[Federal Register Volume 75, Number 66 (Wednesday, April 7, 2010)]
[Rules and Regulations]
[Pages 17584-17590]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-7757]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 54

[CC Docket No. 02-6; FCC 09-105]


Schools and Libraries Universal Service Support Mechanism

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: In this document, the Federal Communications Commission 
(Commission) addresses matters related to the eligibility of products 
and services under the schools and libraries universal service support 
mechanism, also known as the E-rate program. First, in the Report and 
Order, the Commission modifies its rules to expressly include 
interconnected voice over Internet protocol (VoIP) and text messaging 
as eligible services under the E-rate program. Second, in the process 
of releasing the list of services that will be eligible for discounts 
for E-rate funding year 2010, the Commission clarifies the E-rate 
program eligibility of video on-demand servers, ethernet, web hosting, 
wireless local area network (LAN) controllers, and virtualization 
software. It also finds that telephone broadcast messaging, unbundled 
warranties, power distribution units, softphones, interactive white 
boards, and e-mail archiving are ineligible for E-rate program funding.

DATES: Effective May 7, 2010.

FOR FURTHER INFORMATION CONTACT: Cara Voth, Wireline Competition 
Bureau, Telecommunications Access Policy Division, (202) 418-7400 or 
TTY: (202) 418-0484.

SUPPLEMENTARY INFORMATION: This is a synopsis of the Commission's 
Report and Order in CC Docket No. 02-6, FCC 09-105, adopted December 1, 
2009, and released December 2, 2009. The complete text of this document 
is available for inspection and copying during normal business hours in 
the FCC Reference Information Center, Portals II, 445 12th Street, SW., 
Room CY-A257, Washington, DC 20554. The document may also be purchased 
from the Commission's duplicating contractor, Best Copy and Printing, 
Inc., 445 12th Street, SW., Room CY-B402, Washington, DC 20554, 
telephone (800) 378-3160 or (202) 863-2893, facsimile (202) 863-2898, 
or via the Internet at http://www.bcpiweb.com. It is also available on 
the Commission's Web site at http://www.fcc.gov.
    People with Disabilities: To request materials in accessible 
formats for people with disabilities (braille, large print, electronic 
files, audio format), send an e-mail to [email protected] or call the 
Consumer & Governmental Affairs Bureau at 202-418-0530 (voice), 202-
418-0432 (tty).

Synopsis of the Report and Order

I. Introduction

    1. In the Report and Order, we conclude that interconnected VoIP 
service is eligible for E-rate support and should continue to be an 
eligible service under the E-rate program. We also conclude that text 
messaging is eligible for E-rate support. In response to the 2010 ESL 
Public Notice, we clarify the E-rate program eligibility of video on-
demand servers, ethernet, web hosting, wireless local area network 
(LAN) controllers, and virtualization software. We find that telephone 
broadcast messaging, unbundled warranties, power distribution units, 
softphones, interactive white boards, and e-mail archiving are 
ineligible for E-rate program funding. Finally, we release the Eligible 
Services List (ESL) for E-rate funding year 2010.

II. Background

    2. Under the E-rate program, eligible schools, libraries, and 
consortia that include eligible schools and libraries may receive 
discounts for eligible telecommunications services, Internet access, 
and internal connections. Section 254 of the Communications Act of 
1934, as amended (the Act), gives the Commission the authority to 
designate ``telecommunications services'' and certain additional 
services eligible for support under the E-rate program. The Commission 
may also designate services eligible for E-rate support as part of its 
authority to enhance, to the extent technically feasible and 
economically reasonable, access to advanced telecommunications and 
information services for all public and non-profit elementary and 
secondary school classrooms and libraries.
    3. Since the initial implementation of the E-rate program in 1998, 
and consistent with the Commission's rules and requirements, USAC has 
developed procedures and guidelines to ensure that E-rate funding is 
provided only for eligible services. Initially, the Commission directed 
USAC, in consultation with the Commission, to determine whether 
particular services fell within the eligibility criteria established 
under the Act and the Commission's rules and policies. USAC began to 
update and post to its Web site on an annual basis a list of services 
and products eligible to receive discounts under the E-rate program, 
now known as the ESL. In consultation with the Wireline Competition 
Bureau (Bureau), USAC updated the list to reflect any

[[Page 17585]]

changes in rules that had occurred during the previous year and to 
address issues that arose in the application review process.
    4. On December 23, 2003, the Commission adopted section 54.522 of 
its rules, formalizing the process for updating the ESL for the E-rate 
program. Specifically, under section 54.522 of the Commission's rules, 
the Commission must seek comment on USAC's proposed ESL and issue a 
public notice attaching the final ESL for the upcoming funding year at 
least 60 days prior to the opening of the application funding window 
for the E-rate program. In its current form, the ESL is divided into 
five main categories--telecommunications service, Internet access, 
internal connections, basic maintenance of internal connections, and 
miscellaneous.
    5. In the 2010 ESL Public Notice, the Bureau sought comment on 
changes to the ESL proposed by USAC for funding year 2010. Comments on 
the 2010 ESL Public Notice were due on June 23, 2009, and reply 
comments were due on June 30, 2009. In the ESL NPRM, released in July 
2008, the Commission sought comment on issues related to eligible 
services that had been raised by commenters but had not yet been 
resolved through the ESL public notice and revision process. For 
example, the Commission sought comment on the inclusion of 
interconnected VoIP service in the ESL, and whether text messaging, 
telephone broadcast messaging, and other individual services should be 
eligible for E-rate support under section 254(c)(3) of the Act. The 
Commission also sought comment on which rules, if any, would need to be 
amended to implement any changes made as a result of the ESL NPRM. 
Comments on the ESL NPRM were due on September 18, 2008, and reply 
comments were due on October 3, 2008.

III. Discussion

A. Designation of Additional Supported Services

    6. In this Report and Order, we modify our rules to expressly 
include interconnected VoIP and text messaging as eligible services 
under the E-rate program.
    7. Interconnected VoIP We conclude that we should modify our rules 
to expressly include interconnected VoIP as a service eligible for E-
rate support, and we will continue to fund interconnected VoIP service 
under the E-rate support mechanism. We also determine that 
interconnected VoIP service should be a Priority 1 service because 
regardless of its ultimate regulatory classification, it is defined as 
``enabl[ing] real-time, two-way voice communications,'' 47 CFR 9.3, and 
thus provides basic connectivity akin to other Priority 1 services. We 
note, however, that not all of the components of an interconnected VoIP 
service are eligible for Priority 1 funding. Any components of an 
interconnected VoIP system that would be considered internal 
connections would be eligible for Priority 2 funding only, and any 
components of an interconnected VoIP system that are end-user equipment 
are ineligible for funding. We also adopt USAC's proposal that 
interconnected VoIP be listed in both the telecommunications and 
Internet access categories of the ESL, despite the fact that the 
Commission has not yet determined the regulatory classification of 
interconnected VoIP.
    8. We find that, pursuant to section 254 of the Act, the Commission 
has the authority to include interconnected VoIP service as an 
additional service eligible for E-rate support. We therefore amend 
section 54.503 of our rules to designate interconnected VoIP as a 
supported special service. We note that the Commission has not yet 
classified interconnected VoIP service as either a telecommunications 
service or an information service. If interconnected VoIP service is 
found to be a telecommunications service, sections 254(c)(1), (c)(3), 
and (h)(1)(B) of the Act provide the Commission with the authority to 
provide E-rate support for all commercially available 
telecommunications services. 47 U.S.C. 254(c)(1), (c)(3). If, however, 
interconnected VoIP is determined to be an information service, 
sections 254(c)(3), (h)(1)(B), and (h)(2) of the Act, as explained in 
the Universal Service First Report and Order, provide the Commission 
with the authority to provide E-rate support for interconnected VoIP 
when provided by both telecommunications carriers and non-
telecommunications carriers because such support will ``enhance * * * 
access to advanced telecommunications and information services'' for 
schools and libraries. 47 U.S.C. 254(c)(3), (h)(1)(B), (h)(2)(A). No 
matter how interconnected VoIP is ultimately classified, we find that 
the Commission has statutory authority to include it as an eligible 
supported service. Therefore, we amend section 54.517 of our rules to 
permit interconnected VoIP to be provided by non-telecommunications 
carriers.
    9. Furthermore, we agree with commenters that the permanent 
inclusion of interconnected VoIP service increases the options 
available to schools and libraries to encourage meaningful 
communications among parents, teachers, and school and library 
administrators. Indeed, because interconnected VoIP is increasingly 
used to replace analog voice service, funding interconnected VoIP 
service is consistent with the concept of competitive neutrality, which 
is the principle of treating similarly situated services in the same 
manner for E-rate funding purposes, as mandated by the Commission. We 
also agree with commenters that the inclusion of interconnected VoIP 
service as an eligible service allows schools and libraries to benefit 
from the same cost efficiencies and service features that have led many 
consumers and businesses to choose this technology.
    10. We also sought comment on whether interconnected VoIP service 
should remain classified in the miscellaneous service category, as it 
has been in previous ESLs. As proposed by USAC in its annual ESL 
submission, we conclude that interconnected VoIP service should be 
listed in both the telecommunications and Internet access categories to 
help minimize applicant confusion noted by commenters. We clarify that 
we are not, by this action, ultimately determining that interconnected 
VoIP is either a telecommunications service or an Internet access 
service. Rather, we put interconnected VoIP in both of those ESL 
categories because interconnected VoIP can be provided by both 
telecommunications service providers or non-telecommunications service 
providers. Because of this change, it will no longer be necessary to 
list interconnected VoIP in the miscellaneous category of the ESL. We 
believe this change will also clarify that applicants can apply for and 
receive E-rate funding for interconnected VoIP service provided by 
either a telecommunications service provider or an Internet access 
service provider. We encourage applicants soliciting bids for 
interconnected VoIP services to post for the services in both 
categories to expand the number of service providers that can bid on 
the services sought. Consistent with USAC's recommendation, we clarify 
that applicants are not required to prepare a technology plan if they 
are seeking discounts only for interconnected VoIP. Thus, we amend 
section 54.504(b) of our rules to make clear that no technology plan is 
needed if applicants are applying only for interconnected VoIP.
    11. We also agree with Funds for Learning that any interconnected 
VoIP hardware that does not meet the test for Priority 1 services in 
the Tennessee

[[Page 17586]]

Order should be considered Priority 2 internal connections and should 
be ineligible for Priority 1 funding. In the Tennessee Order, the 
Commission stated that a service is considered a component of internal 
connections if it is necessary to ``transport information within one or 
more instructional buildings of a single school campus.'' The 
Commission also stated that it was reasonable to presume that if 
facilities are located on an applicant's premises, then such facilities 
are necessary to transport information within one or more buildings of 
the school campus, and are thus a Priority 2 internal connections 
service and not part of an end-to-end Internet access service, i.e., a 
Priority 1 service. This presumption can be rebutted with evidence that 
the applicant does not own or have exclusive use of the facilities. 
Thus, leased VoIP telephone systems will need to be evaluated in 
accordance with the conditions in the Tennessee Order, to determine 
whether they should be eligible as Priority 2 internal connections only 
or if some portion of the system would be eligible as Priority 1. For 
example, only the lease of a single basic terminating component is 
eligible as a Priority 1 service under E-rate and this may include a 
VoIP gateway device located on the applicant's premises, but hubs, 
routers and switches are not considered basic terminating components 
and would be subject to the on-premise Priority 1 equipment conditions 
set forth in the Tennessee Order.
    12. In the ESL NPRM, we also sought comment on whether applicants 
requesting funding for interconnected VoIP service as an Internet 
access service must comply with and certify to requirements identified 
in the Children's Internet Protection Act (CIPA). 47 U.S.C. 254(h)(5), 
(l). Enacted in 2001, CIPA imposed requirements on schools and 
libraries ``having computers with Internet access'' and prohibits 
schools and libraries from receiving discounted services if those 
requirements are not met. 47 U.S.C. 254(h)(5), (h)(6). This prohibition 
is not applicable to a school or library that receives discounted 
services ``only for purposes other than the provision of Internet 
access, Internet service, or internal connections.'' 47 U.S.C. 
254(h)(5)(A)(ii), (h)(6)(A)(ii). Thus, the Commission determined that 
schools or libraries receiving only discounted telecommunications 
services were not required to comply with CIPA. Consistent with the 
majority of commenters' arguments, we conclude that applicants 
requesting funds for interconnected VoIP service alone are not required 
to comply with and certify to CIPA requirements. While interconnected 
VoIP service may traverse the Internet, interconnected VoIP service, by 
definition, is not used to provide an Internet access service, Internet 
service, or internal connections. 47 CFR 9.3. Therefore, we find that 
CIPA compliance is not required for applicants that receive funding for 
interconnected VoIP service. Applicants seeking support for 
interconnected VoIP service that also seek support for Internet access, 
Internet service, or internal connections would certify their CIPA 
compliance separately for the Internet access.
    13. Text Messaging. We find that we should modify our rules to 
include text messaging, known as short message service (SMS), as a 
service eligible for E-rate support. We agree with commenters who noted 
that text messaging is similar to other E-rate-eligible services used 
by applicants to communicate, such as e-mail and paging services. 
Moreover, we believe our decision to add text messaging is analogous to 
our decision in the Schools and Libraries Second Report and Order to 
add voice mail service to the list of E-rate-eligible services. Thus, 
for similar reasons, we designate text messaging as a service eligible 
for E-rate support. We note that we include text messaging as an 
eligible service irrespective of whether text message is ultimately 
categorized as a telecommunications service or an information service. 
This service will be categorized in the ESL in the telecommunications 
service category as a component of telephone service because text 
messaging has generally been available in conjunction with wireless 
telephone service, and the charges for text messaging are typically 
bundled with wireless telephone service or the separate charges for the 
text messaging service appear on the same bill as the telephone 
service. We therefore amend section 54.503 of our rules to designate 
text messaging as a supported special service.
    14. We remind applicants that text messaging is eligible for E-rate 
support when used for educational purposes only. The Commission had 
established a presumption that activities that occur in a library or 
classroom or on library or school property are integral, immediate, and 
proximate to the education of students or the provision of library 
services to library patrons. We caution applicants that for purposes of 
the E-rate program, eligible text messaging would not include 
applications, software or other special features that, for example, are 
used to facilitate the mass distribution of text messages, or the 
creation or management of distribution groups for text messaging.

B. Clarifications Regarding the Eligibility for Support of Services in 
the Funding Year 2010 ESL

    15. We also release the ESL for E-rate funding year 2010 and make 
findings about the particular changes to the ESL recommended by USAC. 
Specifically, we clarify the eligibility of video on-demand servers, 
ethernet, Web hosting, wireless LAN controllers, VoIP-related services, 
and virtualization software. We also find that telephone broadcast 
messaging, unbundled warranties, power distribution units, softphones, 
interactive white boards, and e-mail archiving are ineligible for E-
rate program funding.
    16. Video On-Demand Servers. Although USAC had proposed to make 
``video on-demand servers'' ineligible in their entirety, we clarify 
that applicants can continue to receive E-rate discounts as internal 
connections for the portion of a video on-demand server that enables 
the transport of video to the classroom or parts of a library. The 
portion of a video on-demand server that enables the storage of video 
or other content, however, would remain ineligible. To clarify the 
eligibility status of a video on-demand server, we add the term ``video 
content storage'' to the list of ineligible storage components on the 
ESL. This should more clearly delineate the portion of a video on-
demand server that is ineligible for discounts. Currently, applicants 
are using servers that house video for various purposes, including 
transporting information over a wide area network (WAN) or LAN to 
classrooms from a central server. We note that there may be video on-
demand servers that are primarily dedicated to the storage of video and 
other content and the cost-allocation used by the manufacturer should 
accurately reflect the true use of the server. We also caution 
applicants that duplicative products or services are ineligible. If 
applicants are using other products or services to transport video or 
information throughout their school or library buildings, the portion 
of a video on-demand server that also provides this capability will be 
considered duplicative and ineligible.
    17. Ethernet. We clarify that ethernet is an eligible digital 
transmission technology in the telecommunications funding category of 
the ESL. Ethernet technology provides a network that connects 
computers. Although traditionally associated with local area

[[Page 17587]]

networks, technology has evolved such that ethernet networks can span 
large distances and can provide connections from within an eligible 
school or library to other locations beyond the school or library. 
Therefore, we find that for purposes of the E-rate program, ethernet 
service is eligible in the telecommunications funding category. We 
agree with commenters who state that adding ethernet to the ESL 
``reflects the evolution of telecommunications technologies that are 
commercially available and is a clarification of previous 
eligibility.'' We also note that although it was not specifically 
listed in the ESL for funding year 2009, ethernet is a type of digital 
transmission service that has been eligible for E-rate discounts when 
purchased as a Priority 1 telecommunications service.
    18. Web hosting. We clarify that web pages protected by a username 
and password are eligible for funding as part of web hosting services. 
The fact that a school or library restricts access to all or part of 
its Web site to certain users--e.g., school administrators, teachers, 
librarians and students--does not render the service ineligible for E-
rate funds. Web hosting has been on the ESL since funding year 2004, as 
Internet access. We emphasize that an eligible Web hosting service is 
limited to hosting a school or library's Web site--software 
applications, end-user file storage, and content editing features are 
still ineligible components of a web hosting service. Such ineligible 
web hosting features would include, but would not be limited to, the 
posting of content created by third party vendors, any type of 
interactive application feature that would allow for blogging, and any 
features involving data input or retrieval including searching of 
databases for grades, student attendance files, or other reports. We 
caution applicants that they must cost-allocate these types of 
ineligible features. The clarification to allow funding for web pages 
protected by a username and password was intended to allow school 
administrators, parents, students, and library employees to view web 
pages that, may, for various reasons, need to be restricted from 
viewing by the rest of the public. This clarification was not intended 
to allow applicants to obtain funding for additional web hosting-
related applications and features beyond the service that enables a 
school or library to have hosted web pages, including any application 
software or features that may be required to maintain password 
protected Web pages.
    19. Wireless LAN Controllers. We agree with USAC that wireless LAN 
controllers should be specifically listed in the ESL as eligible 
internal connections under the data distribution category. A wireless 
LAN controller is a device that is a central component of a wireless 
network solution and that helps to manage the large-scale deployment of 
a wireless network. In its proposed changes to the ESL for E-rate 
funding year 2010, USAC proposes to include a definition of a wireless 
LAN controller as a component that is used in conjunction with access 
points to create a wireless local area network. USAC defines an 
``access point'' as a base station in a wireless LAN and states that 
access points are typically stand-alone devices that may plug into an 
ethernet hub or server or may provide a repeater function for wireless 
networks. When a school or library is relying on a wireless network 
solution, wireless LAN controllers, in conjunction with access points, 
are necessary for the delivery of information all the way to the 
classrooms of the school or rooms of the library. Under the E-rate 
program, internal connections components are those that are necessary 
to ``transport information within one or more instructional buildings 
of a single school campus or within one or more non-administrative 
buildings that comprise a single library branch.'' Wireless LAN 
controllers, therefore, are eligible for support under the E-rate 
program as internal connections. Applicants have been receiving support 
for wireless LAN controllers as eligible internal connections and this 
change to the ESL is merely a clarification of the service's existing 
funding status.
    20. Interconnected VoIP-Related Software. We agree with USAC that 
we should clarify that funding for user licenses for VoIP systems are 
eligible server based software and can be requested in the internal 
connections funding category. Interconnected VoIP user licenses are 
necessary for the utilization of the VoIP system. They are similar to 
client access licenses for eligible software products, except that they 
are specific to VoIP systems. Client access licenses are currently 
eligible for E-rate funding. Commenters agree with the proposed 
clarification, noting that applicants have received funding for these 
services in prior funding years.
    21. Virtualization Software. We agree with USAC that virtualization 
software is eligible for E-rate support as internal connections. As 
stated above, under the E-rate program, internal connections components 
are those that are necessary to ``transport information within one or 
more instructional buildings of a single school campus or within one or 
more non-administrative buildings that comprise a single library 
branch.'' USAC's draft ESL for funding year 2010 states that 
virtualization software allows for the creation of multiple virtual 
servers on a single server, essentially allowing the work of multiple 
servers to be performed on one server. We agree with Funds for Learning 
that virtualization software should be eligible for E-rate funding when 
it is used for eligible server functions. Moreover, one of the internal 
connections for which the E-rate program provides discounts is 
operating system software, which enables the basic operations of a 
computer system or other electronic device. We find that virtualization 
software is a type of operating system software. Applicants can use 
virtualization software to transport information within its school or 
library, and, in so doing, would be using a single server to perform 
the tasks of what would usually take multiple servers. Thus, 
virtualization software may be a cost-effective technology for 
applicants and is eligible for E-rate funding. If applicants also use 
virtualization software for functions that are ineligible for E-rate 
support, such as archiving, functions that support ineligible 
applications, or network management, the applicants must perform a cost 
allocation to remove the ineligible functions from their E-rate funding 
requests.
    22. Telephone Broadcast Messaging. We agree with USAC that 
telephone broadcast messaging should not be added to the ESL because we 
find that it does not fit within any of the current categories of 
supported services. A broadcast messaging service is one that can call 
hundreds or thousands of recipients and play a pre-recorded message 
from school administrators about information including, but not limited 
to, weather delays or closings, school absences, or child safety 
issues. Broadcast messaging has been described by commenters as an add-
on to voice mail service and an application riding on top of a service 
provider's telecommunications infrastructure. Only a few categories of 
software are eligible for E-rate funding, however, including operating 
system software, e-mail software, and software for a server-based, 
shared voice mail system. While voice mail has been designated as an 
eligible service, and the E-rate program pays for the software for a 
server-based shared voice mail system, the record in the ESL NPRM 
proceeding established that telephone broadcast messaging is an ``add-
on to voice mail'' service and not software for voice mail itself. 
Therefore, we find that broadcast

[[Page 17588]]

messaging consists of applications or features that do not fit into any 
of the current categories of supported services and thus, should not be 
added to the list of software applications that are currently eligible 
for support as internal connections. Moreover, we find that it would 
not be in the public interest to add telephone broadcast messaging to 
the ESL when requests for E-rate funding consistently exceed the 
funding cap. While we believe that many school districts find telephone 
broadcast messaging a useful service, we do not believe it is essential 
to the educational purposes of schools and libraries, and funding this 
service may have an adverse effect on funds available for other already 
eligible services.
    23. Unbundled Warranties. We find that unbundled warranties are not 
services eligible for E-rate discounts as basic maintenance of internal 
connections. In its proposed changes to the ESL, USAC proposes to add 
unbundled warranty to the basic maintenance category of the ESL and 
defines ``unbundled warranty'' as a separately priced warranty allowing 
for broken equipment to be fixed or, in the event that the problem is 
beyond repair, replaced. The Commission has found that basic 
maintenance services are eligible for universal service support as 
Priority 2 internal connections service if, but for the maintenance at 
issue, the internal connection would not function and serve its 
intended purpose with the degree of reliability ordinarily provided in 
the marketplace to entities receiving such services. We do not add 
unbundled warranties to the ESL at this time because we find that a 
warranty may be duplicative of an applicant's maintenance agreement or 
contract, which is eligible for E-rate discounts. To avoid the 
potential waste of E-rate resources, we decline to allow applicants to 
receive E-rate discounts for duplicative unbundled warranties. 
Moreover, the current ESL states that basic maintenance is eligible for 
discount only if it is a component of a maintenance agreement or 
contract for eligible components. An unbundled warranty would not be a 
component of a maintenance agreement or contract for eligible 
components. Therefore, we find that an unbundled warranty is not 
eligible for E-rate funds as basic maintenance.
    24. Power Distribution Units. We agree with USAC that the ESL 
should be updated to clearly state that power distribution units are 
not eligible for E-rate support as internal connections. USAC proposes 
to define a ``power distribution unit'' as a power strip designed for 
data centers or racks with greater capacity and features than a power 
strip, and a ``power strip'' as a group of sockets that allow for 
multiple power cords to plug into a single device. Power strips have 
not previously been eligible for E-rate funding and, because a power 
distribution unit is merely a type of power strip with additional 
capacities and features, we find that it is also ineligible for E-rate 
program funds.
    25. Softphones. We agree with USAC's proposal to clarify in the ESL 
that softphones are software that is ineligible for E-rate funding. The 
Commission has approved operating system software, e-mail software, and 
software for a server-based, shared voice mail system as eligible 
software under the internal connections funding category for E-rate. 
USAC proposes to define a softphone as end-user application software 
that allows users the use of a personal computer's microphone and 
speakers to make telephone calls in place of a physical end-user 
telephone. This type of application software is unlike the types of 
software the Commission has previously approved for E-rate funding and, 
as commenters note, softphones perform the same functions as physical 
desktop telephones, which are end-user equipment and are not eligible 
for E-rate funding.
    26. Interactive White Boards. We agree with USAC and commenters 
that the ESL should clarify that interactive white boards are end-user 
equipment that is ineligible for E-rate funding. End-user equipment, 
such as desktop telephones, personal computers, fax machines, and 
modems, for example, is not eligible for E-rate discounts. In its draft 
ESL for funding year 2010, USAC defines an ``interactive white board'' 
as a device that allows end-users to display information with a vast 
array of interactive features. We find, therefore, that interactive 
white boards are end-user equipment that is not eligible for E-rate 
funding.
    27. E-mail Archiving. We agree with USAC's proposal to clarify in 
the ESL that e-mail archiving is an ineligible component of an e-mail 
service. In addition, we agree with USAC's clarification to the draft 
ESL for funding year 2010 that, for purposes of E-rate support, storage 
products may be used for eligible e-mail files but not for e-mail 
archiving. USAC's draft ESL for funding year 2010 defines e-mail 
archiving as a form of electronic recordkeeping, often compressing e-
mail files to make available greater in-box space. For example, when e-
mail is archived to reduce in-box size, reduce hard drive space, and 
retain records for future retrieval, it constitutes the storage of end-
user files and is ineligible for E-rate discounts. Although E-rate 
eligible e-mail services can include a short-term storage component 
that enables the user to view current e-mails, any long-term storage 
service is ineligible for E-rate discounts and we agree with USAC that 
this distinction should be made clear to applicants in the 2010 ESL.

Procedural Matters

Final Regulatory Flexibility Act Certification

    28. The Regulatory Flexibility Act (RFA), see 5 U.S.C. 603, 
requires that an agency prepare a regulatory flexibility analysis for 
notice-and-comment rulemaking proceedings, unless the agency certifies 
that ``the rule will not, if promulgated, have a significant economic 
impact on a substantial number of small entities.'' See 5 U.S.C. 
605(b). The RFA generally defines ``small entity'' as having the same 
meaning as the terms ``small business,'' ``small organization,'' and 
``small governmental jurisdiction.'' 5 U.S.C. 601(6). In addition, the 
term ``small business'' has the same meaning as the term ``small 
business concern'' under the Small Business Act. 5 U.S.C. 601(3). A 
``small business concern'' is one which: (1) Is independently owned and 
operated; (2) is not dominant in its field of operation; and (3) 
satisfies any additional criteria established by the Small Business 
Administration (SBA). 15 U.S.C. 632.
    29. In the report and order, we modify our rules to expressly 
include interconnected voice over Internet protocol (VoIP) and text 
messaging as eligible services in our rules governing the E-rate 
program. We also release the list of services that will be eligible for 
discounts for E-rate funding year 2010. This Eligible Services List 
(ESL) is released on an annual basis to enable school and library 
applicants and other affected entities to determine the services and 
products that are eligible for E-rate discounts. In the report and 
order we add services to the ESL but do not remove any services from 
the list. Thus, the only changes made in our report and order result in 
the ability of schools and libraries to seek E-rate discounts for more 
services than were available to them in the prior funding year. This 
means that the rule revisions will result in a positive net impact on 
small entities. Therefore, we certify that the requirements of the 
report and order will have no significant economic impact.
    30. The Commission will send a copy of the report and order, 
including a copy

[[Page 17589]]

of this Final Regulatory Flexibility Certification, in a report to 
Congress pursuant to the Congressional Review Act. See 5 U.S.C. 
801(a)(1)(A). In addition, the report and order (or summary thereof) 
and this final certification will be published in the Federal Register, 
and will be sent to the Chief Counsel for Advocacy of the U.S. Small 
Business Administration. See 5 U.S.C. 605(b).

Paperwork Reduction

    31. This report and order does not contain proposed information 
collection(s) subject to the Paperwork Reduction Act of 1995 (PRA), 
Public Law 104-13. In addition, therefore, it does not contain any new 
or modified ``information collection burden for small business concerns 
with fewer than 25 employees,'' pursuant to the Small Business 
Paperwork Relief Act of 2002, Public Law 107-198, see 44 U.S.C. 
3506(c)(4).

Congressional Review Act

    32. The Commission will send a copy of this Report and Order [CC 
Docket No. 02-6; FCC 09-105] in a report to Congress and the Government 
Accountability Office pursuant to the Congressional Review Act, see 
U.S.C. 801(a)(1)(A).

Ex Parte Presentations

    33. These matters shall be treated as a ``permit-but-disclose'' 
proceeding in accordance with the Commission's ex parte rules. 47 CFR 
1.1200 through 1.1216. Persons making oral ex parte presentations are 
reminded that memoranda summarizing the presentations must contain 
summaries of the substance of the presentations and not merely a 
listing of the subjects discussed. More than a one or two sentence 
description of the views and arguments presented is generally required. 
47 CFR 1.1206(b)(2). Other requirements pertaining to oral and written 
presentations are set forth in section 1.1206(b) of the Commission's 
rules. 47 CFR 1.1206(b).

Ordering Clauses

    34. It is ordered, that pursuant to the authority contained in 
sections 1 through 4, 201-205, 254, 303(r), and 403 of the 
Communications Act of 1934, as amended, 47 U.S.C. 151-154, 201 through 
205, 254, 303(r), and 403, this report and order is adopted.
    35. It is further ordered, that pursuant to the authority contained 
in sections 1 through 4, 201-205, 254, 303(r), and 403 of the 
Communications Act of 1934, as amended, 47 U.S.C. 151-154, 201 through 
205, 254, 303(r), and 403, sections 54.503, 54.507, and 54.517 of the 
Commission's rules, 47 CFR 54.503, 54.507 and 54.517, is amended, 
effective May 7, 2010.
    36. It is further ordered that the Commission's Consumer and 
Governmental Affairs Bureau, Reference Information Center, shall send a 
copy of this report and order, including the Final Regulatory 
Flexibility Certification, to the Chief Counsel for Advocacy of the 
Small Business Administration.

List of Subjects in 47 CFR Part 54

    Communications common carriers, Health facilities, Infants and 
children, Libraries, Reporting and recordkeeping requirements, Schools, 
Telecommunications, Telephone.

Federal Communications Commission.
Marlene H. Dortch,
Secretary.

Final Rules

0
For the reasons discussed in the preamble, the Federal Communications 
Commission amends 47 CFR part 54 as follows:

PART 54--UNIVERSAL SERVICE

0
1. The authority citation for part 54 continues to read as follows:

    Authority: 47 U.S.C. 151, 154(i), 201, 205, 214, and 254 unless 
otherwise noted.


0
2. Section 54.503 is revised to read as follows:


Sec.  54.503  Other supported special services.

    For the purposes of this subpart, other supported special services 
provided by telecommunications carriers include voice mail, 
interconnected voice over Internet protocol (VoIP), text messaging, 
Internet access, and installation and maintenance of internal 
connections in addition to all reasonable charges that are incurred by 
taking such services, such as state and federal taxes. Charges for 
termination liability, penalty surcharges, and other charges not 
included in the cost of taking such services shall not be covered by 
the universal service support mechanisms.

0
3. Section 54.504 is amended by revising paragraph (b)(2)(iv) to read 
as follows:


Sec.  54.504  Requests for services.

* * * * *
    (b) * * *
    (2) * * *
    (iv) The technology plan(s) has/have been approved by a state or 
other authorized body; the technology plan(s) will be approved by a 
state or other authorized body; or no technology plan needed because 
the applicant is applying for voice mail, interconnected voice over 
Internet protocol (VoIP), or basic local, cellular, PCS, or long 
distance telephone service only.
* * * * *

0
4. Section 54.507 is amended by revising paragraphs (g) introductory 
text, (g)(1)introductory text, (g)(1)(i) through (iii) (the note 
remains unchanged) to read as follows:


Sec.  54.507  Cap.

* * * * *
    (g) Rules of priority. The Administrator shall act in accordance 
with paragraph (g)(1) of this section with respect to applicants that 
file an FCC Form 471, as described in Sec.  54.504(c) of this part, 
when a filing period described in paragraph (c) of this section is in 
effect. The Administrator shall act in accordance with paragraph (g)(2) 
of this section with respect to applicants that file an FCC Form 471, 
as described in Sec.  54.504(c) of this part, at all times other than 
within a filing period described in paragraph (c) of this section.
    (1) When the filing period described in paragraph (c) of this 
section closes, the Administrator shall calculate the total demand for 
support submitted by applicants during the filing period. If total 
demand exceeds the total support available for that funding year, the 
Administrator shall take the following steps:
    (i) The Administrator shall first calculate the demand for services 
listed under the telecommunications and Internet access categories on 
the eligible services list for all discount levels, as determined by 
the schools and libraries discount matrix in Sec.  54.505(c). These 
services shall receive first priority for the available funding.
    (ii) The Administrator shall then calculate the amount of available 
funding remaining after providing support for the telecommunications 
and Internet access categories for all discount levels. The 
Administrator shall allocate the remaining funds to the requests for 
support for internal connections, beginning with the most economically 
disadvantaged schools and libraries, as determined by the schools and 
libraries discount matrix in Sec.  54.505(c) of this part. Schools and 
libraries eligible for a 90 percent discount shall receive first 
priority for the remaining funds, and those funds will be applied to 
their requests for internal connections.
    (iii) To the extent that funds remain after the allocation 
described in Sec. Sec.  54.507(g)(1)(i) and (ii), the

[[Page 17590]]

Administrator shall next allocate funds toward the requests for 
internal connections submitted by schools and libraries eligible for an 
80 percent discount, then for a 70 percent discount, and shall continue 
committing funds for internal connections in the same manner to the 
applicants at each descending discount level until there are no funds 
remaining.
* * * * *

0
5. Section 54.517 is amended by revising paragraph (b) to read as 
follows:


Sec.  54.517  Services provided by non-telecommunications carriers.

* * * * *
    (b) Supported services. Non-telecommunications carriers shall be 
eligible for universal service support under this subpart for providing 
interconnected voice over Internet protocol (VoIP), voice mail, 
Internet access, and installation and maintenance of internal 
connections.
* * * * *

[FR Doc. 2010-7757 Filed 4-6-10; 8:45 am]
BILLING CODE 6712-01-P