NEWSReport No. CC 97-38   COMMON CARRIER ACTION                July 18, 1997

              Commission Directs Changes to NECA's Governance 
   Permitting NECA To Serve as Temporary Universal Service Administrator 
                        (CC Docket Nos. 97-21; 96-45)

                         The Commission has directed changes to the National Exchange
Carrier Association (NECA)'s governance so that NECA may serve as the temporary
administrator of the universal service support mechanisms established by the
Commission's Universal Service Order. These changes will assure appropriate 
representation in the administration of universal service funding from industry
contributors and recipients as well as the intended beneficiaries of such funding. 

                         In its May 8, 1997 Universal Service Order, the Commission adopted
the recommendation of the Federal-State Joint Board on Universal Service that, in the
interest of speedy implementation of the universal service support mechanisms,
NECA serve as temporary universal service administrator, subject to changes in its
governance that would render it more representative of interests other than those of
incumbent local exchange carriers.

                         In the Order released today, the Commission directed NECA to
create an independent, not-for-profit subsidiary through which it will administer
certain portions of the federal universal service support mechanisms. The Board of
Directors of this subsidiary, the Universal Service Administrative Company (USAC),
will include broad representation of both industry and non-industry interests,
including representatives from service providers, schools and libraries and state
regulatory commissions. In addition, the Commission reconsidered, on its own
motion, its determination in the Universal Service Order that the universal service
administrator should select a subcontractor to manage the application process for
schools and libraries.  In lieu of a subcontractor, the Commission directed NECA to
create two unaffiliated, not-for-profit corporations to manage the administration of
universal service funds with respect to schools and libraries and rural health care
providers. 

                         The establishment of these corporations will bring to the
administration of the universal service funds for schools and libraries and rural health
care providers the necessary expertise to ensure that funds are administered
efficiently and effectively and in the best interests of the intended beneficiaries.  The
establishment of these corporations will ensure that the administration of universal
service support for these entities will be accountable, efficient, and cost-effective. 
The Commission will retain oversight of the corporations' budgets and collection and
disbursement of universal service funds, and each corporation will be subject to an
annual independent audit.

                         The Commission assigned to the unaffiliated corporations all
functions associated with the administration of funds to the schools and libraries and
rural health care programs, except those relating to billing and collection of universal
service contributions and disbursing support. These functions will be performed by
USAC. To ensure continuity in, and efficient administration of, the schools and
libraries and rural health care programs, the Commission also concluded that the two
unaffiliated corporations should continue to perform their designated functions for the
permanent administrator.  The continued existence of these corporations will ensure
that start up costs are not wasted and will provide incentives for strategic and long-
range planning and the ability to attract and retain staff of the highest quality. 

                         USAC will also have responsibility for administering the universal
service support mechanisms for high cost areas and low-income consumers.  To
allow for the efficient administration of decisions relating to universal service support
mechanisms for high cost areas and low-income consumers, USAC will establish a
committee with delegated powers.  

                         Action by the Commission July 17, 1997, by Report and Order and
Second Order on Reconsideration (FCC 97-253).  Chairman Hundt, Commissioners
Quello and Ness, with Chairman Hundt and Commissioners Quello and Ness issuing 
separate statements and Commissioner Chong dissenting and issuing a separate
statement.
                                    
                                     -FCC-

                         News media contact:  Rochelle Cohen at (202) 418-0253.
                         Common Carrier Bureau contact: Diane Law at (202) 418-7400.