funding mechanism is not equitable and nondiscriminatory *as applied* to Telco Group because it must pay a high proportion of its “U.S. interstate revenues into the TRS Fund”). In any event, *TOPUC* is specifically based on the equitable and nondiscriminatory contribution requirement of Section 254 of the Communications Act. Section 254 of the Communications Act states that “[a]ll providers of telecommunications services should make an equitable and nondiscriminatory contribution to the preservation and advancement of universal service.” 47 U.S.C. 254(b)(4). The Court found that requiring COMSAT, a satellite provider of primarily international services along with *de minimis* interstate service offerings, to contribute to the Universal Service Fund based on its international services revenues was inequitable and discriminatory given that COMSAT's contribution based on international services revenue would exceed the company's total interstate revenues. The Court stated that “the agency's interpretation of ‘equitable and nondiscriminatory,’ allowing it to impose prohibitive costs on carriers such as COMSAT, is ‘arbitrary and capricious’ * * * [because] COMSAT and carriers like it will contribute more in universal service payments than they will generate from interstate service.” *TOPUC* , 183 F.3d at 434-435. Section 225 of the Communications Act, however, contains no such express requirement. In the absence of such language, and particularly because international services are supported by the Interstate TRS Fund, the Commission is not bound by the *TOPUC* decision to reduce or eliminate Interstate TRS Fund assessments on international services for Telco Group or similarly situated providers. With respect to contributions, the only limiting language of Section 225 is jurisdictional in nature. *See* 47 U.S.C. 225(d)(3) (addressing jurisdictional separation of costs). Telco Group also suggests that even if *TOPUC* does not apply in the TRS context, the Commission has the discretion to apply a similar rule for TRS. Telco Reply Comments at 4. The issue presented is not, however, whether the Commission *could* apply the *TOPUC* principle to TRS, but whether the rule the Commission did adopt for TRS (requiring payments into the Fund based on international revenues) is reasonable and in the public interest. Accordingly, Telco Group's request for a declaratory ruling excluding international services revenue from the interstate contribution base is denied. Telco Group also asserts that because it does not *receive* any TRS funds, and does minimal business in the United States, it should not have to pay into the Fund based on international revenues “in return for ‘benefits’ largely and primarily enjoyed by other carriers.” Telco Reply Comments at 3-4. The obligation to pay into the Fund, however, is not tied to particular benefits contributors may receive from the Fund. Under the rules, a broad range of interstate telecommunications carriers are required to pay into the Fund, regardless of whether they also provide relay services paid for by the Fund or otherwise “benefit” directly from the provision of relay service. *See* 47 CFR 64.604(c)(5)(iii)(A) of the Commission's rules. Telco Group's request for waiver of the interstate TRS assessment on its international services revenue is also denied. Although the Commission may waive a provision of its rules for “good cause shown,” 47 CFR 1.3 of the Commission's rules; *see generally 2004 TRS Report and Order* , 19 FCC Rcd at 12520, paragraph 110 (discussing standard for waiving Commission rules), Telco Group's argument rests on the fact that a high percent of its revenues derive from international services and therefore its TRS payment is substantially higher that it would be if international revenues were not included and burdensome. *See also Petition* at 9-10. As noted above, however, because the Fund supports both international and interstate TRS, TRS assessments are based on both international and interstate revenues, and the fact that some contributors have relatively more international revenues, or more interstate revenues, is not relevant to ensuring adequate funding for these services. Congressional Review Act The Commission will not send a copy of the *Declaratory Ruling on Reconsideration* pursuant to the Congressional Review Act because the adopted rules are rules of particular applicability. *See* 5 U.S.C. 801(a)(1)(A). Ordering Clauses Pursuant to the authority contained in Section 225 of the Communications Act of 1934, as amended, 47 U.S.C. 225, and §§ 0.141, 0.361, and 1.108 of the Commission's rules, 47 CFR 0.141, 0.361, and 1.108, the *Declaratory Ruling on Reconsideration* is hereby denied. Federal Communications Commission. Monica S. Desai, Chief, Consumer & Governmental Affairs Bureau. [FR Doc. 06-6012 Filed 6-30-06; 12:30 pm]

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