[Federal Register Volume 75, Number 110 (Wednesday, June 9, 2010)]
[Proposed Rules]
[Pages 32699-32719]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-12930]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 54
[CC Docket No. 02-6; GN Docket No. 09-51; FCC 10-83]
Schools and Libraries Universal Service Support Mechanism, A
National Broadband Plan for Our Future
AGENCY: Federal Communications Commission.
ACTION: Notice of proposed rulemaking.
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SUMMARY: In this document, the Federal Communications Commission
(Commission) seeks comment on several potential reforms that would cut
red tape by eliminating rules that have not effectively served their
intended purpose, while continuing to protect against waste, fraud, and
abuse. In addition, the Commission seeks comment on how to provide
stability and certainty for the funding of internal connections that
are necessary to deliver higher bandwidth services to the classroom and
how to expand access to funding for internal connections for schools
and libraries serving impoverished populations. Finally, the
[[Page 32700]]
Commission seeks comment on indexing the funding cap to inflation,
which would make additional funding available to support current and
new services to deliver the full benefits of the Internet to all.
DATES: Comments on the proposed rules are due on or before July 9, 2010
and reply comments are due on or before July 26, 2010. Written comments
on the Paperwork Reduction Act proposed information collection
requirements must be submitted by the public, Office of Management and
Budget (OMB), and other interested parties on or before August 9, 2010.
If you anticipate that you will be submitting comments, but find it
difficult to do so within the period of time allowed by this notice,
you should advise the contact listed below as soon as possible.
ADDRESSES: You may submit comments, identified by CC Docket No. 02-6
and GN Docket No. 09-51, by any of the following methods:
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
Federal Communications Commission's Web Site: http://fjallfoss.fcc.gov/ecfs2/. Follow the instructions for submitting
comments.
People with Disabilities: Contact the FCC to request
reasonable accommodations (accessible format documents, sign language
interpreters, CART, etc.) by e-mail: [email protected] or phone: (202)
418-0530 or TTY: (202) 418-0432.
In addition to filing comments with the Secretary, a copy
of any comments on the Paperwork Reduction Act information collection
requirements contained herein should be submitted to the Federal
Communications Commission via e-mail to [email protected] and to Nicholas A.
Fraser, Office of Management and Budget, via e-mail to [email protected] or via fax at 202-395-5167.
For detailed instructions for submitting comments and additional
information on the rulemaking process, see the SUPPLEMENTARY
INFORMATION section of this document.
FOR FURTHER INFORMATION CONTACT: Regina Brown at (202) 418-0792 or
James Bachtell at (202) 418-2694, Wireline Competition Bureau,
Telecommunications Access Policy Division or TTY: (202) 418-0484. For
additional information concerning the Paperwork Reduction Act
information collection requirements contained in this document, send an
e-mail to [email protected] and to Nicholas A. Fraser, Office of Management
and Budget, via e-mail to [email protected] or via fax
at 202-395-5167.
SUPPLEMENTARY INFORMATION: This is a synopsis of the Commission's
Notice of Proposed Rulemaking in CC Docket No. 02-6, GN Docket No. 09-
51, FCC 10-83, adopted May 20, 2010, and released May 20, 2010. 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.
Pursuant to Sec. Sec. 1.415 and 1.419 of the Commission's rules,
47 CFR 1.415, 1.419, interested parties may file comments and reply
comments on or before the dates indicated on the first page of this
document. Comments may be filed using: (1) The Commission's Electronic
Comment Filing System (ECFS), (2) the Federal Government's eRulemaking
Portal, or (3) by filing paper copies. See Electronic Filing of
Documents in Rulemaking Proceedings, 63 FR 24121, May 1, 1998.
Electronic Filers: Comments may be filed electronically
using the Internet by accessing the ECFS: http://www.fcc.gov/cgb/ecfs/
or the Federal eRulemaking Portal: http://www.regulations.gov. Filers
should follow the instructions provided on the Web site for submitting
comments.
For ECFS filers, if multiple docket or rulemaking numbers
appear in the caption of this proceeding, filers must transmit one
electronic copy of the comments for each docket or rulemaking number
referenced in the caption. In completing the transmittal screen, filers
should include their full name, U.S. Postal Service mailing address,
and the applicable docket or rulemaking number. Parties may also submit
an electronic comment by Internet e-mail. To get filing instructions,
filers should send an e-mail to [email protected], and include the following
words in the body of the message, ``get form.'' A sample form and
directions will be sent in response.
Paper Filers: Parties who choose to file by paper must
file an original and four copies of each filing. If more than one
docket or rulemaking number appears in the caption of this proceeding,
filers must submit two additional copies for each additional docket or
rulemaking number.
Filings can be sent by hand or messenger delivery, by commercial
overnight courier, or by first-class or overnight U.S. Postal Service
mail (although we continue to experience delays in receiving U.S.
Postal Service mail). All filings must be addressed to the Commission's
Secretary, Office of the Secretary, Federal Communications Commission.
The Commission's contractor will receive hand-delivered or
messenger-delivered paper filings for the Commission's Secretary at 236
Massachusetts Avenue, NE., Suite 110, Washington, DC 20002. The filing
hours at this location are 8 a.m. to 7 p.m. All hand deliveries must be
held together with rubber bands or fasteners. Any envelopes must be
disposed of before entering the building.
Commercial overnight mail (other than U.S. Postal Service
Express Mail and Priority Mail) must be sent to 9300 East Hampton
Drive, Capitol Heights, MD 20743.
U.S. Postal Service first-class, Express, and Priority
mail should be addressed to 445 12th Street, SW., Washington, DC 20554.
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) or
(202) 418-0432 (TTY). Contact the FCC to request reasonable
accommodations for filing comments (accessible format documents, sign
language interpreters, CART, etc.) by e-mail: [email protected]; phone:
(202) 418-0530 or (202) 418-0432 (TTY).
In addition, one copy of each pleading must be sent to each of the
following:
The Commission's duplicating contractor, Best Copy and
Printing, Inc., 445 12th Street, SW., Room CY-B402, Washington, DC
20554; Web site: http://www.bcpiweb.com; phone: 1-800-378-3160; and
Charles Tyler, Telecommunications Access Policy Division,
Wireline Competition Bureau, 445 12th Street, SW., Room 5-A452,
Washington, DC 20554; e-mail: [email protected] or telephone number
(202) 418-7400.
Filings and comments are also available for public inspection and
copying during regular business hours at the FCC Reference Information
Center, Portals II, 445 12th Street, SW., Room CY-A257, Washington, DC
20554. Copies may also be purchased from the
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Commission's duplicating contractor, BCPI, 445 12th Street, SW., Room
CY-B402, Washington, DC 20554. Customers may contact BCPI through its
Web site: http://www.bcpiweb.com, by e-mail at [email protected], by
telephone at (202) 488-5300 or (800) 378-3160 (voice), (202) 488-5562
(TTY), or by facsimile at (202) 488-5563.
Comments and reply comments must include a short and concise
summary of the substantive arguments raised in the pleading. Comments
and reply comments must also comply with Sec. 1.49 and all other
applicable sections of the Commission's rules. We direct all interested
parties to include the name of the filing party and the date of the
filing on each page of their comments and reply comments. All parties
are encouraged to utilize a table of contents, regardless of the length
of their submission. We also strongly encourage parties to track the
organization set forth in the NPRM in order to facilitate our internal
review process.
Initial Paperwork Reduction Act of 1995 Analysis: This document
contains proposed information collection requirements. The Commission,
as part of its continuing effort to reduce paperwork burdens, invites
the general public and the Office of Management and Budget (OMB) to
comment on the information collection requirements contained in this
document, as required by the Paperwork Reduction Act of 1995, Public
Law 104-13. Public and agency comments are due August 9, 2010.
Comments on the proposed information collection requirements should
address: (a) Whether the proposed collection of information is
necessary for the proper performance of the functions of the
Commission, including whether the information shall have practical
utility; (b) the accuracy of the Commission's burden estimates; (c)
ways to enhance the quality, utility, and clarity of the information
collected; and (d) ways to minimize the burden of the collection of
information on the respondents, including the use of automated
collection techniques or other forms of information technology. In
addition, pursuant to the Small Business Paperwork Relief Act of 2002,
Public Law 107-198, see 44 U.S.C. 3506(c)(4), we seek specific comment
on how we might further reduce the information collection burden for
small business concerns with fewer than 25 employees.
OMB Control Number: 3060-0853.
Title: FCC Form 479, Certification by Administrative Authority to
Billed Entity of Compliance with Children's Internet Protection Act;
FCC Form 486, Receipt of Service Confirmation Form, FCC Form 500,
Funding Commitment Change Request Form.
Form Number(s): FCC Forms 479, 486, 500.
Type of Review: Revision of a currently approved collection.
Respondents: Business or other for-profit and not-for-profit
institutions.
Number of Respondents and responses: 45,300 respondents and 45,300
responses.
Estimated Time per Response: .25-1.5 hours (average time per
response).
Obligation to Respond: Required to obtain or retain benefits.
Frequency of Response: Annual and on occasion reporting
requirements, recordkeeping and third party disclosure requirements.
Total Annual Burden: 63,720 hours.
Total Annual Cost: N/A.
Privacy Act Impact Assessment: No impact.
Nature of Extent of Confidentiality: The Commission is not
requesting that the respondents submit confidential information to the
FCC. Respondents may, however, request confidential treatment for
information they believe to be confidential under 47 CFR 0.459 of the
Commission's rules.
Needs and Uses: The existing information collection requires
schools and libraries to report on the FCC Form 500 to the Universal
Service Administrative Company (USAC) the disposal of equipment
purchased with an E-rate discount for payment or other consideration.
This revision has no effect on FCC Forms 479 and 486 (and Internet
policy statement), which are also part of this information collection.
This revision specifically pertains to the FCC Form 500. This revision
also adds or corrects the burden for the provision of Internet safety
policy to the FCC. The Internet safety policy requirement was proposed
in a Notice of Proposed Rulemaking, FCC 09-96, CC Docket 02-6 (75 FR
2826, dated January 19, 2010 and approved by OMB on March 25, 2010). At
this time of submission to the OMB, it is uncertain which proposed rule
will be finalized to account for the Internet safety policy burden.
Therefore, we have included it in this submission.
Specifically, the revised FCC Form 500 would require a school or
library disposing of equipment to report the following information to
USAC: (1) The applicant's name, entity number, address, and telephone
number; (2) the name, address, telephone number, and e-mail address of
the applicant's authorized point of contact; (3) the date of the
disposal of obsolete equipment; (4) the name of each piece of equipment
disposed of, including the date of purchase and the funding request
number(s) associated with the disposed equipment; (5) any payment,
trade-in value, or other consideration received for such disposal of
equipment; (6) the name of the entity that paid or otherwise gave the
applicant valuable consideration for the equipment; (7) formal
declaration by the school board or other authorized body or individual
that the equipment subject to disposal is surplus; and (8)
certification that the information provided on the form is true and
accurate to the best of the applicant's knowledge, evidenced by the
signature of someone authorized to so certify by the applicant and the
date.
Requiring schools and libraries to submit this information as part
of the FCC Form 500 could facilitate our ongoing efforts to mitigate
waste, fraud and abuse. Additionally, it would allow USAC and the
Commission to better assess how long program participants are using
equipment purchased with E-rate discounts prior to disposal of any
obsolete equipment, and to track what E-rate program participants do
with equipment they no longer use. Moreover, such revision would
require limited information, all of which is easy to obtain whenever a
school or library seeks to dispose of obsolete equipment.
I. Introduction
1. In sum, this NPRM seeks comment on a package of potential
reforms to the E-rate program that could be implemented in funding year
2011 (July 1, 2011-June 30, 2012). These proposed reforms include:
Streamlining the application and competitive bidding
processes for telecommunications and Internet access in an effort to
further reduce the administrative burden on applicants, while at the
same time maintaining appropriate safeguards to mitigate potential
waste, fraud, and abuse;
Codifying the requirement developed in Commission
precedent that competitive bidding processes be ``fair and open'' to
enhance the Commission's ability to enforce its rules in cases
involving waste, fraud and abuse;
Simplifying the way schools calculate their discounts and
conforming the E-rate definition of ``rural'' to the Department of
Education's definition;
Supporting 24/7 online learning by eliminating the current
rule that requires schools to allocate the cost of wireless Internet
access service between funded, in-school use and non-funded uses away
from school premises;
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Providing greater flexibility to recipients to choose the
most cost-effective bandwidth solutions for their connectivity needs by
allowing the leasing of low-cost fiber from municipalities and other
entities that are not telecommunications carriers;
Expanding the reach of broadband in residential schools
that serve populations facing unique challenges, such as Tribal schools
or schools for children with physical, cognitive, or behavioral
disabilities;
Creating a new, predictable funding mechanism for internal
connections so that more schools and libraries have the ability to use
the most technologically advanced applications, including video
streaming to the classroom, to provide superior learning opportunities;
Indexing the current $2.25 billion cap on E-rate
disbursements to inflation to maintain the purchasing power of the
current program and enable continued support for high speed broadband
and internal connections in the future; and
Creating a process for schools and libraries to dispose of
obsolete equipment without running afoul of the prohibition on
reselling equipment and services purchased using E-rate funds.
II. Streamlining the Application Process
2. In this section, we discuss several proposals designed to
improve and simplify the current E-rate application process. It is the
intent that the adoption of these proposals will result in greater E-
rate participation and will reduce the costs associated with
administering the E-rate program. To the extent we can minimize the
potential for inadvertent errors that do not fundamentally threaten
program integrity, we should reduce the number of appeals of funding
decisions that consume resources at both USAC and the Commission,
resulting in faster decisions on funding and greater certainty for both
applicants and service providers. About 15 percent of appeals to the
Commission involve issues relating to alleged non-compliance with
technology plan and competitive bidding requirements.
3. Specifically, we propose to eliminate technology plan
requirements for priority one applicants that otherwise are subject to
State and local technology planning requirements. We also propose to
eliminate the FCC Form 470 posting and the 28-day waiting period before
applicants can enter into contracts for those priority one applicants
that are subject to public procurement requirements. We propose to
retain our current technology planning and competitive bidding
requirements for applicants seeking priority two services. In order to
provide greater clarity regarding our competitive bidding requirements
for priority one and priority two services, we propose to codify a rule
requiring all applicants to conduct competitive bidding processes that
are fair and open. We also seek comment on other proposals that
streamline the application process. For instance, we propose to
significantly streamline the FCC Form 470 and 471 online application
process and require that those forms be completed and submitted
electronically. We also propose to revise our discount rules so that
schools will calculate discounts on supported services by using the
average discount rate for the entire school district rather than the
weighted average for each school building. Finally, we propose to adopt
a new definition of ``rural area'' for the purpose of determining
whether an E-rate applicant qualifies for the rural discount.
1. Technology Plans
4. We propose to amend Sec. 54.508 of our rules to eliminate E-
rate technology plan requirements for priority one applicants that
otherwise are subject to State and local technology planning
requirements. We seek comment on this proposal. The provision of
priority one services (i.e., telecommunications services and Internet
access) is fairly straightforward for many applicants and, therefore, a
technology plan for these services may represent an unnecessarily
complex and burdensome program requirement. According to one commenter,
the U.S. Department of Education and most, if not all, States already
require technology planning, and therefore our requirement is largely
duplicative.
5. We recognize, however, that the selection of the optimal package
of telecommunications and Internet access solutions can be more
complicated for larger school districts that typically have a greater
array of competitive options for their broadband connectivity. We seek
comment on whether a separate E-rate mandated technology plan
requirement remains useful for larger telecommunications and Internet
access service priority one funding requests, even for those applicants
that are subject to other State or local requirements. For example,
should we retain the E-rate technology plan requirement for applicants
that request more than a specified amount of funding for priority one
services, such as $1 million.
6. We propose to retain the FCC technology plan requirement for all
priority two service requests and seek comment on this proposal.
Priority two services and equipment are specifically tailored to the
needs and requirements of the individual applicant. The FCC requirement
for a detailed technology plan for internal connections therefore may
continue to serve valuable purposes. They can help the school, school
district, or library ensure that (i) it is requesting the appropriate
amount of equipment necessary to satisfy network demands, (ii) it has
taken into account any unique installation requirements, appropriate
placement of facilities, and time demands, including possible
disruption to the classroom or library services during installation,
and (iii) it has considered and selected the most cost-effective
implementation methods. We also seek comment on whether the current
third-party approval process should be retained to the extent that we
continue to require technology plans.
2. Competitive Bidding Process
7. FCC Form 470. We propose to simplify significantly the
application process for priority one services, e.g., telecommunications
services and Internet access services by adding Sec. 54.510 to our
rules. Specifically, we propose to eliminate the requirement that
applicants for priority one services file an FCC Form 470 and wait 28
days before signing a contract with their selected service provider, as
long as those applicants are subject to public procurement
requirements. That is, for priority one services, an applicant that is
subject to public procurement requirements would no longer be required
to comply with Sec. 54.504(b) of the Commission's rules. Instead, the
applicant would initiate the application process for priority one
services by filing an FCC Form 471. Applicants for priority one funding
would still comply with their State and local procurement laws and
processes when entering into E-rate eligible service contracts and with
the Commission's requirement that the competitive bidding process be
fair and open. We emphasize that compliance with local and State
procurement requirements would remain a condition of receiving E-rate
funding.
8. The elimination of the FCC Form 470 process and the 28-day
waiting period for most priority one applicants could streamline the
application process and make it easier for eligible institutions to
receive support for essential priority one services such as
telecommunications and Internet access services. The complexity of the
FCC Form 470 and its associated deadlines, category selections, multi-
year contract and contract extension requirements, in and of
themselves, have been the basis
[[Page 32703]]
for a multitude of funding request denials by USAC. Eliminating these
requirements for priority one services could reduce the number of
unnecessary application funding denials and reduce the administrative
burden on program participants and USAC during the application process.
Fewer unnecessary reviews should also result in faster processing of
applications for priority one services.
9. Eliminating the FCC Form 470 and 28-day waiting period for
priority one applications should not jeopardize the integrity of the
fund in those situations where State and local governments already have
prescribed procurement regulations in place that public schools and
libraries must follow before entering into a contract for goods or
services. Purchasing thresholds also are set by State and local
policymakers to ensure that bidding occurs for desired products and
services and the most cost-effective bids are selected. In addition,
public schools and libraries are held accountable by State and local
authorities for violating State and local procurement regulations.
Further, priority one services such as telecommunications and Internet
access are more likely to be purchased as commodities based on volume
and distance, as opposed to being priced by project. Commenters note
there have been relatively few instances of alleged waste, fraud, or
abuse associated with priority one requests. Eliminating these
requirements could free up USAC program resources now spent applying
these rules to priority one service applications, and allow more
resources for reviewing other areas in which there is a greater chance
of waste, fraud, and abuse. Nevertheless, we invite comment as to
whether this proposed change would inadvertently increase instances of
waste, fraud, and abuse.
10. We propose that priority one applicants not subject to State or
local bidding requirements--for example, private schools or some
charter schools--continue to be required to follow the current E-rate
competitive bidding process by posting an FCC Form 470 and waiting 28
days to select a service provider. We believe that this would be less
burdensome than requiring those applicants to learn and follow State or
local procurement requirements that do not actually apply to them. We
also propose that an applicant located in a State that does not have
procurement rules in place would still need to follow the Commission's
existing Form 470 process to satisfy the E-rate competitive bidding
requirement. We seek comment on these proposals.
11. We propose to retain, for the present time, the Commission's
existing competitive bidding requirements as set forth in Sec. 54.504
of the Commission's rules for applications requesting support for
priority two services. We can re-evaluate the need for these
requirements after gaining practical experience from the outcome of the
rule changes proposed here. Unlike most priority one services, priority
two services are specifically tailored to the needs and requirements of
the individual applicant. Configurations and prices can vary widely. In
addition, on average, priority two requests generally involve greater
amounts of money, per applicant, than priority one requests. We seek
comment on these proposals.
12. Fair and Open Competitive Bidding Rule. The Commission
previously has addressed specific situations in which the fairness of
an applicant's competitive bidding process has been compromised because
of improper conduct by the applicant, service provider, or both.
Although the Commission has held in numerous orders that the
competitive bidding process must be fair and open, there is currently
no codified Commission rule specifically requiring that the competitive
bidding process be conducted by an E-rate applicant in a fair and open
manner.
13. We therefore propose to amend Sec. 54.510 of our rules to
codify the requirement that an applicant must conduct a fair and open
bidding process when seeking bids for services eligible for E-rate
support. This rule will apply to all applicants for both priority one
and priority two services--including applicants not filing FCC Forms
470--and will apply in addition to State and local procurement
requirements. In addition, all applicants for both priority one and
priority two must still comply with the Commission's rule requiring the
careful consideration of all bids submitted, the selection of the most
cost-effective bid for services or equipment, with price as the primary
factor considered, and the selection of the service that is the most
cost-effective means of meeting educational needs and technology plan
goals. Because we are proposing merely to codify an existing
requirement, this should not increase the burden on E-rate applicants
that are already following our competitive bidding rules. We propose to
codify this requirement to emphasize that, even without a Commission-
established competitive bidding process in some instances, the
Commission still requires any and all competitive bidding processes in
which E-rate applicants participate to be conducted in a fair and open
manner. We seek comment on this proposal.
14. We are deeply concerned about practices that thwart Commission
and other public competitive bidding policies and create conditions for
waste of funds intended to promote access to telecommunications and
information services. As the Commission has observed, competitive
bidding is vital to limiting waste and assisting schools and libraries
in receiving the best value for their limited funds. Codifying the
requirement for a fair and open bidding process will assist in our
continuing effort to ensure that the fund is being utilized by
applicants as Congress intended, without waste, fraud, or abuse, by
deterring program participants from engaging in any conduct that
undermines the Commission's competitive bidding process as well as any
State or local procurement processes. We do not believe that the
Commission's fair and open process requirement will conflict with State
and local procurement laws.
15. If we codify this rule, we propose to provide illustrative
guidance of the types of conduct that would satisfy or violate the
rule, which could be updated periodically based on experience gained
through investigations involving waste, fraud and abuse. Generally
speaking, all potential bidders and service providers should have
access to the same information, they should be treated in the same
manner throughout the procurement process, and they should not have
additional information beyond the contents of an applicant's FCC Form
470 or RFP, if the applicant uses these documents to initiate bidding.
While the lists set forth below are not exhaustive, we propose that the
following behaviors constitute inappropriate conduct during the
competitive bidding process. Moreover, we believe that any party with a
potential financial interest in the E-rate program (for example, a
subcontractor to a service provider) also could not engage in the
prohibited activities described below:
An applicant may not have a relationship with a service
provider that would unfairly influence the outcome of a competition or
would furnish the service provider with ``inside'' information;
An applicant may not turn over its responsibility for
ensuring a fair and open competitive bidding process to a service
provider.
Applicant employees or board members may not serve on any
board of any type of telecommunications, Internet access, or internal
connections service provider that participates in the E-rate program in
the same State;
[[Page 32704]]
Service providers may not offer or provide gifts,
including meals, to employees or board members of the applicant;
Applicant employees with any role in the selection of
vendors may not have an ownership interest in a vendor that is seeking
to provide products or services.
Once a contract for products or services is signed by the
applicant and service provider, a different service provider may not
circumvent the bidding process and offer a new, lower price for the
same products and services.
16. In addition, we seek comment on a proposal that applicants
using the FCC Form 470 bidding process should also comply with the
following requirements.
An applicant using the FCC Form 470 bidding process must
describe the desired products and services with sufficient specificity
to enable interested parties to submit responsive bids;
An applicant must identify the correct category of service
on the FCC Form 470, e.g., telecommunications, Internet access, or
internal connections so that it can receive bidders for the services it
seeks;
Only an applicant or an authorized representative of the
applicant can prepare, sign, and submit the FCC Form 470 and
certification;
An applicant cannot list a service provider representative
as the FCC Form 470 contact person and allow that service provider to
participate in the competitive bidding process;
A service provider may not help an applicant prepare the
FCC Form 470 or participate in the bid evaluation or vendor selection
process in any way;
A service provider may provide information to an applicant
about products or services--including demonstrations--before the
applicant posts the FCC Form 470, but not during the bid selection
process.
17. We reiterate that these lists do not include every possible
scenario in which we would find an applicant in violation of our
competitive bidding rules. We seek comment on whether these proposed
requirements and examples are appropriate and whether there are others
we should specifically adopt as part of a codified rule to provide
guidance to program participants.
3. Application Process Streamlining
18. We note that the Commission is currently seeking comment on
significantly streamlined FCC Forms 470 and 471 for funding year 2011.
Additionally, we are working with USAC in developing an improved online
system that provides applicants with the tools and access to data
necessary to participate more effectively and efficiently in the
program. All forms should be available for online submission, and
applicants should be able to upload requested information
electronically. Applicants also should be able to save, retrieve, and
edit previously filed applications and use these forms as the basis for
future funding requests, thereby improving the efficiency of submission
and processing of applications. We seek feedback from all interested
parties on these planned user enhancements.
19. Because these forms and systems upgrades will dramatically
improve the online experience for applicants, we propose to require all
applicants to file their FCC Forms 470 and 471 electronically. We
believe that the electronic submission of these forms will improve the
efficiency of submitting and processing applications. It will also save
administrative costs as USAC will not have to enter data into its
electronic system from paper submissions, which will free up additional
funding for supported services. Electronic completion and submission
also would likely result in fewer errors on the form. We seek comment
on this proposal.
4. Discount Matrix Streamlining
20. Discount calculation. We propose to revise our discount rules
so that schools will calculate discounts on supported services by using
the average discount rate for the entire school district rather than
the weighted average for each school building. Currently, school
districts, library systems, or other billed entities are required to
calculate discounts for services that are shared by two or more of
their schools, libraries, or consortia members by calculating an
average based on the discounts of all member schools and libraries.
School districts, library systems, or other billed entities are
required to ensure that, for each year in which an eligible school or
library is included for purposes of calculating the aggregate discount
rate, that eligible school or library receives a proportionate share of
the shared services for which support is sought. For schools, the
average discount is the weighted average of the applicable discount of
all schools sharing a portion of the shared services, with the
weighting based on the number of students in each school. For
libraries, the average discount is a simple average of the applicable
discounts to which the libraries sharing a portion of the shared
services are entitled.
21. We agree with E-rate Provider Services (EPS) that calculating
discounts by individual school adds a significant level of complexity
to the application process, as the discounts must be calculated
separately by school and checked individually by USAC. Accordingly, we
propose to revise Sec. 54.505(b)(4) of our rules to require applicants
to: (1) Calculate a single discount percentage rate for the entire
school district by dividing the total number of students eligible for
the National School Lunch Program by the total number of students in
the district; and (2) then compare that single figure against the
discount matrix to determine the school district's discount for
priority one and priority two services. All schools and libraries
within that school district would then receive the same discount rate.
We seek comment on our proposal. We also seek comment on whether there
should be a similar requirement for library systems and how this
proposed rule would affect consortium applications.
22. This proposed discount percentage rate calculation could
streamline the application process by simplifying the way in which
schools compute their discount percentage rate and reduce the
administrative burden on USAC by no longer requiring USAC to verify
each individual school's discount percentage rate. Additionally, it
could significantly reduce the amount of information necessary for
block 4 of the FCC Form 471 application. This proposal could also
eliminate applicants' submission of multiple FCC Form 471 applications
at different discount levels. Moreover, it could reduce the incentive
for districts to purchase priority two equipment at a 90 percent
discount rate and transfer it after three years to a school with a
lower discount rate. We also seek comment on other ways to accomplish
these goals. We also seek comment on how to determine if a school
district can receive the additional discount available for some
applicants located in rural areas. Currently, the urban/rural
designation is based on the physical address of each individual school
or library. Some applicants have a mixture of urban and rural entities
on the same application. Should these districts be considered urban?
Should their urban/rural status depend on the number of entities within
the district that fall within each category?
23. Rural Definition. We propose to adopt a new definition of
``rural area'' for the purpose of determining whether an E-rate
applicant qualifies for the rural discount. A school's E-rate discount
level is determined in part by whether
[[Page 32705]]
it is classified as urban or rural. In some discount bands, schools and
libraries in rural areas receive 5 percent to 10 percent more in
discounts than those schools and libraries in urban areas. We look at
this proposed change with the recognition that the reason certain
discounts are provided to schools and libraries located in rural areas
is because those schools and libraries sometimes face significant
challenges due to their remote location. As we seek comment on this
proposed change in definition, it is not with the intent to reduce
discounts to certain rural schools but rather to ensure that the funds
are targeted appropriately.
24. In 1997, the Commission adopted for the E-rate program the
definition of ``rural area'' used by the U.S. Department of Health and
Human Service's Office of Rural Health Care Policy (ORHP). Under ORHP's
definition, an area is rural if it is not located in a county within a
Metropolitan Statistical Area (MSA) as defined by the Office of
Management and Budget (OMB), or if it is specifically identified as
``rural'' in the Goldsmith Modification to Census data. In the 2003
Schools and Libraries Third Report and Order, the Commission sought
comment on a new definition of ``rural area.'' At that time, the
Commission commented that a new definition was necessary because ORHP
was no longer using the definition adopted by the Commission and had
not updated the Goldsmith Modification to the 2000 Census data.
25. We now propose that, for E-rate purposes, an area will be
considered rural based on the methodology and locale codes used by the
U.S. Department of Education's National Center for Education Statistics
(NCES), also known as urban-centric locale codes. We propose that any
school or library that is within a territory that is classified as
``town-distant,'' ``town-remote,'' ``rural-distant,'' or ``rural-
remote'' by an NCES urban-centric locale code will be considered rural
for purposes of calculating its E-rate discount level. We propose
revising Sec. Sec. 54.505(b)(3) and 54.5 of our rules to reflect this
approach.
26. First, it is reasonable for the E-rate program, which benefits
schools and libraries, to use the Department of Education's definition
because it is specifically targeted to schools. By contrast, the
current ORHP definition defines rural areas for rural health grant
purposes only. Second, commenters have noted that the urban-centric
locale codes pinpoint more precisely whether a school is located in a
rural area. Rather than determining whether the school's county or
census tract is located in a rural area under the ORHP definition, the
urban-centric locale codes determine whether a particular address is
rural based on its proximity to metropolitan areas and on population
size and density. The locale codes can be more specific because they
are based solely on settlement patterns and are not constrained by
political or geographic boundaries such as census tracts. Third, one of
the reasons proffered by the Commission for selecting its original
definition of ``rural area''--that it was less burdensome to schools
and libraries and that the information was readily available to the
public--applies to the new definition as well. In particular, it should
be administratively straightforward for a school to discover its
categorization, because the Department of Education's Web site has the
coding system broken down by State, and the information is readily
available. We seek comment on this proposal.
III. Providing Greater Flexibility To Select Broadband Services
27. We propose to support wireless Internet access service even
when the portable device is used off school property, provide greater
flexibility to use low-cost fiber for broadband connectivity, and
expand access to broadband for students who live at their schools due
to geographic challenges or in order to receive specialized
instruction. Each of these proposals is described in further detail
below. We also seek comment on additional ways in which the Commission
can better allocate E-rate funding to support educational purposes more
directly and to more effectively target our funding to broadband
services.
1. Wireless Services Outside of School
28. We propose to adopt the National Broadband Plan recommendation
to provide full E-rate support for wireless Internet access service
used with a portable learning devices that are used off premises. We
seek comment on this proposal. Currently, the E-rate program supports
wireless Internet access on school grounds. If a device that provides
wireless Internet access service, such as a laptop, is taken off school
grounds, however, applicants are required to cost-allocate the dollar
amount of support for the time that the device is not at school. If
that same device is left at school all of the time, the program would
pay 100 percent of the applicant's non-discount share. As such, our
rules prevent students from fully utilizing learning opportunities that
the devices can provide in the home.
29. Advances in technology have enabled students to continue to
learn well after the school bell rings and from virtually anywhere. As
noted in the NBP, ``Online educational systems are rapidly taking
learning outside the classroom, creating a potential situation where
students with access to broadband at home will have an even greater
advantage over those students who can only access these resources at
their public schools and libraries.'' We propose to modify our rules so
that we can lessen the digital divide between those who are fortunate
enough to subscribe to broadband at home and those who do not.
30. Recent data demonstrates that the widespread availability of
wireless laptop computing for students is linked to improved
educational outcomes. For example, the Maine Learning and Technology
Initiative (MLTI) provided a laptop to every seventh- and eighth-grade
student in the State as part of its mission to transform teaching and
learning in Maine's public schools. A study of the MLTI conducted by
the Maine Education Policy Research Institute at the University of
Southern Maine found that eighth-grade student writing, as measured by
the Maine Educational Assessment (MEA), the State's standardized
assessment, improved significantly after laptop implementation in
middle schools. Laptop initiatives have been deployed at the regional
and district level as well. In Henrico County in Richmond, Virginia, a
three-year study released in 2008, revealed that 1-to-1 laptop use was
associated with higher test scores in biology, history, chemistry,
reading and Earth science. Both of these laptop programs have
incorporated student connectivity to the Internet in home and school
environments.
31. We emphasize that this proposal only relates to support for
Internet access monthly service, and not the purchase of devices or
equipment, such as mobile broadband cards, smartphones, or e-books.
This proposal, therefore, would allow E-rate funding for Internet
access services, which are already eligible, to be used to facilitate
learning both on and off premises. It also would permit funding for
connectivity that schools may increasingly utilize in the future to
provide customized educational content to students.
32. We note that that the requirements of the Children's Internet
Protection Act and the Protecting Children in the 21st Century Act
still would apply to services being used off-premises. In addition,
consistent with the Act, the Commission requires schools and libraries
to certify, among other things, that services obtained through
discounts
[[Page 32706]]
from the E-rate program will be used solely for educational purposes.
We recognize that usage in the school or library typically occurs under
the supervision of school or library personnel. We seek comment on what
other safeguards, if any, we should consider imposing to mitigate
against the risk of non-educational use at home that is not directly
supervised by the recipient of funding.
33. We seek comment on whether recipients of funding should be
required to have policies and procedures in place to mitigate the risk
that E-rate funded wireless connectivity is not used for educational
uses off-premises. For instance, should recipients be required to have
policies relating to acceptable use off-premises? We seek comment on
whether the residents of the households of students may use E-rate
funded connectivity (so long as it is for educational purposes)
because, for example, such use may be fundamental to promoting digital
literacy skills for both the students and the other household members
who support the child's educational experience, and whether such use is
consistent with the educational purposes requirement of the statute. In
our recent decision to permit schools to make E-rate funded connections
available to the community, in order to reduce the likelihood of waste,
fraud, and abuse, and to guard against potential additional costs being
imposed on the E-rate program, we set forth certain conditions
regarding other uses of school facilities that choose to allow the
community to use their E-rate funded services. Among other things, the
Commission required that: (1) Schools participating in the E-rate
program not be permitted to request funding for more services than are
necessary for educational purposes; and (2) consistent with the Act, a
school's discounted services or network capacity may not be ``sold,
resold, or transferred by such user in consideration for money or any
other thing of value.'' Should similar or other requirements be imposed
if we expand support for wireless connectivity off-premises to guard
against waste, fraud, and abuse?
34. We seek comment on whether providing E-rate funds for wireless
Internet access to portable devices in offsite locations would result
in increased demand for wireless connectivity in the E-rate program,
and if so, how that would affect other requests for E-rate funding,
given the overall annual funding cap. According to one 2008 survey,
more than 27 percent of school districts were implementing in at least
one grade or on pilot basis some form of one-on-one computing program
with Internet connected wireless devices for use in the classroom and
at home. We seek comment on how funding for wireless connectivity might
increase over the next several years if we were to adopt this rule. If
commenters believe that this rule change would limit the ability of
eligible users to obtain other services, we seek comment on whether the
Commission should limit wireless Internet access for mobile devices on
a trial basis by, for example, capping the number of monthly service
contracts per school district or some other method of allocating
funding. We seek comment on whether we should implement this proposal
on an interim basis for funding year 2011 and subsequently evaluate how
to implement a permanent rule based on that experience.
2. Expanded Access to Low-Cost Fiber
35. We seek comment on permitting recipients to receive support for
the lease of fiber, even if unlit, from third parties that are not
telecommunications carriers, such as municipalities and other community
or anchor institutions, to allow schools and libraries more flexibility
to select the most cost-effective broadband solutions. Dark fiber was
conditionally eligible for E-rate discounts prior to Funding Year 2004.
In the Schools and Libraries Third Report and Order, released in 2003,
however, the Commission found that, pending resolution of the
regulatory status of dark fiber, it would not be eligible for E-rate
discounts.
36. Fiber networks are used by both the public sector and
governmental agencies for broadband Internet access today. A number of
commenters in the record of the National Broadband Plan asserted that
dark fiber may be a more cost-effective option for applicants--and
therefore the program--in many instances. Several commenters expressed
support for giving recipients more flexibility to use dark fiber as
part of their broadband solutions. In order to provide greater
flexibility to E-rate participants to reduce their overall cost of
broadband and increase their bandwidth, we now propose to make leased
dark fiber from any source eligible for funding as a priority one
service.
37. We propose to add leased dark fiber to the ESL, pursuant to
section 254(h)(2)(A) of the Act. We propose to add leased fiber with
the same conditions as when it was on the ESL previously. That is,
applicants would be able to lease fiber capacity that does not include
modulating electronics, as long as they provide the electronics. In
addition, the leased fiber must be used immediately. Under such an
approach, applicants would, for instance, be able to lease dark fiber
that may be owned by State, regional or local governmental entities,
when that is the most cost-effective solution to their connectivity
needs. We also seek comment on any other operational issues that may
arise with the addition of leased fiber, such as dark fiber, to the
ESL.
3. Expanding Access for Residential Schools That Serve Unique
Populations
38. We seek comment on whether we should allow schools that serve
unique populations to receive E-rate funding for priority one and
priority two services delivered to residential areas. In the Schools
and Libraries Second Report and Order, recognizing that the technology
needs of participants in the E-rate program are complex and unique to
each participant, the Commission clarified the scope of educational
purposes. Specifically, the Commission defined educational purposes as
``[A]ctivities that are integral, immediate, and proximate to the
education of students, or in the case of libraries, integral,
immediate, and proximate to the provision of library services to
library patrons, qualify as ``educational purposes.'' The Commission
concluded that activities that occur on library or school property are
presumed to be integral, immediate, and proximate to the education of
students or the provision of library services to library patrons. The
Commission thus concluded that in certain limited instances, the use of
telecommunications services offsite would be considered integral,
immediate, and proximate to the education of students or the provision
of library services to library patrons, and thus, would be considered
to be an educational purpose.
39. In the Universal Service First Report and Order, the Commission
limited the eligibility of internal connections by limiting support for
a service ``only if it is necessary to transport information all the
way to individual classrooms.'' The Commission subsequently elaborated
on this policy in the Universal Service Fourth Order on
Reconsideration, explaining that E-rate support is ``not available for
internal connections in non-instructional buildings used by a school
district unless those internal connections are essential for the
effective transport of information within instructional buildings.''
Consistent with these orders, funding for internal connections to
dormitory rooms, study centers within dormitories, teachers' centers,
and residential programs have
[[Page 32707]]
been found to be ineligible for support under the E-rate program.
40. We recognize, however, that this rule does not take into
account the special circumstances of institutions that provide
residential living arrangements to meet the unique challenges of
certain student populations. We propose to revise our rules to allow
schools with residential areas on their grounds to receive E-rate
funding for priority one and priority two services in those residential
areas in circumstances where the students do not have access to
comparable schooling or training if they were to reside at home.
Specifically, we seek comment on whether the use of priority one and
priority two services at a dormitory on a school campus could be
considered integral, immediate, and proximate to the education of
students, and thus, considered to be used for educational purposes,
when the school is serving students with medical needs, cognitive, or
behavioral disabilities, or who have no option but to live at school
due to challenging terrain or their home's distance from a school. For
example, in West Virginia, students at the West Virginia School for the
Deaf and Blind reside in dormitories on the same campus as the school,
away from their parents, to receive schooling. These students are
unable to go home or to a public library to access the Internet after
school hours. The West Virginia School for the Deaf and Blind, however,
pursuant to our rules, is unable to receive funding for services
provided to these residential facilities, thus, requiring the school to
cost-allocate between the eligible and ineligible uses of its services
on the school's campus. Currently, our rules state that service is
eligible for support as a component of the institution's internal
connections only if it is necessary to transport information all the
way to individual classrooms. We invite comment on whether we should
amend our eligibility limitation imposed on internal connections, and
if so, how we should amend that limitation with regard to schools
described above. In addition, should we require that support for
services to dormitories be limited to only to those schools whose
operating expenses are funded, in whole or in part, with State or
Federal funds? We seek comment on any other possible conditions or
limitations to extending support to schools for services provided to
dormitories located on a school's campus to target finite funding to
those schools for which funding may be truly necessary to access
advanced telecommunications and information services and to minimize
the potential for waste, fraud, and abuse.
4. Targeting Support for Broadband Services
41. Finally, we seek comment on other ways to reallocate funding so
that finite amounts of E-rate dollars can be better targeted to satisfy
the educational needs of students and library patrons. We recognize
that schools and libraries face significant challenges in obtaining
higher bandwidth necessary to support emerging needs at a time when
budgets are stagnant or declining. According to one report, more than
half of school districts surveyed faced problems in obtaining funding
for higher bandwidth services, and two-thirds of those surveyed
reported conserving bandwidth by restricting certain online
applications such as streaming video. At the same time, more advanced
applications such as media streaming and video conferencing, distance
or online learning, multimedia applications that make learning more
engaging and relevant, and one-to-one programs that enable students to
engage in continuous learning hold great promise for educating the next
generation. We therefore seek comment on specific proposals to re-
prioritize E-rate funding to support higher bandwidth connectivity that
will enable such applications to be delivered to students and libraries
across the country.
42. In the short-term, the demand for wireless services and
increased bandwidth for broadband will likely increase. We seek comment
on whether there are specific telecommunications services, Internet
access services, or priority two services on the current ESL that
should receive a lower priority in E-rate funding so that we can target
funding toward higher bandwidth connectivity. For example, should dial-
up Internet access continue to be funded as a priority one service or
instead, should greater priority be given to applicants seeking support
for broadband services? Similarly, should we give a higher priority to
advanced telecommunications and broadband services, rather than voice
telecommunications services? We recognize that budgets are challenged
for State and local authorities around the country, but also emphasize
that our objective in managing this finite program is to achieve the
maximum benefits of access to the full range of content and
applications that the Internet can deliver, not to fund voice telephone
service that schools and libraries across the country were paying for
in full before the inception of the E-rate program. We seek comment on
these and any other proposals commenters might suggest to meet the goal
of generating the most return for each E-rate dollar.
IV. Expanding the Reach of Broadband to the Classroom
43. Internal connections, such as routers or hubs, are essential to
the effective use of broadband within schools and libraries because
they enable students and library patrons to utilize higher bandwidth
applications in multiple locations within a school or library. As
schools and libraries are increasingly utilizing higher bandwidth
services to meet educational and community needs, they need to upgrade
and replace their existing internal connections as well in order to
fully utilize the broadband services they are purchasing. Without
upgraded Internet access and the internal connections necessary to
bring the connection all the way to the classroom or library patron,
many users simply will be unable to utilize the many applications
available in today's marketplace, such as high-definition video
streaming, that support online learning. Demand for priority one
services has grown from $800 million in 1998 to approximately $2
billion in 2009. As noted above, only schools and libraries with the
highest discount levels are receiving priority two subsidies, and the
availability of priority two funding gets smaller as applicants apply
for more funding for priority one services. The net result is the E-
rate program is funding high-capacity pipes to a single point of entry
at the school (or library) but not providing any support for the
equipment that enables the computer terminals or laptops across the
school or library to access that high-capacity pipe. Further, without
changes to the way in which we allocate funding for internal
connections, it is quite possible that in funding year 2011, E-rate
support for telecommunications services and Internet access could
eliminate the availability of any funding for internal connections.
44. In this NPRM, we seek comment on how to ensure that schools and
libraries receive funding for internal connections (priority two
services). We have two important goals in mind: (1) Providing funding
for internal connections to more schools and libraries than in the
past; and (2) ensuring a predictable amount of funding available to
schools and libraries for internal connections each year.
[[Page 32708]]
1. Predictable Internal Connections Funding for More Schools and
Libraries
45. One option would be to allocate funding for internal
connections based on a per student cap per school district, to which
the applicant's discount rate would be applied. Under this option,
libraries would be eligible to receive the same amount of funding as
the public school districts within which they are located. To ensure
that a predictable amount of funding is available for internal
connections, we could set aside a defined amount of funding before
funding is allocated to telecommunications and Internet access, current
priority one services. If we choose this option, we also could
eliminate the 2-in-5 rule. Another option would be to eliminate support
for basic maintenance for internal connections, or, in the alternative,
to cap the amount available for basic maintenance. We seek comment on
whether and, if so, how we could phase in any of these proposals on a
trial basis to examine the distributional impacts of such rule changes.
In what funding year should any of these options be implemented?
Commenters should provide specific proposals on the timing and staging
of specific reforms. We further describe these options below and seek
comment.
46. We believe that these options for reforming how we fund
internal connections could have several advantages over our current
rules. First, the current discount matrix and rules of priority have
the effect of providing funding to a limited number of school districts
that have the very highest percentage of students eligible for free or
reduced price school lunch, while providing nothing to other districts
that are significantly impoverished. Second, many stakeholders have
expressed a desire for a more predictable funding mechanism whereby
schools and libraries would know on a yearly basis how much funding
they will receive for internal connections. This predictability is
essential so that schools and libraries can better plan for their
future technological needs. If, for instance, a certain amount of total
funding would be designated for internal connections, USAC would be
able to issue funding commitment decision letters earlier for priority
two projects, enabling schools and libraries to begin projects more
quickly.
47. Capped Amount. To create a more predictable funding mechanism
for priority two services, we seek comment on establishing a flat per
student cap per school district for each funding year, with the
applicant's discount rate applied after the cap is determined. For
example, if the cap were set at $15 per student, a school district that
has 100,000 students would have a cap of $1.5 million in internal
connections funding. If the district were eligible for an 75 percent
discount (that is, a school with 50 percent to 74 percent of its
students eligible for free or reduced price lunch), it would be
eligible to receive up to $1.125 million for internal connections each
year. If that same school district was eligible for a 30 percent
discount (that is, a school with 20 percent to 34 percent of its
students eligible for free or reduced price lunch), it could receive up
to $450,000. Under this option, libraries would receive the same
discount as the public school districts in which they are located. We
seek comment on this option and any alternatives that would increase
predictability of priority two funding while meeting the goal of
ensuring internal connections funding to more schools and libraries.
48. We also seek comment on whether there should be a minimum
amount for which a school, library, or school district is eligible, not
tied to the number of students. For instance, should we establish a
baseline amount of support that would be provided to an eligible
facility, and then a variable amount of support depending on the number
of students? If a minimum amount is established, what should it be? We
note that smaller applicants might receive less funding because of
their smaller number of students; however, some types of equipment are
not necessarily usage-sensitive. Should there be additional funding
provided to rural applicants, either by establishing a higher dollar
amount for rural applicants or a higher discount level?
49. We recognize that schools and libraries at the highest discount
levels could receive significantly less funding if we were to establish
a capped amount than they receive under the current rules. However, in
the near future, as demand for priority one services grows, it is
likely that, absent changes to the current funding structure, there
will be no funding available for internal connections for even the
highest-discount applicants. In addition, those same schools and
libraries may be able to realize savings on their purchase of priority
one services if they have greater freedom to use lower-cost fiber, as
proposed above, which could free up additional money in their budget to
pay for internal connections. And in any event, we are concerned that
the same few schools continue to receive all of the available funding,
year after year, while many schools that have nearly as many students
in poverty receive no funding for internal connections.
50. Set Aside for Internal Connections. We seek comment on revising
Sec. 54.507 of our rules to set aside a defined amount of funding from
the $2.25 billion fund for internal connections before priority one
funding is allocated. We seek comment on an appropriate amount to set
aside for internal connections. For instance, would $500 million be an
appropriate amount to set aside for internal connections? Depending on
the amount set aside, it is possible that all of the requests for
priority one would not be funded. If so, our rules of priority would
operate to fund requests from the highest-discount schools first, and
it is possible that recipients with the lowest discounts (namely,
schools that serve very few students eligible for free or reduced price
school lunch) would no longer receive any funding from the E-rate
program. We seek comment on whether we should change our rules of
priority to effectuate an alternative result.
51. Threshold for Priority Two Funding. We seek comment on the
appropriate threshold for any revised methodology for internal
connections funding. Today, the money effectively is channeled to
school districts that have 75 percent or more students eligible for
free or reduced-price school lunch. We seek comment on how to focus
funding on improving internal connections to a broader group of needy
schools, school districts, and libraries. For instance, should we adopt
rule changes that would enable school districts where 35 percent or 50
percent of students are eligible for NSLP to obtain predictable funding
for internal connections. We encourage parties to submit factual
analyses of the distributional impact of alternative thresholds into
the record.
52. Revised Discount Matrix. Many commenters have suggested that
the Commission should revise the priority two discount matrix to enable
more school districts to obtain funding for internal connections. SECA
and other commenters argue that altering the discount rate is an
effective way to increase the availability of priority two funds and
more evenly distribute priority funds to a greater number of entities.
Additionally, we note that other governmental programs that award
funding for similar purposes require recipients to pay 15 or 20 percent
of the total cost. An approach that strengthens incentives for
applicants to find the most cost-effective services to meet their needs
is an important tool to maximize the public benefits of a finite amount
of governmental funding, and could
[[Page 32709]]
further our efforts to curb waste, fraud, and abuse by applicants and
service providers. We seek comment on a revised discount matrix for
internal connections and ask whether we should adjust the current level
of additional discount provided to rural schools and libraries.
Commenters should set forth with specificity an alternative proposed
discount matrix.
53. Eliminate the 2-in-5 Rule. We seek comment, in conjunction with
the options detailed above, on eliminating Sec. 54.506(c), the 2-in-5
rule, which limits an eligible entity's receipt of discounts on
internal connections to twice every five funding years. In the Schools
and Libraries Third Report and Order, the Commission sought to make
funds for internal connections available to more eligible schools and
libraries on a regular basis by limiting the frequency with which
applicants may receive priority two discounts. Further, the Commission
concluded that, by precluding a particular entity from receiving
support for priority two discounts every year, the rule would
strengthen incentives for applicants not to waste program resources by
replacing or upgrading equipment on an annual basis but rather to fully
use equipment purchased with universal service funds.
54. However, the 2-in-5 rule has not served its intended purposes.
Today, funding for maintenance represents roughly 15 percent of all
priority two funding, with the very largest school districts receiving
most of that funding. The rule has not increased the availability of
priority two funding to more eligible schools and libraries on a
regular basis. In addition, because the availability of funding is
dependent, in part, on the amount of funding sought by higher-discount
eligible entities, the 2-in-5 rule actually has increased the
unpredictability of priority two funding. Additionally, commenters
argue that, instead of increasing the incentive for applicants to not
waste program resources, the rule has encouraged schools to undertake
large projects that might not be necessary and discriminates against
schools that undertake smaller, more long-term projects. We seek
comment on any potential implications the elimination of the 2-in-5
rule may have upon current recipients of funding for maintenance and
how to address such implications.
55. Application by School District. We seek comment on requiring
schools and libraries to submit applications for internal connections
by school district, not by individual school. Schools that operate
independently from a school district, however, such as private schools
and some charter schools, should still apply for discounts
individually. We propose, therefore, that any school that is part of an
organized school district must apply as part of that district, with
libraries receiving the same discount as the public school districts in
which they are located. Requiring schools to apply by school district
could help streamline the process and will simplify the discount
calculation for schools. Additionally, it would ensure that libraries
receive funding for internal connections and at the same discount level
as schools located within their school district.
56. Eliminate Funding for Basic Maintenance for Internal
Connections. We seek comment on options for modifying the funding of
basic maintenance of internal connections. Currently, the ESL lists
basic maintenance as a supported priority two service. In the Universal
Service First Report and Order, the Commission determined that support
for internal connections includes ``basic maintenance services'' that
are ``necessary to the operation of the internal connections network.''
Subsequently, in the Schools and Libraries Third Report and Order, the
Commission provided further detail on which maintenance services are
``necessary'' under the terms of the Universal Service First Report and
Order. The Commission found that basic maintenance services are
eligible for universal service support as an 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. At that time, the Commission sought to
identify maintenance as a separate category for priority two funding in
part to provide greater transparency regarding the use of internal
connections funding. It appears, however, some recipients of funding
for maintenance may be using such funding to pay for ongoing
information technology support functions, which siphons funding away
from other critical uses.
57. One option would be to eliminate E-rate funding for basic
maintenance of internal connections. We seek comment on whether funding
of basic maintenance for internal connections should remain on the ESL.
First, given that funding for the E-rate program is finite and there is
a consistent level of unmet demand, we have concerns that our current
rules inadvertently result in basic maintenance effectively taking
precedence over funding the internal connections that are necessary to
deliver higher bandwidth applications like high definition video
streaming to schools and libraries. We believe it may be preferable to
spread funding more broadly across needy schools and libraries for
internal connections than to provide funding for maintenance of
networks for a limited number of school districts. Second, it may be
the case that funding for basic maintenance is used to pay for
``warranties'' on equipment or to support significant information
technology departments. Given the limited funding available for
internal connections, we question whether the E-rate should be
supporting ongoing tech support to address potential problems when
there is such unmet demand for actual equipment that will enable
services definitely to be used. We recognize that maintenance in some
form is important for services to be available, but are concerned that
our current rules fail to impose appropriate limitations. Third, under
our current allocation method, the same schools and school districts
receive large amounts of funding year after year for basic maintenance,
while others receive nothing. In order to achieve our inclusion
objectives, the limited funding available could be better utilized to
pay for facilities for schools and libraries serving high poverty
populations that have never received funding for internal connections.
At least until priority two funding has been distributed more broadly,
we ask whether the funding should be used to support initial
installation of internal connections rather than pay for maintenance
for entities that have already had their internal connections funded
through the E-rate program. Finally, eliminating funding for basic
maintenance could provide additional incentives for schools and
libraries to evaluate carefully the reliability of different solutions
from various providers and think seriously about maintenance costs when
constructing their internal networks.
58. Another option would be to cap basic maintenance payments and
reimburse requests that are based on actual repair and maintenance
costs only. Specifically, consistent with the internal connections
approach, we seek comment on establishing a per student cap per school
district for each funding year, with the applicant's discount rate
applied after the cap is determined. For example, if the per student
cap were $2, a school district with 100,000 students would have a total
of up to $200,000 in E-rate funding for basic maintenance for internal
connections. If the district were eligible for a 75 percent discount,
it
[[Page 32710]]
could be eligible to receive up to $150,000 for maintenance each year.
Under this option, libraries would be eligible for up to the same
discount as the public school district in which they are located. We
believe that this approach would help to ensure that funding for basic
maintenance for internal connections is allocated more equitably among
the schools and libraries that most need funding support for
maintenance. To address the potential waste that occurs by funding
maintenance based on estimated costs, we also propose to limit funding
for maintenance to actual expenses for repair and maintenance. In order
to make this change, we propose to change E-rate program rules to allow
applicants to seek E-rate funds for basic maintenance for internal
connections in the funding year following the funding year in which
they sought and received repairs on internal connections. We seek
comment, therefore, on revising Sec. 54.507(d) of the Commission's
rules to allow applicants to request funding for basic maintenance that
was received in the prior funding year.
59. For either option (eliminating funding for basic maintenance of
internal connections or capping such funding), we seek comment on
whether such a change should be phased in over some number of funding
years, and, if so, how. In either case, the requirement that applicants
seek funding for only basic maintenance would remain unchanged.
Specifically, we would continue to find ineligible any services that
include maintenance of equipment that is not supported by E-rate or
that enhances the utility of equipment beyond the transport of
information, as well as diagnostic services in excess of those
necessary to maintain the equipment's ability to transport information.
Additionally, we seek comment on any other methods we could use to
ensure support for basic maintenance is distributed equitably and in a
way that is based on actual repair costs. For example, one alternative
method could be that funding for basic maintenance could be distributed
in the next funding year after the costs were incurred based on the
actual amount for labor and parts or equipment.
2. Indexing the Annual Funding Cap to Inflation
60. We propose to amend Sec. 54.507 of our rules to index the E-
rate program funding cap to the rate of inflation, on a prospective
basis, so that the program maintains its current purchasing power in
2010 dollars. Many commenters responding to the NBP Public Notice #15
support adjusting the annual E-rate funding cap to take into account
inflation, suggesting that increasing the cap will allow schools and
libraries to continue to benefit from upgraded connections that deliver
faster and more efficient broadband service as demand for greater
capacity increases. In order to maintain predictability, however, we
propose that during periods of deflation, the funding cap will remain
at the level from the previous funding year. We seek comment on these
proposals.
61. We propose using the gross domestic product chain-type price
index (GDP-CPI), which is released quarterly. This is the same index
used by the Commission to inflation-adjust revenue thresholds used for
classifying carrier categories for various accounting and reporting
purposes. It also is used to calculate adjustments to the annual
funding cap for the high cost loop support mechanism, which subsidizes
service provided by rural telephone companies. The Commission has noted
that the Bureau of Economic Analysis of the Department of Commerce,
which produces the index, considers the GDP-CPI a more accurate measure
of price changes than other indices for the Commission's purposes. The
GDP-CPI is used by the Commission since it reflects price changes in
all sectors of the economy. While inflation is currently very low,
implementation of such a proposal could result in the E-rate cap
growing from $2.25 billion to approximately $2.55 billion over the next
five years if inflation were to occur similar to the historical rate
for the last five years. We seek comment on this proposal and on
whether there are better ways to index the E-rate funding cap to
inflation.
V. Creating a Process for Disposal of Obsolete Equipment
62. We propose to amend Sec. 54.513 of our rules establishing how
participants in the E-rate program may dispose of obsolete equipment
purchased with E-rate discounts. We also propose revising an FCC form
to report such equipment disposals to USAC. The changes we propose seek
to balance the competing concerns of providing schools and libraries
the flexibility to dispose of obsolete equipment and the need to guard
against waste, fraud, and abuse within the E-rate program. We seek
comment on our proposed changes provided below.
63. Process for Disposal of Obsolete Equipment. We seek comment on
permitting the disposal of E-rate equipment for payment or other
consideration, subject to four of E-Rate Central's proposed five
principles. We propose to revise Sec. 54.513 of our rules to provide
for the disposal of equipment for payment or other consideration where
such equipment has exhausted its useful life. We clarify that, to the
extent a school or library chooses to dispose of equipment purchased
using E-rate funds and does not receive monetary payment or other
consideration, it may do so without complying with these proposed
rules. As BellSouth suggests, the Commission encourages schools and
libraries to recycle the equipment when feasible. We do not believe,
however, that it is necessary to adopt a requirement that applicants
return any non-de minimis value, as discussed below. Specifically, we
believe that the Act's prohibition on the sale, resale, or transfer of
telecommunications services and network capacity was intended to
prevent applicants from profiting from supported services during the
time that the applicant is supposed to be using them. We do not believe
this prohibition extends to when the applicant is no longer utilizing
equipment purchased with the assistance of E-rate funds because the
equipment is past its useful life. Thus, we propose to allow schools
and libraries to dispose of equipment for payment or other
consideration under the following conditions: (1) The equipment has
exhausted its useful life but no sooner than five years after the
equipment is installed; (2) the equipment is formally declared to be
surplus by the school board, information technology officer, or other
authorized body or individual; (3) the school or library notifies USAC
within 90 days of disposal and keeps a record of the disposal for a
period of five years following the disposal; and (4) the disposal
process fully complies with State and local laws, where applicable. We
discuss these conditions separately below.
64. First, we propose that schools and libraries be permitted to
sell or trade in equipment after the equipment has exhausted its useful
life. We agree with commenters that there should be a rebuttable
presumption of no less than five years from the installation date for
the useful life of any equipment purchased using E-rate funds.
Commenters note that the absence of rules specifically addressing the
disposal of equipment purchased under the E-rate program when it has
reached the end of its useful life has led some schools and libraries
to place obsolete, out-of-service equipment in school basements or
other on-campus storage locations. Such indefinite storage imposes
additional needless costs on schools and libraries. Additionally, our
[[Page 32711]]
silence may have encouraged some schools or libraries to simply throw
away unused equipment, even though that same equipment could be put to
use by others. We seek comment on permitting the disposal of E-rate
equipment for payment or other consideration, subject to certain
conditions. Specifically, we seek comment on whether five years is a
reasonable minimum time period for retaining equipment components
purchased using an E-rate discount. Further, this proposal would count
five years from the date of installation. We seek comment on whether
that is the appropriate date from which to count five years or whether
some other date, such as purchase date, is more appropriate. We note
that our proposal would not require schools and libraries to continue
using the equipment for five years, but they could not resell or trade
it in before five years had passed.
65. Second, we seek comment on the proposal suggested by commenters
to require applicants to formally declare that the equipment is
surplus. We propose to require that the school board or other
authorized body make the formal declaration. We note that E-rate
Central proposed that an internal auditor may make the formal
declaration. While we do not believe that is typically the function of
an internal auditor, we do not preclude schools or libraries from
having such a person make the declaration at their discretion. We
believe this formal process will prevent applicants from disposing of
equipment prematurely. We also propose that the formal declaration be
subject to the Commission's document retention rules, as detailed in
Sec. 54.516.
66. Third, we propose that schools and libraries notify USAC of the
resale or trade of equipment funded via the E-rate program within 90
days of its disposal. We also propose that applicants be required to
keep a record of the disposal for a period of five years following the
disposal. To implement this requirement, we propose to revise the FCC
Form 500 (Adjustment to Funding Commitment and Modification to Receipt
of Service Confirmation), as discussed below, to require applicants to
submit certain information to USAC documenting the resale or trade of
their equipment. We seek comment on these proposals.
67. In setting forth these proposed conditions, we do not propose
to require the return of any funds that are related to the resale or
trade of E-rate equipment. Thus, we do not propose the adoption of E-
Rate Central's suggestion that program participants must refund any
non-de minimis consideration received due to the disposal of any
obsolete equipment to the E-rate program. The value of equipment after
five years of purchase in all likelihood would be so small that it
would not justify requiring schools to return a portion of the proceeds
to USAC. As SECA notes, the administrative and financial burden on USAC
and applicants of documenting and processing any such refunds would far
outweigh the value of the funds being returned since such refunds would
be minimal. Further, requiring applicants to return any funds related
to the disposal of E-rate equipment could deter them from disposing
unneeded equipment. We seek comment on these proposals.
68. Revised FCC Form 500. Currently, to help the Commission track
the use of equipment components purchased with E-rate discounts,
schools and libraries are required to ``maintain asset and inventory
records of equipment purchased as components of supported internal
connections services sufficient to verify the actual location of such
equipment for a period of five years after purchase.'' Similarly, if a
school or library closes and transfers services or equipment components
thereof to another school or library, the transferor ``must notify
[USAC] of the transfer, and both the transferor and recipient must
maintain detailed records documenting the transfer and the reason for
the transfer for a period of five years.'' Consistent with the
Commission's recordkeeping and reporting requirements, we propose to
revise the FCC Form 500 to require schools and libraries to report to
USAC the disposal of equipment purchased with an E-rate discount for
payment or other consideration. Specifically, the revised FCC Form 500
would require a school or library disposing of equipment to report the
following information to USAC:
(A) The applicant's name, entity number, address, and telephone
number;
(B) The name, address, telephone number, and e-mail address of the
applicant's authorized point of contact;
(C) The date of the disposal of obsolete equipment;
(D) The name of each piece of equipment disposed of, including the
date of purchase and the funding request number(s) associated with the
disposed equipment;
(E) Any payment, trade-in value, or other consideration received
for such disposal of equipment;
(F) The name of the entity that paid or otherwise gave the
applicant valuable consideration for the equipment;
(G) Formal declaration by the school board or other authorized body
or individual that the equipment subject to disposal is surplus; and
(H) Certification that the information provided on the form is true
and accurate to the best of the applicant's knowledge, evidenced by the
signature of someone authorized to so certify by the applicant and the
date.
69. Requiring schools and libraries to submit this information as
part of the FCC Form 500 could facilitate our ongoing efforts to
mitigate waste, fraud and abuse. Collecting this information would
allow USAC and the Commission to better assess how long program
participants are using equipment purchased with E-rate discounts prior
to disposal of any obsolete equipment, and to track what E-rate program
participants do with equipment they no longer use. Moreover, such
revision would require limited information, all of which is easy to
obtain whenever a school or library seeks to dispose of obsolete
equipment. We seek comment on revising the FCC Form 500 and ways in
which to further minimize any potential burdens on applicants while
guarding against waste, fraud, and abuse in the E-rate program. We also
seek comment on the information that we propose to obtain from
applicants and whether less or more information would be appropriate.
VI. Procedural Matters
A. Initial Regulatory Flexibility Analysis
70. As required by the Regulatory Flexibility Act (``RFA''), see 5
U.S.C. 603, the Commission prepared this Initial Regulatory Flexibility
Analysis (``IRFA'') of the possible significant economic impact on
small entities by the policies and rules proposed in this Notice of
Proposed Rulemaking (NPRM). Written public comments are requested on
this IRFA. Comments must be identified as responses to the IRFA and
must be filed on or before the dates indicated on the first page of
this NPRM. The Commission will send a copy of the NPRM, including the
IRFA, to the Chief Counsel for Advocacy of the Small Business
Administration. In addition, the Notice and IRFA (or summaries thereof)
will be published in the Federal Register.
1. Need for, and Objectives of, the Proposed Rules
71. The Commission is required by section 254 of the Communications
Act of 1934, as amended, to promulgate
[[Page 32712]]
rules to implement the universal service provisions of section 254. On
May 8, 1997, the Commission adopted rules to reform its system of
universal service support mechanisms so that universal service is
preserved and advanced as markets move toward competition.
Specifically, under the schools and libraries universal service support
mechanism, also known as 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.
72. This NPRM is one in a series of rulemaking proceedings designed
to implement the National Broadband Plan's (NBP) vision of improving
and modernizing the universal service programs. The Joint Statement on
Broadband, released with the National Broadband Plan, identifies
comprehensive universal service fund (USF) reform as an essential goal
for the Federal Communications Commission (Commission). In meeting the
objectives set forth in these documents, this NPRM seeks comment on
reforms to focus spending on more productive uses that will better
serve the current educational needs of schools and libraries, while
maintaining the overall size of the E-rate program in relation to the
rate of inflation. This NPRM also seeks comment on potential reforms
that would eliminate rules that have not effectively served their
intended purpose, while continuing to protect against waste, fraud, and
abuse.
2. Legal Basis
73. The legal basis for the NPRM is contained in sections 1 through
4, 201-205, 254, 303(r), and 403 of the Communications Act of 1934, as
amended by the Telecommunications Act of 1996, 47 U.S.C. 151 through
154, 201 through 205, 254, 303(r), and 403.
3. Description and Estimate of the Number of Small Entities to Which
Rules Will Apply
74. The RFA directs agencies to provide a description of and, where
feasible, an estimate of the number of small entities that may be
affected by the proposed rules, if adopted. The RFA generally defines
the term ``small entity'' as having the same meaning as the terms
``small business,'' ``small organization,'' and ``small governmental
jurisdiction.'' In addition, the term ``small business'' has the same
meaning as the term ``small business concern'' under the Small Business
Act. A small business concern is one that: (1) Is independently owned
and operated; (2) is not dominant in its field of operation; and (3)
satisfies any additional criteria established by the SBA. Nationwide,
there are a total of approximately 29.6 million small businesses,
according to the SBA. A ``small organization'' is generally ``any not-
for-profit enterprise which is independently owned and operated and is
not dominant in its field.'' Nationwide, as of 2002, there were
approximately 1.6 million small organizations. The term ``small
governmental jurisdiction'' is defined generally as ``governments of
cities, towns, townships, villages, school districts, or special
districts, with a population of less than fifty thousand.'' Census
Bureau data for 2002 indicate that there were 87,525 local governmental
jurisdictions in the United States. We estimate that, of this total,
84,377 entities were ``small governmental jurisdictions.'' Thus, we
estimate that most governmental jurisdictions are small.
75. Small entities potentially affected by the proposals herein
include eligible schools and libraries and the eligible service
providers offering them discounted services, including
telecommunications service providers, Internet Service Providers
(ISPs), and vendors of the services and equipment used for internal
connections.
a. Schools
76. As noted, ``small entity'' includes non-profit and small
governmental entities. Under the schools and libraries universal
service support mechanism, which provides support for elementary and
secondary schools, an elementary school is generally ``a non-profit
institutional day or residential school that provides elementary
education, as determined under State law.'' A secondary school is
generally defined as ``a non-profit institutional day or residential
school that provides secondary education, as determined under State
law,'' and not offering education beyond grade 12. For-profit schools,
and schools and libraries with endowments in excess of $50,000,000, are
not eligible to receive discounts under the program. Certain other
restrictive definitions apply as well. The SBA has also defined for-
profit, elementary and secondary schools having $7 million or less in
annual receipts as small entities. In funding year 2007, approximately
105,500 schools received funding under the schools and libraries
universal service mechanism. Although we are unable to estimate with
precision the number of these additional entities that would qualify as
small entities under SBA's size standard, we estimate that fewer than
105,500 such schools might be affected annually by our action, under
current operation of the program.
b. Telecommunications Service Providers
77. Incumbent Local Exchange Carriers (LECs). Neither the
Commission nor the SBA has developed a size standard for small
incumbent local exchange services. The closest size standard under SBA
rules is for Wired Telecommunications Carriers. Under that size
standard, such a business is small if it has 1,500 or fewer employees.
According to Commission data, 1,311 incumbent carriers reported that
they were engaged in the provision of local exchange services. Of these
1,311 carriers, an estimated 1,024 have 1,500 or fewer employees and
287 have more than 1,500 employees. Thus, under this category and
associated small business size standard, we estimate that the majority
of entities are small.
78. We have included small incumbent local exchange carriers in
this RFA analysis. A ``small business'' under the RFA is one that,
inter alia, meets the pertinent small business size standard (e.g., a
telephone communications business having 1,500 or fewer employees), and
``is not dominant in its field of operation.'' The SBA's Office of
Advocacy contends that, for RFA purposes, small incumbent local
exchange carriers are not dominant in their field of operation because
any such dominance is not ``national'' in scope. We have therefore
included small incumbent carriers in this RFA analysis, although we
emphasize that this RFA action has no effect on the Commission's
analyses and determinations in other, non-RFA contexts.
79. Interexchange Carriers. Neither the Commission nor the SBA has
developed a definition of small entities specifically applicable to
providers of interexchange services (IXCs). The closest applicable
definition under the SBA rules is for wired telecommunications
carriers. This provides that a wired telecommunications carrier is a
small entity if it employs no more than 1,500 employees. According to
the Commission's 2008 Trends Report, 300 companies reported that they
were engaged in the provision of interexchange services. Of these 300
IXCs, an estimated 268 have 1,500 or fewer employees and 32 have more
than 1,500 employees. Consequently, the Commission estimates that most
providers of interexchange services are small businesses.
[[Page 32713]]
80. Competitive Access Providers. Neither the Commission nor the
SBA has developed a definition of small entities specifically
applicable to competitive access services providers (CAPs). The closest
applicable definition under the SBA rules is for wired
telecommunications carriers. This provides that a wired
telecommunications carrier is a small entity if it employs no more than
1,500 employees. According to the 2008 Trends Report, 1,005 CAPs and
competitive local exchange carriers (competitive LECs) reported that
they were engaged in the provision of competitive local exchange
services. Of these 1,005 CAPs and competitive LECs, an estimated 918
have 1,500 or fewer employees and 87 have more than 1,500 employees.
Consequently, the Commission estimates that most providers of
competitive exchange services are small businesses.
81. Wireless Telecommunications Carriers (except Satellite). Since
2007, the Census Bureau has placed wireless firms within this new,
broad, economic census category. Prior to that time, such firms were
within the now-superseded categories of ``Paging'' and ``Cellular and
Other Wireless Telecommunications.'' Under the present and prior
categories, the SBA has deemed a wireless business to be small if it
has 1,500 or fewer employees. Because Census Bureau data are not yet
available for the new category, we will estimate small business
prevalence using the prior categories and associated data. For the
category of Paging, data for 2002 show that there were 807 firms that
operated for the entire year. Of this total, 804 firms had employment
of 999 or fewer employees, and three firms had employment of 1,000
employees or more. For the category of Cellular and Other Wireless
Telecommunications, data for 2002 show that there were 1,397 firms that
operated for the entire year. Of this total, 1,378 firms had employment
of 999 or fewer employees, and 19 firms had employment of 1,000
employees or more. Thus, we estimate that the majority of wireless
firms are small.
82. Wireless Telephony. Wireless telephony includes cellular,
personal communications services, and specialized mobile radio
telephony carriers. As noted, the SBA has developed a small business
size standard for Wireless Telecommunications Carriers (except
Satellite). Under the SBA small business size standard, a business is
small if it has 1,500 or fewer employees. According to the 2008 Trends
Report, 434 carriers reported that they were engaged in wireless
telephony. Of these, an estimated 222 have 1,500 or fewer employees and
212 have more than 1,500 employees. We have estimated that 222 of these
are small under the SBA small business size standard.
83. Common Carrier Paging. As noted, since 2007 the Census Bureau
has placed paging providers within the broad economic census category
of Wireless Telecommunications Carriers (except Satellite). Prior to
that time, such firms were within the now-superseded category of
``Paging.'' Under the present and prior categories, the SBA has deemed
a wireless business to be small if it has 1,500 or fewer employees.
Because Census Bureau data are not yet available for the new category,
we will estimate small business prevalence using the prior category and
associated data. The data for 2002 show that there were 807 firms that
operated for the entire year. Of this total, 804 firms had employment
of 999 or fewer employees, and three firms had employment of 1,000
employees or more. Thus, we estimate that the majority of paging firms
are small.
84. In addition, in the Paging Second Report and Order, the
Commission adopted a size standard for ``small businesses'' for
purposes of determining their eligibility for special provisions such
as bidding credits and installment payments. A small business is an
entity that, together with its affiliates and controlling principals,
has average gross revenues not exceeding $15 million for the preceding
three years. The SBA has approved this definition. An initial auction
of Metropolitan Economic Area (``MEA'') licenses was conducted in the
year 2000. Of the 2,499 licenses auctioned, 985 were sold. Fifty-seven
companies claiming small business status won 440 licenses. A subsequent
auction of MEA and Economic Area (``EA'') licenses was held in the year
2001. Of the 15,514 licenses auctioned, 5,323 were sold. One hundred
thirty-two companies claiming small business status purchased 3,724
licenses. A third auction, consisting of 8,874 licenses in each of 175
EAs and 1,328 licenses in all but three of the 51 MEAs, was held in
2003. Seventy-seven bidders claiming small or very small business
status won 2,093 licenses.
85. Currently, there are approximately 74,000 Common Carrier Paging
licenses. According to the most recent Trends in Telephone Service, 281
carriers reported that they were engaged in the provision of ``paging
and messaging'' services. Of these, an estimated 279 have 1,500 or
fewer employees and two have more than 1,500 employees. We estimate
that the majority of common carrier paging providers would qualify as
small entities under the SBA definition.
c. Internet Service Providers
86. The 2007 Economic Census places these firms, whose services
might include voice over Internet protocol (VoIP), in either of two
categories, depending on whether the service is provided over the
provider's own telecommunications facilities (e.g., cable and DSL
ISPs), or over client-supplied telecommunications connections (e.g.,
dial-up ISPs). The former are within the category of Wired
Telecommunications Carriers, which has an SBA small business size
standard of 1,500 or fewer employees. The latter are within the
category of All Other Telecommunications, which has a size standard of
annual receipts of $25 million or less. The most current Census Bureau
data for all such firms, however, are the 2002 data for the previous
census category called Internet Service Providers. That category had a
small business size standard of $21 million or less in annual receipts,
which was revised in late 2005 to $23 million. The 2002 data show that
there were 2,529 such firms that operated for the entire year. Of
those, 2,437 firms had annual receipts of under $10 million, and an
additional 47 firms had receipts of between $10 million and
$24,999,999. Consequently, we estimate that the majority of ISP firms
are small entities.
d. Vendors of Internal Connections
87. Telephone Apparatus Manufacturing. The Census Bureau defines
this category as follows: ``This industry comprises establishments
primarily engaged in manufacturing wire telephone and data
communications equipment. These products may be standalone or board-
level components of a larger system. Examples of products made by these
establishments are central office switching equipment, cordless
telephones (except cellular), PBX equipment, telephones, telephone
answering machines, LAN modems, multi-user modems, and other data
communications equipment, such as bridges, routers, and gateways.'' The
SBA has developed a small business size standard for Telephone
Apparatus Manufacturing, which is: All such firms having 1,000 or fewer
employees. According to Census Bureau data for 2002, there were a total
of 518 establishments in this category that operated for the entire
year. Of this total, 511 had employment of under 1,000, and an
additional 7 had employment of 1,000 to 2,499. Thus,
[[Page 32714]]
under this size standard, the majority of firms can be considered
small.
88. Radio and Television Broadcasting and Wireless Communications
Equipment Manufacturing. The Census Bureau defines this category as
follows: ``This industry comprises establishments primarily engaged in
manufacturing radio and television broadcast and wireless
communications equipment. Examples of products made by these
establishments are: Transmitting and receiving antennas, cable
television equipment, GPS equipment, pagers, cellular phones, mobile
communications equipment, and radio and television studio and
broadcasting equipment.'' The SBA has developed a small business size
standard for firms in this category, which is: All such firms having
750 or fewer employees. According to Census Bureau data for 2002, there
were a total of 1,041 establishments in this category that operated for
the entire year. Of this total, 1,010 had employment of under 500, and
an additional 13 had employment of 500 to 999. Thus, under this size
standard, the majority of firms can be considered small.
89. Other Communications Equipment Manufacturing. The Census Bureau
defines this category as follows: ``This industry comprises
establishments primarily engaged in manufacturing communications
equipment (except telephone apparatus, and radio and television
broadcast, and wireless communications equipment).'' The SBA has
developed a small business size standard for Other Communications
Equipment Manufacturing, which is: all such firms having 750 or fewer
employees. According to Census Bureau data for 2002, there were a total
of 503 establishments in this category that operated for the entire
year. Of this total, 493 had employment of under 500, and an additional
7 had employment of 500 to 999. Thus, under this size standard, the
majority of firms can be considered small.
4. Description of Projected Reporting, Recordkeeping, and Other
Compliance Requirements
90. The specific proposals under consideration in the NPRM would
not, if adopted, result in additional recordkeeping requirements for
small businesses.
5. Steps Taken To Minimize Significant Economic Impact on Small
Entities, and Significant Alternatives Considered
91. The RFA requires an agency to describe any significant
alternatives that it has considered in reaching its proposed approach,
which may include the following four alternatives (among others): (1)
The establishment of differing compliance and reporting requirements or
timetables that take into account the resources available to small
entities; (2) the clarification, consolidation, or simplification of
compliance or reporting requirements under the rule for small entities;
(3) the use of performance, rather than design, standards; and (4) an
exemption from coverage of the rule, or part thereof, for small
entities.
92. In this NPRM, we seek comment on a package of potential reforms
to the E-rate program that can be implemented in funding year 2011
(July 1, 2011-June 30, 2012). We seek to improve and modernize the
program by streamlining the E-rate application process, providing
greater flexibility to choose the most cost-effective and educationally
useful broadband services, and expanding the reach of broadband to the
classroom. More particularly, these proposed reforms include: improving
and simplifying the current E-rate application process; codifying the
requirement that competitive bidding processes be ``fair and open'';
simplifying the way schools calculate their discounts; conforming the
E-rate definition of ``rural'' to the Department of Education's
definition; allowing greater flexibility in the use of wireless
Internet access for educational purposes away from school grounds;
allowing recipients the option of leasing low-cost fiber; expanding the
reach of broadband in residential schools that serve populations facing
unique challenges; creating a predictable funding mechanism that would
provide a per student amount for internal connections each year, while
eliminating support for basic maintenance of internal connections;
indexing the current $2.25 billion cap on E-rate disbursements to
inflation; and creating a process for schools and libraries to dispose
of obsolete equipment.
93. As note, we believe the proposals and options being put out for
comment will not have a significant economic impact on small entities
under the E-rate program. Indeed the proposals and options will benefit
small entities by simplifying the application process, eliminating
burdensome restrictions on the purchase of certain broadband
technologies, creating a more stable and predictable funding pool, and
allowing more applicants to receive program funding, while ensuring
that the amount of funding available keeps pace with the rate of
inflation. Because this NPRM does not propose additional regulation for
service providers and equipment vendors, these small entities will
experience no significant additional burden. We nonetheless invite
commenters, in responding to the questions posed and tentative
conclusions in the NPRM, to discuss any economic impact that such
changes may have on small entities, and possible alternatives.
6. Federal Rules That May Duplicate, Overlap, or Conflict With the
Proposed Rules
94. None.
B. Paperwork Reduction Act Analysis
95. This document contains proposed modified information collection
requirements. The Commission, as part of its continuing effort to
reduce paperwork burdens, invites the general public and the Office of
Management and Budget (OMB) to comment on the information collection
requirements contained in this document, as required by the Paperwork
Reduction Act of 1995, Public Law 104-13. In addition, pursuant to the
Small Business Paperwork Relief Act of 2002, Public Law 107-198, see 44
U.S.C. 3506(c)(4), we seek specific comment on how we might further
reduce the ``information collection burden for small business concerns
with fewer than 25 employees.''
C. Ex Parte Presentations
96. These matters shall be treated as a ``permit-but-disclose''
proceeding in accordance with the Commission's ex parte rules. 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. Other requirements
pertaining to oral and written presentations are set forth in Sec.
1.1206(b) of the Commission's rules.
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.
Proposed Rules
For the reasons discussed in the preamble, the Federal
Communications
[[Page 32715]]
Commission proposes to amend 47 CFR part 54 as follows:
PART 54--UNIVERSAL SERVICE
1. The authority citation continues to read as follows:
Authority: 47 U.S.C. 151, 154(i), 201, 205, 214, and 254 unless
otherwise noted.
2. Section 54.5 is amended by revising the definition for ``Rural
area'' to read as follows:
Sec. 54.5 Terms and definitions.
* * * * *
Rural area. For purposes of the rural health care universal service
support mechanism, a ``rural area'' is an area that is entirely outside
of a Core Based Statistical Area; is within a Core Based Statistical
Area that does not have any Urban Area with a population of 25,000 or
greater; or is in a Core Based Statistical Area that contains an Urban
Area with a population of 25,000 or greater, but is within a specific
census tract that itself does not contain any part of a Place or Urban
Area with a population of greater than 25,000. ``Core Based Statistical
Area'' and ``Urban Area'' are as defined by the Census Bureau and
``Place'' is as identified by the Census Bureau.
* * * * *
3. Section 54.500 is revised to read as follows:
Sec. 54.500 Terms and definitions.
(a) Applicant. For purposes of this subpart, an ``applicant'' is an
eligible school or library, or a consortium that includes an eligible
school or library.
(b) Billed entity. A ``billed entity'' is the entity that remits
payment to service providers for services rendered to eligible schools
and libraries.
(c) Educational purposes. For purposes of this subpart, activities
that are integral, immediate, and proximate to the education of
students, or in the case of libraries, integral, immediate and
proximate to the provision of library services to library patrons,
qualify as ``educational purposes.'' Activities that occur on library
or school property are presumed to be integral, immediate, and
proximate to the education of students or the provision of library
services to library patrons.
(d) Elementary school. An ``elementary school'' is a non-profit
institutional day or residential school, including a public elementary
charter school, that provides elementary education, as determined under
State law.
(e) Internal connections. For purposes of this subpart, a service
is eligible for support as a component of an institution's ``internal
connections'' if such service is 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.
(f) Library. A ``library'' includes:
(1) A public library;
(2) A public elementary school or secondary school library;
(3) An academic library;
(4) A research library, which for the purpose of this section means
a library that:
(i) Makes publicly available library services and materials
suitable for scholarly research and not otherwise available to the
public; and
(ii) Is not an integral part of an institution of higher education;
and
(5) A private library, but only if the State in which such private
library is located determines that the library should be considered a
library for the purposes of this definition.
(g) Library consortium. A ``library consortium'' is any local,
statewide, regional, or interstate cooperative association of libraries
that provides for the systematic and effective coordination of the
resources of schools, public, academic, and special libraries and
information centers, for improving services to the clientele of such
libraries. For the purposes of these rules, references to library will
also refer to library consortium.
(h) Lowest corresponding price. ``Lowest corresponding price'' is
the lowest price that a service provider charges to non-residential
customers who are similarly situated to a particular school, library,
or library consortium for similar services.
(i) Master contract. A ``master contract'' is a contract negotiated
with a service provider by a third party, the terms and conditions of
which are then made available to an eligible school, library, rural
health care provider, or consortium that purchases directly from the
service provider.
(j) Minor contract modification. A ``minor contract modification''
is a change to a universal service contract that is within the scope of
the original contract and has no effect or merely a negligible effect
on price, quantity, quality, or delivery under the original contract.
(k) National school lunch program. The ``national school lunch
program'' is a program administered by the U.S. Department of
Agriculture and State agencies that provides free or reduced price
lunches to economically disadvantaged children. A child whose family
income is between 130 percent and 185 percent of applicable family size
income levels contained in the nonfarm poverty guidelines prescribed by
the Office of Management and Budget is eligible for a reduced price
lunch. A child whose family income is 130 percent or less of applicable
family size income levels contained in the nonfarm income poverty
guidelines prescribed by the Office of Management and Budget is
eligible for a free lunch.
(l) Pre-discount price. The ``pre-discount price'' means, in this
subpart, the price the service provider agrees to accept as total
payment for its telecommunications or information services. This amount
is the sum of the amount the service provider expects to receive from
the eligible school or library and the amount it expects to receive as
reimbursement from the universal service support mechanisms for the
discounts provided under this subpart.
(m) Priority one services. For purposes of this subpart, ``priority
one services'' are telecommunications services, Internet access, and
information services as designated annually by the Commission in the
Eligible Services List.
(n) Priority two services. For purposes of this subpart, ``priority
two services'' are internal connections, as designated annually by the
Commission in the Eligible Services List.
(o) Rural area. For purposes of this subpart, a ``rural area'' is
within a territory whose locale code is classified as either rural-
fringe, rural-distant, or rural-remote by the U.S. Department of
Education's National Center for Education Statistics.
(p) Secondary school. A ``secondary school'' is a non-profit
institutional day or residential school that provides secondary
education, as determined under State law. A secondary school does not
offer education beyond grade 12.
(q) State telecommunications network. A ``State telecommunications
network'' is a State government entity that procures, among other
things, telecommunications offerings from multiple service providers
and bundles such offerings into packages available to schools,
libraries, or rural health care providers that are eligible for
universal service support, or a State government entity that provides,
using its own facilities, such telecommunications offerings to such
schools, libraries, and rural health care providers.
4. Section 54.501 is amended by revising paragraph (a) to read as
follows:
[[Page 32716]]
Sec. 54.501 Eligibility for service provided by telecommunications
carriers.
(a) Telecommunications carriers shall be eligible for universal
service support under this subpart for providing supported services to
eligible applicants.
* * * * *
5. Revise Sec. 54.502 is to read as follows:
Sec. 54.502 Supported services.
(a) Telecommunications services. For purposes of this subpart,
supported telecommunications services provided by telecommunications
carriers include all commercially available telecommunications services
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 service shall not be covered by the universal
service support mechanisms. Supported telecommunications services are
designated annually in the Eligible Services List by the Commission in
accordance with Sec. 54.503 of the Commission's rules.
(b) Internet access and information services. For purposes of this
subpart, supported Internet access and information services include
basic conduit access to the Internet and the services defined in Sec.
54.5 of the Commission's rules as Internet access. Supported Internet
access and information services are designated annually by the
Commission in the Eligible Services List in accordance with Sec.
54.503 of the Commission's rules.
(c) Internal connections. For purposes of this subpart, supported
internal connections are defined in Sec. 54.500(e) as eligible
services. Discounts are not available for internal connections in non-
instructional buildings of a school or school district, or in
administrative buildings of a library, to the extent that a library
system has separate administrative buildings, unless those internal
connections are essential for the effective transport of information to
an instructional building of a school or to a non-administrative
building of a library. Internal connections do not include connections
that extend beyond a single school campus or single library branch.
There is a rebuttable presumption that a connection does not constitute
an internal connection if it crosses a public right-of-way. Supported
internal connections are defined and listed in the Eligible Services
List as updated annually in accordance with Sec. 54.503 of the
Commission's rules.
(d) Non-telecommunications carriers shall be eligible for universal
service support under this subpart for providing the supported services
described in paragraph (b) and (c) of this section for eligible
schools, libraries, and consortia including those entities. Such
services provided by non-telecommunications carriers shall be subject
to all the provisions of this subpart, except Sec. Sec. 54.501(a),
54.502(a), and 54.515.
6. Sec. 54.504 [Amended]
a. Remove paragraphs (a) and (b);
b. Redesignate paragraph (c) as paragraph (a);
c. Redesignate paragraphs (d), (e), (f), (g), and (h) as paragraphs
(b), (c), (d), (e), and (f);
d. Revise newly designated paragraphs (a) introductory text, (a)(1)
introductory text, (a)(1)(iv), (a)(1)(v), (a)(1)(vii), (a)(1)(xi), (e)
introductory text, (e)(1), and (e)(2).
The revisions read as follows:
Sec. 54.504 Requests for services.
(a) Filing of FCC Form 471. An applicant seeking to receive
discounts for eligible services as designated by the Commission on the
eligible services list under this subpart shall, upon signing a
contract for eligible services, submit a completed FCC Form 471 to the
Administrator. A commitment of support is contingent upon the filing of
FCC Form 471.
(1) The FCC Form 471 shall be signed by the person authorized to
order telecommunications services for the applicant and shall include
that person's certification under oath that:
* * * * *
(iv) All of the schools and libraries listed on the FCC Form 471
application are:
(A) Covered by an individual or higher-level technology plan for
using the services requested in the application that meets the
requirements of Sec. 54.508 of the Commission's rules;
(B) Are not covered by a technology plan because the application
requests only eligible priority one services as defined in Sec.
54.500(1) and the applicant is subject to State or local technology
planning requirements; or
(C) Are not covered by a technology plan because the application
requests only basic telecommunications services.
(v) The applicant's technology plan(s) has/have been/will be
approved by a State or other authorized body consistent with Sec.
54.508 of this subpart.
* * * * *
(vii) The services the applicant purchases at discounts will be
used solely for educational purposes and will not be sold, resold, or
transferred in consideration for money or any other thing of value.
Services that the applicant purchases at discounts are not deemed sold,
resold, or transferred in consideration for money or any other thing of
value if disposed pursuant to Sec. 54.513.
* * * * *
(xi) All bids submitted to an applicant seeking eligible services
were carefully considered and the most cost-effective bid was selected
in accordance with Sec. 54.510 of this subpart, with price being the
primary factor considered, and is the most cost-effective means of
meeting educational needs and technology plan goals.
* * * * *
(e) Rate disputes. If they reasonably believe that the lowest
corresponding price is unfairly high or low, applicants may have
recourse to the Commission, regarding interstate rates, and to State
commissions, regarding intrastate rates.
(1) Applicants may request lower rates if the rate offered by the
carrier does not represent the lowest corresponding price.
(2) Service providers may request higher rates if they can show
that the lowest corresponding price is not compensatory, because the
relevant applicant is not similarly situated to and subscribing to a
similar set of services to the customer paying the lowest corresponding
price.
* * * * *
7. Section 54.505 is amended by revising paragraph (b) introductory
text, (b)(3)(i), (b)(3)(ii), and (b)(4) to read as follows:
Sec. 54.505 Discounts.
* * * * *
(b) Discount percentages. The discounts available to eligible
schools and libraries shall range from 20 percent to 90 percent of the
pre-discount price for eligible services as designated by the
Commission. The discounts available to a particular applicant shall be
determined by indicators of poverty and high cost.
* * * * *
(3) * * *
(i) Schools and libraries whose locale code is city, suburb, town-
fringe, or rural-fringe, as measured by the U.S. Department of
Education's National Center for Education Statistics, shall be
designated as urban.
(ii) Schools and libraries whose locale code is town-distant, town-
remote, rural-distant, or rural-remote, as measured by the U.S.
Department of Education's National Center for Education Statistics,
shall be designated as rural.
[[Page 32717]]
(4) Applicants shall calculate discounts on supported services
described in Sec. 54.502 or other supported special services described
in Sec. 54.503 by first calculating a single discount percentage rate
for the entire school district by dividing the total number of students
eligible for the National School Lunch Program or other alternative
eligible mechanism by the total number of students in the district.
Applicants shall then compare that single figure against the discount
matrix to determine the school district's discount for priority one and
priority two services. All schools and libraries within that school
district shall receive the same discount rate.
* * * * *
8. Section 54.507 is amended by revising paragraphs (a), (c), and
(d) introductory text, to read as follows:
Sec. 54.507 Cap.
(a) Amount of the annual cap. The annual funding cap on Federal
universal service support for schools and libraries shall be $2.25
billion in funding year 2010. In funding year 2011 and subsequent
funding years, the funding cap shall be automatically increased
annually to take into account increases in the rate of inflation as
calculated in (a)(1) of this section. All funds collected that are
unused shall be carried forward into subsequent funding years for use
in the schools and libraries support mechanism in accordance with the
public interest and notwithstanding the annual cap.
(1) Increase Calculation. To measure increases in the rate of
inflation for annual automatic increase purposes, the Commission shall
use the Gross Domestic Product Chain-type Price Index (GDP-CPI). To
compute the annual increase, the average of the GDP-CPI for four
quarters shall be calculated by adding the four GDP-CPI quarters and
dividing the sum by 4. The increase shall be rounded to the nearest 0.1
percent by rounding 0.05 percent and above to the next higher 0.1
percent and otherwise rounding to the next lower 0.1 percent. This
percentage increase shall be applied to the amount of the annual
funding cap from the previous funding year. If the yearly average GDP-
CPI decreases or stays the same, the annual funding cap shall remain
the same as the previous year.
(2) Public Notice. When the calculation of the yearly average GDP-
CPI is determined, the Commission shall publish a Public Notice in the
Federal Register within 60 days announcing any increase of the annual
funding cap based on the rate of inflation.
* * * * *
(c) Requests. Funds shall be available to fund discounts for
applicants on a first-come-first-served basis, with requests accepted
beginning on the first of July prior to each funding year. The
Administrator shall maintain on the Administrator's Web site a running
tally of the funds already committed for the existing funding year. The
Administrator shall implement an initial filing period that treats all
applicants filing within that period as if their applications were
simultaneously received. The initial filing period shall begin on the
date that the Administrator begins to receive applications for support,
and shall conclude on a date to be determined by the Administrator. The
Administrator may implement such additional filing periods as it deems
necessary.
(d) Annual filing requirement. Applicants shall file new funding
requests for each funding year no sooner than the July 1 prior to the
start of that funding year. Applicants must use recurring services for
which discounts have been committed by the Administrator within the
funding year for which the discounts were sought. The deadline for
implementation of non-recurring services will be September 30 following
the close of the funding year. An applicant may request and receive
from the Administrator an extension of the implementation deadline for
non-recurring services if it satisfies one of the following criteria:
* * * * *
9. Revise Sec. 54.508 to read as follows:
Sec. 54.508 Technology plans.
(a) When plan is necessary and content. Applicants seeking only
basic telecommunications services do not need to develop a technology
plan when requesting schools and libraries universal service support.
Applicants must develop a technology plan when requesting schools and
libraries universal service support;
(1) For eligible priority one services if they are not subject to
State or local technology planning requirements and;
(2) For eligible priority two services. Applicants must document
the date on which the technology plan was created. The technology plan
must comply with State and local technology planning requirements or
meet the standards established by the U.S. Department of Education's
Enhancing Education through Technology, 20 U.S.C. 6764, or the U.S.
Institute for Museum and Library Services. The technology plan must
include the following elements:
(b) Approval. Applicants required to prepare technology plans under
this subpart must have such plan(s) approved. An applicant that has
developed a technology plan approved by the State, the U.S. Department
of Education's Enhancing Education through Technology, or the U.S.
Institute for Museum and Library Services has an approved plan for
purposes of the universal service program. Other applicants must obtain
approval from either the Administrator or an independent entity
approved by the Commission or certified by the Administrator as
qualified to provide such approval. All parties who will provide such
approval must apply the standards set forth in paragraph (a) of this
section.
(c) Timing of certification. Applicants must certify on the FCC
Form 471 that they have prepared a technology plan, if required.
Applicants must also confirm in FCC Form 486 that their technology plan
was approved before they began receiving services pursuant to it.
10. Add Sec. 54.510 to read as follows:
Sec. 54.510 Competitive bidding requirements.
(a) All entities participating in the schools and libraries
universal service support program must conduct a fair and open
competitive bidding process, consistent with all requirements set forth
in this subpart.
(b) Competitive bid requirements. An applicant shall:
(1) Seek competitive bids for all eligible priority one services in
accordance with State or local procurement requirements. If requested
by the Administrator, each applicant bears the burden of demonstrating
compliance with State or local procurement requirements. Unless there
is an existing contract signed on or before July 10, 1997, pursuant to
Sec. 54.511(c), an applicant that is not subject to State or local
procurement requirements shall follow the FCC Form 470 posting
requirements as set forth in paragraph (c) of this section to meet the
competitive bidding requirements.
(2) Seek competitive bids for all eligible priority two services
pursuant to the requirements established in this subpart, except as
provided in Sec. 54.511(c). These competitive bid requirements apply
in addition to State and local competitive bid requirements and are not
intended to preempt such State and local requirements.
(c) Posting of FCC Form 470. (1) An applicant seeking to receive
discounts for eligible internal connections products and services under
this subpart shall post an FCC Form 470 to
[[Page 32718]]
initiate the competitive bidding process. An eligible applicant that is
not subject to State or local procurement requirements and that is
seeking to receive for eligible priority one service shall post an FCC
Form 470 to initiate the competitive bidding process. The FCC Form 470
and any request for proposal cited in the FCC Form 470 should include:
(i) A list of specified services for which the applicant
anticipates they are likely to seek discounts; and
(ii) Sufficient information to enable bidders to reasonably
determine the needs of the applicant.
(2) The FCC Form 470 shall be signed by the person authorized to
order eligible services for the eligible applicant and shall include
that person's certification under oath that:
(i) The schools meet the statutory definition of elementary and
secondary schools found under section 254(h) of the Act, as amended in
the No Child Left Behind Act of 2001, 20 U.S.C. 7801(18) and (38), do
not operate as for-profit businesses, and do not have endowments
exceeding $50 million;
(ii) The libraries or library consortia eligible for assistance
from a State library administrative agency under the Library Services
and Technology Act of 1996 do not operate as for-profit businesses and
whose budgets are completely separate from any school (including, but
not limited to, elementary and secondary schools, colleges, and
universities).
(iii) All of the individual schools, libraries, and library
consortia receiving eligible services are covered by:
(A) Individual technology plans for using the internal connections
products or services requested in the application that meets the
requirements of Sec. 54.508; or
(B) No technology plan is required by the Commission's rules.
(iv) The technology plan(s) has/have been/will be approved
consistent with Sec. 54.508 or no technology plan is required.
(v) The services the applicant purchases at discounts will be used
solely for educational purposes and will not be sold, resold, or
transferred in consideration for money or any other thing of value
except as allowed by Sec. 54.513.
(vi) Support under this support mechanism is conditional upon the
school(s) and library(ies) securing access to all of the resources,
including computers, training, software, maintenance, internal
connections, and electrical connections necessary to use the services
purchased effectively.
(vii) All bids submitted for eligible priority one and priority two
products and services will be carefully considered, with price being
the primary factor, and the bid selected will be for the most cost-
effective offering consistent with Sec. 54.511.
(3) The Administrator shall post each FCC Form 470 that it receives
from an eligible school, library, or consortium that includes an
eligible school or library on its Web site designated for this purpose.
(4) After posting on the Administrator's Web site an applicant's
FCC Form 470, the Administrator shall send confirmation of the posting
to the entity requesting service. That entity shall then wait at least
four weeks from the date on which its description of services is posted
on the Administrator's Web site before making commitments with the
selected providers of services. The confirmation from the Administrator
shall include the date after which the requestor may sign a contract
with its chosen provider(s).
11. Section 54.511 is amended by revising paragraphs (a), (b),
(c)(1) introductory text, (c)(1)(ii), (c)(2), (d)(1), removing
paragraph (c)(3), and adding paragraph (e) to read as follows:
Sec. 54.511 Ordering services.
(a) Selecting a provider of eligible services. In selecting a
provider of eligible services, applicants shall carefully consider all
bids submitted and must select the most cost-effective service
offering. In determining which service offering is the most cost-
effective, entities may consider relevant factors other than the pre-
discount prices submitted by providers but price should be the primary
factor considered.
(b) Lowest corresponding price. Providers of eligible services
shall not charge applicants a price above the lowest corresponding
price for supported services, unless the Commission, with respect to
interstate services or the State commission with respect to intrastate
services, finds that the lowest corresponding price is not
compensatory. Promotional rates offered by a service provider for a
period of more than 90 days must be included among the comparable rates
upon which the lowest corresponding price is determined.
(c) Existing contracts. (1) A signed contract for services eligible
for discounts pursuant to this subpart between an eligible school or
library as defined under Sec. 54.501 or consortium that includes an
eligible school or library and a service provider shall be exempt from
the requirements set forth in Sec. 54.510(b), (c)(3), and (c)(4) as
follows:
* * * * *
(ii) A contract signed after July 10, 1997, but before the date on
which the universal service competitive bid system described in Sec.
54.510 is operational, is exempt from the competitive bid requirements
only with respect to services that are provided under such contract
between January 1, 1998 and December 31, 1998.
(2) For an applicant that takes service under or pursuant to a
master contract, the date of execution of that master contract
represents the applicable date for purposes of determining whether and
to what extent the applicant is exempt from the competitive bid
requirements.
(d)(1) The exemption from the competitive bid requirements set
forth in paragraph (c) of this section shall not apply to voluntary
extensions or renewals of existing contracts.
* * * * *
(e) Contract requirements. All contracts for eligible products and
services must comply with State and local contract laws. Applicants
must have a contract or legally binding agreement in place when filing
the FCC Form 486. Applicants bear the burden of demonstrating
compliance with State and local contract laws and should be prepared to
provide the necessary documentation of such compliance at any time
during the application review process.
12. Section 54.513 is amended by revising the section heading and
adding paragraph (d) to read as follows:
Sec. 54.513 Resale and transfer of services and disposal of surplus
equipment.
* * * * *
(d) Disposal of Surplus Equipment That Has Exhausted Its Useful
Life. At least five years after its installation date, surplus
equipment may be resold for payment or other consideration if:
(1) The equipment has exhausted its useful life;
(2) The school board or other authorized body formally declares the
equipment to be surplus;
(3) The school or library notifies USAC within 90 days of reselling
or trading the equipment using FCC Form 500 and keeps a record of such
disposal for a period of five years following the disposal; and
(4) The disposal process substantially complies with State and
local laws, where applicable.
13. Section 54.519 is amended by revising paragraphs (a), (a)(6),
and (b) to read as follows:
[[Page 32719]]
Sec. 54.519 State telecommunications networks.
(a) Telecommunications services. State telecommunications networks
may secure discounts under the universal service support mechanisms on
supported telecommunications services (as described in Sec. 54.502) on
behalf of applicants. Such State telecommunications networks shall pass
on such discounts to applicants and shall:
* * * * *
(6) Comply with the competitive bid requirements set forth in Sec.
54.510(b).
(b) Internet access and installation and maintenance of internal
connections. State telecommunications networks either may secure
discounts on Internet access and installation and maintenance of
internal connections in the manner described in paragraph (a) of this
section with regard to telecommunications, or shall be eligible,
consistent with Sec. 54.502(d), to receive universal service support
for providing such services to applicants.
[FR Doc. 2010-12930 Filed 6-8-10; 8:45 am]
BILLING CODE 6712-01-P