[Federal Register Volume 78, Number 161 (Tuesday, August 20, 2013)]
[Proposed Rules]
[Pages 51597-51644]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-19491]



[[Page 51597]]

Vol. 78

Tuesday,

No. 161

August 20, 2013

Part VII





Federal Communications Commission





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47 CFR Part 54





Modernizing the E-Rate Program for Schools and Libraries; Proposed Rule

Federal Register / Vol. 78 , No. 161 / Tuesday, August 20, 2013 / 
Proposed Rules

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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 54

[WC Docket No. 13-184; FCC 13-100]


Modernizing the E-Rate Program for Schools and Libraries

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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SUMMARY: In this document, the Federal Communications Commission 
(Commission) initiates a thorough review and update of the E-rate 
program (more formally known as the schools and libraries universal 
service support mechanism), building on reforms adopted in 2010 as well 
as the Commission's reforms of each of the other universal service 
programs. The Commission takes this step because there is a growing 
chorus of calls to build on the success of the E-rate program by 
modernizing the program and adopting clear forward-looking goals aimed 
at efficiently and effectively ensuring high-capacity connections to 
schools and libraries nationwide.

DATES: Comments are due on or before September 16, 2013, and reply 
comments are due on or before October 16, 2013. 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 WC Docket No. 13-184, 
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 email: [email protected] or phone: (202) 418-
0530 or TTY: (202) 418-0432.
    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, Wireline Competition 
Bureau, (202) 418-0792, or James Bachtell, Wireline Competition Bureau, 
(202) 418-2694, or TTY: (202) 418-0484.

SUPPLEMENTARY INFORMATION: This is a synopsis of the Commission's 
Further Notice of Proposed Rulemaking (NPRM) in WC Docket No. 13-184, 
FCC 13-100, adopted July 19, 2013, and released July 23, 2013. 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. (BCPI), 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.
    We invite comment on the issues and questions set forth in the NPRM 
and IRFA contained herein. 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 on this NPRM by September 16, 2013 and may file reply 
comments by October 16, 2013. All filings related to this NPRM shall 
refer to WC Docket No. 13-184. Comments may be filed using the 
Commission's Electronic Comment Filing System (ECFS) or 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://fjallfoss.fcc.gov/ecfs2/.
     Paper Filers: Parties who choose to file by paper must 
file an original and one copy of each filing.
     Filings can be sent by hand or messenger delivery, by 
commercial overnight courier, or by first-class or overnight U.S. 
Postal Service mail. All filings must be addressed to the Commission's 
Secretary, Office of the Secretary, Federal Communications Commission.
     All hand-delivered or messenger-delivered paper filings 
for the Commission's Secretary must be delivered to FCC Headquarters at 
445 12th St. SW., Room TW-A325, Washington, DC 20554. The filing hours 
are 8:00 a.m. to 7:00 p.m. All hand deliveries must be held together 
with rubber bands or fasteners. Any envelopes and boxes 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 must 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 email to [email protected] or call the 
Consumer & Governmental Affairs Bureau at (202) 418-0530 (voice), (202) 
418-0432 (tty).
    In addition, one copy of each paper filing must be sent to each of 
the following: (1) the Commission's duplicating contractor, Best Copy 
and Printing, Inc., 445 12th Street SW., Room CY-B402, Washington, DC 
20554; Web site: www.bcpiweb.com; phone: (800) 378-3160; (2) Lisa Hone, 
Telecommunications Access Policy Division, Wireline Competition Bureau, 
445 12th Street SW., Room 6-A326, Washington, DC 20554; email: 
[email protected]; and (3) Charles Tyler, Telecommunications Access 
Policy Division, Wireline Competition Bureau, 445 12th Street SW., Room 
5-A452, Washington, DC 20554; email: [email protected].
    Filing 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 Commission's duplicating 
contractor, BCPI, 445 12th Street, SW., Room CY-B402, Washington, DC 
20554. Customers may contact BCPI through its Web site: www.bcpi.com, 
by email at [email protected], by telephone at (202) 488-5300 or (800) 
378-3160 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 or internal 
review process.
    For additional information on this proceeding, contact Regina Brown 
at (202) 418-0792 or James Bachtell at (202) 418-2694 in the 
Telecommunications Access Policy Division, Wireline Competition Bureau.

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I. Introduction

    1. In this Notice of Proposed Rulemaking (NPRM), we initiate a 
thorough review and update of the E-rate program (more formally known 
as the schools and libraries universal service support mechanism), 
building on reforms adopted in 2010 as well as the Commission's reforms 
of each of the other universal service programs. During the past 15 
years, the financial support provided by the E-rate program has helped 
revolutionize schools' and libraries' access to modern communications 
networks. E-rate-supported Internet connections are crucial for 
learning and for the operation of modern schools and libraries. 
Increasingly, schools and libraries require high-capacity broadband 
connections to take advantage of digital learning technologies that 
hold the promise of substantially improving educational experiences and 
expanding opportunity for students, teachers, parents and whole 
communities. As a result, there is a growing chorus of calls to build 
on the success of the E-rate program by modernizing the program and 
adopting clear forward-looking goals aimed at efficiently and 
effectively ensuring high-capacity connections to schools and libraries 
nationwide.
    2. E-rate has been instrumental in ensuring our schools and 
libraries have the connectivity necessary to enable students and 
library patrons to participate in the digital world. When Congress 
passed the Telecommunications Act of 1996 authorizing the creation of 
the E-rate program, only 14 percent of classrooms had access to the 
Internet, and most schools with Internet access (74 percent) used dial-
up Internet access. By 2005, nearly all schools had access to the 
Internet, and 94 percent of all instructional classrooms had Internet 
access. Similarly, by 2006, nearly all public libraries were connected 
to the Internet, and 98 percent of them offered public Internet access. 
The challenge we now face is modernizing the program to ensure that our 
nation's students and communities have access to high-capacity 
broadband connections that support digital learning while making sure 
that the program remains fiscally responsible and fair to the consumers 
and businesses that pay into the universal service fund (USF or Fund).
    3. In schools, high-capacity broadband connectivity, combined with 
cutting-edge educational tools and content, is transforming learning by 
providing customized teaching opportunities, giving students and 
teachers access to interactive content, and offering assessments and 
analytics that provide students, their teachers, and their parents, 
real-time information about student performance. High-capacity 
broadband is also expanding the boundaries of our schools by allowing 
for interactive and collaborative distance learning applications, 
providing all students--from rural communities to inner cities--access 
to high-quality courses and expert instruction, no matter how small a 
school they attend or how far they live from experts in their field of 
study. High-capacity broadband platforms and the educational options 
they enable are particularly crucial for providing all students, in 
both rural and urban communities, customized and personalized education 
and access to cutting-edge learning tools in the areas of science, 
technology, engineering and math (STEM) education, thus preparing our 
students to compete in the global economy.
    4. In libraries, high-capacity broadband access provides patrons 
the ability to search for and apply for jobs; learn new skills; 
interact with federal, state, local, and Tribal government agencies; 
search for health-care and other crucial information; make well-
informed purchasing decisions; engage in life-long learning; and stay 
in touch with friends and family. In Idaho, for example, the state 
agency's Libraries Linking Idaho database portal, available in all 
Idaho libraries, provides essential resources to library patrons such 
as an online video encyclopedia and a program to provide tools for test 
preparation and skill-building. Additionally, the Chicago Public 
Library's YOUMedia and The Labs at the Carnegie Library of Pittsburgh 
offer young people an opportunity to produce rich, multi-media products 
using the latest technology tools while connecting these learning 
experiences directly back to school and careers. Further, the Howard 
County Public Library in Maryland houses a Learning Lab to engage young 
adults in using new and emerging media and technology. Libraries are 
uniquely important because they provide Internet access to all 
residents in communities they serve. In addition, libraries support 
distance learning and continuing education for college and adult 
students.
    5. There is strong evidence and growing consensus that E-rate needs 
to sharpen its focus and provide schools and libraries with high-
capacity broadband connections. In response to a 2010 Commission survey 
of E-rate funded schools and libraries, only 10 percent of survey 
respondents reported broadband speeds of 100 Mbps or greater, while 48 
percent reported broadband speeds of less than 10 Mbps. Approximately 
39 percent of the respondents cited cost of service as a barrier in 
meeting their needs, and 27 percent cited cost of installation as a 
barrier.
    6. Likewise, although the speeds of library connections have been 
increasing over time, many libraries report that speeds are 
insufficient to meet their growing needs. An annual survey done by the 
American Library Association (ALA) shows that in 2011-2012, while 9 
percent of libraries reported connection speeds of greater than 100 
Mbps, 25 percent of libraries still have speeds of 1.5 Mbps or less, 
and approximately 62 percent of libraries reported connection speeds of 
10 Mbps or less. Thus, notwithstanding the trend towards faster speeds, 
41 percent of libraries reported that their speeds fail to meet their 
patrons' needs some or most of the time.
    7. Last month, President Obama announced the ConnectED initiative 
aimed at connecting all schools to the digital age. The ConnectED 
initiative seeks to connect schools and libraries serving 99 percent of 
our students to next-generation high-capacity broadband (with speeds of 
no less than 100 Mbps and a target speed of 1 Gbps) and to provide 
high-capacity wireless connectivity within those schools and libraries 
within five years. President Obama has called on the Commission to 
modernize and leverage the E-rate program to help meet those targets. 
Teachers, local school officials, state education leaders, digital 
learning experts, and businesses from across the country endorsed 
President Obama's vision and have called for an update to the E-rate 
program to meet today's teaching and learning needs.
    8. In voicing his support for President Obama's ConnectED 
initiative, Senator John D. Rockefeller IV, one of the original 
supporters of the E-rate program, explained: ``[I]n its almost two 
decades, the E-Rate program has fundamentally transformed education in 
this country--we have connected our most remote schools and libraries 
to the world. But as impressive and important as the E-Rate program has 
been, basic Internet connectivity is no longer sufficient to meet our 
21st Century educational needs.'' Even more recently, the bipartisan 
Leading Education by Advancing Digital (LEAD) Commission has taken up 
the call and released a blue print for paving a path to digital 
learning in the United States which highlights ``inadequate high-speed 
Internet connectivity in the classrooms''

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as ``the most immediate and expensive barrier to implementing 
technology in education,'' and calls modernizing E-rate the 
``centerpiece of solving the infrastructure challenge.''
    9. The need for E-rate reform is also clear given the extraordinary 
demand for existing E-rate support. For this funding year, schools and 
libraries sought E-rate funding in excess of $4.9 billion, more than 
twice the annual cap of $2.25 billion. The E-rate funding cap was set 
by the Commission when it created the E-rate program in 1997 and demand 
for funds has exceeded the cap every year since the inception of the 
program. Moreover, technology is constantly evolving, so to be most 
effective, the E-rate program must evolve to meet the current and 
future needs of schools and libraries. Therefore, in this NPRM, we seek 
to modernize E-rate to ensure that it can most efficiently and 
effectively help schools and libraries meet their connectivity needs 
over the course of the rest of this decade and the next.
    10. Three years ago, the Commission took important initial steps to 
modernize E-rate to improve efficiency and respond to the increasing 
technological needs of schools and libraries in response to 
recommendations made in the National Broadband Plan. The reforms, 
adopted in the Schools and Libraries Sixth Report and Order, 75 FR 
75393, December 3, 2010, focused on: (1) Providing greater flexibility 
to schools and libraries in their selection of the most cost-effective 
broadband services; (2) streamlining the E-rate application process; 
and (3) improving safeguards against fraud, waste, and abuse. Among 
other things, the Commission allowed schools and libraries to lease 
dark fiber from any entity, including state, municipal or regional 
research networks and utility companies; made permanent a rule to allow 
schools to open their facilities to the public when schools are not in 
session so that community members may use the school's E-rate supported 
services on the school's campus; and established the Learning On-The-Go 
(also known as E-rate Deployed Ubiquitously (EDU) 2011) pilot program 
to investigate the merits and challenges of wireless off-premises 
connectivity services for mobile learning devices.
    11. In this NPRM, we seek comment on ways to build on these steps 
and more comprehensively modernize E-rate, including improving the 
efficiency and administration of the program. We begin by proposing 
explicit program goals and seeking comment on specific ways to measure 
our progress towards meeting those goals. During the last two years, 
the Commission has established goals and measures as part of 
modernizing the three other universal service support programs. Today, 
we propose to do the same for the E-rate program. We then seek comment 
on a number of possible approaches to achieving each of our proposed 
goals.
    12. Thus, the balance of this NPRM is organized into the following 
six sections:
     In Section II, we propose three goals for the E-rate 
program:
    (1) Ensuring schools and libraries have affordable access to 21st 
Century broadband that supports digital learning;
    (2) Maximizing the cost-effectiveness of E-rate funds; and
    (3) Streamlining the administration of the E-rate program.
    We also propose to adopt measures for each of the proposed goals.
    In proposing to adopt specific goals and measures, we seek to focus 
available funds on the highest communications priorities for schools 
and libraries and, over time, to determine whether E-rate funds are 
effectively targeted to meet those goals.
     In section III, we focus on the first proposed goal and 
seek comment on ways to modernize and reform the E-rate program to 
better ensure eligible schools and libraries have affordable access to 
high-capacity broadband. First, we propose to focus E-rate funds on 
supporting high-capacity broadband to and within schools and libraries, 
and we seek comment on updating the list of services eligible for E-
rate support. Second, we seek comment on various options for ensuring 
equitable access to limited E-rate funding. Finally, we seek comment on 
what other measures we could take if these steps, combined with the 
other efficiency measures proposed elsewhere in this NPRM, appear 
insufficient to meet our program goals. In particular, we seek comment 
on potential options to focus additional state, local, and federal 
funding on school connectivity and to lower the costs of new high-
capacity broadband deployment to schools and libraries.
     In section IV, we focus on the second proposed goal and 
seek comment on maximizing the cost-effectiveness of E-rate purchases, 
including how we can encourage increased consortium purchasing; create 
bulk buying opportunities; increase transparency of spending and 
prices; amend the competitive bidding processes; and encouraging 
efficient use of funding. We also seek comment on a pilot program to 
incent and test more efficient purchasing practices.
     In section V, we focus on the third proposed goal and seek 
comment on ways to streamline the administration of the E-rate program 
by, among other things, requiring electronic filing of all documents 
with the E-rate program Administrator, the Universal Service 
Administrative Company (USAC); increasing transparency of USAC's 
processes; speeding USAC's review of E-rate applications; simplifying 
the eligible services list; finding more efficient ways to disburse E-
rate funds; addressing unused E-rate funding; and streamlining the E-
rate appeals process.
     In section VI, we seek comment on several additional 
issues relating to the E-rate program that have been raised by 
stakeholders, including issues related to school and library 
obligations under the Children's Internet Protection Act (CIPA); 
identifying rural schools and libraries; changes to the National School 
Lunch Program; fraud protection measures; use of E-rate supported 
services for community Wi-Fi hotspots; and procedures for dealing with 
national emergencies.
    In seeking comment on our proposed goals and measures, and on 
options to modernize E-rate to better align it with these goals, in 
addition to specific questions posed throughout, we encourage input 
from Tribal governments and ask generally whether there are any unique 
circumstances on Tribal lands that would necessitate a different 
approach. Similarly, we request comment on whether there are any unique 
circumstances in insular areas that would necessitate a different 
approach.

II. Goals and Measures

A. Ensuring Schools and Libraries Have Affordable Access to 21st 
Century Broadband That Supports Digital Learning

1. Proposed Goal
    13. The first goal of the E-rate program we propose to adopt is to 
ensure that schools and libraries have affordable access to 21st 
Century broadband that supports digital learning. As discussed above, 
the communications priorities of schools and libraries have shifted as 
they seek access to higher-speed connectivity and to allow students and 
teachers to take advantage of the rapidly expanding opportunities for 
interactive digital learning.
    14. Section 254(h) of the Act, requires the Commission to enhance 
access to advanced telecommunications and information services to 
schools and libraries ``to the extent technically feasible and 
economically reasonable,'' and determine a discount level for all E-

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rate funded services that is ``appropriate and necessary to ensure 
affordable access to and use of such services.'' Thus, in considering 
our statutory obligations and in light of the growing technological 
needs of schools and libraries, this proposed goal has two components. 
The first component of this proposed goal requires that all schools and 
libraries have access to high-capacity broadband connectivity necessary 
to support digital learning. The second component of this goal is that 
schools and libraries be able to afford such services.
    15. We also seek comment on whether we should adopt specific goals 
for other communications services, including voice services. If so, 
what should those goals be and how can we best harmonize those goals 
with our proposed goal of ensuring schools and libraries have access to 
21st Century broadband that supports digital learning?
2. Proposed Measurements
    16. We seek comment on what performance measure or measures we 
should adopt to support our proposed goal of ensuring eligible schools 
and libraries have affordable access to high-capacity broadband at 
speeds that will support digital learning. We also seek comment on how 
best to perform the relevant measurements.
    17. One of the primary measures of progress towards meeting this 
goal would be benchmarking the performance of schools' and libraries' 
broadband connections against specific speed targets. We also seek 
comment on other measures of the availability and affordability of 
high-capacity broadband to schools and the educational impact of high-
capacity broadband in the classroom. We seek comment on whether these 
are the areas on which we should focus in measuring progress towards 
this goal. We also seek comment on how other network performance 
measurement efforts, including the Commission's own Measuring Broadband 
America Program, should inform our consideration of how to measure 
network performance. Commenters are encouraged to propose any 
additional or alternative measures.
    18. Connectivity metrics. We seek comment on how to define 
``broadband that supports digital learning'' for purposes of measuring 
progress toward our first goal. President Obama's ConnectED initiative 
set a target of at least 100 Mbps service with a target of 1 Gbps to 
most schools and libraries within 5 years. The ConnectED proposals are 
consistent with those made by the State Education Technology Directors 
Association (SETDA). According to SETDA, in order to have sufficient 
broadband access for enhanced teaching and learning, K-12 schools will 
need Internet connections of at least 100 Mbps per 1,000 students and 
staff (users) by the 2014-15 school year and at least 1 Gbps Internet 
access per 1,000 users by the 2017-18 school year.
    19. We seek comment on adopting the SETDA target of ensuring that 
schools have 100 Mbps per 1,000 users increasing to 1 Gbps per 1,000 
users. SETDA also recommends that a school within a district have Wide 
Area Network (WAN) connectivity to other schools within their district 
of at least 10 Gbps per 1,000 students and staff by 2017-2018. We also 
seek comment on adopting that target for WAN connectivity.
    20. More specifically, we seek comment on whether the SETDA targets 
are appropriate for all schools, or whether we should set some other 
minimum levels of broadband speed necessary to meet our proposed goal, 
and what those levels should be. How much capacity do schools currently 
use? How are schools' bandwidth needs changing, particularly in those 
schools that have one-to-one device initiatives? We also seek comment 
on what our goals should be for schools or school districts with less 
than 1,000 students and staff if we do adopt the SETDA targets. Will 
schools with 500 students need 500 Mbps Internet capacity, and how much 
WAN connectivity will they need? How about schools with 100 students? 
We also seek comment on the timing of reaching these proposed bandwidth 
targets for schools. What percent of schools currently have 100 Mbps 
per 1,000 users? What percent of schools currently have 1 Gbps per 
1,000 users? How quickly are schools already moving towards these 
targets? What percent of schools currently have fiber connectivity to 
the school? How much would it cost to reach these targets? What are the 
challenges for schools and the E-rate program in meeting these targets?
    21. We also seek comment on the appropriate bandwidth target for 
libraries. According to the Gates Foundation, the State Library of 
Kansas has developed a broadband capacity tool that recommends that all 
libraries have a minimum of 1 Gbps Internet connectivity by 2020 and 
recognizes that libraries with a large number of connected users will 
likely need even greater capacity. We seek comment on whether a target 
of 1 Gbps for all libraries by 2020 is an appropriate measure or 
whether we should set some other minimum level of broadband speed for 
libraries necessary to meet our proposed measure and what that should 
be. We also seek comment on whether we should adopt a WAN connectivity 
target for libraries interconnected by WANs, and if so, what that 
target should be. We also seek comment on the target date of 2020 for 
libraries to have 1 Gbps Internet connectivity. What are the challenges 
to libraries and the E-rate program of meeting this goal? What percent 
of libraries currently have 100 Mbps connectivity? What percent of 
libraries currently have 1 Gbps connectivity?
    22. Further, we seek comment on whether there are schools and 
libraries in some extremely remote parts of our country where the SETDA 
and the State Library of Kansas capacity targets may not be 
economically feasible. If so, why are the SETDA or the State Library of 
Kansas targets unfeasible and what are feasible connectivity targets or 
benchmarks for those extremely remote geographic areas?
    23. As part of the ConnectED initiative, President Obama also 
called for high-capacity connectivity within schools, and others, 
including the bi-partisan LEAD Commission, have echoed that proposal. 
We seek comment on adopting specific bandwidth targets for wireless 
connectivity within schools, similar to our targets for Internet and 
WAN bandwidth. Specifically, we seek comment on whether all schools 
should have internal wireless networks capable of supporting one-to-one 
device initiatives, and whether libraries should have comparable 
wireless connectivity. We seek comment on more quantitatively defining 
these standards. Should we define connectivity in Mbps of wireless 
capacity available per-student in classrooms, school libraries, and 
other areas of schools? Should these match the Internet or WAN 
connectivity recommendations of SETDA? For example, building off 
SETDA's 2017 recommendation of 100 Mbps Internet connectivity per 1000 
students, should we aim for 1 Mbps of wireless capacity per 10 students 
in classrooms and other learning spaces? What would this standard 
generally require to implement? We seek comment on this proposal and on 
alternative bandwidth targets.
    24. Many of the applications that enable digital learning require 
not just high-capacity connections, but also high-quality connections 
that have associated latency, jitter and packet loss requirements. For 
example, online viewing of a real-time science lecture and 
demonstration requires low latency (transmission delay), low jitter

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(variability in the timing of packets' arrival), and low packet loss. 
Should we adopt latency, jitter and packet loss performance 
requirements tailored to the specific uses of broadband connectivity by 
schools and libraries to ensure successful learning experiences? If so, 
what such requirements should be? We also seek comment on how best to 
update network performance requirements as technology and network uses 
evolve.
    25. Using adoption to measure availability and affordability. The 
simplest measure of broadband availability and affordability for 
schools and libraries may observe whether eligible schools and 
libraries are purchasing broadband services that meet our proposed 
speed benchmarks. We therefore seek comment on whether to measure 
school and library broadband speeds as one metric of broadband 
availability and affordability.
    26. If we adopt this proposal, we seek comment on how best to 
collect data on the speed and quality of school and library 
connections. Currently, all schools and libraries must complete an FCC 
Form 471 application when applying for E-rate funding, and among other 
things, are requested to provide information about the level of 
broadband services requested on that form. The Commission is currently 
seeking comment on modifying the FCC Form 471 to collect more detailed 
information from applicants on connection speeds and the types of 
technologies being used for connectivity.
    27. We seek comment on additional ways to update the FCC Form 471 
to provide information necessary to monitor and measure our proposed 
goal. Should we require that E-rate applicants provide specific 
information about the bandwidth or speed for which they seek funding? 
Should we make that information publicly available? Should there be 
specific, required mechanisms for making the information public? For 
example, should we require such information be published on data.gov?
    28. Should we adopt additional measures based on information we 
gather? For example, should we measure the difference in each school's 
or library's baseline capacity and speed for each workstation or device 
over a specified time period?
    29. We seek comment on whether there are other methods we should 
consider adopting for measuring broadband performance, including not 
only bandwidth available but actual usage as well. We also seek comment 
on how measuring actual usage would take into account the different 
possible reasons for level of usage. For example, how would such a 
measurement account for schools that use broadband connections less 
because the speeds available are too slow for use of educational 
software or other reasons? In addition, how do we account for levels of 
usage that vary based on the availability of teacher technology 
training? In addition to collecting information on the FCC Form 471, 
should we conduct an annual or biennial survey to assess the broadband 
capability of schools and libraries? If so, should it be modeled on the 
survey of E-rate recipients that the Commission conducted in 2010?
    30. In the alternative, should we require some or all E-rate 
applicants to have dedicated equipment measuring performance to and 
within each of their buildings? If so, what would be the cost of such a 
requirement and what would be the benefits? Should we require 
applicants to pay for such equipment or provide E-rate support for such 
equipment and the related information collection? Should we make the 
collected information available to the public? We ask for 
recommendations on performance measurement systems that are low cost 
and of minimal burden; easy to implement; low-impact; that will produce 
uniform results and test a full range of performance metrics; and that 
include a proven design and are generally accepted as valid testing.
    31. Are there other less burdensome methods that would still ensure 
we are able to examine and employ useful information in lieu of 
requiring all applicants to employ equipment to test broadband? For 
example, could we test a sample of schools? Are most schools and 
libraries or their service providers already measuring the speed of 
their broadband connections? Are there cost-efficient ways of 
collecting that information from schools and libraries? Several years 
ago, the Commission created the Measuring Broadband America Program to 
measure residential broadband performance. Should we adopt a national 
performance measurement system for schools and libraries similar to our 
Measuring Broadband America Program? If so, how could we accommodate 
measuring not only average or peak performance but also actual usage? 
We recognize that some third parties are already attempting to collect 
some such information. For example, Education Superhighway is 
encouraging schools to participate in its national School Speed Test 
program. Are there ways the Commission can use the information 
collected by Education Superhighway or other third-party groups to 
measure progress towards this goal?
    32. As part of measuring progress towards the goal of ensuring 
eligible schools and libraries have affordable access to high-capacity 
broadband at speeds that will support digital learning, we seek comment 
on how to measure high-capacity broadband availability and 
affordability and the metrics that should be used.
    33. For example, to measure availability, should we use the 
National Broadband Map to estimate what fraction of schools and 
libraries have access to at least one broadband provider within the 
same census block offering broadband at speeds that meet our proposed 
performance metrics? If so, what geographic vicinity should we use? 
Should we use census blocks as the measure? Should we supplement 
National Broadband Map data with other information? Instead, or in 
addition, should we collect data on the number of zero-bid service 
requests as a measure of service availability?
    34. Similarly, to measure affordability, we could benchmark the 
post-discount prices paid by schools for broadband connections against 
some objective measure. We seek comment on this approach, and on what 
measures we could use. Would there be benefit to conducting an annual 
or biennial survey to measure school and library perceptions about 
affordability? If so, what questions should we ask? Alternatively, 
should we survey just those schools that do not adopt broadband 
connections meeting our performance targets to find out why they have 
not done so?
    35. We also seek comment on whether the Commission should measure 
compliance with its ``lowest corresponding price'' rule as a measure of 
affordability to ensure that service providers are providing schools 
and libraries with the lowest corresponding price for E-rate supported 
services that a provider charges to a similarly situated non-
residential customer. The rule mandates that service providers cannot 
charge schools, school districts, libraries, library consortia, or 
consortia including any of these entities 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.
    36. Educational Impact Measurements. Is there a way to measure how 
success in the classroom is affected by access to E-rate funding or 
services supported by E-rate?

[[Page 51603]]

Stakeholders have, in the past, raised concerns with attempts to 
correlate E-rate funding with educational outcomes. Critics claim that 
because classroom performance is affected by many factors, there are no 
reliable conclusions to be drawn. However, proponents believe that 
assessing the contribution of digital learning and E-rate funded 
connectivity towards student outcomes may guide schools in determining 
the bandwidth and usage of broadband that are most effective as well as 
provide us guidance in ensuring that universal service dollars are 
efficiently spent. Is there a way to measure how success in the 
classroom is affected by access to E-rate funding or access to Internet 
access services? If so, what should such measures look like, and should 
they be tied specifically to E-rate funding or more generally to the 
deployment or use of broadband and next-generation infrastructure? A 
2006 study by Austan Goolsbee and Jonathan Guryan found that E-rate 
support substantially increased the investment of some public schools 
in Internet and communications technologies, but did not find a 
statistically significant effect on student test scores. Have more 
recent studies suggested otherwise? We also seek comment on whether the 
Commission should adopt educational-outcome measurements. Is it 
appropriate for the Commission to do so, given that educational 
outcomes are outside the agency's core competence? Are there any legal 
or jurisdictional issues with doing so?

B. Maximizing the Cost-Effectiveness of E-Rate Funds

1. Proposed Goal
    37. We propose to adopt, as the second goal of the E-rate program, 
to maximize the cost-effectiveness of E-rate funds. Ensuring that 
schools and libraries spend E-rate money in the most cost-effective 
ways possible maximizes the impact of limited E-rate funds and helps 
ensure that all eligible schools and libraries are able to receive all 
the support they need. Funds available through the E-rate program come 
from contributions made by consumers and businesses to the USF, and the 
Commission has a responsibility to ensure they are spent effectively.
    38. This proposed goal is consistent with section 254(h)(2)(A) of 
the Communications Act, which requires that support to schools and 
libraries be ``economically reasonable.'' As the Commission has 
previously observed, we have a ``responsibility to be a prudent 
guardian of the public's resources.'' We seek comment on this proposed 
goal.
2. Proposed Measurements
    39. We seek comment on what performance measure or measures we 
should adopt to support the goal of maximizing the cost-effectiveness 
of purchases made using E-rate funds. Should we measure the value 
delivered to schools and libraries with support from the E-rate program 
by tracking the prices and speed of the broadband connections supported 
by the program? Should we measure an applicant's costs per-student and 
costs of products and services in comparison with other costs for 
products and services available in the marketplace? Are there 
additional data we would need to require from applicants to track 
relevant measures, or are there existing data repositories we could use 
for this purpose? Above, we seek comment on a number of possible 
affordability measures. Should we use any of these to measure cost-
effectiveness instead of, or in addition to, affordability?
    40. What data will best allow us to track these metrics? Should we 
encourage studies on the impact of E-rate support on prices paid for 
services? We currently report on the results of USAC's audits, and 
progress in reducing improper payments and waste, fraud and abuse. 
Should we use this information as part of this measurement?

C. Streamlining the Administration of the E-Rate Program

1. Proposed Goal
    41. We propose to adopt, as the third goal of the E-rate program, 
to streamline the administration of the E-rate program. The number of 
applications the Administrator, USAC, receives from schools and 
libraries seeking E-rate support is daunting. For example, in funding 
year 2013, at the close of the application filing window, USAC received 
46,189 applications seeking an estimated $4.986 billion in support. In 
some cases applicants request more in funding commitments than they 
actually use, and there is no requirement or incentive for applicants 
to notify USAC in a timely fashion that they have received funding 
commitments that they will not use. Moreover, the application and 
disbursement processes are complicated, so that many schools and 
libraries now feel compelled to spend money on E-rate consultants just 
to navigate the E-rate processes. Thus, it is essential that we 
continue to improve the E-rate program procedures and continue to 
simplify and streamline the program's application review and 
disbursement processes.
    42. This goal therefore includes further streamlining and 
simplification of the application, review, commitment and disbursement 
processes, in order to make the most of E-rate funding and accelerate 
the delivery of support for high-capacity broadband at speeds that will 
support digital learning, while maintaining appropriate safeguards 
against waste and abuse. We seek comment on this proposed goal. We are 
mindful that the Commission and USAC have a duty to protect against 
waste, fraud and abuse in the program and that the procedures intended 
to protect against waste, fraud and abuse can complicate and slow down 
program administration. Therefore, we also seek comment on ways to 
reconcile the need to simplify the program with the need to protect 
against waste, fraud and abuse.
2. Proposed Measurements
    43. We seek comment on what performance measure or measures we 
should adopt to support the proposed goal of streamlining the 
administration of the E-rate program. In 2007, the Commission adopted 
certain output measurements for evaluating the effectiveness of the E-
rate program related to the application and invoicing processes and the 
resolution of appeals submitted to USAC. Specifically, the Commission 
required USAC to provide data, on a funding year basis by reporting the 
number of applications and funding request numbers (FRNs) submitted, 
rejected, and granted, and the processing time for applications and 
FRNs. The Commission also required USAC to document the amount of time 
it takes to make a billed entity applicant reimbursement payment to the 
service provider, and the number of paid and rejected invoices. 
Additionally, the Commission required USAC to determine the percentage 
of appeals resolved by USAC within 90 days from the date of appeal, and 
how long it takes to process 50 percent, 75 percent, and 100 percent of 
the pending appeals from the schools and libraries division.
    44. What additional measurements should we adopt? The State E-rate 
Coordinators Alliance (SECA) previously suggested establishing 
deadlines for making priority one funding commitments and the payment 
of invoices. As noted above, the Commission currently requires USAC to 
report data measures for commitments, disbursements and appeals. Should 
specific targets be established for each of those categories? If so, 
how should

[[Page 51604]]

we establish those targets? Should we require USAC to improve on those 
targets each year or to maintain a certain level of performance?
    45. Should we set goals for funding commitments by USAC to 
applicants as compared to actual disbursements by funding year? In 
addition, how should we ensure the administrative budget is appropriate 
for the program? Should we establish targets for the cost of 
administering the program compared to the program funds disbursed to 
recipients? Should we measure the number of students and patrons served 
with E-rate funding over a specified period of time? If so, what should 
we compare the results to? For example, should we compare it to other 
federal programs that administer the disbursement of subsidies, such as 
other USF programs, the Broadband Technology Opportunities Program 
(BTOP) or educational grant programs?
    46. We also seek comment on whether we should adopt a proposal by 
SECA that USAC be required to retain an independent third party to 
perform an annual analysis of the barriers to schools and libraries 
participating in the E-rate program. If such an analysis is warranted, 
should it be performed annually, as proposed, or on some other time 
period, such as every three years?
    47. We are also mindful of the cost to applicants associated with 
participating in this program and we seek ways to reduce and measure 
these costs. Should we collect data regarding administrative costs E-
rate applicants incur throughout the application process? If so, what 
are the best methods to obtain that data? Should applicants be required 
to disclose on an FCC form the amount of time and cost spent preparing 
an application? Should we instead consider a survey or sample of 
participants to obtain this and other information relevant to determine 
the financial impact including, for example, the cost of hiring an E-
rate consultant?

D. Data Collection

    48. Finally, we seek comment on a number of cross-cutting issues 
regarding the collection of accurate, relevant and timely data to track 
our progress in meeting these goals. We seek comment on the benefits 
and burdens of requiring E-rate recipients and service providers to 
provide data to USAC in open, machine-readable formats in order to 
enhance the accessibility and usefulness of the data. We also seek 
general comment on what data we collect during the application and 
disbursement process that should make public. Are there any barriers to 
making public any data we collect that helps measure our progress 
towards meeting our proposed goals? Will making such data public 
encourage the public to develop new and innovative methods to analyze 
E-rate data? If there are concerns about protecting the confidentiality 
of some of the data, are there ways to protect sensitive information 
while still making public the most relevant data or are there ways to 
aggregate the data to obviate confidentiality concerns? Finally, we 
seek comment on the extent to which we should apply the principles of 
the Office of Management and Budget's (OMB's) Open Data Policy to our 
efforts to collect and share E-rate data?
    49. In addition to the specific revisions suggested above, should 
we revise any of the Commission's E-rate forms, such as the FCC Form 
471 application, Item 21, or the FCC Form 500, to collect new data, or 
to change the formats in which we collect data? For example, should we 
revise the Item 21 attachment to the FCC Form 471 to collect data more 
consistently from all applicants? Are there ways we can change the 
format of the Item 21 to collect more granular data in a way that will 
allow us to more easily identify what products and services applicants 
are purchasing and at what prices? Commenters who advocate changes in 
data collection should indicate which form(s) and what specific 
revisions we would need to make on those forms in order to ensure that 
we receive useful information.
    50. We also seek comment on essential definitions for purposes of 
measurement. When considering different policy outcomes, what are the 
key concepts that require a formal common definition upfront to enable 
more desirable measurements (e.g., ``per school,'' ``per-student,'' 
``per patron'')? Unique persistent identifiers are important because 
they designate which entity is being dealt with and also are used to 
model relationships. Are there unique persistent identifiers for 
schools, school districts and libraries? For example, are locale codes 
used by the U.S. Department of Education's National Center for 
Education Statistics (NCES), also known as urban-centric locale codes, 
good identifiers to use for schools and school districts? To the extent 
existing identifiers are missing or have problems, would there be value 
in creating persistent identifiers or supplementing existing 
identifiers for some or all such entities, or for other types of 
applicants? What would be the requirements of such persistent 
identifiers?
    51. Finally, are there goals and measures that we should adopt that 
we have not already discussed? Commenters should be as specific as 
possible about their proposed goals and measures.

III. Ensuring Schools and Libraries Have Affordable Access to 21st 
Century Broadband That Supports Digital Learning

    52. In this section, we seek ways to further our proposed first 
goal for the E-rate program: ensuring schools and libraries have 
affordable access to high-capacity broadband services that support 
digital learning. We explore methods to focus E-rate funds on 
supporting high-capacity broadband to and within schools and libraries, 
to ensure equitable access to limited E-rate funds, and to lower new 
build costs and tap into other funding sources.

A. Focusing E-Rate Funds on Supporting Broadband to and Within Schools 
and Libraries

    53. To support the goal of ensuring that schools and libraries have 
access to affordable high-capacity broadband, both to and within 
schools and libraries, we propose to update the E-rate program's 
funding priorities, and seek comment on how to do so. In particular, we 
seek comment on possible updates to the list of services eligible for 
E-rate support and the related rules to focus funding on those services 
that provide high-capacity broadband to school and library buildings 
and those services and equipment that disseminate the high-capacity 
broadband within those buildings, while deprioritizing or phasing out 
support for services associated with legacy technologies and services 
that have little direct educational application.
    54. We recognize that E-rate has historically provided support for 
voice services, and voice services remain essential for communications 
and public safety at schools and libraries. However, we also recognize 
that voice services may increasingly be transitioning to a low-
marginal-cost application delivered over broadband platforms. We seek 
comment on how to approach voice services within this framework.
1. Funding for Broadband Connections
    55. Technological architecture. We begin by seeking general comment 
on the most efficient technological architectures that schools and 
libraries are likely to use for connectivity. Are fiber connections 
generally the most cost effective and future-proof way to deliver high-
capacity broadband to community anchor institutions like schools and 
libraries? Are other

[[Page 51605]]

technologies, such as point-to-point microwave or coaxial cable, which 
are widely used to provide high-capacity broadband to schools and 
libraries today, also efficient and cost-effective ways to provide 
service as bandwidth demands increase?
    56. Smaller schools and libraries may not need the bandwidth 
provided by fiber connectivity and, particularly for small rural and 
Tribal schools and libraries, fiber connectivity to the school or 
library may not currently be available in some areas, or requires the 
payment of very high up-front construction charges. For these schools 
and libraries, what are the most cost-effective ways to meet high-
capacity broadband needs? Are there fixed wireless solutions that are 
cost-effective for such schools? Are there some schools where satellite 
connectivity is the only viable option?
    57. How do schools generally purchase connectivity? As an all-
inclusive service? Or do schools purchase long-term indefeasible rights 
of use (IRUs) in physical infrastructure separately from managed 
services? What approaches are most efficient?
    58. Fiber deployment. In the Schools and Libraries Sixth Report and 
Order, subject to certain limitations, the Commission added dark fiber 
to the list of services eligible for E-rate support. We seek comment on 
how schools and libraries have incorporated dark fiber into their 
broadband deployment plans as the result of this change.
    59. To further improve applicants' flexibility in finding cost 
effective ways to deploy high-capacity broadband, we propose to make 
our treatment of lit and dark fiber more consistent. The E-rate program 
currently supports the recurring costs of leasing lit and dark fiber as 
priority one services. When a school or library leases lit fiber, the 
modulating electronics necessary to light that fiber are included in 
the recurring supported cost of the service and are therefore funded as 
part of the priority one service. By contrast, a school or library that 
leases dark fiber will not receive priority one support for the 
modulating electronics necessary to light the dark fiber. To eliminate 
this disparity, we propose to provide priority one support for the 
modulating electronics necessary to light leased dark fiber.
    60. Installation charges for lit and dark fiber are also treated 
somewhat differently under current rules. Currently, the E-rate program 
provides priority one support for the installation of lit or dark fiber 
up to the property line of eligible schools and libraries. It also 
supports all ``special construction charges'' for leased lit fiber, but 
does not support ``special construction charges'' for leased dark fiber 
beyond an entity's property line. Special construction charges include 
design and engineering costs, project management costs, digging 
trenches and laying fiber. In order to maximize the options available 
for schools and libraries seeking to deploy fiber to their premises, we 
propose to provide priority one support for special construction 
charges for leased dark fiber, as we do for leased lit fiber.
    61. Additionally, although the E-rate program currently provides 
support for some installation and special construction charges, it 
requires the cost of large projects to be spread over three years or 
more. The Commission's intent in requiring the cost to be spread over 
multiple years was to reduce the demand on the fund, but it may have 
the unintended consequence of deterring efficient investments, 
including the deployment of fiber. Should we continue to require that 
large installation and construction costs be spread over multiple 
years? If so, what should the threshold be for requiring that costs be 
spread over multiple years? Is three years the right period? Does the 
answer depend on how many sites are being connected?
    62. We seek comment on the cost to deploy fiber or other 
technologies that would provide high-capacity broadband connectivity to 
schools. We also seek comment on other aspects of support for 
installation and construction charges. Is there a limit to the amount 
of funding we should provide to any one library, school or school 
district over a certain amount of time for construction and 
installation costs? Are there specific costs that we should or should 
not fund as part of installation and construction? Are there other 
approaches we should consider in dealing with high installation and 
construction costs? We seek comment on whether fiber deployment to 
schools and libraries being slowed because applicants cannot afford to 
pay the non-discounted portion of deployment costs. Are there any other 
conditions we should impose on applicants who seek prioritized support 
for lit or dark fiber and modulating electronics? Are there ways to 
cost effectively deploy fiber and minimize recurring costs to schools 
and libraries?
    63. We also seek comment on whether prioritizing special 
construction charges to deploy fiber or other technologies from middle 
mile networks to schools and libraries (lateral fiber builds) by 
dedicating a specific amount of E-rate funding to support such 
deployment would help meet our connectivity goals. Would some 
prioritization to support lateral fiber builds create long term cost 
efficiencies for schools and libraries and for the E-rate program? If 
so, what should that amount be? Should we encourage or require schools 
and libraries to enter into long-term IRUs or other long-term 
arrangements on such lateral builds to get the maximum value of initial 
investments in fiber? How should we determine the rules of priority for 
such funding and how much funding should be allocated to each 
applicant? For example, should funding for fiber builds be distributed 
based on the poverty level of the students at a school, rurality, 
location on Tribal lands, lack of fiber or other high-capacity 
broadband connections to community anchor institutions, or some other 
objective, observable metric? How much support do we need to provide to 
make it possible for schools and libraries to apply for such funds, 
particularly in rural, tribal and other areas where deployment is 
likely to be expensive? Should we also consider allowing applicants to 
amortize the costs over a period of time longer than the three years 
currently required?
    64. Is there a role for the states or Tribal governments to play in 
determining priority for such funds? For example, should we seek state 
and Tribal government recommendations for the neediest communities 
(e.g., low income or schools or libraries without broadband), allowing 
the Commission to make the final determinations based on the amount of 
funding set aside for particular schools and libraries for fiber 
lateral builds? We specifically seek comment on any other factors to 
determine priority of funding for fiber lateral builds. We also seek 
comment on any potential requirements for receipt of specific support 
for fiber lateral builds. Should we, for example, require community 
access to high-capacity broadband facilities in exchange for such 
funding? We ask commenters to be as specific as possible in response to 
these questions.
    65. If we prioritize some funding for new high-capacity broadband 
deployment should we be technology neutral or should we prioritize 
fiber connectivity over other types of broadband connectivity? Should 
we give schools flexibility to select the best technology that meets 
their needs? As discussed above there may be some schools and 
libraries, particularly small rural schools and libraries, where fiber 
deployment is either not necessary or simply cost-prohibitive. How 
should we address the needs of schools and libraries in areas where 
fiber is far less likely to be offered or available, such as Tribal 
lands? Are there other solutions

[[Page 51606]]

such as fixed wireless or cable solutions that would be sufficient 
today or in the future for meeting such schools' and libraries' high-
capacity broadband needs? Are there deployment costs associated with 
any of those technologies that should be supported by the E-rate 
program?
    66. If we seek to spur fiber or other broadband deployments through 
dedicated funding, are there associated changes we should make in how 
we fund the recurring costs for telecommunications and Internet access 
services, which are also priority one services today? For example, 
should we fund broadband deployment upgrades before recurring costs, 
creating a further prioritization within existing priority one 
services? Should we consider providing a different discount rate for 
ongoing services than for initial fiber upgrades? Would this approach 
encourage schools and libraries to enter more efficient long-term 
service arrangements as part of new infrastructure investments?
    67. Wide Area Networks (WANS). Many schools and libraries use WANs 
to provide broadband connectivity to and among their buildings. WANs 
are useful for participants in the E-rate program, particularly school 
districts and consortia, because they provide dedicated connections 
between the schools within a school district or the schools and 
libraries within a consortium allowing them to easily share information 
and resources. For example, last August, Red Lion School District in 
Pennsylvania finished deploying a fiber-based WAN network that was 
supported by the E-rate program. Prior to deploying the new WAN, the 
district, which has nine schools, had an assortment of technologies but 
no school had bandwidth greater than 50 Mbps. The new WAN, which 
incorporates both microwave and fiber technology, provides many of the 
schools with 1 Gbps in bandwidth to support distance learning, social 
media, Web 2.0, and cloud-based services. Under the current E-rate 
rules, however, applicants are allowed to seek support for leased 
access to WANs but are not permitted to seek support for WANs that they 
build or purchase.
    68. We seek comment on whether there are circumstances under which 
it will be more cost-effective for schools and libraries to build or 
purchase their own WAN rather than to lease a WAN. We also seek comment 
on whether there might be occasions where building or purchasing their 
own WAN is the only way for schools and libraries to get broadband 
access. If so, we seek comment on whether we should lift our 
prohibition on schools and libraries building or purchasing their own 
WANs by removing Sec.  54.518 of our rules, or amend that section of 
our rules to allow schools and libraries to build or purchase their own 
WANs under certain circumstances. If the latter, we seek comment on the 
criteria we should use in determining whether to provide E-rate support 
to schools and libraries that purchase or build their own WANs.
    69. In the Healthcare Connect Fund Order, 78 FR 13935, March 1, 
2013, the Commission allowed consortia to seek rural health care fund 
support to build and own their own network facilities if construction 
was determined to be the most cost-effective option after competitive 
bidding. However, the Healthcare Connect Fund Order also imposed 
several safeguards on the program to ensure that consortia only 
exercised their option to self-construct when it was absolutely 
necessary. Should we impose similar safeguards on schools and 
libraries' option to self-construct WANs in the E-rate program? Are 
there other E-rate supported services that we should allow applicants 
to self-provision? If so, what services and under what conditions?
    70. More generally, are there any other rule changes needed to 
ensure schools and libraries can access high-capacity connections to 
their premises? What other steps can we take to spur efficient new 
broadband deployments, particularly those deployments, like new fiber 
builds, that will dramatically increase speeds while bringing down 
long-term per Mbps prices?
    71. Broadband connectivity within schools and libraries. We also 
seek comment on options to support connectivity within schools and 
libraries. In recent years, the E-rate program has been unable to fund 
billions of dollars in requests from applicants seeking support for 
internal connections. For example, in funding year 2012, USAC received 
approximately $2.47 billion in funding requests for internal 
connections, and was unable to fund any requests below the 88 percent 
discount rate. As a result, many E-rate recipients have not received 
support for internal connections, and must provide full funding for 
needed internal connections or go without. We seek comment on the 
percent of schools and libraries that do not have the necessary 
equipment to provide high-capacity broadband connectivity within 
schools, and the amount it would cost to provide high-capacity 
broadband connectivity within such schools and libraries. We invite 
commenters to be as specific as possible and to provide any data they 
have available on this issue.
    72. More broadly, we request that commenters provide data on the 
nature of internal networks generally deployed within schools and 
libraries today and the likely needs of schools and libraries going 
forward. Previously in this section, we asked for information about the 
most efficient and cost effective network architectures for deployment 
of high-capacity broadband. Similarly, we ask for detailed information 
about internal network configurations. Will school networks generally 
consist of wired connections between classrooms and high-capacity 
wireless routers in each classroom? Do schools generally have internal 
high-capacity wired connections to each classroom today? If so, should 
we focus funding on newer high-capacity wireless routers, which are 
needed to allow multiple simultaneous high-capacity connections in a 
classroom environment?
    73. Are there other equipment or services necessary for high-
capacity broadband connections that should qualify for prioritized 
support? For example, which of the internal connection services listed 
as priority two services on the current ESL are necessary for providing 
high-capacity broadband connectivity within schools or libraries? What 
services not on the ESL should we consider supporting? Should we, for 
example, consider providing support for caching services or for 
services necessary for providing network security for schools and 
libraries? Is there evidence that outdated networking equipment 
(firewalls, content filters, etc.) creates significant speed 
bottlenecks on school and library networks? Is adding these types of 
services to the list of supported services, so that schools and 
libraries have the funding necessary to update those services, needed 
to eliminate significant speed bottlenecks? Are there any services not 
currently receiving support that would allow more cost effective use of 
E-rate funds?
    74. In 2001, the Commission prohibited E-rate recipients from 
obtaining discounts under the universal service support mechanism for 
the purchase or acquisition of technology protection measures necessary 
for the Children's Internet Protection Act (CIPA) compliance. At the 
time of the 2001 CIPA Order, 66 FR 8374, January 31, 2001, protection 
delivered at the network level was in its nascent stages and now 
schools and libraries need to employ network-level protection more 
ubiquitously. Should the 2001 decision to prohibit schools and 
libraries from receiving E-rate discounts for

[[Page 51607]]

technology protection measures apply to the broad spectrum of services 
schools and libraries employ for network security which may include, or 
go beyond those protections necessary for CIPA compliance, in order to 
maintain and protect high-capacity broadband networks? We seek comment 
on whether we should review the 2001 CIPA Order decision in light of 
the network security needs of schools and libraries today.
    75. Are there any other rule changes needed to ensure schools and 
libraries can effectively use high-capacity connections to their 
premises? What other steps can we take to spur efficient new high-
capacity broadband deployment within schools and libraries.
    76. Recurring costs. We also seek comment on the recurring costs of 
high-capacity broadband services. As schools and libraries have been 
increasingly purchasing high-bandwidth connections, how have their 
recurring monthly costs changed? We anticipate that in order to meet 
our proposed connectivity goals, the average recurring per-megabit 
prices of connectivity purchased by schools will need to come down 
substantially. Fortunately, there is precedent for significant price 
reductions associated with infrastructure upgrades. For example, the 
Commission's Rural Health Care Pilot Program showed that bulk buying 
through consortia coupled with competitive bidding can reduce the 
prices that recipients pay for services and infrastructure.
    77. How can we ensure that recurring costs come down sufficiently 
over time within the E-rate program to make our proposed connectivity 
goals achievable and sustainable? Are the program's existing matching 
and competitive bidding requirements sufficient safeguards, or are 
further steps required? For example, should we phase in maximum per-
megabit prices over time that are eligible for E-rate discounts, or set 
program-wide per-megabit price guidelines or targets? Would such prices 
give schools and libraries greater leverage in soliciting bids from 
vendors, or simply limit the choices available to schools and 
libraries? What should such prices be? If we set maximum per-megabit 
prices, should we allow exceptions in certain circumstances? What 
impact would such price guidelines or targets have on schools or 
libraries in areas that lack competition for high-capacity broadband, 
such as Tribal lands? How would such prices account for differences 
between more and less heavily-managed services? We seek comment on 
other options. Below, we also seek comment on how to maximize cost-
efficient purchasing. Will these approaches ensure cost-effective 
purchasing of recurring services?
2. Phasing Down Support for Certain Services
    78. Above we seek comment on modifying our rules to ensure 
availability of the key products and services needed for high-capacity 
broadband connectivity to and within schools and libraries. We now seek 
comment on two approaches for streamlining the remainder of the ESL to 
focus support on high-capacity broadband. First, we propose to phase 
out support for a number of specific services, including outdated 
services currently on the ESL, for components of voice service, and 
seek comment on phasing out support for services that are not used 
primarily for educational purposes. Second, we seek comment on more 
fundamentally shifting the way we direct E-rate support to focus 
exclusively on high-capacity broadband connectivity to and within 
schools. In so doing, we seek comment on whether there are additional 
services for which we should phase out or reduce support, including 
traditional telephone services. Finally, we seek comment on a number of 
issues that will need to be addressed whichever approach we take.
    79. We recognize that flash-cuts to support in a funding year could 
be financially difficult for schools and libraries and therefore, 
throughout this section, we seek comment on phasing out support for 
services we remove from the ESL, rather than eliminating them 
immediately. We also seek comment on other changes we could make, such 
as assigning such services a different discount rate that would require 
applicants to pay for a greater share of those services than for 
services that we consider to be directly connected to the fundamental 
purpose of the E-rate program. We also seek comment on how to address 
bundling of supported services, including bundles that include services 
for which we phase out support.
a. Specific Services for Which Support May No Longer Be Appropriate
    80. Outdated services. We first propose to phase out funding for 
those services that are outdated. For example, paging services are 
eligible for support because in 1998, the first year of E-rate funding, 
the adoption of mobile phones was not yet widespread and pagers filled 
the role of common personal and mobile communications. Paging services 
have grown increasingly obsolete with the advent and explosive growth 
of mobile technology and services, many of which are also supported by 
the E-rate program. Yet, paging services continue to be eligible for E-
rate support, and in funding year 2011, USAC committed approximately 
$934,000 for paging services for more than 500 E-rate requests.
    81. Likewise, directory assistance services are eligible for 
support because, in 1997, directory assistance was considered a core 
service. Now, however, Internet search has largely replaced directory 
services. We, therefore, seek comment on our proposal to phase out E-
rate support for paging services and directory assistance.
    82. Do either paging services or directory assistance service serve 
any important educational purposes? Is it in the public interest to 
continue to provide support for either paging services or directory 
assistance? Are there any other services that are similarly outdated 
and should no longer be eligible for E-rate support? For example, is 
there any reason to continue to provide support for dial-up services? 
In funding year 2011, there were more than 100 requests for 
approximately $95,000 in funding commitments for dial-up services. Is 
that still necessary today? Are there any schools or libraries that 
have no other option for accessing the Internet besides dial up 
services?
    83. Components of voice service and supplemental services. We also 
propose to phase out funding for services that are simply components of 
voice service as well as those services, other than voice, that ride 
over or are supplemental to high-capacity broadband connections but are 
not necessary to make a broadband service functional. More 
specifically, we first propose to eliminate support for custom calling 
features, inside wiring maintenance plans, call blocking, 800 number 
services, and text messaging as components of voice services that may 
not serve educational purposes and do not further our proposed goals. 
USAC has estimated that it committed more than $85,000 for 800 number 
service in funding year 2011 and more than $75,000 for unbundled text 
messaging in funding year 2011. We seek comment on this proposal and we 
ask whether there are other such services for which we should no longer 
provide E-rate support?
    84. We also seek comment on phasing out funding for supplemental or 
``ride-over'' services. In the Healthcare Connect Fund Order, the 
Commission determined it would only provide support for services 
necessary to make a high-capacity broadband service functional as 
distinguished from

[[Page 51608]]

services or applications that ride over the network. The Commission 
explained that it was connectivity that served as the ``input'' to 
making the ride-over services functional and not the other way around. 
Although the proposed goals for the E-rate program are somewhat 
different from our Healthcare Connect Fund goals, should we use the 
Healthcare Connect Fund Order's concept of ``ride over'' services to 
help determine what currently supported E-rate services should be 
considered supplemental to broadband, and therefore no longer 
supported? We seek comment on whether the Healthcare Connect Fund 
Order's characterization of ride-over services is instructive for E-
rate purposes.
    85. Based on the concept articulated in the Healthcare Connect Fund 
Order, we seek comment on phasing out E-rate support for services that 
are not directly related to connectivity and seek comment on this 
proposal, such as electronic mail services (email) service and web 
hosting as supplemental services. In previous proceedings, commenters 
have claimed that the pricing of web hosting in the K-12 market has 
become skewed when compared to other commercially available web hosting 
services and claim that vendors have become adept at packaging their 
services to increase the cost of web hosting above market rates in 
order to decrease the cost of the ineligible services. USAC estimates 
that it committed $9.8 million for email services and almost $28 
million for web hosting in funding year 2011. Should the E-rate fund be 
supporting services such as web hosting and email at costly monthly 
rates when many such services are cloud based and offered basically for 
free to other users? Is there any continuing and compelling policy 
reason to continue to fund such services?
    86. We note that ``electronic mail services'' are included with in 
the definition of ``Internet access'' in Sec.  54.5 of our rules and we 
therefore seek comment on whether we would need to change the 
definition of ``Internet access'' for purposes of the E-rate program if 
we were to stop providing support for email services. If so, should we 
simply delete the reference to electronic mail services in the 
definition of Internet access in Sec.  54.5 of our rules? Are there are 
other changes we need to make to our rules if we phase down or 
eliminate support for the types of services discussed above? Are other 
services that are currently eligible for E-rate support that ride over 
or are supplemental to high-capacity broadband connections, but are not 
necessary to make a high-capacity broadband service functional?
    87. Educational purposes. In the Schools and Libraries Second 
Report and Order, 68 FR 36931, June 20, 2003, the Commission determined 
that 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.'' The Schools and 
Libraries Second Report and Order also, however, provided a presumption 
that services provided on-campus serve an educational purpose. More 
recently, the Commission clarified educational purposes in Schools and 
Libraries Sixth Report and Order by requiring that schools must 
primarily use services funded under the E-rate program, in the first 
instance, for educational purposes.
    88. We seek comment on whether we should make changes to the E-rate 
program to ensure that supported services are, at a minimum, used for 
the core purpose of educating students and serving library patrons. 
More specifically, we seek comment on whether we should allow a school 
or library to seek E-rate support for services that will be used only 
by school and library staff, administrators, or board members. If 
school and library staff use the supported services in their role as 
educators and information providers but the services are inaccessible 
to students and library patrons, does this satisfy the statutory 
requirement that the support be used for educational purposes in 47 
U.S.C. 254(h)(1)(B) and that advanced telecommunications be enhanced 
for all classrooms and libraries in 47 U.S.C. 254(h)(2)(A)? Should E-
rate funds be provided if school and library staff use such services 
only for administrative or other purposes not directly tied to 
education? If funds are provided for administrative or other purposes 
not directly tied to education, should they have a lower priority than 
funds provided for the core purpose of serving students and library 
patrons? Alternatively or additionally, should we stop providing E-rate 
support for services to non-instructional buildings, such as bus 
garages? If so, how should we treat non-instructional buildings, such 
as technology centers, that support E-rate supported services? Are 
there some administrative functions such as parent-teacher 
communication that should always be considered as primarily serving an 
educational purpose? Or, even if there are services that further the 
educational mission of the school, is it now no longer realistic to 
support all of these services within our budget since funding is always 
limited? We invite commenters to distinguish between and among E-rate 
supported services when responding to these questions. For example, do 
commenters think we should take a different approach when it comes to 
Internet access services as opposed to basic voice services? What 
changes to the E-rate program would be necessary, such as changes to 
our rules or required program certifications, if we were to limit E-
rate funding to services directly available, at least in part, to 
students and patrons? Would placing limits on funding for services that 
are not directly available to students or patrons be too difficult to 
monitor or audit or raise cost-allocation challenges? Commenters should 
be specific in their proposals.
    89. Basic maintenance of internal connections (BMIC). We seek 
comment on phasing out funding for BMIC. For funding year 2011, USAC 
committed nearly $125 million for BMIC. We previously sought comment on 
modifying our approach to funding for BMIC, and now seek to refresh the 
record. We recognize that maintenance in some form is necessary for 
broadband and other supported services to remain available to schools 
and libraries. However, under our current rules which fund BMIC as a 
priority two service, the same high-discount school districts receive 
more than ample funding for basic maintenance each year, while other 
needy schools and school districts have received no priority two 
support for increasingly important and necessary internal connections. 
Additionally, it is especially difficult for USAC to monitor compliance 
with rules regarding BMIC, and BMIC may therefore be more susceptible 
to abuse than other funded services. We therefore seek comment on 
whether to amend Sec.  54.502 of our rules by deleting subsection 
(a)(2) and removing all other references to basic maintenance services. 
We also seek comment on whether there are other provisions of our rules 
that need to be amended if we phase out support for BMIC.
    90. Cellular data plans and air cards. We also seek comment on how 
to treat support for Internet access services provided via cellular 
data plans, including air cards. Such services are costly, and can be 
provided more efficiently on-campus via an E-rate supported local area 
(LAN) network that connects to the Internet. Should we phase out 
support for cellular data plans and air cards or should we instead 
deprioritize support for such services?

[[Page 51609]]

b. Tightly Focusing the Eligible Service List
    91. In addition to the specific services identified above, we seek 
comment on whether we should more fundamentally shift the way we 
prioritize E-rate support to emphasize and accelerate high-capacity 
broadband connectivity to and within schools and libraries. In 
particular, we seek comment on whether we should seek to identify the 
services currently on the ESL--plus any additional services--that are 
essential for high-capacity broadband connectivity, and limit the ESL 
to just those services. What services, in addition to those identified 
above, should we remove from eligibility under this approach? Would 
taking this approach help ensure that schools and libraries have the 
bandwidth necessary to support digital learning?
    92. SECA's recent proposal to streamline priority two services is 
one example of such an approach. SECA recommends that the priority two 
ESL be ``redefined to focus on ensuring that the transmission of 
bandwidth inside the building is sufficient, and all other 
functionality should no longer be eligible for support.'' It therefore 
suggests that priority two eligible services should be limited to 
routers, up to one per building; wireless access points, up to one per 
classroom for schools; and internal cabling, up to three cabling drops 
per classroom for schools. We seek comment on SECA's proposal, as well 
as on variations and alternatives.
c. Transitioning Voice Support to Broadband
    93. We also seek comment on phasing out services that are used only 
for voice communications. At the inception of the E-rate program, one 
of the primary ways to access the Internet was through voice telephone 
lines that delivered dial-up service via a 56 kbps modem. Today, 
widespread deployment of faster-speed technology has permitted schools 
and libraries to have access to high-capacity broadband connections 
that permit many types of digital learning technologies. We ask whether 
focusing on the transport of broadband and transitioning away from 
voice services would better serve the proposed priorities of the 
program.
    94. In funding year 2011, there were more than 37,000 requests for 
local and long distance telephone service, amounting to approximately 
$260 million in funding commitments. While, for funding year 2011, USAC 
estimates that it committed close to an additional $176 million for 
cellular services. We seek comments on whether this funding would have 
greater impact for students and library patrons if it were transitioned 
to support broadband for schools and libraries.
    95. SECA's June 2013 White Paper recommends that telecommunications 
services that are used only for voice communications should be phased 
out of E-rate support because such services are not used to provide 
advanced telecommunications or information services to schools or 
libraries. It suggests, however, that telecommunications services used 
for both data and voice telecommunications services should continue to 
be fully eligible for E-rate without requiring any cost allocation. 
SECA specifically proposes a tiered phase out of funding for all basic 
phone service over a five-year period to allow the smaller and more 
rural applicants who disproportionately use the basic phone service and 
legacy technologies ample opportunity to upgrade their infrastructure, 
and for their associated service providers to also update their service 
offerings. We seek comment on SECA's plan for phasing out E-rate 
support for basic voice telecommunications. Would the savings resulting 
from the phase out of funding for basic voice be better spent on high-
capacity broadband that supports digital learning? Would the phase out 
of voice services give more E-rate applicants the opportunity to have 
internal connections project funded under the program?
    96. We ask about the potential hardship schools and libraries would 
face if voice phone service was phased out under the E-rate program. As 
we noted in the E-rate Broadband NPRM, 75 FR 32699, June 9, 2010, we 
recognize that local, state and Tribal jurisdictions around the country 
are facing economic difficulties and budget tightening. At the same 
time, we seek comment on the extent to which E-rate support for voice 
service serves to provide schools and libraries access to services they 
would not otherwise be able to afford, or simply subsidizes voice 
telephone service that schools and libraries would purchase anyway, 
including voice services schools across the country may have been 
paying for in full before the inception of the E-rate program.
    97. Should the Commission consider subsidizing more cost-effective 
ways to make local and long-distance calls? Does Voice over Internet 
Protocol (VoIP) service provide a viable alternative to public-switch 
telephone service? Has the advent of increased broadband speeds in 
schools and libraries made VoIP service a more cost-efficient and 
attractive way to receive voice services? How should our rules 
accommodate the needs of schools and libraries in areas without VoIP 
services, including some Tribal lands? Or should the Commission also 
phase out funding for all voice services, including VoIP service?
    98. We seek comment on whether there are any statutory limitations 
that must be considered in eliminating voice telephone service from the 
ESL. To the extent there are legal concerns with removal of voice 
telephony service from the ESL, could we condition support for voice 
telephony service in a way that would eliminate stand-alone support for 
voice telephony service but allow it for bundles that include broadband 
service? Could the Commission forbear from applying the obligation on 
telecommunications carriers to discount their voice telephony service, 
thus eliminating the need for such reimbursement?
d. General Issues Related to Phasing out Support
    99. In the paragraphs above, we have proposed or sought comment on 
proposing phasing out funding for several types of services. If we 
decide to phase out support for these services, should we begin 
immediately for funding year 2014? Or should we instead phase down such 
support over a longer period of time to provide more time for 
applicants? If so, what period of time would be appropriate? Are there 
some services we should stop supporting immediately, and others we 
should phase out incrementally over time?
    100. Alternatively, should we consider maintaining support for some 
or all of these services, but at a lower priority than the funding of 
high-capacity broadband services? Or, as another alternative to phasing 
out funding for the services described above, should we consider 
reducing the percentage of support we provide for those services? If 
so, what percentage of support would be appropriate?
    101. Are there other services for which we should phase out support 
or reduce the percentage of support E-rate provides? We ask commenters 
to identify any specific services that they think should be supported 
by the E-rate program, but at a lower discount rate, and what discount 
rate commenters think we should use. Should the discount be flat for 
all services, regardless of the applicant or should we adjust all 
applicant discount rates for such services? Finally, we invite 
commenters to help us refine USAC's estimates of the amount of E-rate 
funding spent on each of the services at

[[Page 51610]]

issue in this section and elsewhere in this NPRM. Should we consider 
other changes to the ESL?
    102. We seek comment on any other approaches we should consider. 
For example, because access to high-capacity broadband is far below the 
national average on Tribal lands, should we consider adopting an E-rate 
Tribal priority? If so, how should such Tribal priority operate? 
Should, for example, a Tribal priority be available to schools operated 
by the Bureau of Indian Education or by individual Tribal governments? 
Commenters should be as specific as possible.

B. Ensuring Equitable Access to Limited E-Rate Funds

    103. To help address high demand for E-rate funding and to ensure 
equitable access to limited E-rate funds, we seek comment on revisions 
to the way E-rate funding is currently distributed. As explained in 
more detail above, under current program rules, eligible applicants 
must contribute between 10 and 80 percent of the cost of the supported 
service. The discount available to a particular school is determined by 
the percentage of student enrollment that is eligible for a free or 
reduced price lunch under the NSLP or a federally-approved alternative 
mechanism, such as a survey. A library's discount percentage is based 
on the discount rate of the public school district in which the library 
is physically located. Schools and libraries located in rural areas 
also may receive an additional 5 to 10 percent discount compared to 
urban areas. The rules provide a matrix, produced above in Figure 1, 
reflecting both a school's urban or rural status and the percentage of 
its students eligible for the school lunch program to establish a 
school's discount rate, ranging from 20 percent to 90 percent, to be 
applied to eligible services.
    104. Below we seek comment on six options for revising the 
structure for distributing funds under the E-rate program by: (1) 
revising the discount matrix to increase certain applicants' matching 
requirements; (2) providing support on a district-wide basis; (3) 
revising our approach to supporting rural schools and libraries; (4) 
incorporating a per-student or per-building cap on funding into the 
discount matrix; (5) providing more equitable access to priority two 
funding; and (6) allocating funds to all eligible schools and libraries 
up front. These options are not necessarily exclusive of one another 
and we encourage interested parties to address comprehensively the 
various proposals, particularly if aspects of one are in tension with 
another. We also ask that parties consider the impact of changes to the 
discount matrix on libraries, and we seek comment on what particular 
challenges libraries will face if we change the discount matrix.
1. Modifying the Discount Matrix
    105. To have sufficient funds to meet applicants' needs for high-
capacity broadband and equitably distribute funding across schools and 
libraries, we seek comment on whether we should gradually increase, 
over time, the minimum percentage of matching funds that E-rate 
applicants must provide when seeking support from the E-rate program. 
We seek comment on whether this would better serve--on a cost benefit 
basis--our statutory mandate to ``ensure affordable access to and use 
of'' E-rate services. We also seek comment on other possible changes to 
the discount matrix.
    106. Increasing applicants' matching requirement. Gradually 
increasing the minimum matching funds provided by applicants would 
broaden the availability of E-rate support. In funding year 2011, for 
example, USAC committed approximately $818 million in support for 
applicants at the 90 percent discount level, and $790 million in 
support for applicants at 80-89 percent discount levels. Thus, nearly 
two thirds of all funding went to applicants at these funding levels. 
Some previous commenters have suggested reducing the maximum discount 
rate to 80 or even 70 percent. If the maximum discount rate had been 80 
percent in funding year 2011, there would have been approximately $150 
million in funding to spread more widely to applicants who did not 
receive support for priority two services.
    107. Increasing the matching requirement could also encourage 
applicants to make more efficient and smarter decisions. In 2003, a 
USAC task force on the prevention of waste, fraud and abuse found that 
increasing the percentage of costs that schools and libraries pay for 
E-rate supported services would encourage more careful and cost-
efficient purchasing of E-rate supported services and would thereby 
reduce the risk of waste, fraud and abuse of E-rate funds. Therefore, 
it recommended requiring applicants to pay at least 20 percent of the 
price of priority two E-rate services. We seek comment on that 
analysis.
    108. More recently, Funds for Learning, an E-rate consultant, 
issued a report demonstrating that school districts with high discount 
rates spend, on average, far more on E-rate supported services than 
schools that have to pay a higher percentage of the costs of the 
supported services they purchase. We seek comment on that analysis and 
whether it supports a decision to reduce the maximum discount level. 
Funds for Learning also notes, however, that the majority of high-
discount schools are not, in its words, ``big spenders.''
    109. Recent changes to the Rural Health Care program provide an 
example of the potential benefits of reducing the maximum discount 
level. In adopting the Healthcare Connect Fund Order last year, the 
Commission required fund recipients to contribute 35 percent of the 
costs of the supported services. The Commission found that requiring 
recipients of Healthcare Connect funds to contribute 35 percent of the 
costs of services gave health care providers a strong incentive to 
control the total costs of the supported services and ``appropriately 
balances the objectives of enhancing access to advanced 
telecommunications and information services with ensuring fiscal 
responsibility and maximizing the efficiency of the program.''
    110. We anticipate several advantages to increasing the matching 
requirement even if we do so over time. For example, requiring the 
schools and libraries with the highest discount rate to pay for a 
greater share of their purchases could help drive down the purchase 
price for E-rate supported services. Applicants receiving substantial 
(80-90 percent) discounts have greatly reduced incentives to ensure 
they are receiving the lowest priced services or that they are getting 
only services they need. We also seek comment on the other benefits, as 
well as the drawbacks, to increasing schools' and libraries' minimum 
matching requirement for E-rate supported services.
    111. For any revisions we may ultimately make to the discount an 
applicant can receive for E-rate supported services, we propose to 
phase in such changes over some period of time, such as three years. Is 
this enough of a phase-in to allow applicants to adjust their requests? 
Does the length of the necessary phase-in depend on the extent of 
reduction in the maximum discount level? We seek comment on such a 
phase-in for each of the different suggested revisions noted above.
    112. Other modifications to the discount matrix. We also seek 
comment on other potential adjustments to the discount matrix to ensure 
that we can provide some funding to all eligible schools and libraries 
for all supported services. Should we, for example, reduce the lowest 
discount rate from 20 percent to 10 percent? How would that

[[Page 51611]]

change affect the ability of schools and libraries with the lowest 
number of students qualifying for free and reduced lunch to receive 
affordable high-capacity broadband? Should we reduce the top discount 
to 85 percent, 75 percent, or 65 percent? If so, should there be a 
reasonable transition period? Should we consider reducing each discount 
level by a set percentage, such as five percent or ten percent? We 
estimate that if all the discount rates were five percent lower in 
2011, USAC would have been able to distribute an additional $169 
million in priority two funding. We estimate that if all discount rates 
were ten percent lower, in 2011 USAC would have been able to distribute 
an additional $338.5 million in priority two funding. Would reducing 
the discount rate across the board result in a disparate impact on 
applicants depending on the discount level? What would the impact be if 
we reduced the number of discount levels? Would such a decision 
simplify the discount calculation process for applicants? Should we 
consider combining applicants at similar discount levels into a single 
discount level? Should we require all applicants eligible for a 
discount between 75 percent and 85 percent, for example, to apply using 
only an 80 percent discount? Should we have a flat rate discount, or 
one flat rate discount for rural schools and libraries and one for all 
other schools and libraries? Are there other ways to adjust the 
discounts applicants are eligible for? In order to encourage consortium 
purchasing, should we have a higher minimum discount rate for consortia 
applications than for individual school and school district 
applications?
    113. There are other possible ways to modify the matching funds 
requirement, and we invite commenters to offer other proposals. We also 
invite commenters to refresh the record on previous proposals. For 
example, in response to the E-rate Broadband NPRM, SECA proposed 
simplifying the discount matrix by setting applicants' discount rate at 
the sum of the applicant's NSLP discount percentage plus 20 percent for 
non-urban areas, and 25 percent for rural areas, up to a maximum 
discount rate. We invite comments on that proposal, and specifically 
seek comment on how such a change would affect applicants and the fund. 
What should the maximum discount rate be? Are there other ways that 
SECA's proposal should be adjusted?
2. Support Based on District-Wide Eligibility and Application by School 
District
    114. We seek comment on requiring all schools within a school 
district to submit applications by school district, rather than by 
individual school or groups of schools within the same discount, and to 
use the average discount rate for the entire school district rather 
than the weighted average for each school building. We also seek 
comment on whether all libraries located within a school district 
should use the school district's discount rate when calculating their 
discount rate.
    115. 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 discount 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 in an application 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. Each billed entity-the entity 
responsible for making payments directly to a service provider--must 
file a separate FCC Form 471 application to certify their eligibility 
to receive discounts on eligible services for eligible schools, 
libraries, and consortia of those entities.
    116. In the E-rate Broadband NPRM, the Commission sought comment on 
a proposal to revise the discount rules so that schools would 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. As the Commission observed in the E-rate Broadband 
NPRM, calculating discounts by individual school adds a significant 
level of complexity to the application process, because the discounts 
must be calculated separately by school and checked individually by 
USAC. Simplifying the discount percentage rate calculation across a 
school district could streamline the application process for school 
districts and reduce the administrative burden on USAC by no longer 
requiring USAC to verify each individual school's discount percentage 
rate. We also anticipate that applying one discount rate to all 
eligible schools in a school district could lead to more timely funding 
commitments from USAC. Additionally, the Commission stated that it 
could significantly reduce the amount of information necessary for 
Block 4 of the FCC Form 471 application and eliminate a billed entity's 
submission of multiple FCC Form 471 applications at different discount 
levels. Moreover, SECA argues that calculating discounts on a district-
wide basis better reflects schools' financial realities: tax bases are 
calculated on an entire district population, not just those of a subset 
of schools, and budgets are set district-wide. Allowing libraries 
located within a school district to use the school district's discount 
rate would also ease the administrative burden of such libraries.
    117. Accordingly, we propose to revise Sec.  54.505(b) of the E-
rate rules to read:
    School districts shall calculate discounts on supported services 
described in Sec.  54.502(b) by 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 
within the school district by the total number of students within the 
school district. This single discount percentage rate shall then be 
applied to the discount matrix to set a discount rate for the supported 
services purchased by all schools within the school district.

We seek comment on this proposed rule. We also seek comment on whether 
we should define ``school district'' for purposes of this proposal.

    118. We also propose below to change our definition of ``rural'' 
for purposes of the E-rate program to ensure greater funding to truly 
rural areas by using the U.S. Department of Education's NCES 
definitions. Currently, the definition of ``rural area'' is the same 
used by the U.S. Department of Health and Human Service's Office of 
Rural Health Care Policy (ORHP). Are there any school districts for 
which some schools would be differently classified as ``rural'' or not 
under our current or proposed definition? If so, we seek comment on 
whether to apply the rural discount if any schools in a district are 
considered to be located in a ``rural'' area or if a majority of the 
schools in a district are considered rural. Alternatively, should we 
consider partial rural discounts depending on the proportion of schools

[[Page 51612]]

that are rural, or other approaches? We recognize that there may be 
specific instances where adopting a district-wide discount rate may 
result in a lower discount for certain entities. We therefore seek 
comment on the impact of this proposal on schools and libraries.
    119. Additionally, in the E-rate Broadband NPRM, as part of its 
efforts to streamline the application process, the Commission sought 
comment on a proposal to require all schools and libraries that are 
part of the same school district to submit applications for priority 
two internal connections by school district, rather than by individual 
school. As the Commission stated in the E-rate Broadband NPRM, 
requiring schools to apply by school district would help streamline the 
process and simplify the discount calculation for schools as well as 
the review process for both applicants and USAC. Additionally, it would 
ensure that libraries receive funding for internal connections and at 
the same discount level as schools located within their school 
district. We thus seek comment on amending Sec.  54.504(a) of the E-
rate rules to read:
    An eligible school, library, or consortium that includes an 
eligible school or library seeking to receive discounts for eligible 
services under this subpart, shall, upon signing a contract for 
eligible services, submit a completed FCC Form 471 to the 
Administrator. All schools and libraries that are part of the same 
school district and seek priority two internal connections shall submit 
a completed FCC Form 471 to the Administrator as part of the school 
district in which they are located. A commitment of support is 
contingent upon the filing of an FCC Form 471.

We seek comment on this proposed rule.
    120. We also seek comment on whether we should require schools and 
libraries to submit applications for priority one services by school 
district. Commenters should address what, if any, additional burden 
such proposal may place on applicants. In addition, we seek comment on 
whether to limit applications for a school district to one for each 
category of service requested. For example, if the Commission retains 
the current priority one and priority two distinctions, an applicant 
could only submit two applications--one for each category. What are the 
advantages and disadvantages of such a requirement?
3. More Equitable Funding for Rural Schools and Libraries
    121. In order to ensure more equitable access to E-rate funding, we 
seek comment on whether we should further increase the discount rate or 
the amount of E-rate funds available for schools and libraries in rural 
areas or in remote rural areas. When the Commission created the E-rate 
program, it recognized that schools and libraries in rural areas would 
likely face higher costs for E-rate supported services, and therefore 
provided an additional 5-10 percent discount rate for rural schools and 
libraries that would otherwise receive a discount rate of 60 percent or 
less. E-rate has been crucial in supporting connectivity to rural 
schools and libraries. However, those schools and libraries in rural 
areas that also have a high percentage of students that qualify for 
free or reduced-price school lunches do not get an additional discount, 
even though there costs may be higher. We therefore seek comment on 
whether all rural schools and libraries, or those in remote-rural areas 
should receive additional E-rate support to recognize the unique 
challenges of providing services in rural, less dense areas.
    122. Conversely, some commenters argue that the Commission should 
adjust the discount matrix so that E-rate applicants with similar 
levels of participation in the national school lunch program receive 
the same discount percentage, regardless of the location. Given that 
most E-rate funding goes to schools and libraries that receive discount 
rates above 60 percent, and therefore the majority of E-rate funds USAC 
commits are not subject to the discount, is there value in simplifying 
how discount levels are established for all schools and libraries, as 
these commenters suggest? Should our approach differ for priority one 
and priority two services?
4. Setting Budgets or Limits
    123. In this section, we seek comment on whether we should impose a 
per-student or per-building budget, or similar limits, on funding for 
schools and libraries. Building on a recommendation of the 2003 USAC 
Task Force, Funds for Learning, an E-rate consultant that has analyzed 
USAC's data, has argued that appropriately-structured budgets on a per-
student or per-building basis could lead to more equitable and 
predictable distribution of E-rate funds by limiting the funding that 
is allocated to a small number of high-spending applicants. According 
to Funds for Learning, 2012 funding requests averaged $44.30 per-
student for priority one services across all applicants, but more than 
10 percent of applicants sought funding of at least $180 per-student 
for priority one services. Notably, four school districts in the 
nation's largest cities requested at least $240 per-student, and more 
than a dozen other applicants sought over $1,000 per student in total 
support in funding year 2012.
    124. Some variation in funding is not surprising because discount 
rates range from 90 percent to 20 percent. Moreover, the Commission has 
always recognized that schools and libraries across the country would 
have different needs and different challenges in purchasing E-rate 
supported services. Yet the Funds for Learning analysis of funding year 
2013 requests shows that applicants with higher discount rates also 
planned to spend significantly more per-student in pre-discount dollars 
for telecommunications and Internet access (priority one services). 
Those seeking 20-59 percent discounts plan $35.23 per-student in pre-
discount purchases of priority one services, while those seeking 60-79 
percent discounts plan $43.02 per-student pre-discount purchases for 
such services, and those seeking 80-90 percent discounts, $86.53 per-
student pre-discount purchases for such services. We also expect that a 
small rural school may have to pay more per-student for Internet access 
than a large urban school. However, Funds for Learning finds that some 
of the highest per-student costs are in urban areas, where competition 
should drive down prices. While the 2,360 applicants in large cities 
plan an average of $67.88 per-student in pre-discount purchases for 
priority one services for funding year 2013, the 4,987 applicants in 
large, medium, and small-size suburban schools plan per-student 
purchases of priority one services averaging only $40.76, $39.17, and 
$46.44 in pre-discount prices, respectively. Even the 3,129 applicants 
in ``rural: distant'' areas planned pre-discount purchases averaging 
only $65.35 per-student.
    125. In the E-rate Broadband NPRM, the Commission proposed a per-
student cap on annual priority two spending for schools of $15 per-
student per year. A $15 per-student cap would have limited the most 
disadvantaged schools to 90 percent of $15 in support, or $13.50 per-
student per year. Notably, this amount is less than half the average 
per student funding amount for priority two funding over the past five 
years. Commenters argued that the proposed cap failed to account for a 
number of factors that could affect applicants' needs.
    126. Having considered the record on that proposal, we now seek 
comment on whether we should consider a higher and more flexible per-
student limit, per-building limit or alternative forms of limits or 
budget on an applicant's E-rate funding. If we adopt a per-student 
limit or other form of limit for some or all

[[Page 51613]]

services, we seek comment on where we might set the limit. Should any 
limits we adopt include adjustments to reflect the higher costs faced 
by applicants in more expensive-to-serve locations, such as Tribal 
lands? Should any such adjustment be based on observed current costs, 
some relatively simple and reliable proxies for costs, or some other 
measure? Should limits be set relatively high, so as to serve as a 
check on excessive funding requests and help prevent a few applicants 
from securing so much funding that other disadvantaged applicants are 
crowded out, while leaving most applicants unaffected? Alternatively, 
should limits be set lower to more aggressively spread funding annually 
to disadvantaged applicants that have rarely, if ever, received funding 
for internal connections?
    127. We invite commenters to propose limits for either total annual 
funding, pre-discount requests, or for priority one and priority two 
purchases separately and ask commenters to explain their rationale for 
the limits that they recommend. We seek particular comment on Funds for 
Learning's most recent proposal calling for a per-student budget 
calculation. We note that we have sought comment on prioritizing 
broadband connectivity to and within schools and libraries, which 
could, among other changes, raise the per student cost of supported 
services for those schools and libraries seeking support for large 
installation and construction costs. How do we implement this 
prioritization of broadband connectivity while also instituting any of 
the potential funding limits? Should we consider excluding some costs 
from the limit, such as non-recurring installation and construction 
costs? Should we instead impose some other cap on costs related to the 
higher priority services?
    128. We realize that anything but a very high per-student limit 
could prevent the smallest schools and particularly those in remote 
areas of the country, such as schools on Tribal lands, from affording 
supported services. Is this an argument for using per-building caps for 
certain types of services instead? As we did in the E-rate Broadband 
NPRM, we also seek comment on whether there should be a minimum amount 
of E-rate support for which a school, library, or school district is 
eligible, irrespective of the number of students, and what it should 
be. If a minimum amount is established, how should we compute that 
minimum? Should we provide for different limits depending on the number 
of students at a school or in a school district? If so, what should 
those limits be? We also repeat our question about whether any limit 
should permit additional funding for rural applicants, either by 
establishing a higher limit for rural applicants or through some other 
mechanism.
    129. We also seek comment on how to set caps for libraries if we 
were to take either approach above for schools. The E-rate Broadband 
NPRM suggested that library demand might be capped at the level of the 
public school district in which they were located, but it also noted 
that it might be advisable to modify that approach. We seek comment on 
the best way to set caps on E-rate support for libraries, whether based 
on the cap for the closest public school district, the size of their 
patron population, or some other figure or figures.
    130. We are also particularly interested in any examples that 
commenters can offer of other funding programs in the United States or 
elsewhere that have used analogous per-customer caps effectively in 
other settings, for us to learn what might work best. We also welcome 
comments pointing us to examples of problems with funding caps that 
have arisen in other programs.
5. More Equitable Access to Funding for Internal Broadband Connections
    131. As described above, internal connections are needed to make 
effective use of high-capacity connectivity to schools. High bandwidth 
connectivity to a school or library serves little purpose if students 
and patrons inside are not able to use it effectively because internal 
wired and wireless connections are missing or insufficient. Yet today, 
few schools are able to receive support for internal connections. 
Indeed some commenters have argued that lack of internal connections 
funding--due to increasing restrictions on the availability of priority 
two support--have become a barrier to adoption of higher speed 
connections for many schools and libraries. In this section we seek 
comment on how to increase access to funding for internal connections.
    132. In order to provide more equitable access to priority two 
funding, in 2003 the Commission adopted a rule limiting each eligible 
entity's discounts receipt of discounts on internal connections to 
twice every five funding years (commonly referred to as the two-in-five 
rule). However, because requests for priority two funding exceed the E-
rate funding cap, there is wide-spread agreement that a relatively 
small number of applicants, those that qualify for the highest discount 
rates, receive priority two funding over and over again, while other 
applicants seldom qualify for priority two funding. Therefore, we seek 
comment on whether we should revise or rescind the two-in-five rule, 
and if so, what we should replace it with.
    133. SECA recently suggested that the Commission rescind the two-
in-five rule. Instead of using the two-in-five rule, SECA suggested 
that the Commission allow all applicants to receive funding on a 
rolling funding cycle. Under SECA's proposal, a different set of 
applicants would be eligible for priority two funding every year, until 
all applicants have been eligible for some priority two funding and 
then the cycle would start again. The benefit to the SECA approach is 
that it ensures all E-rate applicants have access to some priority two 
funding over time. If we continue to prioritize funding for some 
services over others, we seek comment on the approach offered by SECA.
    134. Eliminating the distinction between priority one and priority 
two. Other commenters appear to support replacing the current 
prioritization system with a ``whole networks'' approach, under which 
connectivity to schools and internal connections are funded together 
and all eligible services are given equal priority. Commenters argue 
that this approach would give schools the flexibility to focus E-rate 
funding on those portions of their network where upgrades are most 
needed--whether connection to the schools or internal connections. It 
could also eliminate incentives for vendors to re-characterize priority 
two services as priority one, or for schools to purchase more expensive 
priority one services--like cellular data connections- in lieu of 
cheaper priority two services, like internal wireless connections.
    135. We therefore seek comment on whether we should more 
fundamentally shift the way we prioritize E-rate support by eliminating 
the distinction between priority one and priority two services. Under 
this approach we would instead allow schools and libraries to choose 
from one consolidated menu of services. Would this approach allow more 
schools access to funding for internal connections? Would this 
additional flexibility be beneficial? If we instituted this proposal, 
how should we determine the amount of support that each school or 
library receives? And if we took such an approach, how would we 
prioritize among funding requests to the extent they exceeded the 
funding cap? Would such an approach necessarily require a per-student 
or per-

[[Page 51614]]

building limit, or other form of budget for individual applicants, as 
discussed above?
    136. Are there other changes we should make to the prioritization 
of services? For example, instead of consolidating the two existing 
priority levels should we create more priority levels than currently 
exist? If so, what should be in the various categories and how should 
we transition services between the current priority levels and any new 
ones? Are there any other approaches we should consider?
6. Simplified Allocation of Funds to All Schools and Libraries
    137. In this section, we seek comment on a more fundamental 
approach to changing the distribution of E-rate funding. Under this 
approach, we would eliminate the discount matrix and the priority 
system; instead, each eligible applicant would receive a fixed budget 
at the beginning of the funding year to spend on any eligible services 
of their choosing. In contrast to the existing system, whether or not a 
school or library receives funding would be determined at the beginning 
of the funding year; thus applicants could know the amount of funding 
available before committing to any particular project. We seek comment 
on this approach. We seek comment on the costs and benefits of this 
approach, how this approach would impact other proposals we have 
discussed herein, and whether it would further our proposed goals.
    138. If we adopted the simplified-allocation approach, we seek 
comment on how we should allocate such funds among eligible applicants. 
One method of allocating funding to schools would be to allocate funds 
to each school (or school district) on a per-student basis. Rural 
schools facing higher costs and schools serving low-income areas or 
student populations would receive additional funding for each student. 
Thus, a school serving a rural area might receive twice as much per 
student as a school serving an urban area, or a school located in an 
area with high poverty might receive twice as much per student.
    139. If we were to adopt a per-student allocation system, how much 
additional funding per student should rural schools receive? How much 
additional funding for schools serving low-income populations? Should 
these determinations be done on a bright-line basis (e.g., areas with 
poverty rates of more than 15 percent be classified ``low-income'' and 
those with less than 15 percent poverty ``high-income'') or should we 
use a sliding scale (such as adjusting funding based on median 
household income, poverty rate, or some similar metric)? Should there 
be additional allocations for schools in remote areas (such as schools 
in the northern villages of Alaska)? If so, what criteria should we use 
for determining which schools should be eligible for additional 
allocations? Should there be a minimum funding level (a floor) or a 
baseline funding amount for all schools? We also ask that commenters 
explain how this approach and any modifications they offer would affect 
schools' and libraries' ability to purchase the E-rate supported 
services they currently receive, those they receive no discount for 
today under the priority system, and those they are likely to need in 
the future in order to meet our proposed goals for the E-rate program.
    140. Under this system, how should the Commission allocate funds 
among libraries? For example, could we look at the number of patrons 
served by a library or the population it serves? Should we adjust the 
funding for libraries based on whether they are located in a rural or 
extremely remote area? Should we adjust the funding to reflect the 
wealth of the surrounding population? How do libraries determine the 
area they serve, and how could we adjust the allocation methodology to 
reflect the unique needs of libraries? Should we consider a per-
building funding amount for libraries? We also ask commenters to 
explain the impact of this approach, and of any modifications they 
offer, to libraries' ability to meet their connectivity needs.
    141. We also seek comment on how to allocate funding between 
schools and libraries. For example, should we look at the past 
allocation of distributed funds and reserve a similar proportion of the 
Fund for each group separately? Would allocating 90 percent of E-rate 
funding each year to schools and ten percent to libraries be a fair 
appraisal of historical spending patterns (or future spending needs)?
    142. We also seek comment on how the simplified-allocation approach 
might impact group applicants, including school districts and 
consortia. For example, under this approach, should school districts be 
required to report the number of students at each school or could the 
school district simply report the total number of students in the 
district? If the latter, how should we calculate the per-student 
allocation, on a school-by-school basis or using some district-wide 
averaging? How do we ensure that all schools in a district or a 
consortia benefit from E-rate support? Would the fact that vendors know 
the budget of each school, school district, or consortium impact the 
ability of districts and consortia to drive down prices by aggregating 
demand?
    143. In turn, how might this proposal impact consortia? Today, 
funding for priority two services is determined in part by the student-
weighted average discount-level of consortium applicants. Does that 
system impact priority two requests, given that a lower discount might 
prevent a consortium from receiving any funding at all? Under the 
simplified-allocation approach, each school or library in a consortium 
could know up front the number of E-rate dollars it can bring to the 
table, and each consortium could prioritize its spending as it sees 
fit. Would that knowledge aid or inhibit the formation of consortia?
    144. If we adopted the simplified-allocation approach, what sort of 
matching requirements should we include to ensure that applicants spend 
E-rate funds prudently? As discussed above, just last year the 
Commission found that requiring recipients of Healthcare Connect funds 
to contribute 35 percent of the costs of services gave applicants a 
strong incentive to control the total costs of the supported services 
and ``appropriately balances the objections of enhancing access to 
advanced telecommunications and information services with ensuring 
fiscal responsibility and maximizing the efficiency of the program.'' 
Could a lower matching funds requirement, such as requiring E-rate 
applicants to pay one dollar for every three E-rate dollars they 
receive, serve the same purposes for schools and libraries that depend 
on the E-rate program? Would such a requirement deter wasteful 
spending? Would a flat 25 percent matching requirement give applicants 
sufficient incentive to control the costs of supported services? Would 
the fact that they have a specific budget encourage some applicants to 
spend more money than they might otherwise, or would a specific budget 
aid schools in long-term planning and prudent spending? How would a 
flat 25 percent matching requirement impact schools' and libraries' 
ability to afford high-capacity broadband given that current 
contribution requirements range from 10 percent to 80 percent? Would it 
impose a hardship on certain schools, such as schools with few 
resources and facing extreme costs? If so, should there be an 
alternative matching requirement for such schools and under what 
circumstances?
    145. We seek comment on the relative fairness to recipients of this 
approach

[[Page 51615]]

versus the current system or other options we seek comment on in this 
Notice. We seek comment on whether, under this approach, recipients 
would benefit from a more stable, and predictable level of support from 
year to year. Would such stability aid in long-term planning? We also 
seek comment on whether there are ways to implement this approach that 
would ensure that poor, rural schools and libraries that do not 
currently have access to high-capacity services get them.
    146. Would the simplified-allocation proposal give local schools 
and libraries additional flexibility to meet their diverse needs, 
allowing some to prioritize higher-capacity circuits and others to 
prioritize connecting classrooms or deploying Wi-Fi? For example, could 
we retain support for basic maintenance and other services since 
funding availability will no longer depend on the specific services 
ordered by other schools and libraries?
    147. One of the proposed goals is streamlining the administration 
of the E-rate program. We seek comment on whether adopting the 
simplified-allocation approach would further that goal or hinder it. 
For example, could we consider eliminating all or portions of our 
competitive bidding rules, and if so which ones? Under this approach, 
would schools and libraries' incentives to watch over their E-rate 
funds increase sufficiently to allow us to eliminate the 28-day waiting 
period? Should we eliminate the price as the primary factor requirement 
for competitive bidding? If we eliminate some or all of our competitive 
bidding requirements, should we continue to require applicants to 
conduct fair and open competitive bidding processes? How should we and 
USAC determine whether applicants' processes have been conducted in an 
open and fair competitive manner? How can we best protect against 
waste, fraud and abuse under the simplified-allocation approach?
    148. We also seek comment on other administrative issues under the 
alternative funding approach. Should we eliminate FCC Forms 470 and 471 
and replace them with a single-page form that requires the school or 
library to identify contact information, certify compliance with 
federal rules, and certify the number of students/patrons served? Would 
that initial application need to be filed several months before the 
start of the funding year (as FCC Forms 470 and 471 are today), or 
could the initial application be filed after the funding year begins? 
Could we eliminate the requirement that applicants for internal 
connections funding file technology plans? Could USAC bear a greater 
part of the burden of calculating funding amounts for applicants to 
simplify the process for them? If so, after that initial application, 
USAC could provide the school with the total amount of funding 
available in a commitment letter and the school would have the 
flexibility to spend that funding on any eligible service. Are there 
other forms, deadlines, or requirements, such as the technology plan 
and technology-plan-review process, that we could eliminate? To 
actually receive money, could a school submit invoices or other proof 
that it has paid and received particular services? Would this approach 
reduce the time between funding commitments and disbursements? Why or 
why not, and by how much?
    149. What sort of reporting requirements would work best under this 
proposal? How can we best ascertain that applicants actually purchased 
supported services and that they are being properly used? Should we, 
for example, require a school district superintendent or school 
principal to certify under oath that all supported services are being 
used to benefit students. Would such a certification make sense at the 
beginning of the E-rate funding process (such as on FCC Form 471) or at 
its end (such as on FCC Form 486)? Should libraries be subject to a 
similar certification requirement? For example, should libraries be 
required to certify that E-rate funds are being used to benefit their 
patrons? Would the head librarian be the appropriate representative for 
such a certification?
    150. If we adopted this approach, how could we phase it in over 
time to give applicants time to adjust? Or would this approach require 
sufficiently fundamental changes in the program that a flash cut would 
be required?

C. Lowering New Build Costs and Identifying Additional Funding To 
Support Broadband to Schools and Libraries

    151. In this section, we seek comment on what additional steps the 
Commission should take to ensure that there are sufficient funds to 
meet the connectivity needs of students, teaching staff, and libraries.
    152. Public-private partnerships. Are there steps the Commission 
could take to improve the private sector business case for deploying 
fiber to schools and libraries, or otherwise expanding connectivity, 
and thereby reduce the need for E-rate funding? For example, are there 
steps the Commission could take to facilitate use of new fiber runs for 
multiple business objectives, such as backhaul for cell towers or 
service to other enterprise users, and thereby incent greater sharing 
of new construction costs? Could waiving, forbearing from, or reducing 
certain otherwise-applicable requirements in conjunction with new 
infrastructure builds to schools and libraries help lower costs and 
therefore extend the reach of E-rate funding? Should the Commission 
condition certain forms of E-rate funding on changes in local 
permitting practices or other state and local policy changes (e.g., 
state and local dig-once initiatives) to help reduce new build costs? 
What impact would such a policy have on schools and libraries on 
federal or other trust lands, such as Tribal lands? How can the 
Commission best coordinate with and support state, local, and Tribal 
government efforts to increase broadband access to schools and 
libraries? Are there other Commission rule changes that would 
facilitate coordination or support state and local efforts?
    153. We also seek comment on other potential public or private 
sources of funding and how the Commission could help encourage the 
deployment of such funding to meet school and library needs. For 
example, in addition to the possible changes to the discount matrix 
discussed above, could the Commission make certain types of E-rate 
support, or E-rate support above certain amounts, conditional on state, 
local, Tribal, or private funds above the otherwise-required school or 
library 10-80 percent contribution? Would a larger emphasis on matching 
funds help recruit additional funding from state, local, or private-
sector sources? Would it disproportionately benefit schools with 
greater means or higher-income student populations? What impact would 
such an approach have on schools and libraries located on Tribal lands? 
Should schools and libraries operated by the Bureau of Indian Affairs 
or individual Tribal governments be exempt from such a requirement?
    154. Are there other steps the Commission could take to encourage 
public-private partnerships to promote our proposed E-rate goals? For 
example, Verizon suggests that its Verizon Foundation Innovative 
Learning Schools program, which focuses on teacher training and 
professional development for select schools nationwide, complements E-
rate but sometimes faces challenges with respect to E-rate gift rules. 
We seek comment on whether there are ways that E-rate could allow 
schools and libraries to take greater advantage of private philanthropy 
while still allowing the

[[Page 51616]]

Commission to maintain appropriate control over E-rate expenditures and 
to prevent improper influence over E-rate service provider selections.
    155. Coordination with other universal service programs. We also 
seek comment on whether greater coordination of E-rate funding with 
funding from other universal service programs could multiply the impact 
of these other programs to support the goals of E-rate. In the USF/ICC 
Transformation Order, 76 FR 78384, December 16, 2011, the Commission 
adopted broadband service obligations for eligible telecommunications 
carriers (ETCs) that receive high-cost support. The Commission noted 
that it expected ETCs to engage with community anchor institutions, 
which include schools and libraries, in the network planning stages 
with respect to the deployment of Connect America-supported networks. 
Both price cap and rate-of-return ETCs that receive high-cost support 
are already required to include in their annual reports the number, 
names and addresses of community anchor institutions to which the ETC 
newly began providing access to broadband service in the preceding 
calendar year.
    156. We seek comment on how to minimize any overlap in funding for 
broadband, while extending the reach of both programs to support the 
deployment and adoption of broadband by E-rate applicants? How can we 
best ensure and encourage the two support mechanisms to achieve our 
universal service objectives, including the goals identified herein? 
For example, should we consider what portion of deployment should high-
cost funding support and what portion should E-rate support? Would it 
be useful to specify that certain costs--such as construction charges 
to extend fiber to the school or library property line--are funded by 
high cost, and other costs--such as recurring charges for broadband 
service--are funded by E-rate? What measures should we adopt to ensure 
that there is no duplicative funding of the same facilities or services 
from the two programs?
    157. The Commission has concluded that a forward-looking wireline 
cost model will be used to determine support to be offered to price cap 
carriers. After the model is finalized and adopted for Phase II 
purposes, should we consider how it might be used or modified to assist 
in determining the cost of providing fiber-based broadband to the E-
rate applicants in the relevant geographic area? Could we use a model-
derived cost to establish a benchmark for the prices an E-rate 
applicant should pay for broadband? Should we instead consider a model-
derived cost--with the relevant E-rate discount applied--as a cap on 
the amount the E-rate program will fund for such broadband?
    158. We also ask for comment on how we can maintain the core 
requirements and procedures in the E-rate program if we closely 
coordinate support with other universal service programs. How could we 
implement some of these ideas while maintaining the framework of the 
existing competitive bidding requirements for the E-rate program?
    159. In the Healthcare Connect Fund Order, the Commission allowed 
an exemption from the rural health care competitive bidding obligations 
for health care providers entering into a consortium with E-rate 
participants. Should we consider a similar accommodation for applicants 
to the E-rate program?
    160. Funding the proposed goals through E-rate. In this Notice, we 
seek comment on various approaches to refocusing or reprioritizing 
funds, or adjusting the support levels for certain services, as well as 
other proposals that will reduce costs while better targeting support 
to help schools and libraries get the connectivity they need. We seek 
comment on whether, in concert with these changes, enough funding will 
be saved or preserved to enable the E-rate program to meet our proposed 
connectivity goals within the existing E-rate funding cap. Recent 
reforms to the other USF programs were achieved without having to 
increase the overall size of the USF. For example, the Commission 
established a budget for the Connect America Fund and a savings target 
for the Lifeline program. Also, the Commission recently reformed the 
Rural Health Care program to encourage consortium applications, 
increase eligibility in covered services and provide applicants more 
flexibility in renewing multi-year contracts. We ask commenters to 
identify the funding that could become available as a result of the 
reforms suggested in this NPRM and whether these reforms will result in 
sufficient cost savings to the E-rate program to meet our proposed 
program goals.
    161. Alternatively, we seek comment on whether a temporary increase 
in the E-rate cap is necessary to reach our goals and ensure high-
capacity broadband connectivity to and within schools? If we were to 
authorize such a temporary increase, should we modify our rules to 
focus the temporary funds on providing services related solely on high-
capacity broadband connectivity? What services should be eligible for 
support under such a short-term program? How much short-term funding 
would be needed to connect all or virtually all schools to 
infrastructure or other connectivity sufficient to meet their needs? 
How much short term funding, and over what period of time, would be 
needed to provide robust internal connections sufficient to take 
advantage of the high-capacity broadband connectivity to schools and 
libraries? Should any such funding be allocated using the generally 
applicable discount matrix, application process, timeline, and other 
rules, or should we consider modifications, for example to accelerate 
availability of funding for upgrades? If we consider a temporary 
increase in E-rate funding to upgrade school and library connections 
for digital learning, should we limit participation to only some 
category of applicants, such as only regional consortia?
    162. Should we instead consider a more permanent change to the cap 
to achieve the goals of a modern E-rate program? When the Commission 
adopted the $2.25 billion cap 16 years ago, it recognized that it was a 
best efforts attempt to estimate what the demand would be for 
telecommunications and Internet access services by schools and 
libraries. Commenters advocating an increase in the cap emphasize that 
every funding year applicants have requested more than is available in 
E-rate support. They further argue that because of the effects of 
inflation and the growth in the number of students in our nation's 
schools, the actual purchasing power of the E-rate program declined by 
nearly one third from the start of the program in 1998 to today. We 
seek comment on these arguments.
    163. Also, under either a temporary, long-term or permanent 
approach to providing additional funding, would it make sense to 
initially provide funding to a small group of schools and libraries on 
a competitive basis with the goal of developing best practices and 
cost-effective approaches to building out high-capacity broadband 
services? Are there other ways to use competitive approaches to 
maximize the impact of funding?
    164. We also seek comment on the appropriate role for the Federal-
State Joint Board on Universal Service in providing the Commission with 
advice and guidance on any temporary, long-term or permanent approach 
to providing additional funding for the E-rate program. For example, if 
we consider any increase in E-rate funding, should we first seek the 
opinion of the Joint Board regarding the necessity and the amount of 
the increase?

[[Page 51617]]

IV. Maximizing the Cost Effectiveness of E-Rate Funds

A. Increasing Consortium Purchasing

    165. In the Universal Service First Report and Order, 62 FR 32862, 
June 17, 1997, the Commission envisioned that allowing schools and 
libraries to participate in consortia would aggregate demand to 
influence existing carriers to lower their prices and promote efficient 
use of shared facilities. The Commission expected that consortia would 
be particularly important in rural regions to negotiate lower rates as 
well as secure efficiencies. Today, there are more than 400 consortia, 
representing more than 9,400 schools and libraries (which include 
schools in more than 800 school districts), participating in the E-rate 
program. Every state in the nation has at least one consortium and many 
states have multiple consortia.
    166. At the same time, in funding year 2011, consortium purchasing 
accounted for only about $300 million of E-rate funds committed by 
USAC, or about 13 percent of all E-rate funds disbursed. In the recent 
Healthcare Connect Fund Order the Commission found that bulk purchasing 
by consortia helped drive down service rates, increase bandwidth, 
improve service quality and reduce administrative overhead. We 
therefore seek comment on whether we should adopt additional incentives 
or mechanisms to facilitate the use of consortium purchasing in the E-
rate program. In particular, we are interested in ways that consortium 
purchasing can drive down prices and otherwise benefit applicants and 
the E-rate fund.
    167. We also seek comment on whether there are legal, geographic or 
other barriers preventing certain schools and libraries from taking 
advantage of consortium purchasing. Are there ways in which our rules 
prevent or discourage participation by applicants who might otherwise 
join a consortium? We invite commenters to identify specific amendments 
we can make to our rules to ensure that applicants can join or form 
consortia.
    168. Are there other actions the Commission can take to remove 
barriers to participation in consortia? We recognize that not all 
applicants choose to join a consortium and we therefore ask about the 
factors that contribute to an applicant's decision to join or not to 
join a consortium. In particular, we seek comment from applicants on 
how they weigh the administrative benefits of joining a consortium in 
the E-rate program against the burdens the program imposes today. We 
seek comment on whether there are consortia-friendly application 
processes that would minimize the administrative burden on applicants 
and USAC. Should we, for example, prioritize consortium applications in 
the USAC review process? Should we allow for prioritization for all 
consortia or only those that, for example, include the neediest schools 
and libraries? In what ways should we streamline the consortia review 
process? What steps should we take to avoid disadvantaging schools and 
libraries unable to participate in consortia, such as some schools and 
libraries on Tribal lands?
    169. We also seek comment on whether particular types of services 
lend themselves better to consortium purchasing. For example, we note 
that while schools and libraries might join consortia for broadband 
access, they might apply independently for internal connections. In 
particular, we seek comment on whether consortia are effective vehicles 
for driving down specific costs, such as equipment purchases or 
broadband access.
    170. We seek comment on whether our consortium procedures have 
different impacts depending on the composition of the consortia. For 
example, are there disparate impacts between consortia that include 
only schools, or only libraries, or both schools and libraries? Is the 
formation of consortia impacted by potential disparities in discount 
levels? Are consortia that include other entities such as health care 
providers and/or public sector entities such as state colleges and 
universities, educational broadcasters, counties, and municipalities 
impacted in different ways? While we seek comment on these consortia 
configurations, we also open the inquiry to whether there are other 
entities that join with schools and/or libraries to create consortia 
and whether there are specific impacts on those consortia. Given the 
potential efficiencies of broadband networks that serve multiple types 
of anchor institutions, are there steps we can take to facilitate the 
formation of consortia that extend beyond schools and libraries?
    171. Finally, while we are eager for schools and libraries to 
secure the many benefits that consortia can provide, we are mindful 
that aggregation of applicants can also diminish competition. We seek 
comment on whether service providers who would compete to serve some of 
the entities in a consortium might not bid if they could not serve the 
entire consortium. As a result, a larger consortium could leave a 
single bidder facing little pressure to pass on any reduced costs to 
applicants. We seek comment on what the Commission might do while 
encouraging cost-saving consortia so as to minimize, if not avoid, 
negative effects on competition.

B. Encouraging Other Types of Bulk Buying Opportunities

    172. We seek comment on how best to encourage other types of bulk 
buying of E-rate supported services. Currently, consortia are one of 
many ways that E-rate applicants aggregate demand for E-rate supported 
services in order to reduce prices and procure necessary services. In 
some cases, E-rate applicants purchase from state master contracts, 
which offer prices, terms and conditions negotiated by a state on 
behalf of a wide range of public institutions within that state. In 
many places, state or regional research and education networks (R&E 
networks) are also available and offer bulk purchasing opportunities 
for applicants. In other cases, E-rate applicants may be able to take 
advantage of regional contracts managed by public, non-profit or 
private entities that also aggregate demand and manage the procurement 
process. Should applicants be required to purchase from these state 
master or regional contracts in which they may participate, unless they 
can receive the same services for a lower price? We seek comment on the 
benefits and burdens of these and any other methods that E-rate 
applicants currently use to aggregate demand for E-rate supported 
services and request that commenters provide data on how effective such 
approaches are for driving down prices and creating administrative 
efficiencies for E-rate applicants. We also invite applicants to 
identify and comment on other methods of bulk buying that exist outside 
the E-rate program and whether such methods could be successfully 
adapted to the E-rate program.
    173. We also seek comment on whether the Commission, working with 
USAC or some other entity, should create a formal bulk buying program 
for E-rate supported services. If so, are there specific products or 
services that such a program should cover? For example, are there 
certain products, like wireless routers, that are standard or common to 
school and library networks nationwide? Generally, how would such an 
initiative work within the structure of the current E-rate program? How 
would such a program appeal to applicants?
    174. If we adopt a bulk buying program, should we amend our rules 
so that purchases made using the program would be exempt from our 
competitive bidding requirements? Would we incentivize participation by 
preempting

[[Page 51618]]

all or some of the USAC review processes for applicants who purchase 
through the bulk buying program? How should we treat applicants who 
purchase products and services that are available through the bulk 
buying program, outside of the bulk buying program? Should we, for 
example, treat the prices available through such a bulk-buying as the 
maximum price for which an applicant can seek support?
    175. On the other hand, are there benefits to consortium membership 
or independent purchasing that could be lost if we were to encourage 
alternative bulk-purchasing arrangements? By suggesting one bulk buying 
option, we do not intend to foreclose others, and seek comment on other 
options.
    176. We also seek comment on whether E-rate applicants can lower 
costs by aggregating data traffic. As we noted earlier, many schools 
and libraries use district-wide or regional WANs to provide broadband 
connectivity between buildings. Similarly, state R&E networks can 
provide high capacity routes from major locations within a state, 
relying on national networks for long-distance connections and local 
connections to reach smaller communities and buildings within a 
community. By partnering with WANs or R&E networks and aggregating 
Internet traffic, schools and libraries may be able to further drive 
down prices. E-rate applicants may also work with WANs and R&E networks 
to purchase circuits and network equipment in bulk and to take 
advantage of knowledge and relationships with commercial service 
providers. We seek comment on policies that we can adopt to encourage 
E-rate applicants to leverage these other networks to lower prices.

C. Increasing Transparency

    177. We also propose to increase the transparency of E-rate 
spending and specifically the prices E-rate applicants pay for service. 
Increasing such transparency may aid oversight of the E-rate program 
and drive down the prices of E-rate supported services. We seek comment 
on directing USAC to publish more granular information about E-rate 
spending and on how to collect such information. We seek comment on 
whether increasing price transparency will result in schools and 
libraries paying less for E-rate supported services and on ways we can 
assist in making prices for E-rate supported services more transparent. 
More specifically, we propose options for informing schools and 
libraries about the prices at which service providers are willing to 
offer for E-rate supported services. We seek comment on the options we 
propose and invite commenters to offer other suggestions.
    178. Transparency of E-rate spending. We seek ways to increase 
transparency with respect to how E-rate funds are allocated and spent. 
The National Broadband Plan, for example, recommended that we ``collect 
and publish more specific, quantifiable and standardized data about 
applicants' use of E-rate funds.'' We accordingly seek comment on 
whether USAC should be required to create a Web site where any American 
could easily look up the details of how any participant in the E-rate 
program had used its funds in any given year. How should such 
information be organized? At what level of detail should it be 
reported? Would such a Web site provide valuable information to 
parents? Would it encourage officials to spend money more wisely? How 
else can we increase the transparency of E-rate spending, including the 
access that local journalists, school boards, librarians, city 
governments, and parents have on how E-rate funds are allocated and on 
what they are spent?
    179. Below we seek comment on ways to streamline the E-rate 
application process. In line with that discussion, how can we minimize 
the reporting burden on schools and libraries while maximizing the 
insight the American public has into the spending of E-rate funds? For 
example, schools report certain characteristics such as the number of 
classrooms connected on the current Form 471, but that information must 
be reported before a school has completed a project and before a school 
has even received a commitment of funding. Could we reduce this burden 
by instead requiring the disclosure of relevant information (such as 
capacity leased or wireless access points purchased) on the back-end as 
part of the invoicing/payment validation process (perhaps as part of 
Form 486)? Should we require such reporting in a standard format or 
allow or encourage a fuller description? In short, can we 
simultaneously increase the transparency of E-rate spending while 
reducing the burden on applicants?
    180. Transparency of prices available for E-rate supported 
services. We seek comment on how best to increase the transparency of 
prices for E-rate supported services. Are there publicly available 
online forums, blogs or other media, where schools and libraries can 
share information about the best prices and deals for E-rate eligible 
services? If not, or if currently available information is 
insufficient, we seek comment on what role, if any, the Commission or 
USAC should have in operating, hosting or endorsing Web sites or other 
ways of encouraging service providers to share pricing information with 
E-rate applicants, and facilitate price comparisons. We invite 
commenters who have experience with other information exchanges to 
comment on examples of what does or does not work in other contexts, 
and whether there are models we should look to in unrelated markets or 
other countries.
    181. Transparency of prices being bid for E-rate supported 
services. Our competitive bidding rules require applicants to publicly 
seek bids for E-rate supported services, but our rules do not require 
applicants or service providers to make the responses to those bids 
public. Should we consider making bid responses public or at least 
accessible to other E-rate applicants? Would it be advisable to release 
this information only after the applicant has selected a vendor for the 
requested services? Are there any state laws, court orders, or 
contracts expressly prohibiting such disclosure? If we do require 
public disclosure of bid responses, what is the best format and timing 
for making such responses public in order to maximize the usefulness of 
such information to other E-rate applicants? To what extent would 
publicizing such bids drive down prices, both with respect to specific 
applications and more generally? On the other hand, is there a risk 
that public bid responses inflate bid prices for E-rate supported 
services by, among other things, discouraging providers from bidding to 
provide E-rate supported services? Could such disclosure facilitate 
tacit collusion to restrict competition through coordinated pricing, 
market allocation or other approaches that would inflate the price or 
reduce the quality of E-rate supported services? We also seek comment 
on the degree to which state, local, and Tribal laws currently require 
the disclosure of bid responses for E-rate supported services, and 
whether service providers can and do limit any such public access.
    182. Transparency of actual purchase prices. As an alternative to 
requiring public disclosure of all bids to provide E-rate services, we 
seek comment on making available the prices applicants are paying for 
E-rate supported services. We note that applicants currently provide 
that information to USAC. We seek comment on whether we should direct 
USAC to permit public access to FCC Form 471, Item 21 information or 
any other information provided by either applicants or service 
providers participating in the E-rate program. Are there any state 
laws, court orders, or

[[Page 51619]]

contracts that would prohibit such public disclosure? Should we limit 
disclosure of pricing information to other E-rate applicants? We also 
seek comment on whether requiring public disclosure of the prices 
applicants actually pay for E-rate supported services create a more 
effective competitive marketplace for those services and products, or 
might service providers eschew participation to shield their prices 
from public view. Could such disclosure facilitate tacit price fixing, 
bid rigging or market allocation schemes, thus inflating the price of 
E-rate supported services? In the alternative, do commenters believe 
that publicly displaying prices may encourage more service providers to 
approach individual schools and libraries with lower prices and 
discourage participation in consortia or other aggregate buying groups? 
Might transparency of pricing also help ensure that providers are 
complying with the Commission's lowest corresponding price rule?
    183. Finally, we note that Sec.  54.501(c)(3) of our rules requires 
service providers to ``keep and retain records of rates charged to and 
discounts allowed for eligible schools and libraries--on their own or 
as part of a consortium. Such records shall be available for public 
inspection.'' We seek comment on the extent to which applicants can and 
have availed themselves of that provision of our rules to determine the 
prices paid by other applicants for E-rate supported services. We also 
seek comment on the benefits and shortcomings of that provision of our 
rules and whether we can and should amend it to increase pricing 
transparency in order to drive down prices of E-rate supported 
services.
    184. Greater Assistance to Schools and Libraries. We also seek 
comment on whether the Commission, USAC, or other entities should take 
a more active role in assisting applicants in identifying cost-
effective purchasing options. The Commission previously directed USAC 
to develop a pilot program testing an online list of internal 
connections equipment eligible for discounts. USAC has not updated the 
database in some time in part because keeping the list current imposed 
significant administrative burdens on both USAC and vendors. We propose 
to terminate that pilot program and we invite participants to comment 
on how the Commission can transition to a more effective system to 
provide more transparent price information for applicants. For example, 
should we direct USAC to establish an office to help applicants 
identify the best prices for E-rate eligible services and products? 
Such an office could be staffed by consultants with expertise in 
configurations of educational technologies and the best prices and 
service providers, and could mine the USAC E-rate databases to identify 
and publicly disclose attractive prices, terms and conditions for the 
products and services. We seek comment on the likely cost of providing 
that sort of expert assistance and whether the benefits of such an 
undertaking would outweigh its costs. We also ask whether we can, or 
should, limit access to this pricing data to participants in the E-rate 
program.
    185. If we adopt such an approach, should we amend our rules so 
that applicants who chose a product or service at the price posted on 
the Web site would be exempt from any additional competitive bidding 
requirements for such purchases? We seek comment on ways to implement 
such a proposal. How should the office identify best terms? What 
criteria should the office use to filter the information?
    186. We also seek comment on whether we should direct USAC to 
employ a team of technical experts who could assist applicants in 
planning and designing cost-effective networks? Is there a need for 
such assistance? What are the costs and benefits of housing a team of 
technical experts at USAC? How should such a team prioritize its work 
to be most beneficial to schools and libraries and help drive 
efficiencies in E-rate purchasing?
    187. Are there entities other than the Commission or USAC that 
could perform this function? For example, could USAC or the Commission 
assemble a list of school chief information officers or other officials 
from better-resourced districts that could serve as advisors to smaller 
or lower-resourced districts? Are there other approaches the Commission 
should take to ensure schools are planning to efficiently and 
effectively meet their needs?

D. Improving the Competitive Bidding Process

    188. To maximize the cost-effectiveness of purchases made using E-
rate funds, we seek comment on the current competitive bidding process, 
and ask how the Commission can reduce the number of E-rate recipients 
that do not receive multiple bids, and whether the lowest corresponding 
price rule helps ensure that E-rate recipients receive cost-effective 
prices. While USAC does not collect comprehensive information about the 
quantity or quality of the bids received, there is anecdotal evidence 
that a substantial number of E-rate applications receive one or no 
viable competitive bids. We seek comment on whether the current 
competitive bidding process typically results in multiple competitive 
bids, and ask commenters to elaborate on the characteristics of 
recipients that do not ordinarily receive multiple bids. We also seek 
comment on whether the current competitive bidding process continues to 
address the needs of the schools and libraries program, or if a 
different application process would better suit applicants' needs. We 
specifically request that commenters discuss how the current 
competitive bidding process and any proposed processes ensure that 
schools and libraries are selecting the most cost-effective services to 
meet their unique needs, that service providers are offering the lowest 
prices available, and that we continue to minimize waste, fraud, and 
abuse in the program.
    189. FCC Form 470. We also seek comment on how we can ensure that 
applicants select cost-effective services in situations in which no 
entity, or only one entity, responds to a FCC Form 470 posting. Under 
the competitive bidding requirements, eligible schools and libraries 
that wish to receive support for discounted services must submit an FCC 
Form 470 to USAC. The FCC Form 470 describes the applicant's needs and 
notifies service providers of the applicant's intent to contract for 
eligible services. After the FCC Form 470 has been posted to the 
Administrator's Web site for 28 days, the applicant may contract for 
the provision of services and file an FCC Form 471, requesting 
discounts for the services. In some situations, however, there may be 
only one service provider capable of, or willing to, provide the 
requested service. How can we ensure that the prices for such services 
are reasonable, and do not waste scarce universal service funds? Should 
we adopt bright line rules that would impose limits on the amount of 
discounts available in such situations, or would that unfairly penalize 
applicants in areas where there are limited numbers of service 
providers (e.g. on Tribal lands)?
    190. Currently, if an FCC Form 470 filer receives no bids, the 
applicant is allowed to solicit bids from service providers. Should the 
Commission create separate requirements for E-rate applicants that 
receive no bids from service providers to ensure that services are 
procured at reasonable prices? Are there steps we should take to avoid 
imposing additional administrative burdens on schools and libraries 
located in areas in which there is no

[[Page 51620]]

competition for supported services, such as some Tribal lands? Are 
there resources available at the state or regional level that could 
assist these filers in finding vendors to provide E-rate-supported 
services at reasonable rates? For instance, we have anecdotal evidence 
that E-rate applicants may be unaware of state master contracts or 
cooperative purchasing organizations, such as the Western States 
Contracting Alliance, that could be beneficial to them. Should USAC 
post guidance on its Web site or take other steps to assist E-rate 
applicants in finding these resources? Should applicants be required to 
certify that they have reviewed state master contracts before selecting 
a vendor?
    191. We also seek comment on whether the current system of applying 
for discounted E-rate services provides potential vendors enough 
information to formulate bids. We seek comment on whether the FCC Form 
470 is the proper tool for adequately informing vendors of the services 
schools and libraries are seeking through the E-rate program. Does the 
format of the FCC Form 470 limit the pool of service providers seeking 
new business? Is the information provided on the FCC Form 470 sometimes 
so broad or narrow as to limit the number of vendors that could 
reasonably respond to the posting? The Commission has previously found 
that an overly broad or generic FCC Form 470 posting may stifle 
competition among service providers. In the Ysleta Order, 69 FR 3349, 
January 23, 2004, the Commission clarified that such broad FCC Forms 
470 are not consistent with our rules and that the FCC Forms 470 should 
mirror the level of complexity of the services and products for which 
discounts are being sought.
    192. Our rules require E-rate applicants to ``conduct a fair and 
open competitive bidding process,'' as spelled out in our rules. Our 
rules also require E-rate applicants to comply with state and local 
competitive bidding requirements. We seek comment on whether we should 
exempt certain applications or applicants from the E-rate competitive 
bidding rules on the basis that they are complying with state and local 
competitive bidding requirements. Commenters should identify the 
criteria they recommend using for selecting which applications or 
applicants should be exempt from our competitive bidding requirements, 
and how we can assure that such an exemption does not increase the 
opportunity for waste, fraud, and abuse, and, if so, what criteria 
should be used for any exemptions. If we adopt this exemption, should 
we limit it to purchases below some threshold? What should that 
threshold be? We seek guidance on providing USAC a practical, reliable, 
and minimally burdensome way to confirm that the applicants claiming 
such an exemption had actually complied with these procurement 
processes. We also seek comment on what USAC should consider as 
sufficient documentation of compliance with state or local procurement 
rules. Further, we seek comment on whether we might consider a de 
minimis exemption. For example, if an applicant's total annual E-rate 
purchases fall below some minimal threshold, should that applicant be 
exempt from the competitive bidding requirements? What should that 
threshold be?
    193. Many states negotiate state master services agreements (State 
MSAs) for services eligible for E-rate support. Should we allow 
applicants to purchase off a State MSA without the applicant or the 
State MSA having gone through our competitive bidding process? What are 
the benefits and burdens of such an approach? If a State MSA offers 
purchasing options for the same or functionally equivalent products or 
services at different prices, should we require an applicant select the 
lowest price offering if it wants to select off the State MSA and be 
exempt from our competitive bidding rules? In the alternative, under 
such circumstances should we require applicants to follow currently 
required process and evaluate all the options on the State MSA using 
price as the primary factor in selecting a vendor? We note that some 
State MSAs do not contain specific prices for goods and services, under 
those circumstances we would not be inclined to provide E-rate support 
for goods and services purchased off a State MSA, and we seek comment 
on that issue.
    194. Finally we seek comment on whether to revise the deadline for 
applicants to sign a contract with their service provider. We note that 
sometimes applicants have difficulty obtaining signatures or final 
board approvals prior to their submission of their FCC Forms 471, as is 
currently required by the E-rate rules. Commenters are invited to offer 
specific examples of difficulty they have had obtaining a signed 
contract in a timely fashion, and propose alternatives to the current 
deadline for obtaining a signed contract. We also seek comment on 
whether modifying this requirement would lead to waste, fraud, and 
abuse and we invite comments on how to minimize that risk.
    195. Lowest Corresponding Price (LCP). We also seek comment on the 
extent to which the LCP rule helps ensure that service providers charge 
cost-effective prices. In section II.A.2, we sought comment on using 
the LCP rule to measure progress towards our proposed goal of ensuring 
applicants have affordable access to broadband. The LCP rule requires 
service providers to charge the lowest price that a service provider 
charges to non-residential customers that are similarly situated to a 
particular E-rate applicant for similar services. We specifically seek 
comment on the role of the lowest corresponding price rule for 
competitive bidding. If an applicant receives only one bid or no bid 
for services should the applicant be required to report that fact to 
USAC? If an applicant receives only one bid or no bids, should USAC 
automatically engage in additional review of the application to 
determine whether the service provider has offered the lowest 
corresponding price? Or, should USAC only do additional review under 
those circumstances if the price for the service at issue is flagged as 
higher than similar services? If USAC should conduct further pre-
commitment review for compliance with the LCP rule, what is the least 
burdensome but effective method for determining whether the service 
provider is offering the LCP?
    196. We also seek comment on the clarity of the LCP rule. In 2010, 
US Telecom and CTIA (together Petitioners) petitioned the Commission to 
issue a declaratory ruling to clarify the scope and meaning of the 
Commission's LCP rule. More specifically, Petitioners requested that 
the Commission clarify that: (1) The lowest corresponding price 
obligation applies only to competitive bids submitted by a provider in 
response to a Form 470; (2) the lowest corresponding price obligation 
is not a continuing obligation that entitles a school or library to 
constantly recalculate the lowest corresponding price during the term 
of a contract; (3) there are no specific procedures that a service 
provider must use to ensure compliance with the lowest corresponding 
price obligation; (4) in determining whether a service bundle complies 
with the lowest corresponding price obligation, discrete elements in 
such bundles need not be individually compared and priced; and (5) in a 
challenge regarding whether a provider's bid satisfies the lowest 
corresponding price obligation, the initial burden falls on the 
challenger (i.e., a school or library) to demonstrate a prima facie 
case that the bid is not the lowest corresponding price. The

[[Page 51621]]

Commission sought comment on that petition, and we now invite 
commenters to refresh the record on whether it is necessary to clarify 
the scope and meaning of the LCP rule.

E. Efficient Use of Funding

    197. We seek comment on how best to ensure that any given E-rate 
application reflects a cost-effective approach to filling the 
applicant's need for E-rate supported services. Our competitive bidding 
rules require that price must be the primary factor when selecting a 
winning bid and that applicants must select cost-effective service 
offerings. We seek comment, however, on whether our rules and our 
enforcement mechanisms are sufficient to ensure cost-effective 
purchasing on an application-by-application basis.
    198. This is not the first time the Commission has sought comment 
on this issue. In the 2003 Schools and Libraries Third Report and 
Order, 69 FR 6181, February 10, 2004, the Commission sought comment on 
whether to codify additional rules to ensure that applicants make 
informed and reasonable decisions in deciding which services they will 
seek discounts. Given that demand for E-rate funding greatly exceeds 
the cap and that there is a wide disparity in the amount of funds on a 
per-student basis that applicants seek, it is time to refresh the 
record on this issue. Specifically, we seek comment on how to ensure 
that applicants are not receiving support for expensive services that 
provide functionality that they do not need and will not use and that 
applicants are not selecting expensive priority one services simply 
because they are supported services, when less expensive services would 
fill the same need.
    199. As part of our effort to ensure that applicants are making 
cost-effective purchasing decisions, we seek to refresh the record on 
whether we should adopt bright line tests, benchmark or formula for 
determining the most cost-effective means of meeting an applicant's 
technology needs. For example, should we establish limits or guidelines 
on purchases of certain kinds of equipment based on reasonable per-
classroom, per-teacher, or per-library technology needs? If so, what 
are appropriate bright line tests, benchmarks or formulas? Would we 
need a process for granting exceptions, and if so, how should it work? 
As an alternative to setting hard limits, should we make purchases of 
equipment above per-classroom, per-teacher, per-student, or other 
limits a lower priority?
    200. Our rules require that an applicant establish that equipment 
and services are installed and in use. Should we require that an 
applicant regularly use all of the functions provided by an E-rate 
supported service? If an applicant has requested and installed an E-
rate supported service, but does not use all of the functionality of 
the service, has the applicant violated the requirement to engage in 
cost-effective purchasing? Does it matter if no other vendor services 
more closely matched the needs of the applicant?
    201. We seek comment on whether applicants seek support for 
priority one services because they know they will receive support for 
those services, when in reality the services they need or are seeking 
are unsupported services, or priority two services that are often not 
funded. We noted above that many applicants purchase expensive cellular 
data plans and air cards that are funded as priority one services, 
instead of using less expensive local area network (LAN) services, 
which are priority two services. Is this an example of applicants 
seeking support for priority one services because they do not expect to 
qualify for priority two services, given the E-rate program's funding 
cap? Are there other examples of such practices? How can the Commission 
discourage these practices and encourage participants to select the 
less expensive services? Would the proposals discussed above to 
reprioritize the E-rate supported services help address this issue?
    202. We seek comment on how our cost-effectiveness rules should 
apply to multi-year contracts and to purchases of ongoing services. 
Should we encourage or require schools and libraries to take a long-
term view of cost-effectiveness? How can we provide E-rate applicants 
assurance that significant investments which raise costs in the short 
term but significantly lower recurring costs will not run afoul of our 
rules, while continuing to protect against wasteful or inefficient 
purchases? We are particularly interested in this question as it 
relates to the deployment of new broadband connections to schools and 
libraries.

F. Broadband Planning and Use

    203. We next seek comment on measures E-rate applicants should take 
in order to ensure they are carefully assessing their need for and 
readiness to use high-capacity broadband. Should we require schools and 
libraries seeking support for high-capacity broadband to undertake a 
formal review and assessment of their broadband needs--both to the 
premises and within the premises? Such an assessment could not only 
help applicants determine their broadband connectivity needs but also 
encourage efficient and cost-effective purchasing decisions. Should we 
condition receipt of E-rate funds on certain criteria for the broadband 
assessments and if so, what should those criteria be? For example, 
should we require schools to plan for providing a device to every 
student or for a device to a small group of students? Should we require 
schools and libraries to conduct professional development sufficient to 
ensure that their staffs have the knowledge and skills to take 
advantage of high-capacity broadband as well as the devices and 
applications? Should applicants be required to demonstrate that they 
have specific plans for using the bandwidth? Who is in the best 
position to evaluate and, if necessary, approve these assessments, and 
help schools close any gaps? What should be the consequences be if an 
applicant conducts inadequate needs assessment and planning, and what 
resources could be made available to help them improve?
    204. In the Schools and Libraries Sixth Report and Order, the 
Commission eliminated technology plan requirements for E-rate 
applicants seeking only support for priority one services in order to 
simplify the application process for those schools and libraries. We 
seek comment on lessons learned from our current and previous 
technology plan requirements and whether we should consider any 
elements of those requirements if we implement a broadband assessment 
requirement. In particular, how can we make such assessment as simple 
and objective as possible? Is an objective checklist or scorecard 
approach for school planning and readiness feasible?
    205. We seek comment on quantifying the burdens schools and 
libraries face when completing current technology plans in compliance 
with federal requirements and the approval process? If we eliminate the 
technology plan requirement, and do not otherwise require E-rate 
applicants to assess their broadband needs, would schools and libraries 
continue to develop technology plans, or their equivalents, and if so 
how might they differ from current plans developed in order to access 
priority two funding?

G. Innovative Approaches to Encouraging Maximum Efficiency

    206. Finally, as we consider various ways to maximize cost-
effective purchasing in the E-rate program, we seek comment on whether 
utilizing scaled down testing of various approaches to purchasing would 
help identify the most successful practices as

[[Page 51622]]

well as less effective ideas. Towards that end, we seek comment on 
whether we should establish one or more programs to foster innovation 
and highlight specific, scalable best practices for purchasing E-rate 
supported services that eligible schools and libraries can use to drive 
down the cost of E-rate supported services.
    207. Such a program could, for example, allow experimentation use 
of consortia, establish novel bulk buying opportunities, and/or test 
ways to streamline procurement for eligible schools and libraries. A 
pilot program could also provide an opportunity for the Commission and 
USAC to gather data about other innovative approaches to lowering costs 
by incenting cost-reducing measures. Pilots could, for example, offer 
greater discounts for participants that are able to significantly 
decrease the pre-discount costs of the services they purchase. This 
would allow participants to realize a greater share of the savings from 
cost-reductions. Alternatively, we could allow pilot participants to 
use savings from reduced spending on priority one services toward 
priority two services, outside the otherwise applicable prioritization 
system.
    208. We seek comment on these options for pilot programs, and 
whether such programs would be an efficient use of E-rate funds. We 
also seek comment on other potential pilot designs, and other potential 
financial and administrative incentives for participation in purchasing 
pilot programs. How can we set up these incentives to account for the 
fact that some short-term investments may result in long-term cost 
savings? Are there other approaches we should consider to incentivize 
eligible schools and libraries to find the lowest price? Should we 
consider adopting any of the pilot program proposals discussed above 
for the E-rate program as a whole, without first conducting a pilot?
    209. We also seek comment on what data we should collect as part of 
a pilot program, and to measure the effectiveness of the program. In 
evaluating the results of any pilot program, we would propose to 
consider, among other things, the quantity of services supplied, the 
prices per component, the expenses per-student, and the distribution of 
cost across districts of varying incomes. Are the other factors we 
should consider? What would be the most appropriate mechanism for 
sharing this data? How would we maximize the likelihood that any 
innovations developed in a pilot program could be repeated throughout 
the country?

V. Streamlining the Administration of the E-Rate Program

    210. We propose that streamlining the administration of the E-rate 
program should be the third goal of the program to address concerns 
about the complexity and associated burdens of the current E-rate 
application and associated review process. Applicants for E-rate funds 
are required to complete approximately six FCC forms over the course of 
a funding year. Some applicants spend many hours not only filling out 
FCC forms and gathering required data, but also responding to questions 
from USAC and requests for additional information, including 
documentation. As a result, many applicants feel the need to hire 
consultants to handle these tasks. While consultant fees cannot be paid 
using E-rate funds, they are a cost to program participants, and 
therefore may reduce the net benefits that schools and libraries 
realize from participation in the E-rate program.
    211. Moreover, funding review decisions can be delayed while USAC 
seeks to resolve issues that arise during USAC's application review 
process, such as ensuring that: only eligible entities receive funding 
for eligible services; the competitive bidding process was fair and 
open; the applicant has the necessary resources to make use of the 
requested services; and there are no discrepancies between the 
information on the funding request and the associated FCC Form 471 Item 
21 attachment. When that happens, applicants find themselves pressed to 
make purchase decisions with imperfect information about the status of 
their applications or their prospects for receiving E-rate funding. 
Further, because USAC must still enter some applicants' paper filings 
in electronic form in order to process them, USAC's efforts to 
expeditiously process applications and other forms can be handicapped. 
At the same time, the Commission and USAC are responsible for 
protecting the E-rate fund from waste, fraud and abuse. Many of the 
burdens imposed on applicants are rooted in preventing such problems 
with the program.
    212. We therefore propose several options for streamlining the 
administration of the E-rate program while preserving critical 
safeguards. These options include: moving to electronic filing of all 
FCC forms and correspondence with USAC; increasing transparency 
throughout the application process; speeding review of applications and 
issuance of commitment decisions; simplifying the eligible services 
list (ESL) to focus on the service provided rather than the regulatory 
classification of the service; recovery considerations when seeking 
reimbursement of previously disbursed E-rate funding; more effective 
disbursement of unused funds; improve invoicing and disbursement; and 
streamlining the E-rate appeals review process. We seek comment on our 
proposals below and any other ways in which we can further streamline 
the administrative processes, including the program integrity assurance 
(PIA) review process and the commitment and disbursement processes, to 
maximize the efficiency of the E-rate program.

A. Electronic Filing of FCC Forms and Correspondence

    213. To enable USAC to manage applications more quickly and 
efficiently, we first propose to require all E-rate applicants and 
service providers to file all documents, including the FCC Form 500, 
with USAC electronically and to require USAC to make all notifications 
electronically. We seek comment on this proposal.
    214. While many applicants file a majority of the forms online, 
many other E-rate program procedures, such as service provider 
identification number (SPIN) changes, invoice and service delivery 
deadline extension requests, as well as the FCC Form 500, require paper 
submissions, some of which must be filled out by hand. When the E-rate 
program began, some schools and libraries did not have Internet access, 
thus many applicants did not have the resources to file electronically. 
Today, however, the vast majority of schools and libraries have 
Internet access, and--just as we now require E-rate service providers 
receiving disbursements to use electronic payment systems--we propose 
to require electronic filing and notification of the receipt of E-rate 
forms. As the Commission previously concluded, the electronic 
submission of the FCC forms will improve the efficiency of submitting 
and processing applications, thereby resulting in faster commitments 
and disbursements of E-rate funding as well as the return of any unused 
funds to USAC. It will also reduce USAC's administrative costs because 
USAC will not have to manually enter data into its electronic system 
from paper submissions. Additionally, electronic completion, 
submission, and notification will likely result in fewer errors on the 
forms and other communication with USAC and to applicants. In proposing 
to make all forms and correspondence filed with and received by USAC 
electronic, we

[[Page 51623]]

recognize that there may be rare instances in which some applicants may 
still need to file and receive paper forms due to unreliable Internet 
access or emergency situations. We therefore seek comment on whether we 
should impose a minimal fee for applicants who seek to file their forms 
and correspondence in paper form.
    215. SECA suggests that all of an applicant's forms and 
correspondence with USAC should be available from a centralized portal 
so the applicant can retrieve current and prior years' information to 
use as a starting point for new form submissions. SECA states that 
online functionality will conserve on data entry and problem resolution 
resources that USAC currently must utilize as well as customer service 
bureau inquiries. Facilitating access to previous applications will 
also make it easier for applicants to file forms that are similar to 
those of previous years and eliminate the duplicative requests for 
information during PIA review since all the requested information would 
be available online and available for review. We seek comment on SECA's 
proposal and any alternative ways to simplify the submission and 
receipt of FCC forms and other correspondence to USAC. Another way to 
increase E-rate program efficiencies is automate more of the processes 
for the program. In addition to requiring online filing, we seek 
comment on whether there are administrative processes in the program 
that could be automated and would also result in cost savings and 
efficiencies. What could be gained by increasing the amount of 
automated processes at USAC and how could this be best achieved? For 
example, would increased automation in the application process result 
in quicker commitment decisions? What aspects of this process lend 
themselves to automation? What are the ways that increased automation 
can lead to efficiencies and cost savings? What are the ways automation 
could reduce or eliminate improper payments? Commenters should be as 
specific as possible in their proposals.
    216. Requiring all forms and correspondence to be available 
electronically may require USAC to upgrade its internal technology 
systems in order to accommodate additional electronic submissions and 
increased automation which could result in initial increased 
expenditures for the E-rate program. We seek comment on whether the 
administrative and economic benefits that would result from these 
changes outweigh any initial upfront costs that would be required for 
the technological upgrades proposed herein. We note that USAC has 
already sought public comment on measures to update its internal 
informal technology systems to improve operational efficiencies and 
enhance the customer experience. We therefore direct USAC to 
incorporate into its consideration this proposal as it adopts measures 
to improve operational efficiencies.
    217. Other than time and resource efficiencies gained for both 
applicants and USAC, we estimate that several of these proposals will 
result in actual cost savings for the E-rate program. While it is 
difficult to quantify the aggregate total savings to the E-rate program 
as result of these proposals, according to USAC's annual report for 
2012, USAC spent approximately $70 million on E-rate program operating 
expenses in 2012. Any reduction in these costs as a result of changes 
such as electronic filing and increased automation of program processes 
would result in increased funding availability for applicants, 
especially when considered in combination with the other changes 
proposed herein such as elimination of funding for certain services.

B. Increasing the Transparency of USAC's Processes

    218. We seek comment on ways to increase transparency throughout 
the application, commitment and disbursement processes, so that 
applicants have a better understanding of the status of their funding 
requests. SECA suggests, among other things, that the longer a decision 
is pending, the more status update information should be made available 
on USAC's Web site to the affected parties. SECA therefore proposes 
that USAC should provide additional levels of detail in its 
``Application Status'' tool on its Web site to provide applicants with 
a better understanding of where their application is in the review 
process. For example, SECA suggests additional designations, such as 
``Normal Review,'' ``Selective Review,'' ``Policy Review,'' 
``Investigative Review,'' and ``Pending Program Decision on Available 
Internal Connection Funding.'' Additionally, in cases where USAC is 
waiting for an applicant submission, it could indicate as part of the 
application status that it is ``awaiting applicant's response to USAC's 
request on [date].'' We seek comment on SECA's proposal and other ways 
in which to increase transparency of the review process for applicants.

C. Speeding Review of Applications, Commitment Decisions, and Funding 
Disbursement

    219. We next seek comment on ways to reduce the time it takes USAC 
to review applications for E-rate support in order to more quickly 
release funding commitment decisions. Currently, applications can 
undergo a number of levels of review prior to release of funding 
commitment decisions. We note that, in a recent report, GAO recommended 
that the Commission undertake a risk assessment of the E-rate program. 
GAO noted that a risk assessment involving a critical examination of 
the program could help determine whether modifications to USAC's 
business practices and internal control structure are needed to 
appropriately address the risks identified and better align program 
resources to risks. In addition, applicants have found that USAC's 
review process can become time-consuming and can significantly delay 
funding commitment decisions, particularly for state networks and 
consortia that may file numerous funding requests per funding year. At 
the same time, the Commission has directed USAC to ensure that funding 
is disbursed to eligible recipients for eligible services. For all the 
suggestions below, given that we must balance administrative efficiency 
with protecting against waste, fraud, and abuse, we also seek comment 
on how we should ensure that streamlining the application and 
disbursement process does not then result in an increase in improper 
payments.
    220. We seek comment on whether we should establish deadlines for 
USAC to issue funding decisions or complete its other processing tasks. 
We describe above the reporting requirements in which USAC must detail 
performance related to commitments, disbursements, and appeals. If 
commenters support deadlines, what should those deadlines be? If so, 
how should we balance speeding the review with protecting against 
improper payments and waste, fraud and abuse? Commenters should 
specifically address how the deadlines might improve or harm the 
application and invoicing processes. What should happen if USAC cannot 
meet the established deadlines?
    221. In addition, we seek comment on ways to expedite the 
application review process. Are there ways in which USAC can streamline 
the PIA review process so that applicants are not asked duplicative 
questions or asked for the same documentation for different 
applications or funding requests where previous responses or 
documentation are applicable? Commenters should provide specific 
examples of the problems they encounter during the application review 
process, including identifying specific duplicative requests made in 
the routine review process.

[[Page 51624]]

    222. Additionally, at times, an entire application or groups of 
applications involving funding requests for different service providers 
may be held up pending resolution of one FRN for one provider. Are 
there changes that should be put in place so that other unrelated 
funding requests are not held up pending the resolution of an issue 
involving another FRN? SECA proposes that, absent an active criminal 
investigation in which the party is the subject, within 90 days of the 
lack of activity on an FCC Form 471 application or invoice, USAC should 
notify all affected parties of concerns that are holding up a decision 
on the application and submit detailed requests for any additional 
documentation or information as part of the notification. Upon receipt 
of the requested information, SECA proposes that USAC should issue a 
decision within 90 days. We seek comment on this proposal and any other 
proposals setting timeframes for resolution of applications and release 
of funding commitments. If we were to adopt a deadline by which USAC 
must act, under what circumstances should we permit USAC to exceed the 
deadline in order to give full consideration to the application?
    223. Further, for USAC to more quickly release funding commitment 
decisions, should we limit the number of opportunities applicants are 
given to respond to USAC's requests for documents and clarification? As 
part of its review, USAC routinely gives applicants additional time to 
provide missing or incomplete information to USAC during PIA review. 
When applicants' timely request an extension of time to submit 
documentation, USAC grants such extensions and gives applicants 
additional time to respond to their requests for information. The 
Commission has granted waivers of the E-rate rules providing applicants 
with additional time to submit documentation to USAC. These extensions 
of time also delay USAC's application review process and ultimately 
hinder the prompt release of funding commitment decisions. We thus seek 
comment on whether to limit the number of opportunities and length of 
time that applicants have to submit complete information to USAC in 
response to USAC's requests. Commenters should specifically indicate 
any potential problems that may arise if we reduce the window of 
opportunity and any concerns with modifying USAC's outreach to gain 
complete information to complete their review of pending FCC Form 471 
applications.
    224. Are there current cost-allocation challenges that impose undue 
burdens on applicants and on USAC that could be removed? For example, 
some states do not include preschool within their definition of 
elementary schools. In such states, preschools classrooms are therefore 
currently not eligible to receive support for E-rate services, even 
when those preschool classrooms are located within an elementary school 
building that otherwise receives E-rate supported services. As a 
result, in such states, applicants must cost-allocate the expenses for 
providing E-rate supported services to preschool classrooms, and 
exclude those expenses from requests for E-rate support. Consistent 
with the Commission's allowance for the community use of E-rate 
services, would an exception for these classrooms improve the efficient 
use of E-rate eligible services and reduce the administrative burden? 
Are those costs typically so small that the burden of cost allocation 
and administrative review outweigh the benefit to the Fund of requiring 
cost-allocation? Commenters should be specific in their proposals.
    225. Multi-year contracts. E-rate applicants are permitted to enter 
into multi-year contracts, but applicants with multi-year contracts 
must file an FCC Form 471 application and go through the same review 
process every year. Our rules prohibit USAC from issuing multi-year 
funding commitments in the E-rate program. Stakeholders have argued 
that it is a waste of an applicant's time to file an application for 
the same services year after year, and that it is a waste of USAC's 
time to review the same applications year after year.
    226. We agree with stakeholders that multi-year contracts have the 
potential to drive down service costs, provide more certainty, and that 
we should minimize duplicative application review by USAC. At the same 
time, given the dynamic marketplace for many E-rate supported services, 
it is important that E-rate applicants not bind themselves to multi-
year contracts that require applicants to pay prices that are higher 
than they would receive had they re-sought competitive bids. In 
balancing those issues, we seek comment on a number of changes to our 
handling of multi-year contracts.
    227. First, we propose that, absent a change in the contract, 
service provider or recipients of service, we allow E-rate applicants 
with multi-year contracts that are no more than three years in length 
(including any voluntary extensions) to file a single FCC Form 471 
application for the funding year in which the contract commences and go 
through the full review process just one time for each such multi-year 
contracts. We seek comment on this proposal, and on what additional 
steps E-rate applicants should have to take in the second and third 
year of such contracts to confirm their request for E-rate support for 
the subsequent years. We specifically seek comment on the following 
proposed rule language:
    Multi-year contracts. An eligible school, library or consortium 
that includes an eligible school or library seeking to receive 
discounts under this subpart may submit to USAC a single FCC Form 471 
covering all the years of a multi-year contract, provided that the term 
of the contract including extensions, does not exceed three years. An 
FCC Form 471 covering a multi-year contract must be submitted to USAC 
before the start of the first funding year covered by the multi-year 
contract.
    228. Second, we seek comment on amending our rules to permit multi-
year commitments in the E-rate program. In the Healthcare Connect Fund 
Order, we allowed applicants to request a funding commitment for a 
multi-year contract that covers up to three years of funding. Unlike 
the E-rate program, however, the universal service rural health care 
program is not currently oversubscribed, so it is more feasible for 
that program to issue multi-year commitments. Is this difference 
relevant to our handling of multi-year commitments? Should multi-year 
funding commitments in E-rate be conditional on the funds being 
available in subsequent years?
    229. Finally we seek comment on whether we should impose any 
additional or different limits on multi-year contracts. For example, 
should we limit the maximum term (including voluntary extensions) of 
multi-year contracts that E-rate applicants may enter into for E-rate 
supported services to three years? What are the typical terms for 
multi-year contracts now? What are the typical terms for comparable 
enterprise services in broader business broadband markets?
    230. Should the maximum term of a contract for E-rate supported 
services depend on the type of service at issue? For example, the 
efficient term for an IRU in dark fiber may be longer than for Internet 
access services. Indeed, where significant new fiber builds are 
involved, long term contracts could be critical to keeping recurring 
costs low. When fiber is laid for the first time to a school or 
library, an applicant may be able to seek bids that guarantee low 
ongoing costs once the initial construction is paid for. If an 
applicant is prohibited from entering a long term

[[Page 51625]]

contract when the fiber is first laid, it may be unable to claim 
similar efficiencies. We seek comment on this analysis.
    231. Should we exempt certain services, such as IRUs for dark 
fiber, from any limits on multi-year contracts? What are the typical 
terms for enterprise connectivity contracts in commercial markets? 
Could applicants eliminate the need for long-term contracts associated 
with new fiber builds by seeking a non-binding renewal option, at a 
predetermined rate, in contracts? Do such terms exist in contracts for 
enterprise connectivity for purchasers other than schools and 
libraries? Do similar issues generally exist for connections to schools 
and libraries using technologies other than fiber, such as fixed 
wireless?
    232. Are there other approaches to multi-year contracts we should 
consider? Should we have a cap on the number of multi-year contracts 
entered into by applicants in a given funding year or the amount of 
future funding covered by multi-year commitments? If so, how should we 
select which applicants seeking multi-year funding commitments receive 
them?
    233. Additional filing windows. We seek comment on other ways to 
streamline the administration of the E-rate program and commit 
available funds as quickly and efficiently as possible. For instance, 
assuming priority one funding requests do not exceed the E-rate funding 
cap, should the Commission create separate filing windows--one for 
priority one and one for priority two commitments? Under this process, 
the priority one application filing window could run from January to 
mid-March and the priority two application filing window could run from 
mid-April to the beginning of June. After the priority one application 
filing window closes, the Commission could announce what funds are 
available after the priority one funding process before applicants file 
for priority two funding. Under this approach, applicants would not 
have to expend resources unnecessarily to file for priority two 
services if there is no funding available. Because USAC does not start 
reviewing priority two funding requests until much later in the funding 
year, the later application filing window should not slow down the 
funding commitment process. If, in reforming the E-rate program, we 
create more than two funding priorities, should we have a separate 
application filing window for each set of priorities? We seek comment 
on the operational challenges to having multiple application filing 
windows, and whether it would, on balance, benefit applicants and help 
achieve the goal of maximizing administrative efficiencies.

D. Simplifying the Eligible Services List

    234. We propose to simplify the ESL and the FCC Form 471 
application process by adopting a definition of eligible services that 
provides funding for eligible services regardless of regulatory 
classification. Specifically, we propose to amend section 54.502 and 
the ESL to remove the regulatory classifications of telecommunications 
services and Internet access to allow applicants to seek eligible 
services from any entity. We seek comment on these proposed rule and 
ESL changes as explained below.
    235. The ESL, which is approved by the Bureau and published by USAC 
each year, provides guidance to applicants on the eligibility of 
products and services under the E-rate program. Last year, the Bureau 
reorganized the priority one section of the ESL to consolidate the list 
of telecommunications services, telecommunications, and Internet access 
into a single priority one category. The Bureau recognized that, ``when 
applying for discounts, E-rate applicants are focused on the services 
they need for their schools and libraries, and may be unfamiliar with 
the regulatory framework for telecommunications services and Internet 
access established by Commission rulemakings.'' Also, the Bureau noted 
that many of the services purchased by schools and libraries using E-
rate funding can fall into more than one of the regulatory 
classifications. As an example, one of the commenters in that 
proceeding asserted that many applicants erroneously think that they do 
not need to request Internet access when they are requesting cellular 
service with data packages and email access. The Bureau also determined 
that applicants would no longer be expected to classify their service 
requests into telecommunications service or Internet services 
categories when soliciting bids for those services on the FCC Form 470, 
but that applicants must continue to select the correct category of 
service on the FCC Form 471 application because this serves statutory 
and regulatory purposes.
    236. In the Healthcare Connect Fund Order, the Commission 
determined that it should support broadband Internet access services 
and also high-capacity transmission services offered on a common 
carrier and a non-common carrier basis to allow health care providers 
to choose from a wide-range of connectivity solutions using any 
technology from any provider. Building off this decision, we seek 
comment on eliminating the regulatory categories with respect to E-rate 
supported services. Instead, we propose only that an applicant indicate 
on the FCC Form 470 the requested service priority level as well as 
provide enough detail for service providers to identify the requested 
services and formulate bids on the FCC Form 470. The FCC Form 471 
application would also require the service priority level (e.g., 
priority one or priority two) and the Item 21 attachment would continue 
to be used by applicants to describe the services for which they seek 
discounts for each funding request. We seek comment on these changes to 
the E-rate forms.
    237. After the ESL was revised for funding year 2013, the Bureau 
continued to require applicants to select the correct category of 
service on the FCC Form 471 application. One of the reasons for 
retaining this requirement is because USAC uses the service category 
selections to determine which applicants have sought Internet access 
and/or internal connections and this need to comply with CIPA. We seek 
comment on an alternative way for USAC to determine which applicants 
are required to be CIPA-compliant. For example, should we add a 
checkbox to the FCC Form 471 with a certification that the applicant is 
seeking discounts for Internet access and/or internal connections and 
is subject to CIPA requirements? If so, should we also add the actual 
CIPA certification to this checkbox allowing the applicant to certify 
its compliance with CIPA? This would allow us to remove the CIPA 
certification from the FCC Forms 479 and 486 so that applicants would 
not have to certify to CIPA on multiple forms. In its June 2013 White 
Paper, SECA suggests that applicants be given the option of providing 
the information currently required on the FCC Form 486 on the Form 471. 
Although, SECA also suggests that applicants who prefer to continue 
filing the FCC Form 486, be given that option as well and a check box 
to designate this preference can be included on the FCC Form 471. We 
seek comment on both of these possible approaches. Would either 
approach streamline the application, commitment and disbursement 
process for applicants? Would moving the CIPA certification work for 
all applicants including consortia?

E. Funding Recovery Considerations

    238. The Commission adopted the Commitment Adjustment 
Implementation Order on September 21, 2000, which, consistent with the 
Debt

[[Page 51626]]

Collection Improvement Act (DCIA), set up a framework for recovering 
funds committed or disbursed in violation of the Act and our rules. 
USAC implemented a process for recovering funds disbursed in violation 
of statutory and rule violations and, in 2004, as part of the Schools 
and Libraries Fifth Report and Order, 69 FR 55097, September 13, 2004, 
the Commission largely affirmed and further refined USAC's approach 
when determining what amounts should be recovered by USAC and the 
Commission when funds have been disbursed in violation of the 
Commission's E-rate program rules. The Commission concluded that there 
are circumstances that warrant full recovery of disbursed funds. For 
instance, the Commission found that full recovery is appropriate when 
the applicant failed to comply with the Commission's competitive 
bidding requirements. The Commission also found that a lack of 
necessary resources to use the supported services warrants full 
recovery of funds disbursed for all relevant funding requests. The 
Commission recognized, however, that recovery may not be appropriate 
for violation of some procedural rules implemented to enhance operation 
of the E-rate program. At the same time, the Commission must comply 
with federal obligations to recover funding that has been improperly 
disbursed.
    239. We recognize the importance of preventing and ferreting out 
waste, fraud and abuse in the E-rate program and believe that strong 
rules requiring applicants to reimburse USAC if they are found to have 
violated a statutory obligation are a powerful deterrent to waste, 
fraud and abuse. At the same time, as our rules have expanded, the risk 
to applicants of having USAC or the Commission seek full reimbursement 
of previously disbursed funds based on a rule or program violation has 
also grown, and sometimes full reimbursement is not commensurate with 
the violation incurred. We therefore seek comment on whether there are 
certain program violations that warrant reduced recovery or some other 
punitive measure short of recovery. For example, would reduced recovery 
be warranted where an applicant delayed installation of equipment due 
to human resource limitations or where an applicant did not conduct a 
broadband assessment at the beginning of the full funding year? Are the 
Commission's findings that competitive bidding or necessary resources 
violations require full recovery still appropriate or should we 
reconsider those findings? Are there appropriate punitive measures we 
could implement that more closely tie to the improper behavior? We ask 
that commenters provide specific scenarios under which they think 
reduced penalties would be warranted, the rationale supporting reduced 
recovery under such scenarios, and commenters' suggestions for how the 
amount of recovery should be recovered. We specifically seek comments 
identifying a bright line approach to determining recovery amounts for 
rule violations, creating a system of recovery that is fair, 
predictable, transparent and administratively efficient. Furthermore, 
we seek comment on how the Commission could comply with its legal 
requirements under such a process.

F. Effective Disbursement of Unused Funding

    240. We also propose to improve the administrative efficiency of 
the E-rate program by reducing the amount of unused E-rate funding each 
year. As discussed above, the demand for E-rate supported services far 
exceeds available funds. Since the start of the program, USAC annually 
issued funding commitment letters covering funding requests up to the 
amount of available funds. However, because applicants do not spend all 
of the funds for which they receive commitments, a substantial amount 
of funds remain unused each funding year.
    241. The Commission's approach to the problem has changed over 
time. From 1997 to 2003, each year USAC committed up to the $2.25 
billion E-rate program cap. This resulted in a large unused balance 
over time, and actual program disbursements well below $2.25 billion. 
Starting in 2003, the Commission allowed USAC to identify unused funds 
from previous years and issue funding commitment letters in excess of 
the annual cap supported by those unused funds. This change has allowed 
the program to increase the dollar amount of commitments each year and, 
as result, bring actual disbursements more in line with the E-rate cap. 
However, there remain many funding commitments each year for which the 
applicants do not purchase all or some of the requested services and 
consequently a large amount of funding gets carried over on the USF's 
balance sheet year-to-year.
    242. We seek comment on whether there are changes we could make to 
the program to reduce the amount of unused funds. For example, should 
we direct USAC to identify applicants that consistently seek and 
receive funding commitments that substantially exceed the amount of 
disbursements that USAC ultimately issues and work with those 
applicants to make their funding requests more accurate? Should there 
be consequences for applicants who repeatedly seek funding commitments 
that substantially exceed the amount of E-rate support they receive? If 
so, how would we determine what constitutes commitments that 
substantially exceed disbursements and what should the consequences be? 
Is there a risk that such consequences could encourage inefficient or 
wasteful spending by a school to avoid those consequences, and, if so, 
how do we reduce or eliminate that risk? In addition, the Commission 
allows applicants an additional year to implement non-recurring 
services if a funding commitment decision is not issued until after 
March 1 of the funding year. We seek comment on whether the delay in 
the issuance of funding commitments may contribute to the amount of 
unused funds. If so, commenters should propose specific ways to adjust 
the process to eliminate or reduce this issue.
    243. We also seek comment on ways to reduce the gap in time between 
when an applicant knows that it will not use all or some of the funds 
for which it has received a commitment and when USAC is able to 
consider those funds rollover funds that can be used the following 
year. Currently, E-rate participants are advised to check with USAC 
whether any funds remain on a funding commitment after USAC has paid 
the associated invoices. Applicants are then asked to submit an FCC 
Form 500 in order to reduce the committed amount on the FRN to the 
exact amount actually used. By reducing its commitment to reflect the 
actual amount used, USAC will know that these funds can be used in the 
following funding year. Otherwise, any unused funding as part of the 
funding commitment remains outstanding and is unavailable to use in a 
following funding year. Should there be a deadline during or 
immediately following the funding year or invoice period for applicants 
to notify USAC whether they will use the full amount of their funding 
commitments and if not, how much will be available for future funding 
commitments? Are there incentives we can offer to applicants to 
encourage them to comply with the deadline? For example, should we 
direct USAC not to process invoices related to an applicant's funding 
requests if, within three months after the close of the funding year, 
the applicant has failed to notify USAC whether it has or does not have 
unused funds from the preceding funding year? Should we direct USAC to 
de-obligate

[[Page 51627]]

funding six months after the invoicing deadline? Should we consider 
some other period of time? Should USAC then send notices to the 
applicants and service providers indicating that those funds have been 
de-obligated?
    244. Are there other measures we could implement to more quickly 
identify unused E-rate funds? For example, should we require applicants 
to review expenditures halfway through the year to determine if part of 
the commitment will go unused and should be returned to USAC rather 
than allowing applicants to wait until after all invoices have been 
paid? Should we limit the number of invoicing and service delivery 
extensions? Are there other steps we can take to encourage or require 
E-rate applicants to identify funding for which they have received 
funding commitment letters, but will not use? More broadly, are the 
other steps we can take to reduce the amount of funding that is rolled-
over from year-to-year and/or minimize the time between when funds are 
collected and when they are disbursed?

G. Invoicing and Disbursement Process

    245. In order to maximize administrative efficiency, we now propose 
changes to improve the E-rate disbursement process. In particular, we 
propose to modify our process to permit schools and libraries to 
receive disbursements directly from USAC and to adopt specific invoice 
deadline and invoice deadline extension rules.
    246. Currently, schools and libraries may choose either of two 
methods of seeking reimbursement for E-rate supported services. An 
applicant may pay its service provider the full cost of the E-rate 
supported services and then submit to USAC an FCC Form 472, Billed 
Entity Application for Reimbursement (BEAR) Form. In the alternative, 
the applicant may pay the service provider only the applicant's portion 
of the E-rate supported services and then the service provider must 
file an FCC Form 474, Service Provider Invoice Form (SPI form), with 
USAC to receive reimbursement. Regardless of which method the applicant 
chooses, USAC remits the E-rate support payments to the service 
provider. If the applicant is using the BEAR method, the service 
provider reimburses the applicant, thus requiring coordination between 
the applicant and service provider in order for the applicant to 
receive payment.
    247. The Commission established the current reimbursement system in 
the Universal Service First Report and Order, concluding that service 
providers, rather that schools and libraries, should seek compensation 
from USAC for ``administrative ease.'' We seek comment on adopting a 
revised disbursement process that allows applicants, paying the full 
cost of the services under the BEAR process, to receive direct 
reimbursement from USAC. Under this proposal, the service provider 
would no longer serve as the pass-through for the reimbursement of 
funds where an applicant has paid the service provider in full for the 
services. Where an applicant, however, pays only the reduced cost of 
the services directly to the service provider, then the service 
provider will continue to file a SPI form with USAC to receive 
reimbursement. We seek comment on whether making direct payments to 
applicants under the BEAR process would simplify the E-rate 
disbursement process for applicants and service providers by removing a 
step in the process. One of the E-rate program goals proposed above is 
to streamline the administration of the program. We seek comment on 
whether this change would improve the efficiency of the program by 
minimizing unnecessary delays in the disbursement process due to an 
applicant's request to review bills before the service provider(s) 
submits the bills to USAC for payment. We also seek comment on whether 
there would be other consequences to applicants, service providers and 
the program from making such changes to our rules. For example, if we 
move the CIPA certifications to another form, would applicants using 
the BEAR process and seeking reimbursement directly need to submit an 
FCC Form 486?
    248. We next seek comment on whether the Communications Act creates 
any barriers to the payment of universal service funds directly to E-
rate applicants. We note that section 254 of the Act gives the 
Commission broad discretion in designing the E-rate program, and that 
section 254(h)(1)(B) requires that a carrier serving a school or 
library either apply the amount of the E-rate discount as an offset to 
its universal service contribution obligations or shall be reimbursed 
for that amount utilizing universal service support mechanisms. One 
possible interpretation of that provision is that a carrier must 
receive any universal service support for discounted services it 
provides to schools or libraries. On the other hand, the Universal 
Service First Report and Order suggested that schools and libraries 
could directly receive universal service support, although it declined 
to adopt such an approach for policy reasons. In addition, the Fifth 
Circuit upheld the Commission's authority under sections 4(i) and 
254(h)(2)(A) of the Act to provide support outside the express 
framework of section 254(h)(1)(B). We seek comment on the possible 
interpretations of section 254 in this regard. If the only requirement 
in the Act regarding reimbursement is that the service provider be made 
whole, we believe modifying the current BEAR process, to allow USAC to 
reimburse the applicant directly would provide sufficient documentation 
to demonstrate that the applicant has fully paid for the requested 
services and is entitled to direct reimbursement from USAC. As it 
currently exists, the BEAR process satisfies that provision of the Act 
because the BEAR form requires the applicant to certify that it has 
made full payment to the service provider. Moreover, the service 
provider currently signs the BEAR form to indicate that all obligations 
have been met. We invite comment on these views.
    249. We next ask whether there are additional improvements that 
could be made to the invoicing process or certifications that are 
required on the invoicing forms, FCC Form 472 and FCC Form 474. 
Currently, service providers must make a certification each time it 
files an FCC Form 472, resulting in some large service providers having 
to submit thousands of certifications each year. We seek comment on 
whether the FCC Form 473, the Service Provider Annual Certification 
Form, should incorporate Block 4 of the FCC Form 472 BEAR form to 
include the current service provider acknowledgement certifications in 
Block 4 of the current FCC Form 472, or if there are other approaches 
that would improve the administrative process while still adequately 
protecting against waste, fraud, and abuse. Are there other 
certifications or components of the invoicing forms that should be 
revised in order to improve administrative efficiency or protect 
against waste, fraud, and abuse? In its 2010 report, the GAO noted that 
USAC did not compare actual bills to the invoices before disbursing 
funding. Should USAC require additional documentation to be filed with 
the invoices in some instances? Should we require that applicants 
approve a service provider invoice prior to reimbursement?
    250. We also seek comment on whether we should codify the invoice 
deadlines and deadlines for requests for an extension of the invoice 
deadline. Although the deadline for filing the FCC Form 472 and the FCC 
Form 474 has been the same, the actual day of the deadline has varied. 
Specifically, since the 2003-2004 funding year, the relevant invoice 
forms must be

[[Page 51628]]

postmarked or received by USAC no later than 120 days after the date of 
the FCC Form 486 NL or 120 days after the last day to receive service, 
whichever is later. A grant of a request for an extension of the filing 
deadline provides an applicant with an additional 120 days to submit 
the relevant invoice forms. In the Schools and Libraries Third Report 
and Order, the Commission sought comment as to whether the Commission 
should codify rules establishing deadlines for service providers to 
file invoices with USAC and whether USAC's existing policy to deny 
support for untimely filed invoices, except in limited circumstances, 
should be codified.
    251. We now seek to refresh the record and seek comment on whether 
to revise our rules to automatically grant, upon request by the 
applicant, a one-time 120-day extension of the filing deadline for both 
recurring and non-recurring services to allow applicants the additional 
time to submit the invoice form. Applicants who receive this one-time 
120-day extension would be required to show good cause for additional 
extensions to limit the amount of time taken for application 
processing. Should we also direct USAC to inform applicants promptly in 
writing if an invoice form is not received by the initial 120-day 
deadline? Applicants would then have 15 calendar days from the date of 
receipt of this written notice to file the relevant invoice form and 
necessary documentation or request a one-time 120-day extension of the 
invoice deadline. We believe these actions appropriately place 
responsibility to submit the invoice forms with E-rate participants 
while ensuring the goals of section 254 are realized. Additionally, 
adopting rules to establish deadlines for the submission of invoices 
and requests for an extension of the invoice deadline should help to 
decrease the processing time for invoices and reduce the number of 
outstanding unpaid invoices. The 15-day period should be sufficient 
time to submit any invoice forms that were untimely filed due to 
technical difficulties or clerical errors. Therefore, we believe this 
additional opportunity to file the relevant invoice form will improve 
the efficiency and effectiveness of the Fund. We thus seek comment on 
this proposal. We note that any rules we adopt on invoicing deadlines 
should conform to proposals aimed at reducing unused funds. For 
instance, we also seeking comment in this NPRM on whether USAC should 
be directed to de-obligate funding six months, or some other period of 
time, after the invoicing deadline.

H. Streamlining E-Rate Appeal Process

    252. We seek comment on how to further improve and streamline the 
Commission's E-rate appeal process. During the last three years, the 
Commission has made a concerted effort to reduce the backlog of E-rate 
appeals and has issued orders addressing more than 1,200 appeals. 
However, a backlog remains, including requests that have been pending 
for years, and we continue to receive many new appeals every month. We 
recognize that with a program attracting over 46,000 applications each 
year, appeals are inevitable. At the same time, we recognize that 
certainty about the outcome of appeals benefits both applicants and the 
program as a whole, and we therefore invite comment on how to 
streamline the E-rate appeals process.
    253. Currently E-rate applicants that are denied funding and 
parties from whom USAC seeks return of money for violating E-rate 
program rules, can seek review of a USAC decision by USAC or by the 
Commission. If a party seeks Commission review of a USAC decision, the 
Bureau acting on authority delegated to it by the Commission, usually 
resolves the appeal. If the Bureau denies a request for review, the 
review process dictated in the Commission's rules is triggered; the 
party can seek reconsideration by the Bureau of that decision and then 
may also seek to have full Commission consider the matter if the Bureau 
denies the request for reconsideration. If the Commission denies an 
application for review, under some circumstances the party can seek 
reconsideration of that decision.
    254. One result of the many opportunities to seek further review of 
USAC and Bureau decisions is a growing number of possible appeals. For 
every USAC decision, the Commission staff could be required to address 
the matter on three different occasions. In some cases, this delay 
benefits the applicants who take the multiple opportunities afforded 
them by our rules to avoid a negative decision. At the same time, there 
are sizable costs to the E-rate community when applicants and service 
providers must sometimes wait long periods of time for their appeals to 
be fully resolved. During the last several years, the Commission has 
attempted to streamline the process by issuing more E-rate orders 
addressing multiple appeals, and by streamlining aspects of the written 
order. Where appropriate, for example, the order provides a more 
concise explanation of the facts. In other orders, the Commission staff 
truncates the written legal analysis where the determination is clearly 
consistent with the Commission's precedent.
    255. We seek comment on other changes Commission staff can 
implement to improve the appeals review process. Should Commission 
staff explore other ways to streamline the orders disposing of the 
appeals? When the Bureau grants an appeal on delegated authority, 
should it simply specify that the appeal is granted and not provide any 
analysis, or does the analysis serve the important function of 
providing guidance to other E-rate stakeholders? Would the request for 
review filed by the party provide enough guidance to interested 
parties? We encourage commenters to suggest creative methods to improve 
the efficiency of the process while providing parties and other 
interested stakeholders with meaningful guidance about the decision. 
Finally, should we consider more comprehensive changes to the appeal 
process pertaining to E-rate decisions? Should we reduce the number of 
opportunities E-rate applicants have to contest adverse findings? If 
so, how could that be done consistent with relevant statutory 
requirements, and what rule changes would be needed? Could we amend or 
clarify the E-rate rules to reduce the number and type of USAC 
decisions that can be appealed? Are there other changes we can make to 
improve the efficiency of the appeals process?

VI. Other Outstanding Issues

    256. We also take this opportunity to seek comment on or refresh 
the record on a variety of issues that have been raised by stakeholders 
in recent years, including the applicability of the Children's Internet 
Protection Act (CIPA) to devices brought into schools and libraries, 
and to devices provided by schools and libraries for at-home use; 
changes to the National Lunch Program; additional measures for 
protecting the program from waste, fraud and abuse; wireless community 
hotspots; and adoption of E-rate program procedures in the event of a 
national emergency or natural disaster.

A. The Children's Internet Protection Act

    257. Stakeholders have sought clarification on the applicability of 
CIPA to devices not owned by E-rate recipients but using E-rate 
supported networks and to off-premises use of devices owned by schools 
and libraries. We seek input from interested parties about the measures 
schools and libraries

[[Page 51629]]

are taking and need to take to comply with CIPA when they allow third-
party devices to connect to their E-rate supported networks. Also in 
response to stakeholder concerns, we seek comment on what steps schools 
and libraries are taking and must take to ensure that they are not 
violating CIPA when they provide employees, students and library 
patrons with portable, Internet-enabled devices that can be used off-
premises.
    258. Covered devices. We seek comment on what devices are covered 
by CIPA. Congress mandates that CIPA apply to schools and libraries 
``having computers with Internet access,'' and also requires each such 
school or library to certify that it is enforcing a policy of Internet 
safety that includes the operation of a technology protection measure 
``with respect to any of its computers with Internet access.'' We seek 
comment on whether the language ``computers with Internet access,'' as 
used in the context of CIPA, includes all devices used to access the 
Internet, including all portable devices such as laptops and netbooks 
with wired Internet access, with Wi-Fi capability, or with wireless 
data or air cards; cellular phones or ``smartphones'' capable of 
accessing the Internet; and Internet-enabled e-readers and tablets. As 
more and more devices, from routers to refrigerators, are equipped with 
computing capability, we seek comment on limiting principles we should 
apply to our treatment of what constitutes a computer with Internet 
access for CIPA purposes, and how those limiting principles relate to 
the statutory language and goals of CIPA. For example, should we 
consider as a limiting principle the language in CIPA that requires the 
operation of a technology protection measure that provides protection 
against access to ``visual depictions'' that are obscene, child 
pornography, or harmful to minors? Specifically, does the use of 
``visual depictions'' in CIPA mandate that in order to fall within 
CIPA, the computers with Internet access in question must at least 
provide a screen, monitor, or other way to view the prohibited 
material? We also invite commenters to recommend specific changes to 
our rules that would clarify this issue. For example, should we include 
a definition of ``computers with Internet access'' in our CIPA-related 
rules, and what should that definition be?
    259. We also seek comment on whether the phrases ``having computers 
with Internet access'' and ``with respect to any of its computers with 
Internet access'' and other similar language in the statute means that 
schools and libraries are required to comply with CIPA only with regard 
to those computers that they own or control. Does this interpretation 
fulfill the intended purpose of CIPA? We also seek comment on whether 
we should amend our CIPA-related rules to reflect this reading of the 
statute, and if so how should we amend them. In the alternative, we 
seek comment on whether CIPA should be interpreted more broadly to be 
focused on protecting children from harmful online content on any 
device, and therefore require CIPA compliance with respect to any 
computer that is accessing the Internet using E-rate supported Internet 
access or internal connections, regardless of the ownership or control 
of the device used to access such content.
    260. Off-Campus Use. We seek comment on whether CIPA requirements 
extend to school or library computers taken off-campus and used with 
outside networks that are not supported by E-rate. If we find that CIPA 
requirements do not apply to computers with Internet access when used 
with networks that are not supported with E-rate funds, how should we 
address instances where school or library computers are used to access 
the Internet using a service that is supported for on-campus use, but 
not for off-campus use? For example, if a student uses a tablet with an 
Internet access data plan, the school could seek E-rate support for the 
portion of the cost of the data plan used on-campus, but not for the 
portion used off-campus. Should the CIPA requirements only apply when 
the computer is used on campus, because the school is not seeking E-
rate support for the off-campus portion of the cost of the data plan? 
We also seek comment on whether our existing CIPA-related rules need to 
be amended to cover these off-campus use situations. We request that 
commenters be as specific as possible when recommending amendments to 
our rules.

B. Identifying Rural Schools and Libraries

    261. We propose to modernize our definition of ``rural area'' to 
make it more relevant and useable for schools and libraries seeking to 
get the benefit of the additional discounts for rural schools and 
libraries. 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 OMB, or if it is 
specifically identified as ``rural'' in the Goldsmith Modification to 
Census data.
    262. The Commission explained in the 2003 Schools and Libraries 
Third Report and Order and again in the E-rate Broadband NPRM and the 
that a new definition was necessary because the U.S. Department of 
Health and Human Service's Office of Rural Health Care Policy (ORHP) no 
longer uses the definition adopted by the Commission and therefore has 
not updated the Goldsmith Modification to the 2000 Census data. In the 
E-rate Broadband NPRM, we proposed that any school or library that is 
within a territory that is classified as ``town-distant,'' ``town-
remote,'' ``rural-distant,'' or ``rural-remote'' by the U.S. Department 
of Education's National Center for Education Statistics (NCES) urban-
centric locale code be considered rural for purposes of calculating its 
E-rate discount level. We seek to refresh the record on that proposal. 
The NCES codes could be a reliable indicator of rural areas for the E-
rate, because the Department of Education's definition is specifically 
targeted to schools, pinpoint more precisely whether a school is 
located in a rural area, and is readily available through the 
Department of Education's Web site which has the coding system broken 
down by state. Therefore we seek comment on changing our rules to read 
as follows:


Sec.  54.505  Discounts.

    (a) * * *
    (b) * * *
    (1) * * *
    (2) * * *
    (3) The Administrator shall classify schools and libraries as 
``urban'' or ``rural'' based on location in an urban or rural area, 
according to the following designations.
    (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.
    263. Because NCES codes are not assigned immediately, it is 
possible that not every school that is part of an E-rate application 
will have a code or classification. If we adopt the proposed rule 
above, how should we handle such schools?

[[Page 51630]]

    264. An alternative to relying on NCES codes would be to use census 
data. The census classifies areas into three groups: urbanized areas, 
urban clusters, and rural areas. Urbanized areas ``consist[] of densely 
settled territory that contains 50,000 or more people,'' urban clusters 
``consist[] of densely settled territory that contains at least 2,500 
people, but fewer than 50,000 people,'' and rural areas include all 
areas that are not urbanized areas nor urban clusters. As of the 2010 
Census, 220 million Americans lived in urbanized areas, 29 million 
lived in urban clusters, and 59 million lived in rural areas. How could 
we use census data to classify a school for purposes of E-rate? Should 
it be based solely on the location of the school, and if so, should the 
``rural'' designation only apply to schools located in rural areas or 
also those in urban clusters? Should it be based on where its students 
live, so that if a majority of student live in a rural area, the school 
should be designated ``rural'' for E-rate even if it's located in an 
urban cluster? How should the classification account for the fact that 
schools are often located in small towns, which may be considered urban 
clusters, even though the costs of providing to the service to the 
school are significantly higher than the costs in urbanized areas (such 
as cities and their suburbs)? We seek comment on relying on census data 
for purposes of the rural-urban classification, and on changing our 
rules to read as follows:


Sec.  54.505  Discounts.

    (a) * * *
    (b) * * *
    (1) * * *
    (2) * * *
    (3) The Administrator shall designate a school or library as 
``urban'' if and only if the school or library is located in an 
urbanized area as determined by the most recent rural-urban 
classification by the Bureau of the Census; the Administrator shall 
designate all other schools and libraries as ``rural''.
    265. In 2010, the American Library Association (ALA) pointed out 
that libraries do not have urban-centric locale codes. We therefore 
seek comment on how libraries should determine whether they are 
considered urban or rural. How can we ensure libraries serving rural 
areas receive sufficient support? Should libraries use the locale-code 
of the school closest to each library? If we adopt our proposal below 
to adopt district-wide discount criteria should a library use the 
urban-centric code of the school district in which it is located? Are 
there any library systems that have facilities in multiple school 
districts? If so, we seek comment on how to account for such library 
systems. We also invite commenters to suggest alternate definitions of 
rural for use in the E-rate program, and we ask that commenters who 
offer other definitions explain the benefits and drawbacks of their 
proposals as compared to our proposal.
    266. Finally, we seek comment on how existing E-rate schools and 
libraries that that receive support would be impacted by changes to the 
rural definition. Should we phase in changes to the rural definition 
over time to help schools and libraries that are reclassified as non-
rural to adjust?

C. Addressing Changes to the National School Lunch Program

    267. As we consider changes to the structure of the E-rate program, 
we also take this opportunity to address changes in the National School 
Lunch Program (NSLP) that necessitate some adjustments to how we 
determine what discounts some schools and libraries can receive. 
Traditionally, schools that participate in the NSLP collect individual 
eligibility applications from each of their students seeking free or 
reduced-priced lunches. Under the E-rate program, most schools and 
school districts use the NSLP eligibility as a proxy for poverty when 
calculating discounts on services received under the E-rate program. In 
the alternative, schools and school districts can use a federally-
approved alternative mechanism, such as a survey. Libraries' discount 
percentages are based on the public school district in which they are 
physically located.
    268. In 2011, as mandated by the Healthy, Hunger-Free Kids Act of 
2010, the United States Department of Agriculture (USDA) began rolling 
out a new reimbursement mechanism called the Community Eligibility 
Option (CEO), allowing schools to elect to serve free breakfasts and 
lunches to all the students attending a school without collecting 
household applications from any of the students at the school. Schools 
that elect to participate in the CEO must: (1) have 40 percent or more 
of their students directly certified as eligible (``Identified 
Students'') for free meals (for example, on the basis of their 
participation in the Supplemental Nutrition Assistance Program (SNAP), 
Temporary Assistance for Needy Families, or Food Distribution Program 
on Indian Reservations) in the year prior to implementing the option; 
(2) agree to serve free lunches and breakfasts to all students for four 
successive school years; and (3) agree to cover with non-federal funds 
any costs of providing free meals to all students above amounts 
provided in federal assistance. To compensate for the students who 
would qualify for free or reduced price meals, but who do not 
participate in a program which allows them to be directly certified as 
school lunch-eligible, schools in the CEO program apply a standard 
multiplier of 1.6 to their Identified Students population in order to 
determine the total percentage of meals for which they will be 
reimbursed by the USDA. Schools are then responsible for the difference 
between the federal reimbursement rate and the total cost of meals for 
all students.
    269. Because schools that participate in the CEO no longer collect 
individual eligibility data from participating students, it could 
affect student eligibility for free school meals. If the E-rate program 
were to use the same eligibility criteria as the CEO program to 
determine E-rate discounts against the current discount matrix, it 
could potentially increase the number of schools eligible for 80 
percent discounts and higher on the E-rate discount matrix.
    270. In 2011, the Bureau directed USAC to allow schools 
participating in the CEO program to use their NSLP eligibility data for 
the most recent E-rate funding year in which such schools did not 
participate in the CEO to determine their E-rate discounts. In 2012, 
the Bureau repeated this guidance.
    271. We now seek to gather data that will inform our ability to 
assess the extent and impact of challenges related to the CEO and the 
E-rate program. In particular, we seek comment on six over-arching 
issues. First, we seek comment on how we should calculate student 
eligibility for schools and school districts electing the CEO as 
opposed to those schools and school districts not electing the CEO. If 
we adopt two separate tracks--CEO schools and school districts and non-
CEO schools and school districts--should CEO schools be permitted to 
qualify under either track, or should they be limited to the CEO track? 
Commenters should address the practical implications of adopting two 
separate tracks. Should any adopted methodology for determining 
discount rates attempt to preserve an applicant's average discount rate 
under the current E-rate program or the current overall distribution of 
discount rates among the applicants?
    272. Second, we seek comment on whether we should consider 
alternative ways to measure the poverty level for eligible schools and 
libraries that is minimally burdensome for schools and

[[Page 51631]]

provides an accurate measure of poverty. For example, should the 
Commission reconsider using U.S. Census Bureau data, such as the 
American Community Survey (ACS), an annual socioeconomic survey of 
households, to determine reimbursement levels? The ACS is designed to 
produce relatively precise estimates throughout the nation for small 
geographic areas, such as school districts, by surveying large samples 
of households and accumulating data over periods of 1, 3, and 5 years, 
depending on an area's population. If we were to use U.S. Census data 
to set subsidy levels, how would we ensure that such data accurately 
measures a school's level of need rather than general community income? 
And how could we ensure that such data is sufficiently current? Are 
there any issues regarding the definition of Tribal lands and the 
collection of data on Tribal lands in the ACS of which we should be 
aware? As more states opt for the CEO, is there a common way in which 
to measure the poverty level for schools that the USDA, the U.S. 
Department of Education and the Commission could all use for CEO 
schools in implementing their programs based on poverty levels? Are 
there other ways to accurately measure poverty among schools that are 
familiar to most schools that we should consider? Specifically, in 
regard to libraries, is there an alternative method that may more 
accurately reflect the level of poverty in a library's service area? 
Commenters should indicate whether any proposed alternatives are 
accessible to all schools and how difficult, costly, and burdensome 
such alternatives may be to administer among schools.
    273. Third, we seek comment on whether we should require schools 
and school districts to use a federally-approved alternative mechanism, 
such as school-wide income survey, to determine their level of poverty. 
Currently, for CEO schools to maintain current free and reduced poverty 
statistics to determine eligibility for various additional state and 
federal program benefits that their students may qualify for, they have 
had to collect Household Information Surveys, which they then process 
manually following poverty guidelines. Should the Commission require a 
similar survey or application for purposes of receiving E-rate program 
benefits? We understand that the requirement of such a survey or form 
for purposes of the E-rate program may conflict with the objective of 
the CEO program to eliminate the effort associated with collecting and 
processing applications. However, does the benefit of receiving E-rate 
reimbursements for services outweigh any administrative burdens 
associated with collecting and processing these forms or surveys, 
particularly, where schools and school districts have already collected 
and processed these forms?
    274. Currently, if a school uses a school-wide income survey and at 
least 50 percent of the surveys are returned, the school may calculate 
the percentage of NSLP-eligible students from the returned surveys and 
project that percentage of eligibility for the entire school 
population, for purposes of determining its discount rate under the E-
rate program. We take this opportunity to revisit that practice, and 
seek comment on whether allowing schools to project the percentage of 
their NSLP-eligible students unreasonably distorts the number of needy 
students by artificially inflating the E-rate discount rate they are 
able to claim. Should CEO or other schools that use school-wide surveys 
be allowed to project the percentage of their NSLP-eligible students 
based on the surveys they receive as permitted by our current 
procedures? Would those projections be more accurate if we require 
schools to receive a higher percentage, such as at least 75 percent of 
the surveys in order to project their students NSLP-eligibility from 
the surveys? In the alternative, should all applicants that use school-
wide income surveys be required to base their E-rate discount rate only 
on the surveys they actually collect? Commenters should indicate what 
other concerns are associated with requiring schools and school 
districts to collect these poverty statistics for the purposes of the 
E-rate program.
    275. Fourth, we seek comment on whether we should use direct 
certification data with a multiplier to determine a school's poverty 
level. Using only the direct certification poverty statistic without a 
multiplier as the basis for a CEO school's E-rate discount would tend 
to severely underreport a school's actual poverty statistic, because 
students at the reduced-price lunch status, along with some free lunch 
students, would not be included in the counts for determining the E-
rate discount rate. Not all families who currently receive free or 
reduced lunch apply for benefits such as Medicaid, SSI, Section 8 and 
SNAP and those students would not be included in the direct 
certification data. While the current multiplier of 1.6 is applied to 
the direct certification data under the CEO program through school year 
2013-2014, USDA's FNS is permitted to change the multiplier to a number 
between 1.3 and 1.6 after school year 2013-2014. We thus seek comment 
on whether we should establish a multiplier between 1.3 and 1.6, 
consistent with the CEO, or some other multiplier to the direct 
certification data? For schools and school districts currently 
participating in the CEO, we seek data on the difference in the poverty 
level when using NSLP eligibility, direct certification, and direct 
certification with the 1.6 multiplier currently used by USDA. 
Commenters should indicate what multiplier they believe is fair and 
reasonable and will adequately capture schools' poverty levels. Should 
we develop a different multiplier for priority one and priority two 
services? Additionally, we seek comment on whether the direct 
certification data and nationwide multiplier should be used for 
determining an applicant's discount rate or should we apply this 
eligibility figure to the current E-rate discount matrix? If so, should 
we make any adjustments to the current E-rate discount matrix given the 
advent of the CEO? Commenters should set forth with specificity any 
alternative proposed discount matrix.
    276. Fifth, we seek comment on whether there are scenarios under 
which we should provide a mechanism for CEO schools to qualify for 
higher discounts than they would under whatever default approach we 
adopt. The CEO operates on four-year cycles, but it provides a 
mechanism whereby schools may demonstrate that their poverty levels 
have changed, thus making them eligible for additional reimbursement. 
The current E-rate program requires applicants to demonstrate discount 
eligibility on an annual basis. If the Commission adopts a mechanism 
that permits schools to establish their discount level for multiple 
funding years, as current CEO schools are now able to do, should there 
be a process by which they may demonstrate that their E-rate discount 
level has increased? If so, what information should we require from 
applicants seeking an exception? Should the applicant then be required 
to establish the discount level annually for successive years in a 
cycle, or would the new discount level be retained for multiple years? 
How would this operate if the applicant were a consortium, or a 
consortium comprised of CEO and non-CEO schools (and potentially 
libraries)?
    277. Lastly, we seek comment on what procedural and administrative 
issues are impacted by the CEO? For example, USAC annually requests 
states to provide a spreadsheet listing NSLP data by school that is 
used for

[[Page 51632]]

application review. While many states attempt to comply with these 
requests, a states' database systems vary by state and may not easily 
lend themselves to producing reports in USAC's requested format. The 
introduction of CEO schools potentially compounds the state reporting 
problem, particularly because CEO states and those that will become CEO 
states may not yet have determined how, or if, CEO schools will be 
accounted for within their NSLP-based database. What procedural 
mechanisms can we establish to minimize the burden upon states, while 
mitigating any additional administrative burden for USAC in reviewing 
the data for CEO schools? Additionally, USAC has provided a specific 
designation to identify those schools providing free meals for all 
students under the USDA's CEO in Block 4 (Discount Calculation 
Worksheet) of a school's FCC Form 471 application. Should the 
Commission revise the FCC Form 471 application or any of the other 
forms in order to accurately identify a CEO school? Commenters should 
specifically indicate any proposed changes. Commenters should also 
indicate what other administrative or procedural barriers or concerns 
may need to be addressed as part of any proposed alternative. For 
example, what information or documentation should be required by USAC, 
as necessary, for state validation of the student eligibility data 
depending upon the method used? Should we consider a different approach 
for schools operated by federal or Tribal entities, such as the Bureau 
of Indian Education or Tribal governments? What should USAC's review 
processes entail for CEO schools? What, if any, other procedural or 
administrative issues may need to be addressed if applying the direct 
certification data with a multiplier to the E-rate program?
    278. We also seek to identify best practices by those currently 
participating in the CEO program, so that we can fully consider 
possible programmatic changes, including potential rule changes. We are 
most interested in ways to mitigate the impact of the CEO on the E-rate 
program regarding discount eligibility, administrative burdens, and E-
rate processes as a whole. So that we may have a factual basis and 
detailed record upon which to determine the nature and extent of any 
problems, we encourage commenters that currently participate in the CEO 
and those that will become eligible in the future, to provide us with 
detailed information regarding their experiences, both positive and 
negative. We believe that input from those schools and school districts 
that currently participate in the CEO and those libraries and library 
systems affected by the CEO is crucial in fully evaluating the impact 
of the CEO on the E-rate program. Further, identifying with specificity 
particular examples or concerns will ensure that we have a complete 
understanding of the issues involved. In responding to the questions 
posed above, commenters should address what, if any, additional burden 
any new reporting or data collections requirements may place on service 
providers and/or applicants.

D. Additional Measures To Prevent Waste, Fraud and Abuse

    279. The Commission is committed to guarding the Fund against 
waste, fraud, and abuse and ensuring that funds disbursed through the 
E-Rate program are used for appropriate purposes. During the last 15 
years, the Commission has assisted with several dozen criminal 
prosecutions of individuals who have sought to defraud the E-rate 
program, entered into compliance plans with individuals, schools and 
companies that are alleged to have violated the E-rate rules, and 
suspended or debarred dozens of persons from participating in the E-
rate program. We invite commenters to identify and discuss ways that 
the Commission can continue to combat waste, fraud and abuse in the E-
rate program. We seek to identify additional policies and procedures 
that we can put in place to protect against waste, fraud, and abuse; to 
identify waste fraud and abuse; and to aggressively pursue actions 
against those engaged in waste fraud and abuse. We also specifically 
seek comment on our proposal to extend document retention requirements 
for participants in the E-rate program from five years to at least ten 
years to ensure documents are available when needed for investigations 
and prosecutions involving waste, fraud and abuse in the E-rate program 
consistent with the time frame for pursuing recovery under the False 
Claims Act.
1. Extending the E-Rate Document Retention Requirements
    280. We propose to extend the E-rate program document retention 
requirements from five to at least ten years. We seek comments on the 
benefits and burdens of doing so. Access to relevant documents is 
crucial to conducting effective audits of E-rate applicants and service 
providers, and otherwise investigating compliance with the requirements 
of the E-rate program. Our rules currently require schools and 
libraries to retain all documents related to the application, receipt, 
and delivery of eligible services received under the E-rate program for 
at least five years after the last day of the delivery of services. 
Schools and libraries must also retain all other documentation that 
demonstrates compliance with the statutory or regulatory requirements 
for the E-rate program as well as all 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. Service providers are also 
required to retain documents related to the delivery of eligible 
services for at least five years after the last day of service delivery 
and all other documentation that demonstrates compliance with the 
statutory or regulatory requirements for the E-rate program.
    281. In the USF/ICC Transformation Order, the Commission revised 
the record retention requirements for recipients of high-cost support 
to extend the retention period from five years to ten years. In doing 
so, the Commission determined that the high-cost retention requirement 
of five years was inadequate for the purposes of litigation under the 
False Claims Act, which can involve conduct that relates back 
substantially more than five years. Similarly, in the Lifeline Reform 
Order, 77 FR 12784, March 2, 2012, the Commission proposed to amend its 
rules to extend the retention period for eligible telecommunications 
carriers receiving low-income universal service support from three 
years to at least ten years. Similar concerns lead us to propose to 
amend Sec.  54.516 of the Commission's rules to read as specified below 
and we seek comment on this proposed rule:
    (a) Record keeping requirements--(1) Schools, libraries and 
consortia. Schools, libraries, and any consortium that includes schools 
and libraries shall retain all documents related to the application 
for, receipt, and delivery of discounted telecommunications and other 
supported services for at least 10 years after the last day of the 
delivery of services or from the end of the applicable funding year, 
whichever is later. Schools, libraries, and any consortium that include 
schools or libraries shall also retain any other document necessary to 
demonstrate compliance with the statutory or regulatory requirements 
for the schools and libraries mechanism. Schools and libraries shall 
maintain asset and inventory records of equipment purchased as 
components of supported

[[Page 51633]]

internal connections services sufficient to verify the actual location 
of such equipment for a period of five years after purchase.
    (2) Service providers. Service providers shall retain documents 
related to the delivery of discounted telecommunications and other 
supported services for at least 10 years after the last day of the 
delivery of services or from the end of the applicable funding year, 
whichever is later. Service providers shall also retain any other 
document that demonstrates compliance with the statutory or regulatory 
requirements for the schools and libraries universal service support 
mechanism.
    282. We also seek comment on whether there are other changes we 
should make to our document retention requirements. For example, should 
our rules specify that applicants and service providers must keep 
records of all their communications relating to bids for and purchases 
of E-rate supported services? Should we extend the required retention 
of records in the event of any Governmental investigation, audit, or 
other governmental inquiry involving a particular participant or 
applicant for funding in the E-rate program to avoid destruction of 
potentially relevant documents. We further seek comment on the manner 
in which such an extension would be implemented. For example, should 
the obligation for an extended retention period be immediately and 
automatically triggered by a participant or applicant's knowledge that 
an investigation of its E-rate funding or E-rate requests is ongoing? 
If so, should the record retention extension be a blanket extension 
applying to all existing E-rate documents in its possession or should 
an extension be implemented only at the discretion of the Commission, 
upon direction from the Commission or USAC, to the party involved? In 
other words, should additional retention be required and permitted ``as 
directed by the Commission or USAC'' and targeted to those documents 
determined to be appropriate in the Commission's sole discretion? Would 
such a targeted ``hold'' requirement be better than an automatic, 
blanket hold? We seek comment on these options.
2. Documentation of Competitive Bidding
    283. As discussed above, E-rate applicants are currently required 
to retain documentation that demonstrates compliance with the statutory 
or regulatory requirements for the E-rate program as well as all 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. In the 
Healthcare Connect Fund Order the Commission required applicants to the 
HealthCare Connect Fund to submit to USAC competitive bidding 
documents, including a copy of each bid received, the bid evaluation 
criteria, bid sheets, a list of people who evaluated bids, memos, board 
minutes, or similar documents, and any correspondence with vendors 
during the bidding, evaluation, and award phase of the process. Having 
such documents from E-rate recipients would allow USAC to evaluate more 
fully the competitive bidding process conducted by E-rate applicants 
and ensure that documentation of the competitive bidding process was 
retained in the event of an audit. At the same time, providing such 
documents would impose additional burdens on E-rate applicants and 
could increase application review time and administrative costs. We 
therefore seek comment on whether we should similarly require E-rate 
applicants to submit competitive bidding documents with their FCC Forms 
471. Are there specific documents, such as the bid selection sheet, 
that would allow USAC to review an applicant's competitive bidding 
process while minimizing the burden on applicants?
3. E-rate FCC Form Certification Requirements
    284. As the custodian of the universal service fund, we are 
committed to ensuring that universal service funds are used in a manner 
consistent with the E-rate program rules. One way to encourage 
compliance and to ensure that we hold entities responsible for failing 
to follow our rules is to require applicants and service providers to 
certify their compliance with various requirements of the E-rate 
program when submitting forms to USAC. Certifications of compliance 
with our rules will help protect against waste, fraud and abuse in the 
program by imposing a duty on the person submitting the certification 
to consider whether the applicant or service provider is in compliance 
with all E-rate rules. Moreover, the certifications are an important 
enforcement tool in protecting the USF from waste, fraud and abuse.
    285. Currently, most E-rate forms submitted to USAC require an 
``authorized person'' to attest to the certifications contained on 
those forms on behalf of the entity submitting the form. While a 
signatory may be ``authorized'' to sign an E-rate form pursuant to a 
general delegation by the applicant or service provider, occasionally 
signatories on the E-rate forms do not have sufficient knowledge about 
the actual operation of the E-rate program or a sufficient 
understanding of the Commission's E-rate program rules to provide a 
meaningful or accurate certification. As a way to further guard against 
waste, fraud and abuse, we therefore propose to amend our rules to 
require that an officer of the service provider sign certain forms 
submitted to USAC in support of an application for eligible services 
and any requests for payment. We also propose to codify the current 
certifications contained on our E-rate forms. We further propose to 
require service providers to certify their compliance with the lowest 
corresponding price rule and with state and local procurement laws.
a. E-rate FCC Form Signatories
    286. First, we seek comment on whether the current signatories on 
the following E-rate forms and any other E-rate forms are sufficiently 
knowledgeable about the E-rate program to accurately certify to program 
compliance. The relevant E-rate forms include:
    FCC Form 470 (Description of Services Requested and Certification 
Form). The FCC Form 470 is used by an applicant to open a competitive 
bidding process for desired eligible services. It requires an 
``authorized person'' on behalf of the school or library to certify 
certain information to ensure, among other things, that the applicant 
will conduct a competitive bidding process in accordance with 
Commission rules, the applicant has not received anything of value from 
the service provider other than the requested services, and that only 
eligible entities receive support under the E-rate program.
    FCC Form 471 (Services Ordered and Certification Form). The FCC 
Form 471 is used by an applicant to request funding from USAC for the 
services selected by the applicant during its competitive bidding 
process, and to provide USAC with information about the requested 
services and the discount(s) for which an applicant is eligible to 
receive on eligible services under the E-rate program. As with the FCC 
Form 470, the FCC Form 471 requires an ``authorized person'' to certify 
to certain information to ensure, among other things, that only 
eligible entities will receive support under the E-rate program.
    FCC Form 472 (Billed Entity Applicant Reimbursement (BEAR)

[[Page 51634]]

Form). The FCC Form 472 is used by an applicant to seek reimbursement 
from USAC for discounts on services paid in full. This form requires 
certifications by an ``authorized person'' on behalf of both the 
applicant and service provider to ensure that the applicant has paid 
for the services, that the service provider has provided discounted 
services within the current funding year for which it submits an 
invoice to USAC, and that invoices submitted from service providers for 
the costs of discounted eligible services do not exceed the amount that 
has been approved.
    FCC Form 473 (Service Provider Annual Certification Form). The FCC 
Form 473 is used to establish that the participating service provider 
is eligible to participate in the E-rate program and to confirm that 
the invoices submitted by the service provider are in compliance with 
the E-rate rules. This form requires certain annual certifications by 
an ``authorized person'' on behalf of the service provider to ensure 
that the service provider is in compliance with the Commission's rules.
    FCC Form 474 (Service Provider Invoice (SPI) Form). The FCC Form 
474 is used by service providers to seek payment from USAC for the 
discounted costs of services it provided to applicants for eligible 
services. The FCC Form 474 is also used to ensure that each service 
provider has provided discounted services within the current funding 
year for which it submits an invoice to USAC, and that invoices 
submitted from service providers for the costs of discounted eligible 
services do not exceed the amount that has been approved. While this 
form does not currently require attestation to certifications, we have 
recently sought renewal of this form and have proposed to include 
certifications by an ``authorized person'' on behalf of a service 
provider.
    FCC Form 479 (Certification by Administrative Authority to Billed 
Entity of Compliance with the Children's Internet Protection Act). The 
FCC Form 479 is used by the Administrative Authority for one or more 
schools or libraries, for which universal service discounts have been 
requested or approved for eligible services, to certify their 
compliance with CIPA. This form requires an ``authorized person'' on 
behalf of the Administrative Authority to certify that an Internet 
safety policy is being enforced.
    FCC Form 486 (Receipt of Service Confirmation Form). The purpose of 
the FCC Form 486 is to authorize the payment of invoices from service 
providers, indicate approval of technology plans, and indicate 
compliance with CIPA. This form requires an ``authorized person'' on 
behalf of the applicant to certify that, for example, the discounted 
services indicated on the form are covered by the technology plan that 
has been approved by the state or other authorized body and that the 
services listed on FCC Form 486 have been, are planned to be, or are 
being provided to all or some of the eligible entities identified on 
the FCC Form 471.
    FCC Form 500 (Adjustment of Funding Commitment and Modification to 
Receipt of Service Confirmation Form). The FCC Form 500 is used by the 
applicant to make adjustments to previously filed forms, such as 
changing the contract expiration date filed with the FCC Form 471, 
changing the funding year service start date filed with the FCC Form 
486, or cancelling or reducing the amount of funding commitments. This 
form requires an ``authorized person'' on behalf of the applicant to 
certify as to the veracity of the information within the form, the 
applicability of the discount level, and that any records relied on to 
complete the form will be retained for five years.
    287. We propose to require that an officer of the service provider 
make the required certifications on the FCC Form 472 (BEAR Form), FCC 
Form 473 (Service Provider Annual Certification Form) and the FCC Form 
474 (SPI Form), the key documents provided by service providers to USAC 
attesting to the service provider's compliance with the E-rate rules 
and seeking payment for supported services provided. Requiring an 
officer to certify compliance will help ensure that the certification 
reflects the service provider's commitment to understand and comply 
with the E-rate program rules and requirements.
    288. Specifically, in proposing to require officer certification on 
the FCC Form 472, we seek comment on amending Sec.  54.504(f) to read:
    (f) Filing of FCC Form 472. All service providers must submit a 
Service Provider Acknowledgement as part of the Applicant's FCC Form 
472 seeking reimbursement from the Administrator for eligible services. 
The FCC Form 472 shall be signed by an officer of the service provider 
and shall include the officer's certifications under oath that:
    (1) This service provider will remit the discount amount authorized 
by the fund administrator to the Billed Entity Applicant who prepared 
and submitted the Billed Entity Applicant Reimbursement Form as soon as 
possible after the fund administrator's notification to the service 
provider of the amount of the approved discounts on this Billed Entity 
Applicant Reimbursement Form, but in no event later than 20 business 
days after receipt of the reimbursement payment from the fund 
administrator, subject to the restriction set forth in subsection (2) 
below.
    (2) This service provider will remit payment of the approved 
discount amount to the Billed Entity Applicant prior to tendering or 
making use of the payment issued by the Universal Service 
Administrative Company to the service provider of the approved 
discounts for the Billed Entity Applicant Reimbursement Form.
    (3) This service provider is in compliance with the rules and 
orders governing the schools and libraries universal service support 
program and that failure to be in compliance and remain in compliance 
with those rules and orders may result in the denial of discount 
funding and/or cancellation of funding commitment.
    (4) Failure to comply with the rules and orders governing the 
schools and libraries universal service support program could result in 
civil or criminal prosecution by law enforcement authorities.
What are the benefits and burdens of requiring an officer signature on 
the FCC Form 472?
    289. Recently, in seeking to renew the information collection 
requirements associated with the FCC Form 473, we sought comment on 
amending that form to require an officer of the service provider, 
rather than just an ``authorized person'' to make the required 
attestations on the FCC Form 473. While we received comments in 
response to our proposal, we do not consider the record robust enough 
to support changes to the form. However, the issue is important to our 
efforts at reducing waste and abuse in the program and we therefore 
renew our request for comments. We thus seek comment on redesignating 
current Sec.  54.504(f) of our rules as newly added Sec.  54.504(g) and 
revise paragraph (g) to read:
    (g) Filing of FCC Form 473. All service providers eligible to 
provide telecommunications services and other supported services under 
this subpart shall submit annually a completed FCC Form 473 to the 
Administrator. The FCC Form 473 shall be signed by an officer of the 
service provider and shall include that officer's certifications under 
oath that:

[[Page 51635]]

What are the benefits and burdens of requiring officer certification on 
the FCC Form 473?
    290. Further, in proposing to require officer certification on the 
FCC Form 474, we seek comment on adding a new provision to our rules at 
Sec.  54.504(h) that would read:
    (h) Filing of FCC Form 474. All service providers seeking 
reimbursement from the Administrator for eligible services shall submit 
a completed FCC Form 474 to the Administrator. The FCC Form 474 shall 
be signed by an officer of the service provider and shall include the 
officer's certifications under oath that:
    (1) This service provider is in compliance with the rules and 
orders governing the schools and libraries universal service support 
program and that failure to be in compliance and remain in compliance 
with those rules and orders may result in the denial of discount 
funding and/or cancellation of funding commitment.
    (2) Failure to comply with the rules and orders governing the 
schools and libraries universal service support program could result in 
civil or criminal prosecution by law enforcement authorities.
What are benefits and burdens of requiring officer certification on the 
FCC Form 474?
    291. Similarly, we propose and seek comment on whether we should 
also require all E-rate forms submitted by E-rate applicants be signed 
by someone with authority equivalent to that of a corporate officer. 
For example, we propose amending Sec.  54.503(a)(2) of our rules to 
read:
    (2) The FCC Form 470 shall be signed by the person authorized to 
order eligible services for the eligible school, library, or consortium 
including such entities, and with authority equivalent to that of a 
corporate officer, and shall include that person's certification under 
oath that:
    We also propose amending Sec.  54.504(a)(1) of our rules to read:
(1) The FCC Form 471 shall be signed by person authorized to order 
eligible services for the eligible school, library, or consortium, and 
with authority equivalent to that of a corporate officer, and shall 
include that person's certifications under oath that:
    Commenters should provide comments on both the benefits and burdens 
of requiring an equivalent signature for applicants on the FCC Forms 
470, 471, 472, 479, 486, and 500, and any other E-rate forms attested 
to by the applicant.
    292. In the alternative, we seek comment on whether we should 
require that the certifications on the FCC Forms submitted by 
applicants, service providers or both be made by an individual with 
substantial knowledge of E-rate program requirements who is also 
responsible for ensuring program compliance by the service provider or 
the applicant. Commenters should provide comments on the benefits and 
burdens of requiring such a knowledgeable individual to sign the FCC 
Forms 470, 471, 472, 473, and 474, and any other E-rate forms.
b. Existing Certifications
    293. Our rules currently require certain certifications be made as 
part of the FCC Forms 470, 471, 472, 479, 486, and 500, but we 
recognize that many of the certifications on the current E-rate forms 
are not codified in the Commission's rules. For example, the FCC Form 
471 requires that a person authorized by the applicant certify that no 
kickbacks were paid to anyone within the applicant. This certification, 
however, is not specified in Sec.  54.504(a)(1) of our rules. We thus 
seek comment on whether we should amend our rules to include all of the 
certifications currently found on the E-rate FCC Forms. If we do so, 
should we make the list of certifications non-exclusive and to continue 
to delegate authority to the Bureau to consider including additional 
certifications on E-rate forms as necessary and appropriate? We seek 
comment on that approach.
c. Additional Certifications
    294. Lowest Corresponding Price Certification. We also propose to 
amend Sec.  54.511 to require service providers to certify their 
compliance with the lowest corresponding price rule. The lowest 
corresponding price rule requires service providers to provide 
applicants with prices no higher than the lowest price that it charges 
to similarly-situated non-residential customer for similar services. 
Requiring such a certification will provide additional incentive for 
service providers to offer schools and libraries with competitive 
prices for supported E-rate services and hold service providers further 
accountable for complying with this rule. We seek comments on the 
benefits and burdens of such a requirement. Specifically, we seek 
comment on the following proposed amendment to Sec.  54.511(b) of our 
rules:
    (e) The service provider must certify on the FCC Form 473 and FCC 
Form 474 that it is charging schools, school districts, libraries, 
library consortia or consortia including any of these entities, the 
lowest corresponding price for supported services, unless the 
Commission, with respect to interstate services, or the state 
commission, with respect to intrastate prices, had found that the 
lowest corresponding prices is not compensatory.
    295. State and Local Law Compliance by Service Providers. There are 
state and local procurement laws that protect against waste, fraud, and 
abuse. Currently, our rules require applicants to comply with state and 
local competitive bidding requirements, but do not impose any such duty 
on service providers. State and local procurement requirements protect 
against waste, fraud and abuse. Therefore, we propose to amend 
Sec. Sec.  54.503 and 54.504 to require service providers to comply 
with state and local procurement laws, and to require service providers 
to certify compliance with that requirement. Specifically, we seek 
comment on the following proposed rule changes to Sec.  54.503(b) of 
our rules:
    (b) Competitive Bid Requirements.
    (1) Except as provided in Sec.  54.511(c), an eligible school, 
school districts, library, or consortium that includes an eligible 
school or library shall seek competitive bids, pursuant to the 
requirements established in this subpart, for all services eligible for 
support under Sec.  54.502. These competitive bid requirements apply in 
addition to state and local competitive bid requirements and are not 
intended to preempt such state or local requirements.
    (2) Service providers must certify that they are in compliance with 
state and local procurement laws.
    296. We also propose to require service providers to certify that 
the service provider complied with all applicable state and local 
procurement laws when it participated in the competitive bidding 
processes as part of submitting an FCC Form 474. Thus, in addition to 
seeking comments above on adding paragraph (h) in Sec.  54.504 of our 
rules, we also seek comment on adding the following required 
certification:
    (3) The service provider is in compliance with state and local 
procurement laws.
    297. As we move forward with other reforms of the E-rate program, 
we also seek comment on additional certifications that may be necessary 
to ensure that funds are being used for their intended purpose.
    298. We seek comment on the benefits and burdens on service 
providers and applicants should we adopt these proposed changes to our 
rules. Are there state or local procurement requirements that do not 
currently apply to E-rate

[[Page 51636]]

service providers? We also seek comment on whether there are other 
obligations on applicants within the rules that do not have 
corresponding obligations on service providers that we should consider 
adopting to ensure that service providers are held responsible where 
appropriate and necessary to guard against waste, fraud and abuse.
4. Post-Commitment Compliance and Enforcement
    299. The Commission currently has tools available to ensure 
compliance with our rules and to impose penalties upon those parties 
who willfully violate our rules. The Commission's USF audit program, 
called the Beneficiary and Contributor Audit Program (BCAP), is one of 
our most important tools for identifying and deterring program rule 
violations, and for recovering funding that has been improperly 
disbursed. We take this opportunity to reinforce our continuing 
commitment to ensuring that the Commission and USAC have a rigorous 
audit program that includes both targeted audits of high-risk 
applicants and vendors as well as random audits to ensure that all 
applicants and vendors comply with our rules. We also take this 
opportunity to seek comment on whether there are ways to further 
strengthen the BCAP audit procedures to ensure that compliance issues, 
particularly substantial ones, are identified.
    300. Recently, in reforming the USF Lifeline program, the 
Commission required that every eligible telecommunications carrier 
(ETC) providing Lifeline services and drawing $5 million or more in the 
aggregate on an annual basis from the Lifeline program hire an 
independent audit firm to assess the ETC's overall compliance with the 
program's requirements. Those audits must be performed once every two 
years, unless otherwise directed by the Commission. We seek comment on 
whether we should adopt a similar third-party independent audit 
requirement for E-rate applicants or service providers as a method of 
augmenting the current BCAP program. If so, what should we establish as 
the threshold for the audits? Should it be a set dollar amount or 
should it be the top percentage of recipients--for example, the top 1 
percent or the top 20 funding requests--regardless of the dollar 
amounts? Should the threshold be based on funding requests or funding 
actually disbursed? How often should such an audit be required? Would 
the frequency of such a requirement be different if the audit 
identified issues or it had no findings? What would be the burden of 
such a requirement on applicants and service providers? We recognize 
that some other federal programs require funding recipients to conduct 
annual audits, and seek comment on whether there are audit requirements 
in those programs that we should adopt in the E-rate program. We also 
seek comment on any other ways the Commission could improve its own 
audit processes.
    301. We also seek comment on whether the Commission should revise 
its suspension and debarment rules to further ensure that individuals 
and entities that have violated the E-rate program rules cannot do so 
in the future. The Commission currently has rules providing for 
suspension and debarment from participation in universal service 
programs when there have been certain criminal convictions or civil 
judgments. We note that there is a government-wide debarment and 
suspension system for non-procurement programs and activities, for 
which OMB guidance is set forth in part 180 of Title 2 of the Code of 
Federal Regulations. We seek comment on the pros and cons of 
participating in that government-wide debarment and suspension system 
in administering our universal service programs. We seek comment on any 
policies or procedures that we should adopt if we were to implement 
part 180, and in particular on what procedures would be ``consistent 
with the [OMB] guidance.'' We seek comment on the extent to which our 
existing procedures for appealing a suspension or debarment could be 
used, or whether different or additional procedures should be employed.
    302. We also seek comment on how we should address those matters 
for which the OMB guidelines give each agency some discretion, 
including both those noted below and the other matters identified in 
the part 180 rules. For example, under the government-wide system 
agencies have some discretion to define the scope of transactions that 
a person excluded or disqualified under those rules generally is 
restricted from participating in. Under the government-wide system, the 
guidelines apply to at least these two categories of transactions: A 
``primary tier between a federal agency and a person''; and a ``lower 
tier between a participant in a covered transaction and another 
person.'' Under this framework, however, each agency's implementing 
regulations must address whether certain subcontracts also should be 
transactions covered by these rules. We seek comment on these issues 
here. Would it be appropriate or desirable to designate contracts 
between a service provider and its subcontractors in the E-rate context 
as ``an additional tier of contracts'' that should be included as a 
``covered transaction?'' Alternatively, should certain transactions be 
exempted from coverage? Proponents of any expansion or contraction of 
covered transactions should explain the rationale for their 
recommendations. As another example, we also seek comment on 
considerations that might be appropriate in implementing Sec.  180.135, 
which allows a Federal agency head or designee to ``grant an exception 
permitting an excluded person to participate in a particular covered 
transaction.''
    303. In addition, we note that the OMB government-wide guidelines 
in part 180 of title 2 afford substantial discretion to agencies to 
evaluate whether or not to suspend or debar depending on the individual 
circumstances presented. Even in the absence of full implementation of 
part 180 of Title 2 of the Code of Federal Regulations, should the 
Commission adopt rules for suspension and debarment similar to those 
set forth in subpart G of part 180 of Title 2 (Suspension) and subpart 
H of part 180 of Title 2 (Debarment)? What other discretionary factors 
should be considered, if any, in addition to those set forth in part 
180? For example, should we treat service providers differently than 
applicants and consultants in any circumstances? Should parties in some 
circumstances have an opportunity to shorten their debarment period by 
demonstrating that they have instituted a compliance plan with training 
and oversight that will facilitate program compliance? Should repeat 
offenders be treated differently than those violating our rules for the 
first time? We seek comment on these and any other factors we should 
take into consideration if the Commission revises its suspension and 
debarment rules to allow for more discretion than exists under the 
current regulations, which provide for debarment only after certain 
criminal convictions or civil judgments.

E. Wireless Community Hotspots

    304. We next inquire whether we should continue to increase the 
reach of E-rate supported services. In the Schools and Libraries Sixth 
Report and Order, the Commission revised its rules to allow schools to 
open their facilities to the general public to utilize services 
supported by E-rate when classes are not in session. The Commission 
recognized that providing community use on school premises was 
consistent with the overarching goals of universal service to promote 
access to telecommunications and information

[[Page 51637]]

services. In order to effectuate this change, the Commission amended 
Sec. Sec.  54.503 and 54.504 to require applicants to certify that 
``[t]he services the applicant purchases at discounts will be used 
primarily for educational purposes,'' as opposed to solely for 
education purposes. We now seek comment on whether we should permit 
schools to provide wireless hotspots to surrounding communities using 
E-rate supported services.
    305. We first seek comment on permitting students and the general 
public to receive E-rate funded Internet access offsite through 
wireless hotspots. In allowing community use of schools' E-rate 
supported broadband services, the Commission recognized that students' 
need for broadband access does not end when their schools' doors close 
for the day. Allowing after-hours, on-premises access to a school's 
broadband connections has given students the opportunity to work on 
homework, school projects and engage in extracurricular activities that 
require broadband access. At the same time, it has allowed other 
community members broadband access for adult education, job training, 
digital literacy programs, and online access to governmental services 
and resources. However, not all community members who need broadband 
access can take advantage of on-premises access to school's broadband 
services. For example, in response to this issue, Oakland Unified 
School District and Revere Public Schools both filed petitions with the 
Commission seeking waivers of our rules to allow them to provide 
wireless hotspots in communities surrounding their schools. We 
therefore seek public input on the prospect of permitting wireless 
hotspots for communities.
    306. We also ask whether we should implement other changes to the 
E-rate program to accommodate the use of wireless hotspots. Currently, 
services used off school or library property are generally ineligible 
for E-rate support because they are not deemed to be used for 
``educational purposes.'' Therefore, if applicants use a service both 
on-premises and off-premises, they must reduce their funding request by 
the amount of the ineligible off-site use. Recognizing the potential 
value to students and the broader community of having access to 
broadband services off-premises, are there programmatic changes we 
should make to ensure applicants are able to deploy such wireless 
hotspots? Do we need to further revise the educational purposes 
standard if we permit off-premises access for community use?
    307. To reduce the likelihood of waste, fraud, and abuse, and to 
guard against potential additional costs being imposed on the E-rate 
program, the Commission adopted several conditions for allowing 
community use of schools' E-rate supported services during non-school 
hours. Specifically, (1) schools are not permitted to request funding 
for more services than are necessary for educational purposes and may 
not seek funding for more services or equipment than necessary to serve 
its current school or library population; (2) the use of E-rate funded 
services after hours must comply with Commission rules, including CIPA; 
and (3) consistent with the Act, the 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 we impose 
the same conditions with respect to off-site access via wireless 
hotspots? We seek comment on whether there are any unique circumstances 
in the context of offsite use that would reasonably change these 
conditions. Furthermore, we seek comment on whether there are any 
additional conditions to guard against waste, fraud, and abuse that 
should be imposed on E-rate applicants that use E-rate funded services 
for wireless community use.
    308. We also seek comment on what other conditions we should impose 
on allowing community access to schools' E-rate supported services via 
community hot spots. Our rules allowing for community use in schools 
limits that use to non-school hours. Should we impose the same 
limitation here? Is there a justification for such a limitation in this 
case where wireless service will be accessible at all hours and, unlike 
the community use implemented in the Schools and Libraries Sixth Report 
and Order, does not require use of the applicant's physical property? 
Are there reasons to preclude access to the wireless service during 
school hours? Would permitting such wireless access to the community 
during school hours be detrimental to the operations of the school? For 
example, could testing or other school operations reliant on broadband 
be negatively affected by community access during school hours? If so, 
are there any measures applicants could take to reduce the impact of 
the community access on the applicant? Next, should we impose any 
geographic limitations on the scope of offsite Internet access? What 
restrictions, if any, should be placed on service providers in the 
communities that donate equipment, services or funding to help with the 
creation or expansion of the Internet access points to ensure no 
violations of the Commission's gift rules occur? We also seek comment 
on the adequacy of security measures that would be needed to guard 
against network security breaches. What other issues are raised by this 
idea?

F. Procedures for National Emergencies

    309. Discussion. In considering what specific disaster relief 
mechanisms to adopt, we first consider the circumstances under which 
such relief procedures should apply. We propose to apply relief 
procedures to schools and libraries that have been directly affected by 
any event determined by the President of the United States to be either 
an ``Emergency'' or a ``Major Disaster,'' as defined by the Federal 
Emergency Management Agency (FEMA); which has caused severe structural 
damage and displaced student and patron populations, and also to those 
schools and libraries indirectly affected by a Major Disaster who 
absorb displaced populations. We note that FEMA declares numerous 
Emergencies and Major Disasters every year, and therefore seek comment 
on how to properly limit any new rule to ensure it only applies to 
schools and libraries in communities that have suffered major 
disruptions. We also seek comment on how to measure the amount of 
disruption to an applicant. Finally, who should make the final 
determination that there has been enough of a disruption to warrant 
relief?
    310. Next, we seek comment on what particular relief procedures we 
should adopt. For example, we recognize that schools and libraries may 
need additional time to file programmatic forms, appeals, and to answer 
questions from USAC. We therefore propose to delegate authority to the 
Bureau to extend Commission deadlines for filing documents, and to 
direct USAC to do the same with respect to its procedures. We also 
propose to excuse the record retention requirement for applicants whose 
records are destroyed in an Emergency or Major Disaster and cannot be 
recovered or recreated, although we propose to require that applicants 
whose records were destroyed document the loss of their records.
    311. We also recognize that schools and libraries affected by a 
Major Disaster or Emergency may need time to repair or rebuild 
buildings and to restore telecommunications and Internet access 
services and that, in the event of evacuation, schools not directly 
affected by the Major Disaster or Emergency may need additional funding 
to support the needs of displaced students and

[[Page 51638]]

citizens. We therefore seek comment on allowing USAC to initiate a 
special filing window upon the declaration of a Major Disaster or 
Emergency for sixty days to allow applicants directly and indirectly 
affected to apply for E-rate eligible services and products. When there 
is a Major Disaster or Emergency, we also propose to exempt affected 
applicants from the FCC Form 470 filing requirement and the 28-day 
waiting period so long as such applicants comply with state and local 
bidding requirements. We propose to allow affected applicants to 
``restart the clock'' for the purposes of calculating compliance with 
the ``two-in-five'' rule for priority two services and excusing them 
from the requirement that substituted services or products have the 
same functionality as the services they are replacing.
    312. Finally, we propose to require affected applicants to make 
certain certifications on their emergency relief forms to USAC similar 
to those found in the Hurricane Katrina Order, 70 FR 65850, November 1, 
2005, to guard against waste, fraud and abuse. For example, we propose 
to require applicants to certify that they incurred substantial 
structural damage as a result of the Major Disaster and/or Emergency 
and that the services and products sought in their applications will be 
solely used to restore the network to the functional equivalent of the 
pre-Major Disaster or Emergency degree of functionality and that other 
resources are not available for restoration. We also propose to require 
applicants to certify that any alternative funding in excess of the 
cost for products or services requested on their applications will be 
returned to the federal Universal Service Fund. To the extent that 
applicants are handling increased populations, those applicants shall 
certify that there are more than a de minimis number of Major Disaster 
or Emergency victims and the applicant experience an associated 
increase in the demand for E-rate eligible services and/or products.
    313. We also seek comment on whether there are other policies and 
rules that should govern circumstances in which schools and libraries 
are faced with an Emergency or Major Disaster.

VII. Procedural Matters

A. Initial Regulatory Flexibility Analysis

    314. As required by the Regulatory Flexibility Act of 1980, as 
amended (RFA), the Commission has prepared this Initial Regulatory 
Flexibility Analysis (IRFA) of the possible significant economic impact 
on a substantial number of small entities by the policies and rules 
proposed in this Notice of Proposed Rulemaking (NPRM). Written comments 
are requested on this IRFA. Comments must be identified as responses to 
the IRFA and must be filed by the deadlines for comments on the NPRM. 
The Commission will send a copy of the NPRM, including this IRFA, to 
the Chief Counsel for Advocacy of the Small Business Administration 
(SBA). In addition, the NPRM and IRFA (or summaries thereof) will be 
published in the Federal Register.
    315. The Commission is required by section 254 of the 
Communications Act of 1934, as amended, to promulgate 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.

B. Need for, and Objectives of, the Proposed Rules

    316. This NPRM is a part of the Commission's continual efforts to 
improve the E-rate program. In it, we propose specific goals and 
measures by (1) ensuring that schools and libraries have affordable 
access to 21st Century broadband that supports digital learning, (2) 
maximizing the cost-effectiveness of E-rate funds and (3) streamline 
the administration of the E-rate program. The rules we propose in this 
NPRM are directed at enabling us to meet these goals.

C. Legal Basis

    317. 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.

D. Description and Estimate of the Number of Small Entities to Which 
the Proposed Rules Will Apply

    318. 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 Small Business 
Administration (SBA). Nationwide, there are a total of approximately 
27.5 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.''
    319. 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.
    320. Small entities potentially affected by the proposals herein 
include eligible schools and libraries and the eligible service 
providers offering them discounted services.
1. Schools and Libraries
    321. As noted, ``small entity'' includes non-profit and small 
government entities. Under the schools and libraries universal service 
support mechanism, which provides support for elementary and secondary 
schools and libraries, 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. A library includes 
``(1) a public library, (2) a public elementary school or secondary 
school library, (3) an academic library, (4) a research library [] 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.'' For-profit schools and 
libraries, and schools and libraries with endowments in excess of 
$50,000,000,

[[Page 51639]]

are not eligible to receive discounts under the program, nor are 
libraries whose budgets are not completely separate from any schools. 
Certain other statutory definitions apply as well. The SBA has defined 
for-profit, elementary and secondary schools and libraries having $6 
million or less in annual receipts as small entities. In funding year 
2007, approximately 105,500 schools and 10,950 libraries received 
funding under the schools and libraries universal service mechanism. 
Although we are unable to estimate with precision the number of these 
entities that would qualify as small entities under SBA's size 
standard, we estimate that fewer than 105,500 schools and 10,950 
libraries might be affected annually by our action, under current 
operation of the program.
2. Telecommunications Service Providers
    322. 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, 1,307 incumbent carriers reported that 
they were engaged in the provision of local exchange services. Of these 
1,307 carriers, an estimated 1,006 have 1,500 or fewer employees and 
301 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. 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.
    323. 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 2010 Trends Report, 359 companies reported that they 
were engaged in the provision of interexchange services. Of these 300 
IXCs, an estimated 317 have 1,500 or few employees and 42 have more 
than 1,500 employees. Consequently, the Commission estimates that most 
providers of interexchange services are small businesses.
    324. 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 2010 Trends Report, 1,442 CAPs and 
competitive local exchange carriers (competitive LECs) reported that 
they were engaged in the provision of competitive local exchange 
services. Of these 1,442 CAPs and competitive LECs, an estimated 1,256 
have 1,500 or fewer employees and 186 have more than 1,500 employees. 
Consequently, the Commission estimates that most providers of 
competitive exchange services are small businesses.
    325. 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.
    326. 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 2010 Trends 
Report, 413 carriers reported that they were engaged in wireless 
telephony. Of these, an estimated 261 have 1,500 or fewer employees and 
152 have more than 1,500 employees. We have estimated that 261 of these 
are small under the SBA small business size standard.
    327. 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.
    328. 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

[[Page 51640]]

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.
    329. Currently, there are approximately 74,000 Common Carrier 
Paging licenses. According to the most recent Trends in Telephone 
Service, 291 carriers reported that they were engaged in the provision 
of ``paging and messaging'' services. Of these, an estimated 289 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.
3. Internet Service Providers
    330. 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.
4. Vendors of Internal Connections
    331. 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 seven had employment of 1,000 to 2,499. Thus, under this 
size standard, the majority of firms can be considered small.
    332. 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.
    333. 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 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.

E. Description of Projected Reporting, Recordkeeping, and Other 
Compliance Requirements for Small Entities

    334. Several proposals under consideration in the NPRM may, if 
adopted, result in additional recordkeeping requirements for small 
entities. It is possible that an increase in purchasing consortia could 
result in an increase in consortia-imposed additional reporting 
requirements. Additionally, reducing competitive bidding that results 
in a single bid would increase the number of price matrices E-rate 
recipients would be required to prepare.

F. Steps Taken To Minimize the Significant Economic Impact on Small 
Entities, and Significant Alternatives Considered

    335. The RFA requires an agency to describe any significant, 
specifically small business, 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 or reporting requirements or timetables that take into 
account the resources available to small entities; (2) the 
clarification, consolidation, or simplification of compliance and 
reporting requirements under the rule for such small entities; (3) the 
use of performance rather than design standards; and (4) an exemption 
from coverage of the rule, or any part thereof, for such small 
entities.''
    336. In this NPRM, we seek to improve and modernize the program by 
proposing the goals of (1) ensuring that schools and libraries have 
affordable access to 21st Century broadband that supports digital 
learning, (2) maximizing the cost-effectiveness of E-rate funds and (3) 
streamlining the administration of the E-rate program.
    337. We recognize that several of our proposed rules would impact 
small entities. Most of the rules we propose would lessen reporting 
burdens on small entities. In those instances in which a proposed rule 
would increase these burdens on small entities, we have determined that 
the benefits from these rules outweigh the increased burdens on small 
entities.
1. Proposed Rules That Lessen Reporting Burdens
    338. Single filing for multi-year contract. Our proposal to allow 
E-rate applicants with multi-year contracts that are no more than three 
years in length (including any voluntary

[[Page 51641]]

extensions) to file a single FCC Form 471 application for the funding 
year in which the contract commences would lessen reporting burdens on 
E-rate recipients by relieving them of the obligation to file an FCC 
Form 471 for some funding years.
    339. Internal connections applications by school district. 
Requiring all schools and libraries that are part of the same school 
district to submit applications for priority two internal connections 
by school district, rather than by individual school, would streamline 
the process and simplify the discount calculation for the applicant. 
Rather than making a discount calculation for each school within a 
district, an applicant would merely be required to make a district-wide 
discount calculation.
    340. Phasing out support for certain services. Phasing out support 
for certain services would lessen reporting burdens on small entities 
because, under this proposal, E-rate applicants would no longer be 
required to comply with E-rate rules for phased-out services. There 
would be no change to reporting burdens for services that are being 
phased down because E-rate applicants and recipients would still be 
required to comply with E-rate rules.
    341. Priority two services. Our proposal to require that any school 
that is part of an organized school district must apply for priority 
two internal connections by school district, rather than by school, 
would lessen reporting burdens by simplifying the discount calculation 
for schools.
    342. Regulatory classification. Likewise, our proposal to adopt a 
rule that allows funding for eligible services regardless of regulatory 
classification would simplify reporting requirements because E-rate 
applicants would no longer be required to designate regulatory 
classifications to seek eligible services from any entity.
    343. Invoicing and disbursement process. We propose to permit 
applicants who submit a Billed Entity Application for Reimbursement 
(BEAR) Form to receive reimbursement directly from USAC, rather than 
receiving reimbursement from the service provider after USAC reimburses 
it. This proposal would lessen reporting burdens because the service 
provider would no longer serve as the pass-through for the 
reimbursement of funds.
2. Proposed Rules That Increase Reporting Burdens
    344. Compliance burdens. Implementing any of our proposed rules 
would impose some burden on small entities by requiring them to become 
familiar with the new rule to comply with it. For many proposed rules, 
such as those to refresh funding priorities, streamline the Eligible 
Services List, increase matching funds, redefine ``rural,'' institute 
per-student or per-building caps, provide priority one support for the 
modulating electronics necessary to light dark fiber and amend the 
formula for determining what discounts some schools and libraries 
receive, this is the sole additional burden on small entities. The 
importance of accomplishing our goals of (1) ensuring that schools and 
libraries have affordable access to 21st Century broadband that 
supports digital learning, (2) maximizing the cost-effectiveness of E-
rate funds and (3) streamlining the administration of the E-rate 
program outweighs the minimal burden requiring small entities to comply 
with new rules would impose.
    345. Increasing transparency of prices. Our proposal to increase 
transparency of prices by either publicly disclosing all bids for E-
rate supported services or disclosing all purchase prices would 
increase reporting burdens on entities required to provide this 
information to the Administrator, the Universal Service Administrative 
Company (USAC). Because E-rate applicants would already have this 
information, the additional burden reporting it to USAC would be 
minimal. The benefit other E-rate applicants would enjoy from being 
able to compare bids and purchases would far outweigh this minimal 
burden.
    346. Electronic filing. Requiring all users to file all E-rate-
related forms electronically should benefit E-rate applicants because 
it would provide a streamlined process and make forms easily 
accessible. We recognize that requiring electronic filing may burden 
users who do not have Internet access due to unreliable Internet access 
or emergency situations. Because of this, we seek comment on 
alternative filing requirements for these users. Ultimately, the cost 
savings for USAC and added efficiency of requiring electronic filing 
outweigh but burden of electronic filing on E-rate applicants and 
recipients.
    347. Separate filing windows. Separating filing windows for 
priority one and priority two services would increase reporting 
requirements for the limited number of E-rate recipients who receive 
priority two services but would decrease reporting burdens for those E-
rate recipients whose discount percentage prevents them from receiving 
priority two services. The benefit of simplifying the application 
process for those who will not receive priority one services justifies 
the added burden of filing separate applications for those who will 
receive priority two services.
    348. Document retention period. Extending the E-rate document 
retention requirement from five years after the last day of the 
delivery of services to ten years after the last day of the delivery of 
services would increase administrative burdens on E-rate recipients by 
requiring them to retain documents for a longer period of time. The 
Commission's interest in combating waste, fraud and abuse by litigating 
matters under the False Claims Act, which can involve conduct that 
relates back substantially more than five years, justifies this 
additional burden.
    349. Competitive bidding documentation. We propose to require 
applicants to submit to USAC competitive bidding documents, including a 
copy of each bid received, the bid evaluation criteria, bid sheets, a 
list of people who evaluated bids, memos, board minutes, or similar 
documents, and any correspondence with vendors during the bidding, 
evaluation, and award phase of the process. Providing such documents 
would impose additional burdens on E-rate applicants and could increase 
application review time and administrative costs. The benefit of 
allowing USAC to evaluate more fully the competitive bidding process 
conducted by E-rate applicants and ensure that documentation of the 
competitive bidding process was retained in the event of an audit 
outweighs this burden.
    350. FCC Form Signatories. Our proposal to require that an officer 
of the service provider make the required certifications on the FCC 
Form 472 (BEAR Form), FCC Form 473 (Service Provider Annual 
Certification Form) and the FCC Form 474 (SPI Form) as well as certify 
compliance with the lowest corresponding price rule and state and local 
procurement laws would impose minimal additional burdens on small 
entities because these entities are already required to ensure 
compliance with E-rate rules. The only new requirement under this 
proposal is for officers to certify that they have complied with E-rate 
rules. The benefit of ensuring that the certification reflects the 
service provider's commitment to understand and comply with the E-rate 
program rules and requirements outweighs this burden. Additionally, we 
propose to require all E-rate forms submitted by E-rate applicants be 
signed by someone with authority equivalent to that of a corporate 
officer. This proposal would impose the additional burden of requiring 
corporate officers of small

[[Page 51642]]

entities to become familiar enough with E-rate applications that they 
can make the certifications. The Commission's interest in combating 
waste, fraud and abuse outweighs this burden. Because of the burden 
this proposal may impose on small entities, we seek comment on 
alternatives to it.
    351. National emergencies. The proposed procedures for national 
emergencies would require the Commission to waive document retention 
requirements for E-rate recipients whose records are destroyed in an 
Emergency or Major Disaster if the recipients document the loss of 
their records. Other proposals would require applicants affected by an 
Emergency or Major Disaster to make certifications regarding the extent 
of the damage they incurred, the extent of planned repairs, funding for 
repairs, population changes and funding demand changes to receive 
additional assistance after an Emergency or Major Disaster. E-rate 
recipients affected by an Emergency or Major Disaster would not incur 
additional requirements if they do not seek additional assistance. The 
Commission's strong interest in preventing waste, fraud and abuse 
justifies the minimal burdens that documenting the loss of records and 
making these certifications would impose.
    352. As noted, we believe the proposals and options being 
introduced 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 processes, ensuring 
access to broadband, maximizing cost-effectiveness and maximizing 
efficiency. 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.

G. Federal Rules That May Duplicate, Overlap, or Conflict With the 
Proposed Rules

    None.
    353. It is ordered that the Commission's Consumer and Governmental 
Affairs Bureau, Reference Information Center, shall send a copy of this 
Notice of Proposed Rulemaking, including the Initial Regulatory 
Flexibility Analysis, to the Chief Counsel for Advocacy of the Small 
Business Administration.

H. Paperwork Reduction Act Analysis

    354. This NPRM seeks comment on a potential new or revised 
information collection requirement. If the Commission adopts any new or 
revised information collection requirement, the Commission will publish 
a separate notice in the Federal Register inviting the public to 
comment on the requirement, as required by the Paperwork Reduction Act 
of 1995, Public Law 104-13 (44 U.S.C. 3501-3520). In addition, pursuant 
to the Small Business Paperwork Relief Act of 2002, Public Law 107-198, 
44 U.S.C. 3506(c)(4), the Commission seeks specific comment on how it 
might ``further reduce the information collection burden for small 
business concerns with fewer than 25 employees.''

I. Ex Parte Presentations

    355. Permit-But-Disclose. The proceeding this Public Notice 
initiates shall be treated as a ``permit-but-disclose'' proceeding in 
accordance with the Commission's ex parte rules. Persons making ex 
parte presentations must file a copy of any written presentation or a 
memorandum summarizing any oral presentation within two business days 
after the presentation (unless a different deadline applicable to the 
Sunshine period applies). Persons making oral ex parte presentations 
are reminded that memoranda summarizing the presentation must (1) list 
all persons attending or otherwise participating in the meeting at 
which the ex parte presentation was made, and (2) summarize all data 
presented and arguments made during the presentation. If the 
presentation consisted in whole or in part of the presentation of data 
or arguments already reflected in the presenter's written comments, 
memoranda or other filings in the proceeding, the presenter may provide 
citations to such data or arguments in his or her prior comments, 
memoranda, or other filings (specifying the relevant page and/or 
paragraph numbers where such data or arguments can be found) in lieu of 
summarizing them in the memorandum. Documents shown or given to 
Commission staff during ex parte meetings are deemed to be written ex 
parte presentations and must be filed consistent with Sec.  1.1206(b). 
In proceedings governed by Sec.  1.49(f) or for which the Commission 
has made available a method of electronic filing, written ex parte 
presentations and memoranda summarizing oral ex parte presentations, 
and all attachments thereto, must be filed through the electronic 
comment filing system available for that proceeding, and must be filed 
in their native format (e.g., .doc, .xml, .ppt, searchable .pdf). 
Participants in this proceeding should familiarize themselves with the 
Commission's ex parte rules.

VIII. Ordering Clauses

    356. Accordingly, it is ordered that, pursuant to the authority 
contained in sections 1 through 4, 201-205, 254, 303(r), and 403 of the 
Communications Act of 1934, as amended by the Telecommunications Act of 
1996, 47 U.S.C. 151 through 154, 201 through 205, 254, 303(r), and 403, 
this Notice of Proposed Rulemaking is adopted.
    357. It is further ordered that the Commission's Consumer and 
Governmental Affairs Bureau, Reference Information Center, shall send a 
copy of this Notice of Proposed Rulemaking, including the Initial 
Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy of 
the Small Business Administration.

List of Subjects in 47 CFR Part 54

    Communications common carriers, Reporting and record keeping 
requirements, Telecommunications, Telephone.

Federal Communications Commission.
Marlene H. Dortch,
Secretary.

Proposed Rules

    For the reasons discussed in the preamble, the Federal 
Communications Commission proposes to amend 47 CFR part 54, subpart F, 
as follows:

PART 54--UNIVERSAL SERVICE

Subpart F--Universal Service Support for Schools and Libraries

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

    Authority:  Sections 1, 4(i), 5, 201, 205, 214, 219, 220, 254, 
303(r), and 403 of the Communications Act of 1934, as amended, and 
section 706 of the Communications Act of 1996, as amended; 47 U.S.C. 
151, 154(i), 155, 201, 205, 214, 219, 220, 254, 303(r), 403, and 
1302 unless otherwise noted.

0
2. Amend Sec.  54.503 by revising paragraphs (b) and (c)(2) 
introductory text to read as follows:


Sec.  54.503  Competitive bidding requirements.

* * * * *
    (b) Competitive bid requirements. (1) Except as provided in Sec.  
54.511(c), an eligible school, school districts, library, or consortium 
that includes an eligible school or library shall seek competitive 
bids, pursuant to the requirements established in this subpart, for all 
services eligible for support under Sec.  54.502. These competitive bid

[[Page 51643]]

requirements apply in addition to state and local competitive bid 
requirements and are not intended to preempt such state or local 
requirements.
    (2) Service providers must certify that they are in compliance with 
state and local procurement laws.
    (c) * * *
    (2) The FCC Form 470 shall be signed by the person authorized to 
order eligible services for the eligible school, library, or consortium 
including such entities, and with authority equivalent to that of a 
corporate officer, and shall include that person's certification under 
oath that:
* * * * *
0
3. Amend Sec.  54.504 by:
0
a. Revising paragraph (a)(1) introductory text;
0
b. Redesignating paragraph (f) as paragraph (g);
0
c. Adding new paragraph (f);
0
d. Revising newly redesignated paragraph (g) introductory text; and
0
e. Adding paragraph (h).
    The revisions and additions read as follows:


Sec.  54.504  Requests for services.

    (a) * * *
    (1) The FCC Form 471 shall be signed by the person authorized to 
order eligible services for the eligible school, library, or 
consortium, and with authority equivalent to that of a corporate 
officer, and shall include that person's certifications under oath 
that:
* * * * *
    (f) Filing of FCC Form 472. All service providers must submit a 
Service Provider Acknowledgement as part of the Applicant's FCC Form 
472 seeking reimbursement from the Administrator for eligible services. 
The FCC Form 472 shall be signed by an officer of the service provider 
and shall include the officer's certifications under oath that:
    (1) This service provider will remit the discount amount authorized 
by the fund administrator to the Billed Entity Applicant who prepared 
and submitted the Billed Entity Applicant Reimbursement Form as soon as 
possible after the fund administrator's notification to the service 
provider of the amount of the approved discounts on this Billed Entity 
Applicant Reimbursement Form, but in no event later than 20 business 
days after receipt of the reimbursement payment from the fund 
administrator, subject to the restriction set forth in paragraph (f)(2) 
of this section.
    (2) This service provide will remit payment of the approved 
discount amount to the Billed Entity Applicant prior to tendering or 
making use of the payment issued by the Universal Service 
Administrative Company to the service provider of the approved 
discounts for the Billed Entity Applicant Reimbursement Form.
    (3) This service provider is in compliance with the rules and 
orders governing the schools and libraries universal service support 
program and that failure to be in compliance and remain in compliance 
with those rules and orders may result in the denial of discount 
funding and/or cancellation of funding commitment.
    (4) Failure to comply with the rules and orders governing the 
schools and libraries universal service support program could result in 
civil or criminal prosecution by law enforcement authorities.
    (g) Filing of Form 473. All service providers eligible to provide 
telecommunications services and other supported services under this 
subpart shall submit annually a completed FCC Form 473 to the 
Administrator. The FCC Form 473 shall be signed by an officer of the 
service provider and shall include that officer's certification under 
oath that:
* * * * *
    (h) Filing of FCC Form 474. All service providers seeking 
reimbursement from the Administrator for eligible services shall submit 
a completed FCC Form 474 to the Administrator. The FCC Form 474 shall 
be signed by an officer of the service provider and shall include the 
officer's certifications under oath that:
    (1) This service provider is in compliance with the rules and 
orders governing the schools and libraries universal service support 
program and that failure to be in compliance and remain in compliance 
with those rules and orders may result in the denial of discount 
funding and/or cancellation of funding commitment.
    (2) Failure to comply with the rules and orders governing the 
schools and libraries universal service support program could result in 
civil or criminal prosecution by law enforcement authorities.
    (3) The service provider is in compliance with state and local 
procurement laws.
0
4. Amend Sec.  54.505 by revising paragraphs (b)(1) and (b)(3)(i) and 
(ii) to read as follows:


Sec.  54.505  Discounts.

* * * * *
    (b) * * *
    (1) School districts shall calculate discounts on supported 
services described in Sec.  54.502(b) by 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 
within the school district by the total number of students within the 
school district. This single discount percentage rate shall then be 
applied to the discount matrix to set a discount rate for the supported 
services purchased by all schools within the school district.
* * * * *
    (3) * * *
    (i) Schools and libraries whose local 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 local 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.
* * * * *
0
5. Amend Sec.  54.507 by redesignating paragraphs (e) and (f) as 
paragraphs (f) and (g) and adding new paragraph (e) to read as follows:


Sec.  54.507  Cap.

* * * * *
    (e) Multi-year contracts. An eligible school, library or consortium 
that includes an eligible school or library seeking to receive 
discounts under this subpart may submit to USAC a single FCC Form 471 
covering all the years of a multi-year contract, provided that the term 
of the contract including extensions, does not exceed three years. An 
FCC Form 471 covering a multi-year contract must be submitted to USAC 
before the start of the first funding year covered by the multi-year 
contract.
* * * * *
0
6. Amend Sec.  54.511 by redesignating paragraphs (c) and (d) as 
paragraphs (d) and (e) and adding new paragraph (c) and to read as 
follows:


Sec.  54.511  Ordering services.

* * * * *
    (c) The service provider must certify on FCC Form 473 and FCC Form 
474 that it is charging schools, school districts, libraries, library 
consortia or consortia including any of these entities, the lowest 
corresponding price for supported services, unless the Commission, with 
respect to intrastate prices, had found that the lowest corresponding 
price is not compensatory.
* * * * *
0
7. Amend Sec.  54.516 by revising paragraph (a) to read as follows:

[[Page 51644]]

Sec.  54.516  Auditing.

    (a) Record keeping requirements--(1) Schools, libraries and 
consortia. Schools, libraries, and any consortium that includes schools 
and libraries shall retain all documents related to the application 
for, receipt, and delivery of discounted telecommunications and other 
supported services for at least 10 years after the last day of the 
delivery of services or from the end of the applicable funding year, 
whichever is later. Schools, libraries, and any consortium that include 
schools or libraries shall also retain any other document necessary to 
demonstrate compliance with the statutory or regulatory requirements 
for the schools and libraries mechanism. Schools and libraries shall 
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.
    (2) Service providers. Service providers shall retain documents 
related to the delivery of discounted telecommunications and other 
supported services for at least 10 years after the last day of the 
delivery of services or from the end of the applicable funding year, 
whichever is later. Service providers shall also retain any other 
document that demonstrates compliance with the statutory or regulatory 
requirements for the schools and libraries universal service support 
mechanism.
* * * * *
[FR Doc. 2013-19491 Filed 8-19-13; 8:45 am]
BILLING CODE 6712-01-P