Board of Directors Minutes - October 26, 1999

A meeting of the Board of Directors of the Universal Service Administrative Company (USAC) was held at the Georgetown University Marriott Conference Center, 3800 Reservoir Road, N.W., Washington, D.C., on Tuesday, October 26, 1999. Ms. Lisa Rosenblum, Chair of the USAC Board of Directors, called the meeting to order at 9:04 a.m. Eastern Time. Mr. Robert Haga, Acting Secretary, called the roll.

Action Items:

1. Approval of Minutes. On a motion duly made and seconded, the Board approved the minutes, as distributed, of the Board of Directors' meetings of Tuesday, July 27, 1999, and Friday, August 20, 1999.
   
   
2. Selection of a USAC Secretary and Treasurer. Ms. Parrino spoke with each Board member one-on-one before this meeting to determine his or her interest in serving as USAC Secretary or Treasurer. More than one Board member indicated an interest in the positions; therefore, the Executive Committee is recommending that the Board of Directors' Chair appoint a Nominating Committee to bring forth nominations for these two officer positions. Ms. Parrino distributed a revised second page of the issue paper reflecting the amended resolution that the Executive Committee passed on October 21, 1999, in which that Committee directed Ms.Parrino to contact Board members Mr. Wheeler, Mr. Hess, Mr.Lineberry, and Ms. Hogerty to determine his or her interest in serving on a Nominating Committee. They affirmed their interest.
   
   On a motion duly made and seconded, the Board unanimously adopted the following resolutions:
   

   RESOLVED, That the USAC Board of Directors accepts the recommendation of the Executive Committee to determine that the position of USAC Treasurer and USAC Secretary will be held by two different Board members and that the positions of USAC Assistant Treasurer and USAC Assistant Secretary will be held by staff members, and
   
   RESOLVED FURTHER, That the USAC Board of Directors accepts the recommendation of the Executive Committee to request that the Chair of the Board of Directors appoint a Nominating Committee to bring a recommended slate of candidates or candidate for the position of Secretary and a recommended slate of candidates or candidate for the position of Treasurer to the Board of Directors for its consideration in the election of a Board member to each of the officer positions at its January 25, 2000, Board meeting, and
   
   RESOLVED FURTHER, That the USAC Board of Directors accepts the recommendation made by the Executive Committee to request the Nominating Committee to place Mr. D. Scott Barash on the ballot for Assistant Secretary and Mr. Robert Haga on the ballot for Assistant Treasurer of USAC.
   
   Ms. Rosenblum announced that she was appointing Mr. Wheeler, Mr. Hess, Mr. Lineberry, and Ms. Hogerty to the Nominating Committee.
   
   

3. Modification of USAC Investment Guidelines. Ms. Parrino recommended that USAC's investment guidelines not be changed to exclude companies that participate in the Universal Service Fund (USF) Program, because to avoid all companies that participate in the USF would unduly restrict safe investments for USAC. She further explained that although USAC employees review the performance of our investors, they do not directly invest any of USAC funds at this time. Investment decisions are based on rates of returns and other such factors unrelated to whether a company has any relationship with the USF. The Board briefly discussed how such a change would be impossible to monitor due to the broad range of companies that participate in the Program.
   
   On a motion duly made and seconded, the Board unanimously adopted the following resolution:
   

   RESOLVED, That the USAC Board of Directors accepts the recommendation of the Executive Committee to retain the existing USAC investment guidelines, which allow short-term investments in commercial paper issued by fund participants.
   

4. Determination of Appropriate Late Filing Fees. Ms. Parrino said that USAC is presenting this agenda item to the Board members per their request to be kept informed of the impact of the late filing fee approved previously by the Board. Ms. Parrino stated that the fees have had a dramatic effect-companies filing late have decreased by 17 percent. She reported that staff members feel very confident that this fee has had a positive impact and recommend that it be applied to the new Form 499 (which replaces the Form 457).
   
   On a motion duly made and seconded, the Board unanimously adopted the following resolution:
   

   RESOLVED, That the USAC Board of Directors directs staff to continue the implementation of the Late Filing Penalty Schedule as detailed below. The Board directs staff to apply the stated penalty schedule without modification to the FCC Form 499 Data Collection submissions:
   

   Form 499 Late Filing Penalty:
   
   Grace Period of 5 business days
   Rate = .00005 applied to total end-user billed revenue
   Minimum Late Filing Penalty = $100
   Maximum Late Filing Penalty = $5,000
   Director - Level (staff) approval needed to waive penalty - extenuating circumstances.

5. Approval of Contracting and Bidding Timeline. With the consent of the Board, the Chair deferred this item until the end of the Agenda. See Executive Session.
   
   
6. Approval of Staff Recommendation Regarding Tax-Exempt Status. Ms. Parrino recalled that at a previous Board meeting, staff estimated that the cost savings that USAC would enjoy were it to obtain tax-exempt status would be minimal. The Board directed staff to consult with the FCC on the matter. Ms. Parrino reported that the FCC advised USAC that it was a good idea to investigate the possibility, but left it up to staff discretion whether to seek tax-exempt status. Ms. Parrino reported that staff determined that the cost savings to USAC are not significant enough to warrant going forward and that there is also some uncertainty associated with which exemption USAC would qualify. Moreover, she reported that due to the uncertainty, the legal fees and other costs associated with seeking tax-exempt status could be substantial.
   
   On a motion duly made and seconded, the Board unanimously adopted the following resolution:
   

   RESOLVED, That the USAC Board of Directors accepts the recommendation made by the Executive Committee that USAC should not seek tax-exempt status at this time.
   

7. Approval of 1^st Quarter 2000 USAC Common and Consolidated Budget and Information on Estimated 2000 Budget. Ms. Parrino distributed a revised Attachment C, Consolidated Budget spreadsheet, which now has the explanations fields completed. She also distributed a revised resolution noting the correct consolidated budget amount. Ms. Parrino reported that staff could not bring a final 2000 budget to the Board at this time, because NECA has not yet approved its budget (NECA Board approval is anticipated in December). The contract costs with NECA constitute the largest portion of USAC's budget. The final USAC 2000 budget will be presented to the Board at the January 2000 quarterly meeting. Ms. Rosenblum noted that if USAC is measuring the efficiency of the program, the numbers show that not only is there a decrease in the percentage of administrative costs to the total program costs but a decrease in the actual dollars as well.
   
   On a motion duly made and seconded, the Board unanimously adopted the following amended resolutions:
   

   RESOLVED, That the USAC Board of Directors approve a 1^st Quarter 2000 USAC common budget of $733,000, and
   
   RESOLVED FURTHER, That the USAC Board of Directors approves a 1^st Quarter 2000 USAC consolidated budget of 11,876,900.
   

8. Approval of 1^st Quarter 2000 Revenue Projections and Resolutions on November 1999 FCC Filing. Mr. Haga stated that there have been a couple of changes in the filing process. First, for the first time the Form 499 was used to collect the revenue information from carriers. It is anticipated that the consolidated data collection will save all of the programs time and money as well as reduce the burden on carriers. The establishment of the late filing penalty has aided greatly in making the information available to the Board in a timely and much more comprehensive manner. Second, the revisions by the Commission earlier this month will result in a revised contribution base once carriers have had a chance to determine whether they qualify for the international exemption. Since that filing is due at the beginning of December, USAC will have to recalculate the contribution base and will seek the approval of the Executive Committee at that time to file the revised amount with the Commission.
   
   On a motion duly made and seconded, the Board unanimously adopted the following resolution:
   

   RESOLVED, That the USAC Board of Directors, having reviewed a summary of the current status of telecommunications service provider revenues for January through June 1999, authorizes staff to proceed with the required November 1, 1999, filing to the FCC on behalf of USAC. If the revenue estimate in the filing varies from the revenue estimate included in Board materials by an amount greater than 5 percent, staff will seek Board approval to file the revised revenue estimate.
   

9. Determination of the Decimal Point for Collection Factor. Ms. Parrino explained that moving the decimal point to six digits from four reduces the margin for error from millions of dollars to thousands.
   
   On a motion duly made and seconded, the Board unanimously adopted the following resolution:
   

   RESOLVED, That the USAC Board of Directors directs staff to round numbers to the thousand level or below in filings with the FCC.
   

10. Approval of a Statement of Ethical Conduct for Members of the USAC Board of Directors. Several Board members expressed concerns with the proposed Guidelines. For example, some members felt that the wording is too restrictive as stated for Board members to be able to make any decisions regarding USAC without appearing to favor their constituents. After all, the Board members were appointed to represent certain stakeholder interests. After discussing the matter further, the Board called for the formation of an Ad Hoc Committee to look into the matter further and report to the Board at its next meeting.
    
    On a motion duly made and seconded, the Board adopted the following amended resolution. Mr. Abramson abstained:
    

    RESOLVED, That the USAC Board of Directors rejects the recommendation made by the Executive Committee to approve the proposed Statement of Ethical Conduct for Members of the USAC Board of Directors, and instead appoints Board members Mr. Wheeler, Mr. Hess, Mr. Lineberry, and Ms. Hogerty to an Ad Hoc Committee to refine the guidelines to more accurately reflect the unique responsibilities of the Board members.

Information Items:

1. Report of Legislative and Media Activity. For information only. No discussion held.
   
   
2. Treasurer's Report. For information only. No discussion held.
   
   
3. Regulatory Report. For information only. No discussion held.
   
   
4. Report on Accounts Receivable and Collection Efforts. For information only. No discussion held.
   
   
5. Report on Form 457 Reported Revenue Decreases Greater than 45 Percent. For information only. No discussion held.
   
   
6. Status of Form 457 Audit. For information only. No discussion held.
   
   
7. Bankruptcy Report. For information only. No discussion held.
   
   
8. Status of Financial and Operational Audits of USAC. For information only. No discussion held.
   
   
9. Status of the Consolidation of Data Collection. For information only. No discussion held.
   
   
10. Draft Outline for USAC Annual Report. For information only. No discussion held.
    
    
11. Status of USAC Clarification Requests at the FCC. For information only. No discussion held.
    
    
12. Contract Review. For information only. With the consent of the Board, the Chair deferred any discussion until the end of the Agenda. See Executive Session.
    
    
13. USAC 1999 Timeline and Key Dates. For information only. No discussion held.
    
    
14. Miscellaneous. None.
    
    

Rural Health Care Program:

15. Rural Health Care Program Status Report. For information only. No discussion held.
    
    
16. Status of the March 5, 1999, USAC Report to the FCC and New Program Overview. For information only. No discussion held.
    
    
17. Review of 1^st Quarter 2000 Rural Health Care Programmatic Budget and Information on Estimated 2000 Budget. For information only. No discussion held.
    
    
18. Review of 1^st Quarter 2000 Rural Health Care Projections and Resolution on the November 1999 FCC Filing. For information only. No discussion held.
    
    
19. Miscellaneous. None.
    
    

Schools & Libraries Program:

20. Schools and Libraries Program Update. For information only. No discussion held.
    
    
21. Review of Revised 1999 Schools and Libraries Programmatic Budget. For information only. No discussion held.
    
    
22. Review of 1^st Quarter 2000 Schools and Libraries Programmatic Budget and Information on Estimated 2000 Budget. For information only. No discussion held.
    
    
23. Review of 1^st Quarter 2000 Schools and Libraries Projections and Resolution on the November 1999 FCC Filing. For information only. No discussion held.
    
    
24. Miscellaneous. None.
    
    

High Cost & Low Income Programs:

25. High Cost Program Status Report. For information only. No discussion held.
    
    
26. Low Income Program Status Report. For information only. No discussion held.
    
    
27. Report on the Implementation of a New High Cost Program for Non-rural Companies. For information only. No discussion held.
    
    
28. Disaggregation of Federal High Cost Support in Washington State. For information only. No discussion held.
    
    
29. Review of 1^st Quarter 2000 High Cost and Low Income Programmatic Budget and Information on Estimated 2000 Budget. For information only. No discussion held.
    
    
30. Review of 1^st Quarter 2000 High Cost and Low Income Projections and Resolution on the November 1999 FCC Filing. For information only. No discussion held.
    
    

On a motion duly made and seconded, the Board unanimously agreed at 9:54 a.m. Eastern Time to go into Executive Session for the purpose of discussing USAC contracts and timelines. On a motion duly made and seconded, the Board unanimously agreed at 10:31 a.m. Eastern Time to adjourn from Executive Session and reconvene in Open Session to report out the discussion and the action of the Board.

Upon reconvening in Open Session, Ms. Rosenblum reported the following action during the Executive Session:

Executive Session

5. Approval of Contracting and Bidding Timeline.

12. Contract Review.
    
    Ms. Parrino combined these two items in discussion as the bidding timeline is affected by USAC contracts. She provided a summary of the status and the rationale for the suggested timeline. On a motion duly made and seconded, the Committee unanimously adopted the following resolution:
    

    RESOLVED, That the USAC Board of Directors accepts the recommendation made by the Executive Committee to approve the contracting and bidding timeframe set forth herein.
    

After reporting the action taken in Executive Session, several miscellaneous action and information items were brought to the floor.

Action Items:

1. Miscellaneous.
   
   
1. Determination of Responsibility for High Cost Data Collection. Mr. Wheeler requested that USAC petition the FCC to transfer the responsibility for High Cost Data Collection from the National Exchange Carrier Association, Inc. (NECA) to USAC. He expressed the view, shared by several other Board members, that because this data collection is reported as a USAC expense, USAC should be responsible for selecting the manner in which the data collection is performed.
   
   On a motion duly made and seconded, the Board adopted the following resolution:
   

   RESOLVED, That the USAC Board of Directors directs staff to petition the FCC to transfer the responsibility for High Cost Data Collection from the National Exchange Carrier Association, Inc. (NECA) to USAC.
   
   

2. Request for Change in Location of USAC Quarterly Board Meetings. Mr. Thoms requested that staff petition the FCC for relief from the requirement that all USAC Board meetings be held in Washington, D.C. Mr. Thoms believes that it would be in the interest of USAC to hold these meetings in different locations around the country in an effort to make USAC more visible to the communities served by the Universal Service Fund. Some members are not sure that that would indeed be the effect, but were supportive for other reasons. All Board members agree that a list of valid reasons for the change should be presented in the request to the FCC.
   
   On a motion duly made and seconded, the Board adopted the following resolution:
   

   RESOLVED, That the USAC Board of Directors directs staff to petition the FCC to eliminate or waive the requirement that all USAC Board meetings must be held in Washington, D.C.
   

3. Request for a Permanent Slot for USAC on the Agendas of the Annual, Winter, and Summer Meetings of the Committee on Telecommunications of the National Association of Regulatory Utility Commissioners (NARUC). Mr. Thoms noted that it would be in USAC's interest to request a slot on this NARUC Committee's agendas in order to give regular updates on the programs administered by USAC.
   
   On a motion duly made and seconded, the Board adopted the following resolution:
   

   RESOLVED, That the USAC Board of Directors directs staff to request a permanent slot for USAC on the agendas of the Annual, Winter, and Summer Meetings of the Committee on Telecommunications of the National Association of Regulatory Utility Commissioners (NARUC) for the purpose of giving regular updates on the Universal Service Program.
   

Information Items:

1. Miscellaneous.

1. USAC Two Year Report. Ms. Parrino distributed copies of the final, printed USAC Two Year Report. Board members requested that it be sent to them electronically, as well as posted to the USAC Web site, so that it can be distributed to their constituents.
   
   
2. Letter from Congressman Gekas. Ms. Parrino informed the Board that she received a letter from Representative George W. Gekas (R-PA), Chairman of the Subcommittee on Commercial and Administrative Law, and Representative J. D. Hayworth (R-AZ) requesting documentation supporting the necessity and the cost-effectiveness of the regional outreach efforts conducted by the Schools & Libraries Division this fall. Ms. Parrino assured the Board that USAC's response clearly stated numerous valid reasons for the seven regional outreach efforts this fall. The correspondence was provided to Board members for their information.
   
   

There being no further business to attend to, Ms. Rosenblum adjourned the meeting at 10:45 a.m. Eastern Time.

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Robert W. Haga
Acting Secretary/Treasurer

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