November 17, 1997 Minutes

Board of Directors Meeting

The regular meeting of the Board of Directors of the Universal Service Administrative Company (USAC) (the Corporation) was held via conference call on the above date. The meeting was called to order at 11:00 AM by Lisa Rosenblum, Chair.

1. Ms. Rosenblum welcomed the Board and suggested that, in the future and with time permitting, the Board would permit members of the public to listen in on Board meeting conference calls. A process needs to be developed to notify the public of the date, time and phone number of the conference call. She then presented the Minutes of the October 20, 1997 Board of Directors meeting. On a motion duly made and seconded, the Minutes were unanimously approved. Ms. Rosenblum requested that both Schools and Libraries Corporation (SLC) and the Rural Health Care Corporation (RHCC) report their activities to the USAC Board.
   

2. Ms. Ouye presented a report on the activities of SLC. She indicated SLC was meeting at 4:00 PM under the direction of Ira Fishman as Chief Executive Officer. Mr. Fishman was appointed as of November 1, 1997 and planned to add staff in Washington. Application forms for SLC were at the Office of Management and Budget awaiting approval. SLC was reviewing its options for office space, staffing and the continued use of the existing contractor to develop the websites and application processes. The Board discussed the finalization of the forms, and it was decided that the USAC Board members would receive a special mailing of the approved forms and instructions as soon as they are available.
   

3. Mr. Hess presented a report on the activities of the RHCC. He explained that the RHCC Board was meeting regularly via conference call on Fridays. RHCC has appointed Covington & Burling to serve as interim legal counsel, and Korn Ferry has been selected to search for a CEO and General Counsel. RHCC was attempting to secure its trademark and obtain an audit firm. Mr. Lineberry and Mr. Hess were involved in outreach efforts. Mr. Hess indicated that Mr. Greenberg, Mr. Fishman and NECA were working closely on all services where collaboration could hold down costs for SLC and RHCC.
   
   The Board thanked Ms. Ouye and Mr. Hess for their reports and requested that SLC and RHCC Minutes be included in the USAC pre-Board materials. Mr. Stern pointed out that all Minutes were also posted on the NECA website (NECA.org) as soon as they are available.
   

4. Ms. Rosenblum requested that, upon Board approval, Heidrick & Struggles (H&S) would be selected to assist USAC in the search for a CEO. The Board was instructed to send any recommendations for CEO to H&S for its evaluation. Ms. Kiser gave her opinion that there were no federal restrictions on the process to select a CEO. Upon a motion duly made and seconded, the Board unanimously passed the following Resolution:
   

   RESOLVED, that Heidrick & Struggles (H&S) be appointed to search for a CEO candidate for USAC.

5. Ms. Kiser presented a report on the status of the contract between NECA and USAC. She indicated that Sandy Fain, herself, Bill Stern and Ken Levy had collaborated to work out the details and that the contract was in its final form. She then reviewed some of the provisions of the contract. Mr. English indicated that, at the current budgeted headcount, the annual cost was just over $5 million, but the contract price was governed by the ultimate activity requested by the permanent CEO. Ms. Rosenblum indicated that the Board had authorized the Committee of the Chair to execute the contract with NECA at the October 20th meeting and that she would be executing the contract shortly.
   

6. Ms. Gold gave a report on the issues being addressed by the High Cost/Low Income Committee. Ms. Gold, Bill Stern and Robert Haga met with FCC staff, Richard Metzger, Tim Peterson and Lisa Gelb. The FCC representatives indicated that they do not have the flexibility to interpret rules to allow for quarterly billing for USF programs and a monthly collection process. Changes could be made through a separate order. They understood the concerns expressed by the contributors and indicated no further paperwork would be required. USAC will not bill contributors until the payment issue is resolved by the FCC. Ms. Gold encouraged ex parte submissions by MCI and others in support of monthly contributions.
   
   On the subject of carrier eligibility, Ms. Gold reported that the FCC will be certifying telephone companies operated by co-ops and Indian tribes, and the FCC was not planning on any fail-safe mechanisms for states that do not act by December 31. It is USAC's expectation that the FCC will address a true-up mechanism for LTS and DEM in the upcoming Reconsideration Order. The issue of treating Lifeline on a current basis rather than historical is still open.
   
   Mr. Thoms reported that NARUC members had been notified of the eligibility issue, and no states foresaw a problem with meeting the reporting requirements.
   

7. Mr. Levy reported on the status of current regulatory and legal issues. He said a Reconsideration Order would be issued before the end of the year. The audit division was requesting information on USAC costs allocation and expense levels. He mentioned Senator Burns' inquiry about the USAC/SLC/RHCC corporation structure. The Board requested that copies of the Senator's inquiry be faxed to all members.
   

8. Ms. Rosenblum informed the Board that, by way of introduction, 4 or 5 Board members will be meeting with Commission Chairman William E. Kennard. She requested that Board members who wish to participate in the meeting let her know off-line.
   

9. Under Financial Matters, the Board considered the need to establish credit lines to ensure the uninterrupted flow of funds to service providers. Mr. English informed the Board that it may take 4-6 weeks to obtain committed lines of credit of $75,000,000, and a fee of .0005 of the principal amount. After some discussion, the Board decided to wait until a subsequent Board meeting to consider the Resolution.
   

10. Ms. Kiser reported on her efforts to review the D&O policy and the potential exposure of the USAC Board members. She indicated that she would be sending an opinion letter to the Board members shortly. Any Board member with specific concerns were invited to contact her directly.
    

11. The next meeting was scheduled for January 26, 1998. There being no further business to come before the Board, upon a motion duly made and seconded, Ms. Rosenblum adjourned the meeting at 11:55 AM.

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Edward R. English
Secretary

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