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G AO United States
General Accounting Office
Washington, D.C. 20548
Office of the General Counsel
B-278820
February 10, 1998
The Honorable Ted Stevens
United States Senate
Dear Senator Stevens:
This letter is in response to your request dated November 28, 1997, asking us to
review the Federal Communications Commission's implementation of section 254(h)
of the Communications Act of 1934, as amended. 47 U.S.C. § 254(h). Subsection
254(h) provides the authority for the Commission to authorize universal service
support benefits for eligible schools and libraries and rural health care providers.
Your request concerns those provisions of the Commission's orders implementing
subsection 254(h) that led to the incorporation in Delaware of two not-for-profit
corporations. These corporations were formed to administer certain functions of
the universal service programs for schools and libraries and rural health care
providers. The Chairman of the Commission selects or approves the board of
directors for these entities and the operating expenses of the corporations are
recovered from industry fees assessed to support universal service. You asked
whether the Commission has the legal authority to establish such corporations.
In addition, you asked us to describe the federal laws (for example, the Federal
Advisory Committee Act), employment rules, and congressional oversight that
govern the operation of the corporations.
We sought the views of the Commission about these and other questions, and by
letter of January 5, 1998, the Commission provided its legal opinion.
Question 1: Was the Commission authorized to establish the Schools and Libraries
Corporation and the Rural Health Care Corporation?
Answer: As explained more fully below, the Commission exceeded its authority
when it directed the National Exchange Carriers Association, Inc. (NECA) to create
the Schools and Libraries Corporation and the Rural Health Care Corporation. The
Government Corporation Control Act specifies that [a]n agency may establish or
acquire a corporation to act as an agency only by or under a law of the United
States specifically authorizing the action. 31 U.S.C. § 9102. These entities act as
the agents of the Commission and, therefore, could only be created pursuant to
specific statutory authority. Because the Commission has not been provided such
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