[Federal Register Volume 78, Number 161 (Tuesday, August 20, 2013)]
[Proposed Rules]
[Pages 51598-51644]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-19491]
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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?
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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
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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