January 26, 1998 Minutes

Board of Directors Meeting

The regular meeting of the Board of Directors of the Universal Service Administrative Company (USAC) (the Corporation) was held at the Washington Marriott, 1221 22nd Street, NW, Washington, D.C., on the above date. The meeting was called to order at 1:30 P.M. by Lisa Rosenblum, Chair.

1. Ms. Rosenblum welcomed the Board and presented the Minutes of the November 17, 1997 Board of Directors meeting. Ms. Rosenblum requested that the words, "with time permitting," be deleted from item one. On a motion duly made and seconded, the Minutes were unanimously approved with the requested change. Ms. Rosenblum then requested reports on the activities of the High Cost/Low Income Committee, the Schools and Libraries Corporation, and the Rural Health Care Corporation.

2. Ms. Gold, Chair of the High Cost/Low Income Committee, reported on the meeting held that morning of the High Cost/Low Income Committee. She reported on the status of carrier eligibility. Only 10 study areas have not been designated as eligible carriers by the state commissions out of approximately 1,500. USAC's outreach efforts to exchange carriers and state commissions contributed to the favorable result. Ms. Gold reported on resolutions adopted by the Committee concerning: obtaining credit lines to address potential shortfalls in either the high cost or low income fund, recommending that the USAC Board explore the idea of interfund borrowing at the FCC (See item 7 below for further USAC Board discussion), engaging NECA to derive an average schedule local switching support formula for USAC, authorizing staff to seek clarification from the FCC on what incremental costs were eligible for support due to voluntary toll limitation, and voting on the second quarter funding levels. Refer to the Minutes of the High Cost/Low Income Committee at Attachment II.

3. Ms. Ouye, Chair of the Schools and Libraries Corporation, reported that they were making progress on the website with an expected opening on Friday, January 30, 1998. She reported that the call-in centers were receiving 600-700 calls per day. Outreach was proceeding through daily training sessions and distribution of informational bulletins and fact sheets. Ms. Ouye encouraged the joint use of facilities between the corporations.

4. Dr. Sanders, on behalf of the Rural Health Care Corporation, reported that they were seeking approval from the FCC on the appointment of a CEO. He reported that the independent audit of processes at NECA was completed and that a Request for Proposal had been circulated for continued process development and implementation. Issues were discussed concerning potential shortfalls due to the reduction in fund size ordered by the FCC. He reported on successful outreach workshops at George Mason University and various other locations. Dr. Sanders also encouraged the joint use of facilities between the corporations.

5. Ms. Rosenblum requested that Mr. Kenneth Levy of NECA give the Regulatory Report. Mr. Levy reported on the Third and Fourth Orders on Reconsideration. He also reported on Senator Stevens' inquiry through the GAO wherein the GAO requested NECA to provide an explanation as to why NECA and USAC were not subject to various federal statutes. He reported that the FCC was directed to report to Congress on the implementation of universal service by April 10, 1998 under H.R. 2267. He reviewed several pending court cases and the status of the Universal Service Advisory Committee. Ms. Rosenblum reported that she was arranging an appointment with Commission Chairman Kennard and requested that 4 or 5 Board members who would like to attend contact her off-line.

6. Ms. Rosenblum requested that Mr. Edward English, Acting Secretary/Treasurer of USAC, review several financial matters. Mr. English presented the cost of operations for USAC from inception to December 31, 1997 and noted that the corporation was $293,000 under budget due to deferral of systems development costs into the first quarter of 1998. Mr. English then presented the proposed 1998 Budget summary and highlighted factors affecting the budget. The Board requested that additional detail be provided. Discussion ensued as to the best way to manage the budget process, and upon a motion duly made and seconded, it was unanimously decided that the Board would form a Budget and Finance Committee. The following members were appointed to the Budget and Finance Committee: Donald Lynch, Frank Gumper, Tom Wheeler and Martha Hogerty. The first task assigned to the Committee was to examine the details contained in the budget, make any modifications deemed necessary, and recommend adoption by the full Board.

7. Mr. English then reported on the desirability to obtain credit lines to allow for the uninterrupted flow of funds to service providers due to a funding shortfall. The Board discussed the recommendations of the High Cost and Low Income Committee. The Board discussed the pros and cons of interfund borrowing. On a motion duly made and seconded, the Board decided to authorize USAC staff to approach the FCC for further clarification on the borrowing provisions contained in the Order. The newly formed Budget and Finance Committee was asked to focus on the level of committed and uncommitted credit lines deemed necessary and prepare a recommendation for adoption by the full Board.

8. Mr. English informed the Board that he was executing paperwork to authorize NECA Treasury staff to act as signatories on USAC bank accounts and as agents for USAC for the purpose of investing fund balances. Mr. English then led a discussion on the complexities of systems development facing USAC and the requirement for a database system to handle offsets/netting. The Board requested a write-up on the proposed systems development and alternatives for discussion at the next meeting. The meeting was recessed at 3:30 for 10 minutes.

9. Mr. John Ricker of NECA led a discussion on the funding base, billing processes and process schedule. Mr. Gumper presented charts depicting a reduction in reported revenues in the All Other category between 1996 and 1997. A discussion ensued as to the responsibility of USAC to verify and analyze data submissions on both a gross and company-specific basis. Concern was expressed about the confidentiality of the data in USAC's possession, particularly in the new era of competition. Mr. Ricker noted that the FCC was already analyzing the data for anomalies. On a motion duly made and seconded, the Board decided that the USAC staff should request that the FCC allow USAC to review the TRS database history to verify the accuracy of data submitted to USAC (See item 12 for reconsideration of this motion).

10. Mr. Ricker explained changes in the Revenue Base Status Report. On a motion duly made and seconded, the Board unanimously passed the following Resolution:

    RESOLVED, that the USAC Board of Directors, having reviewed a summary of current status of telecommunications service provider revenues for the first six months of 1997 at its meeting on January 26, 1998, hereby directs the NECA staff to proceed with the required January 30 FCC filing on behalf of USAC. NECA staff may make adjustments if additional data becomes available or errors are discovered, and to reflect changes required as a result of FCC orders.

11. Ms. Rosenblum requested that, in the future, all materials to be discussed at the Board meeting be submitted in advance to the Secretary for distribution to the full Board, so that members can prepare for the discussion. From 4:20 - 4:36 P.M. the Board went into Executive Session to discuss organizational matters.

12. Ms. Rosenblum reconvened the public meeting at 4:36 P.M. Further discussion ensued concerning the Resolution to utilize the 1996 TRS database to verify 1997 submissions to USAC. The Board acknowledged that there was pending before the FCC a ruling which would address USAC's ability to verify information. On a motion duly made and seconded, the Board resolved to reconsider the vote on the prior motion. On a motion duly made and seconded, the Board resolved to rescind the prior motion pending further action by the FCC.

There being no further business to come before the Board, upon a motion duly made and seconded, Ms. Rosenblum adjourned the meeting at 4:50 P.M.

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Edward R. English
Secretary

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