Telecommunications Act of 1996

The Telecommunications Act of 1996 was the first major overhaul of telecommunications law in almost 62 years. The goal of this law was to let anyone enter any communications business -- to let any communications business compete in any market against any other.

In the Telecommunications Act of 1996, $400 million a year is provided to support telecommunications services for health care in rural areas. Under the Rural Health Care Program of the Universal Service Fund, the public and non-profit health care providers can receive telecommunications services necessary for the provision of health care services at rates comparable to those paid in urban areas.

The Federal Act of 1996 was enacted to remove economic and legal barriers to entry in the telecommunications industry. While Section 253 (a) of the Act proscribes state and local legal requirements that prohibit any entity from providing telecommunications services, Section 253 (b) preserves a state's ability to impose requirements related to universal service, public safety and welfare, consumer protection and quality of services, but on a competitively neutral basis. Section 253 (c) of the Act also preserves the right of a state or local government to manage its rights-of-way and obtain "fair and reasonable" compensation, again, on a competitively neutral basis.

Overall Summary of the Telecommunications Act of 1996

The bill removes Modification of Final Judgment (MFJ) barriers to BOC entry into long distance services and eliminates existing state law barriers to competition in the local telecommunications market by establishing ground rules for carrier interconnection and universal service; preempting state and local entry barriers for local exchange telephone service; removing the remaining line-of-business restrictions in the MFJ; and removing existing restrictions on electric utility entry into the telecommunications market.

Section 254 - Universal Service

Section 254 establishes a joint federal and state controlled board to oversee the mechanisms to ensure universal service to all regions and economic sectors of the public. Universal service is defined as basic interexchange service, advanced telecommunications services, and information services reasonably comparable to services provided elsewhere. The definition is intended to be an evolving one which the Federal Communications Commission (FCC) shall update as technology introduces new levels of service and capabilities. The FCC will establish mechanisms through which all telecommunications service providers must make a financial contribution to preserve and advance universal service. State commissions or the FCC will designate telecommunications carriers as eligible for universal service contributions, with the public interest as the standard justification. The determining factor of eligibility to receive universal service funds is whether the actual cost to that entity of providing universal service is greater than the associated revenues. Non-profit health care facilities and educational institutions will have a presumption of eligibility for universal service funding.

A state may adopt regulations to provide additional standards and definitions to preserve universal service, but only to the extent that they do not contradict the FCC’s rules.

Within six months following enactment of this law, the FCC shall adopt regulations which require that rates charged by providers of interexchange services to subscribers in rural and high cost areas shall be no higher than rates charged by each such provider in its urban areas. Such rules shall also provide that a carrier must charge similar rates to all customers in all states in which it provides service.

Universal Service

“The goals of Universal Service, as mandated by the 1996 Act, are to promote the availability of quality services at just, reasonable, and affordable rates; increase access to advanced telecommunications services throughout the Nation; advance the availability of such services to all consumers, including those in low income, rural, insular, and high cost areas at rates that are reasonably comparable to those charged in urban areas. In addition, the 1996 Act states that all providers of telecommunications services should contribute to Federal universal service in some equitable and nondiscriminatory manner; there should be specific, predictable, and sufficient Federal and State mechanisms to preserve and advance universal service; all schools, classrooms, health care providers, and libraries should, generally, have access to advanced telecommunications services; and finally, that the Federal-State Joint Board and the Commission should determine those other principles that, consistent with the 1996 Act, are necessary to protect the public interest.” From the FCC website. 

The Universal Service Administrative Company (USAC) is an independent, not-for-profit corporation designated as the administrator of the federal Universal Service Fund by the Federal Communications Commission (FCC). USAC administers the Universal Service Fund (USF) programs for high cost companies serving rural areas, low-income consumers, rural health care providers, and schools and libraries. The Universal Service Fund helps provide communities across the country with affordable telecommunications services.

What organizations are eligible for Universal Service Rural Health Care Funding?