December
1999
Issue: Changes in Universal
Service
The Federal Communication Commission
(FCC) recently adopted two Orders concerning
the Rural Health Care Program (RHCP).
These Orders address major programmatic
concerns raised by OAT grantees, OAT in
its filings with the FCC, and by the Secretary
of Health and Human Services (DHHS) in
her Sept. 8, 1999 letter to the Chairman
of the FCC. What are these reforms, and
how could they affect OAT grantees?
Discussion
On November 3, 1999, the FCC released
their Fourteenth and Fifteenth Orders
on Reconsideration of the Universal Service
Order, which address some concerns about
the Rural Health Care Program. These reforms
were based, in part, on the recommendations
of the Universal Service Administration
Corporation (USAC), OAT comments and other
interested parties. Among other things,
the Orders:
- Expand the definition of Eligible
Telecommunications Carriers (ETCs) to
include long distance telecommunication
carriers, retroactively;
- Streamline the application process;
- Calculate discounts on actual distance
based charges paid by the health care
facilities rather than published tariffs;
and
- Support any commercially available
telecommunications service regardless
of bandwidth.
Before the Fourteenth Order, virtually
all ETCs were local phone companies; thus,
rural health care providers were not able
to purchase discounted services from long
distance companies, which provides the
bulk of their telecom services. As a result
of this Order, more rural health care
providers may find that the program will
cover a greater portion of their telecommunications
costs. Grantees can now qualify for discounts
on long distance carrier charges retroactively
to January 1998.
According to USAC,
grantees who had completed FCC Form 465
and had it posted for competitive bids
on the RHCP Web site--but were discouraged
from completing the rest of the application
process because the benefits were too
small without the inclusion of long distance
carriers--should consider reapplying for
the discount, retroactively.
The FCC’s Fifteenth Order, which
will not take effect until July 1, 2000,
allows the Universal Service Administration
Corporation (USAC) to support any commercially
available telecommunications service regardless
of bandwidth. In the past, USAC has been
limited to supporting a T-1 line or some
combination of lesser services. This reform
streamlines the application process and
allows rural health care providers to
choose either higher or lower bandwidth
than a T-1 line for their programs.
However, in areas such as Alaska, South
Dakota, Montana and other states where
services such as ISDN are not yet commercially
available, this reform may not be as beneficial
to rural health care providers as other
areas where telecommunications companies
already offer a variety of services. According
to the FCC, any service, including wireless
services, will be allowed as long as they
are needed for telehealth services and
as long as a telecommunications carrier
provides the service.
The Fifteenth Order also changes the
way the discount rate is calculated. USAC
will calculate the rate on actual distance
based charges paid by the health care
facilities rather than published tariffs.
This change should streamline the application
process and provide discounts that more
closely reflect the difference between
rates paid by urban facilities and rural
facilities. The FCC’s discount benchmark
reforms do raise a question for those
who may predominately use satellite services,
such as parts of Alaska or the Pacific
Basin. How will the discount be calculated
for services that do not base their billings
on distance charges? According to the
FCC, applicants who use satellite services
may still request USAC to use the original
complex calculations to estimate discounts
rates.
Background
Section 254 of the Telecommunications
Act of 1996 required the FCC to explore
actions that would provide advanced telecommunications
services to rural health care providers,
including public health agencies. The
Act required that:
"A telecommunications carrier
shall, upon receiving a bonafide request,
provide telecommunications services which
are necessary for the provision of health
care services in a State, ...at rates
that are reasonably comparable to rates
charged for similar services in urban
areas in that State."
After lengthy public comment and input,
the FCC defined eligible health care providers
and services and established a mechanism
that could distribute up to $400 million
annually to benefit rural health care
providers through the non-profit Universal
Service Administration Corporation (USAC).
However, given legislative restrictions,
the FCC allotted $100 million in funding
for the program’s first year.
In the program’s first two years,
three programmatic issues proved to be
major stumbling blocks:
- The application process was too complex,
involving multiple steps and the involvement
of a local telephone company.
- Eligibility restrictions excluded
long distance carrier services, which
often make up the bulk of rural telecommunications
costs.
- The FCC 's benchmark, used to calculate
subsidies, reflected "list"
rather than "discount" prices
negotiated by urban health care providers.
Thus the difference between the rural
rate and the FCC’s benchmark is
often small, non-existent or negative
for the rural health subsidy applicant.
Consequently, out of more than 2,500
initial inquiries, only 450 rural health
providers submitted or planned to submit
applications to USAC, during the first
year. Based on USAC estimates of future
program demand, the FCC voted to allot
$12 million for the second year of the
program. To date, only $1.28 million has
been committed to 244 eligible rural health
care providers for Year 1 of the program.
Whether or not the new programmatic reforms
will substantially increase grantee demand
for discounts from the Rural Health Care
Program remains to be seen. However, the
reforms are an important step in the right
direction. Grantees will be able to include
long distance carrier rates in their discount
calculations and apply for any telecommunications
services used for telehealth. The application
process should be more streamlined now
that the 30-day waiting period has been
abolished.
What You Need to Know
Other Links
Next Steps
The Office for the Advancement of
Telehealth has filed several letters and
comments with the FCC on the subject of
Rural Health Care Program reforms. OAT
filed comments on another FCC Further
Notice of Proposed Rulemaking, released
September 3, 1999, pertaining to Underserved,
Tribal and Insular Areas on December 1,
1999. OAT will be tracking the implementation
of these orders in the coming months and
welcomes comments as to the success of
the various FCC reforms in improving access
to the Universal Service Fund.
SELECTED SECTIONS
FROM THE FCC
FOURTEENTH AND FIFTEENTH
ORDERS ON RECONSIDERATION OF THE UNIVERSAL
SERVICE ORDER
SECTIONS FROM THE
FOURTEENTH ORDER:
III. ELIGIBLE TELECOMMUNICATIONS SERVICES
23. It is important
to note that we are not, in this in this
Order, altering the scope of services
that eligible rural health care providers
will be able to purchase at urban rates.
We reiterate that inter-LATA toll charges
will not be supported by universal service
support mechanisms with the limited exception
of the support available pursuant to section
254(h)(2) for toll charges incurred by
accessing an Internet service provider.
Although (Inter Exchange Carriers) IXCs,
which might not be ETCs, can benefit from
the service obligation mechanism of section
254(h)(1)(A) when they serve eligible
health care providers, we do not expand
the category of supported services to
include inter-LATA toll charges. The distance-based
component of services that are supported
must be based on a unit of distance, such
as mileage-based charges, no per-minute,
inter-LATA toll charges are supported
under section 254(h)(1)(A). Because the
rates charged for dedicated connections
are generally mileage-based, dedicated
connections, such as a dedicated T-1 connection
between a rural health care provider and
an urban hospital, will be supported.
IV. CONCLUSION
24. In this Order we reconsider the Commission's
earlier conclusion under section 254,
that only carriers that have been certified
as ETCs may receive a credit or reimbursement,
from the universal service support mechanisms,
for providing telecommunications services
to rural health care providers.
We conclude that a better interpretation
is one that permits all telecommunications
carriers to be credited for providing
telecommunications services at urban rates
to rural health care providers, whether
or not the carrier has been designated
as an ETC. The ETC restriction has
limited the benefits available to rural
health care providers. Because this rule
will relieve rural health care providers
of this restriction, it may be made effective
in less than 30 days, consistent with
5 U.S.C. section 553(d).
We also find good cause under section
553(d) to depart from the 30-day requirement,
in order to ensure that rural health care
providers receive the full benefit of
the universal service support mechanism
as soon as possible.
Accordingly, the changes adopted in this
order shall be effective immediately upon
publication in the Federal Register. These
rules shall be applied prospectively to
all future commitments of support for
the benefit of rural health care providers,
including all pending requests therefore.
SECTIONS FROM THE FIFTEENTH
ORDER
2. Discussion
17. We eliminate the per-location funding
limit because it has made it more difficult
for rural health care providers to receive
the benefits of the rural health care
support mechanism, and it is no longer
necessary to ensure that demand for support
remains below the $400 million per year
cap that the Commission established in
the Universal Service Order. We believe
that eliminating the per-location funding
limit will make it easier for rural health
care providers to select and receive support
for the telecommunications services that
they need for telemedicine. We find that,
even if USAC substantially underestimated
the demand for support by rural health
care providers, demand would still be
well within the $400 million cap. Moreover,
we find that the Commission's initial
decision to limit support to a T-1 or
some combination of lesser services was
driven by two express concerns that are
no longer relevant. We further find that,
because the per-location funding limit
imposes some cost and generates no apparent
benefit, it would be contrary to the public
interest to maintain it. Accordingly, we conclude that the universal service
support mechanism for rural health care
providers shall support any commercially
available telecommunications services,
necessary for the provision of health
care services in a state, regardless of
the bandwidth, and we revise section 54.613
of the Commission's rules to reflect this
change.
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