DR 97-113
         Order Nisi Establishing School and Library Discounts for
           Intrastate Services Pursuant to FCC Order No. 97-157
                          O R D E R  N O.  22,618
                                June 9, 1997


         On May 8, 1997, the Federal Communications Commission
(FCC) issued FCC Order No. 97-157 (Order) in CC Docket 96-45,
implementing key portions of Section 254 of the
Telecommunications Act of 1996 (Tact) addressing universal
service.  The Order, based on recommendations of the
Federal/State Joint Board on Universal Service, identifies
services to be supported by federal universal service funding and
the mechanisms for providing such funding.  Discounts on
telecommunications services and certain non-telecommunications
services for schools and libraries are earmarked for federal
         The Order provides for funding of discounts on both
interstate and intrastate services for schools and libraries. 
The Order establishes discount levels for interstate services. 
Although the FCC adopted rules that will permit schools and
libraries to begin using the discounted services on January 1,
1998, they may begin applying for funding July 1, 1997.  For
jurisdictional reasons, eligibility for the discounts is
predicated upon adoption by the state of discount levels for
intrastate services equal to the federal discount levels for
interstate services.  In this order, we adopt discount levels for
intrastate services to schools and libraries.
         A.   Section 254(h)(1)(B) Requirement
         The TAct requires that states establish intrastate
discounts on designated services provided to eligible schools and
libraries.  Specifically, Section 254(h)(1)(B)states:
         All telecommunications carriers serving a
         geographic area shall, upon a bonafide
         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 [FCC], 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.

         B.   The Funding
         Section 254(h)(1)(B) of the TAct permits the states to
determine the level of discount available to eligible schools and
libraries with respect to intrastate services.  Paragraph 550 of
the FCC's Order points out that the TAct does nothing to prohibit
federal funding of intrastate discounts or to prohibit
conditioning that funding on state adoption of the federal
discount levels.  Accordingly, the FCC decided to provide federal
universal service funding for intrastate discounts to schools and
libraries, conditioned on state adoption of discount levels at
least equal to the federal discount levels.  Hence, no state
funding is required for these intrastate discounts, so long as we
adopt the FCC discount levels.  Participating service providers
will be compensated for the discounts completely through the
federal universal fund.
         C.   The Discounts
         The FCC discounts range from 20 percent to 90 percent
for all telecommunications services, internet access, and
internal connections, subject to a $2.25 billion annual cap.  The
range of discounts is correlated to students' eligibility for the
national school free and reduced price lunch program, and urban
or rural designation based on Metropolitan Statistical Areas. 
The following discount matrix has been adopted by the FCC:

% students eligible for national school lunch program Estimated % of US schools in category Urban Discount (%) Rural Discount (%)
>1 3 20 25
1-19 31 40 50
20-34 19 50 60
35-49 15 60 70
50-74 16 80 80
75-100 16 90 90

         The discounts are to be applied to a "Pre-discount
Price", which must be no higher than the lowest price the carrier
charges to similarly situated non-residential customers for
similar services.  The Pre-discount Price represents the total
price that carriers will receive for the services sold to
eligible schools and libraries.  While the federal universal
service fund will pay the carrier the amount necessary to
complete the Pre-discount Price, schools and libraries will pay
the carrier only the discounted amount.  Therefore, schools and
libraries have an incentive to obtain the lowest possible
Pre-discount Price, which is obtained through a bidding process
administered by the National Exchange Carriers Association (NECA)
as the universal service administrator.
         D.   New Tariffs Not Required
         The FCC clarified that a carrier's tariffed rate for an
eligible service will represent a carrier's lowest corresponding
price in a geographic area in which the carrier has not
negotiated rates that differ from the tariffed rate.  The FCC
does not require carriers to file new tariffs to reflect the
discounts it has adopted for schools and libraries; discounts
will be applied to existing tariff rates where appropriate.  We
believe that this is appropriate for New Hampshire carriers, too. 
We will not require that carriers file tariffs reflecting their
discounts for schools and libraries.   
         E.   Further Action
         The level of discounts adopted by us will have no
impact on the federal universal service fund assessments paid by
New Hampshire carriers.  Our telecommunications carriers, and
through them the ratepayers of this state, will be contributors
to the federal universal service fund regardless of our action
         The FCC Order, Paragraph 551, recognizes that Section
254(h)(1)(B) provides that states may establish discounts greater
than those established as federal levels.  States also retain
discretion to establish Pre-discount Prices, to which the
discount is then applied, lower than that which would be
determined by the market.  However, no federal funding will be
provided above the amounts necessary to support the federally
approved discount levels.  Therefore, a state which chooses to
establish greater discounts must provide the funding to support
the difference between the federal and state discounts.
         New Hampshire has not established a funding mechanism
for telecommunications services for schools and libraries.  We
find that imposing additional charges on carriers to create a
state fund to support telecommunications services for schools and
libraries is inappropriate at this time.  Furthermore, while we
may arguably have authority to create such a fund, we would seek
direction from the Legislature before taking such a step.  The
Legislature is well aware of the ongoing changes in
telecommunications. A bill creating a Joint Oversight Committee
on Telecommunications, House Bill Number 452, is currently under
consideration.  We consider that committee, or a similar
legislative study committee, to be an appropriate forum for
initial investigation of a program of this magnitude.      
         The schools and libraries wishing to take advantage of
the first-come, first-served federal funding must apply to the
FCC as soon after July 1, 1997 as possible, once their technology
plans are in place.  Further, because we believe that legislative
input is appropriate before creating further intrastate
discounts, we find that the public good will be served by
establishing the discount levels as soon as possible.  This is
particularly appropriate given that the preliminary analysis of
the federal discount matrix reveals that most, if not all,
eligible New Hampshire schools will receive a 50% discount, a
considerable savings and incentive to participate. 
         By this order we will approve the federal discounts on
a nisi basis subject to written comment from interested parties.  
         Based upon the foregoing, it is hereby 
         ORDERED NISI, that we adopt the Schools and Libraries
Discount Matrix contained in FCC Order No. 97-157, CC Docket
96-45, and reflected in this order; and it is
         FURTHER ORDERED, that pursuant to N.H. Admin. Rules,
Puc 1601.05, the Commission shall cause a copy of this Order Nisi
to be published once in a statewide newspaper of general
circulation, such publication to be no later than June 12, 1997
and to be documented by affidavit filed with this office on or
before June 23, 1997; and it is
         FURTHER ORDERED, that all persons interested in
responding to this order are hereby notified that they may submit
their comments no later than June 19, 1997; and it is
         FURTHER ORDERED, that all persons wishing to file a
request for a hearing on this matter before the Commission are
hereby notified that they may submit a written request for a
hearing no later than June 19, 1997; and it is
         FURTHER ORDERED, that any party interested in
responding to such comments or request for hearing shall do so no
later than June 25, 1997; and it is
         FURTHER ORDERED, that this Order Nisi shall be
effective July 1, 1997, unless the Commission provides otherwise
in a supplemental order issued prior to the effective date.       
         By order of the Public Utilities Commission of New
Hampshire this ninth day of June, 1997.

                Douglas L. Patch     Bruce B. Ellsworth      Susan S. Geiger
                    Chairman            Commissioner           Commissioner

Attested by:

Claire D. DiCicco
Assistant Secretary