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108th Congress                                                   Report
                                 SENATE
 2d Session                                                     108-422
_______________________________________________________________________

                                     

                                                       Calendar No. 809

               RURAL UNIVERSAL SERVICE EQUITY ACT OF 2003

                               __________

                              R E P O R T

                                 OF THE

           COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                                   on

                       S. H.R. deg. 1380



                                     

       DATE deg.December 7, 2004.--Ordered to be printed
       SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION
                      one hundred eighth congress
                             second session

                     JOHN McCAIN, Arizona, Chairman
TED STEVENS, Alaska                  ERNEST F. HOLLINGS, South Carolina
CONRAD BURNS, Montana                DANIEL K. INOUYE, Hawaii
TRENT LOTT, Mississippi              JOHN D. ROCKEFELLER IV, West 
KAY BAILEY HUTCHISON, Texas              Virginia
OLYMPIA J. SNOWE, Maine              JOHN F. KERRY, Massachusetts
SAM BROWNBACK, Kansas                JOHN B. BREAUX, Louisiana
GORDON SMITH, Oregon                 BYRON L. DORGAN, North Dakota
PETER G. FITZGERALD, Illinois        RON WYDEN, Oregon
JOHN ENSIGN, Nevada                  BARBARA BOXER, California
GEORGE ALLEN, Virginia               BILL NELSON, Florida
JOHN E. SUNUNU, New Hampshire        MARIA CANTWELL, Washington
                                     FRANK LAUTENBERG, New Jersey
           Jeanne Bumpus, Staff Director and General Counsel
                   Rob Freeman, Deputy Staff Director
     Samuel Whitehorn, Democratic Staff Director and Chief Counsel
               Margaret Spring, Democratic Senior Counsel


                                                       Calendar No. 809
108th Congress                                                   Report
                                 SENATE
 2d Session                                                     108-422

======================================================================



 
               RURAL UNIVERSAL SERVICE EQUITY ACT OF 2003

                                _______
                                

                December 7, 2004.--Ordered to be printed

                                _______
                                

       Mr. McCain, from the Committee on Commerce, Science, and 
                Transportation, submitted the following

                              R E P O R T

                         [To accompany S. 1380]

    The Committee on Commerce, Science, and Transportation, to 
which was referred the bill joint resolution deg. (S. 
H.R. deg. 1380) TITLE deg. to distribute 
universal service support equitably throughout rural America, 
and for other purposes, having considered the same, reports 
favorably thereon without amendment deg. with 
amendments deg. with an amendment (in the nature of a 
substitute) and recommends that the bill joint 
resolution deg. (as amended) do pass.

                          Purpose of the Bill

  The primary objective of this legislation is to require the 
Federal Communications Commission (FCC) to distribute certain 
universal service funding based on the per line costs in a 
specific area of service, rather than the current State-by-
State basis.

                          Background and Needs

  The Communications Act of 1934 requires the FCC to ``make 
available, so far as possible, to all the people of the United 
States, . . . a rapid, efficient, Nation-wide, and world-wide 
wire and radio communications service with adequate facilities 
at reasonable charges . . .'' \1\ From 1934 until 1996, the FCC 
developed this general mandate into a body of regulations which 
came to be known as ``universal service.'' The original concept 
of universal service was to create Federal rules ensuring that 
telecommunications services would be affordable to all 
Americans, even those in rural and high cost areas.
---------------------------------------------------------------------------
    \1\ Section 1, Communications Act of 1934 (47 U.S.C. 151).
---------------------------------------------------------------------------
  The Telecommunications Act of 1996 (the ``1996 Act'') 
codified this concept by creating a Federal universal service 
fund (USF), that supports the widespread availability of 
eligible telecommunications services. The 1996 Act also 
extended the scope of Federal universal service beyond its 
traditional focus on low-income consumers and those in rural 
and high cost areas to also include eligible schools, 
libraries, and rural health care providers. The total amount of 
universal service support disbursed from the USF for Fiscal 
Year (FY) 2003 was over $5 billion.

                       NON-RURAL CARRIER SUPPORT

  One of the funds established by the FCC within the USF is the 
Federal high-cost universal service support mechanism for non-
rural telephone companies. Non-rural carriers are generally the 
largest local exchange companies serving greater than 100,000 
access lines. The FCC's distribution mechanism for support from 
this fund compares the statewide average cost per line for non-
rural carriers to a nationwide cost benchmark. The FCC has 
found that, since States set intrastate telephone rates and 
hold the primary responsibility of ensuring comparability of 
these rates within their borders, the Federal mechanism should 
operate by shifting money from relatively low-cost States to 
relatively high-cost States. As a result, non-rural carriers 
receive support in only ten states (Alabama, Kentucky, Maine, 
Mississippi, Montana, Nebraska, South Dakota, Vermont, West 
Virginia, and Wyoming). In 2004, carriers in these States 
received over $200 million in support from this fund.
  In 2001, the 10th Circuit Court of Appeals remanded the FCC's 
decision on how to distribute support from this fund to the FCC 
directing it to explain how this program satisfied the 
statutory requirement to achieve reasonably comparable phone 
rates among rural and urban areas. In October 2003, the FCC 
adopted an order reaffirming its conclusion that comparing 
statewide average costs is an appropriate means to determine 
high-cost support for non-rural carriers.
  Although non-rural carriers in many different States serve 
high-cost areas, their statewide average costs, under the FCC's 
rules, are often not high enough to receive support. This bill 
would require the FCC to change the current formula to 
distribute the funding by basing it on a specific area of 
service, rather than the current State-by-State basis.

                          Legislative History

  This bill was introduced by Senator Smith on July 9, 2003, 
and is co-sponsored by 32 Senators.
  On September 22, 2004, the Committee voted to report the bill 
favorably without amendment to the full Senate.

                            Estimated Costs

  In accordance with paragraph 11(a) of rule XXVI of the 
Standing Rules of the Senate and section 403 of the 
Congressional Budget Act of 1974, the Committee provides the 
following cost estimate, prepared by the Congressional Budget 
Office:

                                                  October 21, 2004.
Hon. John McCain,
Chairman, Committee on Commerce, Science, and Transportation,
U.S. Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 1380, the Rural 
Universal Service Equity Act of 2003.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Melissa E. 
Zimmerman.
            Sincerely,
                                       Douglas Holtz-Eakin,
                                                          Director.
    Enclosure.

S. 1380--Rural Universal Service Equity Act of 2003

    S. 1380 would make changes to the formula used by the 
Universal Service Fund (USF) program to calculate funding 
levels for states with high-cost telecommunications services. 
As a result, more states would be eligible for funding; 
however, USF funds collected for high-cost services would not 
change, so total expenditures under this program would not 
change.
    Universal Service is a program intended to promote the 
availability of telecommunications services at affordable 
rates. Charges imposed by the federal government on 
telecommunications services to support Universal Service are 
recorded in the federal budget as revenues. Because the bill 
would not make any changes to the total amount of funding 
collected and distributed for high-cost services, CBO estimates 
that enacting S. 1380 would not affect revenues or direct 
spending. The bill would not have a significant effect on 
spending subject to appropriation.
    S. 1380 contains no intergovernmental mandates as defined 
in the Unfunded Mandates Reform Act (UMRA), but the change in 
the formula for part of the Universal Service Fund would alter 
the distribution of money among the states. The bill contains 
no new private-sector mandates as defined in UMRA.
    The CBO staff contacts for this estimate are Melissa E. 
Zimmerman (for federal costs), Sarah Puro (for the state and 
local impact), and Jean Talarico (for the private-sector 
impact). The estimate was approved by Peter H. Fontaine, Deputy 
Assistant Director for Budget Analysis.

                      Regulatory Impact Statement

  In accordance with paragraph 11(b) of rule XXVI of the 
Standing Rules of the Senate, the Committee provides the 
following evaluation of the regulatory impact of the 
legislation, as reported:

                       NUMBER OF PERSONS COVERED

  The legislation affects the calculations for disbursement of 
funds from the Universal Service Fund under its Non-Rural 
Carrier support mechanism. The number of persons covered by 
this legislation should be consistent with current levels of 
individuals affected by this program.

                            ECONOMIC IMPACT

  This bill would adjust calculations for disbursement of 
Federal Universal Service funds.

                                PRIVACY

  This legislation will not have any adverse impact on the 
personal privacy of the individuals affected.

                               PAPERWORK

  S. 1380 would require the Comptroller General to submit to 
Congress a report on the need to reform the high cost support 
mechanism for rural, insular and high cost areas.

                      Section-by-Section Analysis


Section 1. Short title

  Section 1 would set forth the short title of the bill as the 
``Rural Universal Service Equity Act of 2003.''

Section 2. Findings

  Section 2 would make certain findings related to the FCC's 
high cost fund.

Section 3. Comptroller general report on need to reform high cost 
        support mechanism

  Section 3 would require the Comptroller General to submit a 
report to Congress on the need to reform the high cost support 
mechanism for rural, insular, and high cost areas.

Section 4. Eligibility for universal service support for high cost 
        areas

  Section 4 would require the FCC to change its current 
mechanism for calculating high cost areas to provide support to 
each wire center in which an incumbent telephone company's 
average cost per line exceed the national average cost per line 
by an amount to be defined by the FCC. Currently the FCC 
provides support to large telephone companies based on their 
average cost per line throughout an entire State. Thus, the new 
mechanism would have the effect of distributing the high cost 
fund in a manner that is different than today.
  This section would also keep the total amount of support for 
the high cost fund the same as it is at the time of enactment. 
The section would also require the FCC to hold harmless any 
State that would receive less support under the new mechanism 
than it would under the old mechanism, up to 10 percent of the 
total support distributed. Finally, this section would require 
the FCC to implement the bill within 180 days.

Section 5. No effect on rural telephone companies

  Section 5 would state that nothing in the legislation shall 
be construed to affect the support provided to rural telephone 
companies.

                      Rollcall Votes in Committee

  On a rollcall vote of 13 yeas and 9 nays, the Committee 
ordered S. 1380 favorably reported.
        YEAS--13                      NAYS--9
Mr. Burns                           Mr. Stevens\1\
Mrs. Hutchison                      Mr. Lott
Mr. Brownback                       Ms. Snowe
Mr. Smith                           Mr. Ensign
Mr. Fitzgerald\1\                   Mr. Inouye\1\
Mr. Allen                           Mr. Rockefeller
Mr. Sununu                          Mr. Breaux
Mr. Hollings                        Mr. Nelson
Mr. Dorgan                          Mr. Lautenberg
Mr. Wyden
Mrs. Boxer
Ms. Cantwell
Mr. McCain

    \1\By proxy

                        Changes in Existing Law

  In compliance with paragraph 12 of rule XXVI of the Standing 
Rules of the Senate, changes in existing law made by the bill, 
as reported, are shown as follows (existing law proposed to be 
omitted is enclosed in black brackets, new material is printed 
in italic, existing law in which no change is proposed is shown 
in roman):

                       COMMUNICATIONS ACT OF 1934

 SEC. 254. UNIVERSAL SERVICE

                             [47 U.S.C. 254]

  (a) Procedures To Review Universal Service Requirements.--
          (1) Federal-state joint board on universal service.--
        Within one month after the date of enactment of the 
        Telecommunications Act of 1996, the Commission shall 
        institute and refer to a Federal-State Joint Board 
        under section 410(c) a proceeding to recommend changes 
        to any of its regulations in order to implement 
        sections 214(e) and this section, including the 
        definition of the services that are supported by 
        Federal universal service support mechanisms and a 
        specific timetable for completion of such 
        recommendations. In addition to the members of the 
        Joint Board required under section 410(c), one member 
        of such Joint Board shall be a State-appointed utility 
        consumer advocate nominated by a national organization 
        of State utility consumer advocates. The Joint Board 
        shall, after notice and opportunity for public comment, 
        make its recommendations to the Commission 9 months 
        after the date of enactment of the Telecommunications 
        Act of 1996.
          (2) Commission action.--The Commission shall initiate 
        a single proceeding to implement the recommendations 
        from the Joint Board required by paragraph (1) and 
        shall complete such proceeding within 15 months after 
        the date of enactment of the Telecommunications Act of 
        1996. The rules established by such proceeding shall 
        include a definition of the services that are supported 
        by Federal universal service support mechanisms and a 
        specific timetable for implementation. Thereafter, the 
        Commission shall complete any proceeding to implement 
        subsequent recommendations from any Joint Board on 
        universal service within one year after receiving such 
        recommendations.
  (b) Universal Service Principles.--The Joint Board and the 
Commission shall base policies for the preservation and 
advancement of universal service on the following principles:
          (1) Quality and rates.--Quality services should be 
        available at just, reasonable, and affordable rates.
          (2) Access to advanced services.--Access to advanced 
        telecommunications and information services should be 
        provided in all regions of the Nation.
          (3) Access in rural and high cost areas.--Consumers 
        in all regions of the Nation, including low-income 
        consumers and those in rural, insular, and high cost 
        areas, should have access to telecommunications and 
        information services, including interexchange services 
        and advanced telecommunications and information 
        services, that are reasonably comparable to those 
        services provided in urban areas and that are available 
        at rates that are reasonably comparable to rates 
        charged for similar services in urban areas.
          (4) Equitable and nondiscriminatory contributions.--
        All providers of telecommunications services should 
        make an equitable and nondiscriminatory contribution to 
        the preservation and advancement of universal service.
          (5) Specific and predictable support mechanisms.--
        There should be specific, predictable and sufficient 
        Federal and State mechanisms to preserve and advance 
        universal service.
          (6) Access to advanced telecommunications services 
        for schools, health care, and libraries.--Elementary 
        and secondary schools and classrooms, health care 
        providers, and libraries should have access to advanced 
        telecommunications services as described in subsection 
        (h).
          (7) Additional principles.--Such other principles as 
        the Joint Board and the Commission determine are 
        necessary and appropriate for the protection of the 
        public interest, convenience, and necessity and are 
        consistent with this Act.
  (c) Definition.--
          (1) In general.--Universal service is an evolving 
        level of telecommunications services that the 
        Commission shall establish periodically under this 
        section, taking into account advances in 
        telecommunications and information technologies and 
        services. The Joint Board in recommending, and the 
        Commission in establishing, the definition of the 
        services that are supported by Federal universal 
        service support mechanisms shall consider the extent to 
        which such telecommunications services--
                  (A) are essential to education, public 
                health, or public safety;
                  (B) have, through the operation of market 
                choices by customers, been subscribed to by a 
                substantial majority of residential customers;
                  (C) are being deployed in public 
                telecommunications networks by 
                telecommunications carriers; and
                  (D) are consistent with the public interest, 
                convenience, and necessity.
          (2) Alterations and modifications.--The Joint Board 
        may, from time to time, recommend to the Commission 
        modifications in the definition of the services that 
        are supported by Federal universal service support 
        mechanisms.
          (3) Special services.--In addition to the services 
        included in the definition of universal service under 
        paragraph (1), the Commission may designate additional 
        services for such support mechanisms for schools, 
        libraries, and health care providers for the purposes 
        of subsection (h).
  (d) Telecommunications Carrier Contribution.--Every 
telecommunications carrier that provides interstate 
telecommunications services shall contribute, on an equitable 
and nondiscriminatory basis, to the specific, predictable, and 
sufficient mechanisms established by the Commission to preserve 
and advance universal service. The Commission may exempt a 
carrier or class of carriers from this requirement if the 
carrier's telecommunications activities are limited to such an 
extent that the level of such carrier's contribution to the 
preservation and advancement of universal service would be de 
minimis. Any other provider of interstate telecommunications 
may be required to contribute to the preservation and 
advancement of universal service if the public interest so 
requires.
  (e) Universal Service Support.--After the date on which 
Commission regulations implementing this section take effect, 
only an eligible telecommunications carrier designated under 
section 214(e) shall be eligible to receive specific Federal 
universal service support. A carrier that receives such support 
shall use that support only for the provision, maintenance, and 
upgrading of facilities and services for which the support is 
intended. Any such support should be explicit and sufficient to 
achieve the purposes of this section.
  (f) State Authority.--A State may adopt regulations not 
inconsistent with the Commission's rules to preserve and 
advance universal service. Every telecommunications carrier 
that provides intrastate telecommunications services shall 
contribute, on an equitable and nondiscriminatory basis, in a 
manner determined by the State to the preservation and 
advancement of universal service in that State. A State may 
adopt regulations to provide for additional definitions and 
standards to preserve and advance universal service within that 
State only to the extent that such regulations adopt additional 
specific, predictable, and sufficient mechanisms to support 
such definitions or standards that do not rely on or burden 
Federal universal service support mechanisms.
  (g) Interexchange and Interstate Services.--Within 6 months 
after the date of enactment of the Telecommunications Act of 
1996, the Commission shall adopt rules to require that the 
rates charged by providers of interexchange telecommunications 
services to subscribers in rural and high cost areas shall be 
no higher than the rates charged by each such provider to its 
subscribers in urban areas. Such rules shall also require that 
a provider of interstate interexchange telecommunications 
services shall provide such services to its subscribers in each 
State at rates no higher than the rates charged to its 
subscribers in any other State.
  (h) Telecommunications Services for Certain Providers.--
          (1) In general.--
                  (A) Health care providers for rural areas.--A 
                telecommunications carrier shall, upon 
                receiving a bona fide request, provide 
                telecommunications services which are necessary 
                for the provision of health care services in a 
                State, including instruction relating to such 
                services, to any public or nonprofit health 
                care provider that serves persons who reside in 
                rural areas in that State at rates that are 
                reasonably comparable to rates charged for 
                similar services in urban areas in that State. 
                A telecommunications carrier providing service 
                under this paragraph shall be entitled to have 
                an amount equal to the difference, if any, 
                between the rates for services provided to 
                health care providers for rural areas in a 
                State and the rates for similar services 
                provided to other customers in comparable rural 
                areas in that State treated as a service 
                obligation as a part of its obligation to 
                participate in the mechanisms to preserve and 
                advance universal service.
                  (B) Educational providers and libraries.--All 
                telecommunications carriers serving a 
                geographic area shall, upon a bona fide request 
                for any of its services that are within the 
                definition of universal service under 
                subsection (c)(3), provide such services to 
                elementary schools, secondary schools, and 
                libraries for educational purposes at rates 
                less than the amounts charged for similar 
                services to other parties. The discount shall 
                be an amount that the Commission, with respect 
                to interstate services, and the States, with 
                respect to intrastate services, determine is 
                appropriate and necessary to ensure affordable 
                access to and use of such services by such 
                entities. A telecommunications carrier 
                providing service under this paragraph shall--
                          (i) have an amount equal to the 
                        amount of the discount treated as an 
                        offset to its obligation to contribute 
                        to the mechanisms to preserve and 
                        advance universal service, or
                          (ii) notwithstanding the provisions 
                        of subsection (e) of this section, 
                        receive reimbursement utilizing the 
                        support mechanisms to preserve and 
                        advance universal service.
          (2) Advanced services.--The Commission shall 
        establish competitively neutral rules--
                  (A) to enhance, to the extent technically 
                feasible and economically reasonable, access to 
                advanced telecommunications and information 
                services for all public and nonprofit 
                elementary and secondary school classrooms, 
                health care providers, and libraries; and
                  (B) to define the circumstances under which a 
                telecommunications carrier may be required to 
                connect its network to such public 
                institutional telecommunications users.
          (3) Terms and conditions.--Telecommunications 
        services and network capacity provided to a public 
        institutional telecommunications user under this 
        subsection may not be sold, resold, or otherwise 
        transferred by such user in consideration for money or 
        any other thing of value.
          (4) Eligibility of users.--No entity listed in this 
        subsection shall be entitled to preferential rates or 
        treatment as required by this subsection, if such 
        entity operates as a for-profit business, is a school 
        described in paragraph (7)(A) with an endowment of more 
        than $50,000,000, or is a library or library consortium 
        not eligible for assistance from a State library 
        administrative agency under the Library Services and 
        Technology Act.
          (5) Requirements for certain schools with computers 
        having Internet access.--
                  (A) Internet safety.--
                          (i) In general.--Except as provided 
                        in clause (ii), an elementary or 
                        secondary school having computers with 
                        Internet access may not receive 
                        services at discount rates under 
                        paragraph (1)(B) unless the school, 
                        school board, local educational agency, 
                        or other authority with responsibility 
                        for administration of the school--
                                  (I) submits to the Commission 
                                the certifications described in 
                                subparagraphs (B) and (C);
                                  (II) submits to the 
                                Commission a certification that 
                                an Internet safety policy has 
                                been adopted and implemented 
                                for the school under subsection 
                                (l); and
                                  (III) ensures the use of such 
                                computers in accordance with 
                                the certifications.
                          (ii) Applicability.--The prohibition 
                        in clause (i) shall not apply with 
                        respect to a school that receives 
                        services at discount rates under 
                        paragraph (1)(B) only for purposes 
                        other than the provision of Internet 
                        access, Internet service, or internal 
                        connections.
                          (iii) Public notice; hearing.--An 
                        elementary or secondary school 
                        described in clause (i), or the school 
                        board, local educational agency, or 
                        other authority with responsibility for 
                        administration of the school, shall 
                        provide reasonable public notice and 
                        hold at least 1 public hearing or 
                        meeting to address the proposed 
                        Internet safety policy. In the case of 
                        an elementary or secondary school other 
                        than an elementary or secondary school 
                        as defined in section 14101 of the 
                        Elementary and Secondary Education Act 
                        of 1965 (20 U.S.C. 8801), the notice 
                        and hearing required by this clause may 
                        be limited to those members of the 
                        public with a relationship to the 
                        school.
                  (B) Certification with respect to minors.--A 
                certification under this subparagraph is a 
                certification that the school, school board, 
                local educational agency, or other authority 
                with responsibility for administration of the 
                school--
                          (i) is enforcing a policy of Internet 
                        safety for minors that includes 
                        monitoring the online activities of 
                        minors and the operation of a 
                        technology protection measure with 
                        respect to any of its computers with 
                        Internet access that protects against 
                        access through such computers to visual 
                        depictions that are--
                                  (I) obscene;
                                  (II) child pornography; or
                                  (III) harmful to minors; and
                          (ii) is enforcing the operation of 
                        such technology protection measure 
                        during any use of such computers by 
                        minors.
                  (C) Certification with respect to adults.--A 
                certification under this paragraph is a 
                certification that the school, school board, 
                local educational agency, or other authority 
                with responsibility for administration of the 
                school--
                          (i) is enforcing a policy of Internet 
                        safety that includes the operation of a 
                        technology protection measure with 
                        respect to any of its computers with 
                        Internet access that protects against 
                        access through such computers to visual 
                        depictions that are--
                                  (I) obscene; or
                                  (II) child pornography; and
                          (ii) is enforcing the operation of 
                        such technology protection measure 
                        during any use of such computers.
                  (D) Disabling during adult use.--An 
                administrator, supervisor, or other person 
                authorized by the certifying authority under 
                subparagraph (A)(i) may disable the technology 
                protection measure concerned, during use by an 
                adult, to enable access for bona fide research 
                or other lawful purpose.
                  (E) Timing of implementation.--
                          (i) In general.--Subject to clause 
                        (ii) in the case of any school covered 
                        by this paragraph as of the effective 
                        date of this paragraph under section 
                        1721(h) of the Children's Internet 
                        Protection Act, the certification under 
                        subparagraphs (B) and (C) shall be 
                        made--
                                  (I) with respect to the first 
                                program funding year under this 
                                subsection following such 
                                effective date, not later than 
                                120 days after the beginning of 
                                such program funding year; and
                                  (II) with respect to any 
                                subsequent program funding 
                                year, as part of the 
                                application process for such 
                                program funding year.
                          (ii) Process.--
                                  (I) Schools with internet 
                                safety policy and technology 
                                protection measures in place.--
                                A school covered by clause (i) 
                                that has in place an Internet 
                                safety policy and technology 
                                protection measures meeting the 
                                requirements necessary for 
                                certification under 
                                subparagraphs (B) and (C) shall 
                                certify its compliance with 
                                subparagraphs (B) and (C) 
                                during each annual program 
                                application cycle under this 
                                subsection, except that with 
                                respect to the first program 
                                funding year after the 
                                effective date of this 
                                paragraph under section 1721(h) 
                                of the Children's Internet 
                                Protection Act, the 
                                certifications shall be made 
                                not later than 120 days after 
                                the beginning of such first 
                                program funding year.
                                  (II) Schools without internet 
                                safety policy and technology 
                                protection measures in place.--
                                A school covered by clause (i) 
                                that does not have inplace an 
                                Internet safety policy and 
                                technology protection measures 
                                meeting the requirements 
                                necessary for certification 
                                under subparagraphs (B) and 
                                (C)--
                                          (aa) for the first 
                                        program year after the 
                                        effective date of this 
                                        subsection in which it 
                                        is applying for funds 
                                        under this subsection, 
                                        shall certify that it 
                                        is undertaking such 
                                        actions, including any 
                                        necessary procurement 
                                        procedures, to put in 
                                        place an Internet 
                                        safety policy and 
                                        technology protection 
                                        measures meeting the 
                                        requirements necessary 
                                        for certification under 
                                        subparagraphs (B) and 
                                        (C); and
                                          (bb) for the second 
                                        program year after the 
                                        effective date of this 
                                        subsection in which it 
                                        is applying for funds 
                                        under this subsection, 
                                        shall certify that it 
                                        is in compliance with 
                                        subparagraphs (B) and 
                                        (C). Any school that is 
                                        unable to certify 
                                        compliance with such 
                                        requirements in such 
                                        second program year 
                                        shall be ineligible for 
                                        services at discount 
                                        rates or funding in 
                                        lieu of services at 
                                        such rates under this 
                                        subsection for such 
                                        second year and all 
                                        subsequent program 
                                        years under this 
                                        subsection, until such 
                                        time as such school 
                                        comes into compliance 
                                        with this paragraph.
                                  (III) Waivers.--Any school 
                                subject to subclause (II) that 
                                cannot come into compliance 
                                with subparagraphs (B) and (C) 
                                in such second year program may 
                                seek a waiver of subclause 
                                (II)(bb) if State or local 
                                procurement rules or 
                                regulations or competitive 
                                bidding requirements prevent 
                                the making of the certification 
                                otherwise required by such 
                                subclause. A school, school 
                                board, local educational 
                                agency, or other authority with 
                                responsibility for 
                                administration of the school 
                                shall notify the Commission of 
                                the applicability of such 
                                subclause to the school. Such 
                                notice shall certify that the 
                                school in question will be 
                                brought into compliance before 
                                the start of the third program 
                                year after the effective date 
                                of this subsection in which the 
                                school is applying for funds 
                                under this subsection.
                  (F) Noncompliance.--
                          (i) Failure to submit 
                        certification.--Any school that 
                        knowingly fails to comply with the 
                        application guidelines regarding the 
                        annual submission of certification 
                        required by this paragraph shall not be 
                        eligible for services at discount rates 
                        or funding in lieu of services at such 
                        rates under this subsection.
                          (ii) Failure to comply with 
                        certification.--Any school that 
                        knowingly fails to ensure the use of 
                        its computers in accordance with a 
                        certification under subparagraphs (B) 
                        and (C) shall reimburse any funds and 
                        discounts received under this 
                        subsection for the period covered by 
                        such certification.
                          (iii) Remedy of noncompliance.--
                                  (I) Failure to submit.--A 
                                school that has failed to 
                                submit a certification under 
                                clause (i) may remedy the 
                                failure by submitting the 
                                certification to which the 
                                failure relates. Upon submittal 
                                of such certification, the 
                                school shall be eligible for 
                                services at discount rates 
                                under this subsection.
                                  (II) Failure to comply.--A 
                                school that has failed to 
                                comply with a certification as 
                                described in clause (ii) may 
                                remedy the failure by ensuring 
                                the use of its computers in 
                                accordance with such 
                                certification. Upon submittal 
                                to the Commission of a 
                                certification or other 
                                appropriate evidence of such 
                                remedy, the school shall be 
                                eligible for services at 
                                discount rates under this 
                                subsection.
  (6) Requirements for certain libraries with computers having 
Internet access.--
          (A) Internet safety.--
                  (i) In general--Except as provided in clause 
                (ii), a library having one or more computers 
                with Internet access may not receive services 
                at discount rates under paragraph (1)(B) unless 
                the library--
                          (I) submits to the Commission the 
                        certifications described in 
                        subparagraphs (B) and (C); and
                          (II) submits to the Commission a 
                        certification that an Internet safety 
                        policy has been adopted and implemented 
                        for the library under subsection (l); 
                        and
                          (III) ensures the use of such 
                        computers in accordance with the 
                        certifications.
                  (ii) Applicability.--The prohibition in 
                clause (i) shall not apply with respect to a 
                library that receives services at discount 
                rates under paragraph (1)(B) only for purposes 
                other than the provision of Internet access, 
                Internet service, or internal connections.
                  (iii) Public notice; hearing.--A library 
                described in clause (i) shall provide 
                reasonable public notice and hold at least 1 
                public hearing or meeting to address the 
                proposed Internet safety policy.
          (B) Certification with respect to minors.--A 
        certification under this subparagraph is a 
        certification that the library--
                  (i) is enforcing a policy of Internet safety 
                that includes the operation of a technology 
                protection measure with respect to any of its 
                computers with Internet access that protects 
                against access through such computers to visual 
                depictions that are--
                          (I) obscene;
                          (II) child pornography; or
                          (III) harmful to minors; and
                  (ii) is enforcing the operation of such 
                technology protection measure during any use of 
                such computers by minors.
          (C) Certification with respect to adults.--A 
        certification under this paragraph is a certification 
        that the library--
                  (i) is enforcing a policy of Internet safety 
                that includes the operation of a technology 
                protection measure with respect to any of its 
                computers with Internet access that protects 
                against access through such computers to visual 
                depictions that are--
                          (I) obscene; or
                          (II) child pornography; and
                  (ii) is enforcing the operation of such 
                technology protection measure during any use of 
                such computers.
          (D) Disabling during adult use.--An administrator, 
        supervisor, or other person authorized by the 
        certifying authority under subparagraph (A)(i) may 
        disable the technology protection measure concerned, 
        during use by an adult, to enable access for bona fide 
        research or other lawful purpose.
          (E) Timing of implementation.--
                  (i) In general.--Subject to clause (ii) in 
                the case of any library covered by this 
                paragraph as of the effective date of this 
                paragraph under section 1721(h) of the 
                Children's Internet Protection Act, the 
                certification under subparagraphs (B) and (C) 
                shall be made--
                          (I) with respect to the first program 
                        funding year under this subsection 
                        following such effective date, not 
                        later than 120 days after the beginning 
                        of such program funding year; and
                          (II) with respect to any subsequent 
                        program funding year, as part of the 
                        application process for such program 
                        funding year.
                  (ii) Process.--
                          (I) Libraries with internet safety 
                        policy and technology protection 
                        measures in place.--A library covered 
                        by clause (i) that has in place an 
                        Internet safety policy and technology 
                        protection measures meeting the 
                        requirements necessary for 
                        certification under subparagraphs (B) 
                        and (C) shall certify its compliance 
                        with subparagraphs (B) and (C) during 
                        each annual program application cycle 
                        under this subsection, except that with 
                        respect to the first program funding 
                        year after the effective date of this 
                        paragraph under section 1721(h) of the 
                        Children's Internet Protection Act, the 
                        certifications shall be made not later 
                        than 120 days after the beginning of 
                        such first program funding year.
                          (II) Libraries without internet 
                        safety policy and technology protection 
                        measures in place.--A library covered 
                        by clause (i) that does not have in 
                        place an Internet safety policy and 
                        technology protection measures meeting 
                        the requirements necessary for 
                        certification under subparagraphs (B) 
                        and (C)--
                                  (aa) for the first program 
                                year after the effective date 
                                of this subsection in which it 
                                is applying for funds under 
                                this subsection, shall certify 
                                that it is undertaking such 
                                actions, including any 
                                necessary procurement 
                                procedures, to put in place an 
                                Internet safety policy and 
                                technology protection measures 
                                meeting the requirements 
                                necessary for certification 
                                under subparagraphs (B) and 
                                (C); and
                                  (bb) for the second program 
                                year after the effective date 
                                of this subsection in which it 
                                is applying for funds under 
                                this subsection, shall certify 
                                that it is in compliance with 
                                subparagraphs (B) and (C). Any 
                                library that is unable to 
                                certify compliance with such 
                                requirements in such second 
                                program year shall be 
                                ineligible for services at 
                                discount rates or funding in 
                                lieu of services at such rates 
                                under this subsection for such 
                                second year and all subsequent 
                                program years under this 
                                subsection, until such time as 
                                such library comes into 
                                compliance with this paragraph.
                          (III) Waivers.--Any library subject 
                        to subclause (II) that cannot come into 
                        compliance with subparagraphs (B) and 
                        (C) in such second year may seek a 
                        waiver of subclause (II)(bb) if State 
                        or local procurement rules or 
                        regulations or competitive bidding 
                        requirements prevent the making of the 
                        certification otherwise required by 
                        such subclause. A library, library 
                        board, or other authority with 
                        responsibility for administration of 
                        the library shall notify the Commission 
                        of the applicability of such subclause 
                        to the library. Such notice shall 
                        certify that the library in question 
                        will be brought into compliance before 
                        the start of the third program year 
                        after the effective date of this 
                        subsection in which the library is 
                        applying for funds under this 
                        subsection.
                  (F) Noncompliance.--
                          (i) Failure to submit 
                        certification.--Any library that 
                        knowingly fails to comply with the 
                        application guidelines regarding the 
                        annual submission of certification 
                        required by this paragraph shall not be 
                        eligible for services at discount rates 
                        or funding in lieu of services at such 
                        rates under this subsection.
                          (ii) Failure to comply with 
                        certification.--Any library that 
                        knowingly fails to ensure the use of 
                        its computers in accordance with a 
                        certification under subparagraphs (B) 
                        and (C) shall reimburse all funds and 
                        discounts received under this 
                        subsection for the period covered by 
                        such certification.
                          (iii) Remedy of noncompliance.--
                                  (I) Failure to submit.--A 
                                library that has failed to 
                                submit a certification under 
                                clause (i) may remedy the 
                                failure by submitting the 
                                certification to which the 
                                failure relates. Upon submittal 
                                of such certification, the 
                                library shall be eligible for 
                                services at discount rates 
                                under this subsection.
                                  (II) Failure to comply.--A 
                                library that has failed to 
                                comply with a certification as 
                                described in clause (ii) may 
                                remedy the failure by ensuring 
                                the use of its computers in 
                                accordance with such 
                                certification. Upon submittal 
                                to the Commission of a 
                                certification or other 
                                appropriate evidence of such 
                                remedy, the library shall be 
                                eligible for services at 
                                discount rates under this 
                                subsection.
          (7) Definitions.--For purposes of this subsection:
                  (A) Elementary and secondary schools.--The 
                term ``elementary and secondary schools'' means 
                elementary schools and secondary schools, as 
                defined in section 9101 of the Elementary and 
                Secondary Education Act of 1965.
                  (B) Health care provider.--The term ``health 
                care provider'' means--
                          (i) post-secondary educational 
                        institutions offering health care 
                        instruction, teaching hospitals, and 
                        medical schools;
                          (ii) community health centers or 
                        health centers providing health care to 
                        migrants;
                          (iii) local health departments or 
                        agencies;
                          (iv) community mental health centers;
                          (v) not-for-profit hospitals;
                          (vi) rural health clinics; and
                          (vii) consortia of health care 
                        providers consisting of one or more 
                        entities described in clauses (i) 
                        through (vi).
                  (C) Public institutional telecommunications 
                user.--The term ``public institutional 
                telecommunications user'' means an elementary 
                or secondary school, a library, or a health 
                care provider as those terms are defined in 
                this paragraph.
                  (D) Minor.--The term ``minor'' means any 
                individual who has not attained the age of 17 
                years.
                  (E) Obscene.--The term ``obscene'' has the 
                meaning given such term in section 1460 of 
                title 18, United States Code.
                  (F) Child pornography.--The term ``child 
                pornography'' has the meaning given such term 
                in section 2256 of title 18, United States 
                Code.
                  (G) Harmful to minors.--The term ``harmful to 
                minors'' means any picture, image, graphic 
                image file, or other visual depiction that--
                          (i) taken as a whole and with respect 
                        to minors, appeals to a prurient 
                        interest in nudity, sex, or excretion;
                          (ii) depicts, describes, or 
                        represents, in a patently offensive way 
                        with respect to what is suitable for 
                        minors, an actual or simulated sexual 
                        act or sexual contact, actual or 
                        simulated normal or perverted sexual 
                        acts, or a lewd exhibition of the 
                        genitals; and
                          (iii) taken as a whole, lacks serious 
                        literary, artistic, political, or 
                        scientific value as to minors.
                  (H) Sexual act; sexual contact.--The terms 
                ``sexual act'' and ``sexual contact'' have the 
                meanings given such terms in section 2246 of 
                title 18, United States Code.
                  (I) Technology protection measure.--The term 
                ``technology protection measure'' means a 
                specific technology that blocks or filters 
                Internet access to the material covered by a 
                certification under paragraph (5) or (6) to 
                which such certification relates.
  (i) Consumer Protection.--The Commission and the States 
should ensure that universal service is available at rates that 
are just, reasonable, and affordable.
  (j) Lifeline Assistance.--Nothing in this section shall 
affect the collection, distribution, or administration of the 
Lifeline Assistance Program provided for by the Commission 
under regulations set forth in section 69.117 of title 47, Code 
of Federal Regulations, and other related sections of such 
title.
  (k) Subsidy of Competitive Services Prohibited.--A 
telecommunications carrier may not use services that are not 
competitive to subsidize services that are subject to 
competition. The Commission, with respect to interstate 
services, and the States, with respect to intrastate services, 
shall establish any necessary cost allocation rules, accounting 
safeguards, and guidelines to ensure that services included in 
the definition of universal service bear no more than a 
reasonable share of the joint and common costs of facilities 
used to provide those services.
  (l) Internet Safety Policy Requirement for Schools and 
Libraries.
          (1) In general.--In carrying out its responsibilities 
        under subsection (h), each school or library to which 
        subsection (h) applies shall--
                  (A) adopt and implement an Internet safety 
                policy that addresses--
                          (i) access by minors to inappropriate 
                        matter on the Internet and World Wide 
                        Web;
                          (ii) the safety and security of 
                        minors when using electronic mail, chat 
                        rooms, and other forms of direct 
                        electronic communications;
                          (iii) unauthorized access, including 
                        so-called ``hacking'', and other 
                        unlawful activities by minors online;
                          (iv) unauthorized disclosure, use, 
                        and dissemination of personal 
                        identification information regarding 
                        minors; and
                          (v) measures designed to restrict 
                        minors' access to materials harmful to 
                        minors; and
                  (B) provide reasonable public notice and hold 
                at least one public hearing or meeting to 
                address the proposed Internet safety policy.
          (2) Local determination of content.--A determination 
        regarding what matter is inappropriate for minors shall 
        be made by the school board, local educational agency, 
        library, or other authority responsible for making the 
        determination. No agency or instrumentality of the 
        United States Government may--
                  (A) establish criteria for making such 
                determination;
                  (B) review the determination made by the 
                certifying school, school board, local 
                educational agency, library, or other 
                authority; or
                  (C) consider the criteria employed by the 
                certifying school, school board, local 
                educational agency, library, or other authority 
                in the administration of subsection (h)(1)(B).
          (3) Availability for review.--Each Internet safety 
        policy adopted under this subsection shall be made 
        available to the Commission, upon request of the 
        Commission, by the school, school board, local 
        educational agency, library, or other authority 
        responsible for adopting such Internet safety policy 
        for purposes of the review of such Internet safety 
        policy by the Commission.
          (4) Effective date.--This subsection shall apply with 
        respect to schools and libraries on or after the date 
        that is 120 days after the date of the enactment of the 
        Children's Internet Protection Act.
    ``(m) Universal Service Support for High Cost Areas.--
          (1) Calculating support.--In calculating Federal 
        universal service support for eligible 
        telecommunications carriers that serve rural, insular, 
        and high cost areas, the Commission shall, subject to 
        paragraphs (2) and (3), revise the Commission's support 
        mechanism for high cost areas to provide support to 
        each wire center in which the incumbent local exchange 
        carrier's average cost per line for such wire center 
        exceeds the national average cost per line by such 
        amount as the Commission determines appropriate for the 
        purpose of ensuring the equitable distribution of 
        universal service support throughout the United States.
          (2) Hold harmless support.--In implementing this 
        subsection, the Commission shall ensure that no State 
        receives less Federal support calculated under 
        paragraph (1) than the State would have received, up to 
        10 percent of the total support distributed, under the 
        Commission's support mechanism for high cost areas as 
        in effect on the date of the enactment of this 
        subsection.
          (3) Limitation on total support to be provided.--The 
        total amount of support for all States, as calculated 
        under paragraphs (1) and (2), shall be equivalent to 
        the total support calculated under the Commission's 
        support mechanism for high cost areas as in effect on 
        the date of the enactment of this subsection.
          (4) Construction of limitation.--The limitation in 
        paragraph (3) shall not be construed to preclude 
        fluctuations in support on the basis of changes in the 
        data used to make such calculations.
          (5) Implementation.--Not later than 180 days after 
        the date of the enactment of this subsection, the 
        Commission shall complete the actions (including 
        prescribing or amending regulations) necessary to 
        implement the requirements of this subsection.
          (6) Definition.--In this subsection, the term 
        ``Commission's support mechanism for high cost areas'' 
        means sections 54.309 and 54.311 of the Commission's 
        regulations (47 CFR 54.309, 54.311), and regulations 
        referred to in such sections.