[Federal Register Volume 79, Number 160 (Tuesday, August 19, 2014)]
[Proposed Rules]
[Pages 49036-49044]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-18936]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 54

[WC Docket No. 13-184; FCC 14-99]


Modernization of the Schools and Libraries ``E-rate'' Program

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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SUMMARY: In this document, the Federal Communications Commission 
(Commission) seeks further comment on meeting the future funding needs 
of the E-rate program in light of the goals we adopt for the program in 
an accompanying Report and Order. The Commission acknowledges that 
modernizing a program of this size and scope cannot be accomplished at 
once and so it will continue to seek public input and additional ideas 
to bring 21st Century broadband to libraries and schools throughout the 
country.

DATES: Comments are due on or before September 15, 2014 and reply 
comments are due on or before September 30, 2014. If you anticipate 
that you will be submitting comments, but find it difficult to do so 
within the period of time allowed by this document, you should advise 
the contact listed below as soon as possible.

ADDRESSES: You may submit comments, identified by either 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: James Bachtell or Kate Dumouchel, 
Wireline Competition Bureau, Telecommunications Access Policy Division, 
at (202) 418-7400 or TTY: (202) 418-0484.

SUPPLEMENTARY INFORMATION: This is a synopsis of the Commission's 
Further Notice of Proposed Rulemaking (FNPRM) in WC Docket No. 13-184; 
FCC 14-99, adopted on July 11, 2014 and released on July 23, 2014. The 
full text of this document is available for public inspection during 
regular business hours in the FCC Reference Center, Room CY-A257, 445 
12th St. SW., Washington, DC 20554 or at the following Internet 
address: http://www.fcc.gov/document/fcc-releases-e-rate-modernization-order. The Report and Order that was adopted concurrently with the 
FNPRM is published elsewhere in this issue of the Federal Register.
    Pursuant to Sec. Sec.  1.415 and 1.419 of the Commission's rules, 
47 CFR 1.415, 1.419, interested parties may file comments and reply 
comments on or before the dates indicated on the first page of this 
document. Comments may be filed using the Commission's Electronic 
Comment Filing System (ECFS). See Electronic Filing of Documents in 
Rulemaking Proceedings, 63 FR 24121, May 1, 1998.
    [ssquf] Electronic Filers: Comments may be filed electronically 
using the Internet by accessing the ECFS: http://fjallfoss.fcc.gov/ecfs2/.
    [ssquf] Paper Filers: Parties who choose to file by paper must file 
an original and one copy of each filing. If more than one docket or 
rulemaking number appears in the caption of this proceeding, filers 
must submit two additional copies for each additional docket or 
rulemaking number. Filings can be sent by hand or messenger delivery, 
by commercial overnight courier, or by first-class or overnight U.S. 
Postal Service mail. All filings must be addressed to the Commission's 
Secretary, Office of the Secretary, Federal Communications Commission.
    [ssquf] 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.
    [ssquf] 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.
    [ssquf] 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).

I. Further Notice of Proposed Rulemaking

    1. In this FNPRM we seek further comment on meeting the future 
funding needs of the E-rate program in light of the goals we adopt for 
the program today. We also seek comment on several discrete issues that 
may further simplify the administration of the E-rate program by 
continuing to reduce the burden on applicants of applying for and 
receiving E-rate support, as well as promoting cost-effective 
purchasing through multi-year contracts and consortium purchasing. 
Specifically, we seek comment on ensuring that multi-year contracts are 
efficient. We also seek comment on proposals to ensure the efficient 
use of NSLP data. In particular, we seek to require participating NSLP 
schools to use their NSLP eligibility for purposes of calculating their 
school's discount rate calculation, rather than

[[Page 49037]]

continue to permit more costly and administratively burdensome income 
surveys. We also seek comment on proposals that will encourage 
consortium participation by easing the concerns of consortia 
participants by calculating the consortia's discount rate using a 
weighted average. We further seek comment on whether there are any 
additional programmatic or rule changes that will encourage applicants 
to join consortia either through additional incentives, or reduced 
application burdens. Finally, we seek additional comment on how best to 
calculate the amount of funding eligible libraries need in order to 
purchase Wi-Fi networks and other internal connections.
    2. Furthermore, as we consider next steps to further modernize the 
E-rate program, we invite comment on additional improvements to the E-
rate program. In particular, we seek comment on additional steps we can 
take to further the goals we adopt in the accompanying Report and 
Order. To encourage the deployment of whole networks, are there 
additional changes to the E-rate program that we should adopt to meet 
the connectivity needs of schools and libraries? Are there other ways 
we can foster cost-effective purchasing throughout the program? Are 
there more changes that we can make to further improve the application 
process or to otherwise improve the administration of the program? Are 
there other data that we can and should collect in furtherance of our 
goals for the E-rate program? We acknowledge that modernizing a program 
of this size and scope cannot be accomplished at once and so we 
continue to seek public input and additional ideas to bring 21st 
Century broadband to libraries and schools throughout the country.

A. Meeting Future Funding Needs

    3. In light of the goals we have adopted for the E-rate program and 
the changes that we have made to the program, we seek additional 
comment on the future funding levels needed for the E-rate program to 
meet those goals. In the accompanying Report and Order, we have taken a 
number of significant steps that lay the foundation for this evaluation 
and that will help structure our analysis. First, we have set specific 
goals and connectivity targets for the program, which we can now use to 
size future funding needs. Second, we have taken major steps to refocus 
E-rate funding on broadband, in order to maximize the funding available 
to meet our connectivity goals. Third, we have taken new strides to 
increase the efficiency and impact of E-rate funding, which should help 
drive down per-unit pricing for E-rate supported services over time. 
Fourth, we have set a specific target of providing $1 billion annually 
in E-rate support for category two services, in order to provide 
discounts to all eligible schools and libraries seeking to make LAN and 
WLAN deployments. These steps now put us in a strong position to 
consider the longer-term program needs and how they compare to 
currently available funding. Numerous commenters have called on the 
Commission to raise the E-rate funding cap, which was set in 1997, and 
only began to be adjusted for inflation in 2011. Others have, more 
specifically, called on the Commission to focus on providing increased 
funding for connectivity to eligible schools and libraries, 
particularly those that have not been able to afford access to high-
speed connections, and argue that doing so will require additional 
support. Other commenters have argued that the funding cap should not 
be raised. In light of the steps described, we now seek specific 
comment on how much funding is needed to meet the E-rate programs 
goals, keeping in mind our responsibility to minimize the overall 
Universal Service Fund contribution burden on businesses and consumers. 
In particular, we seek data and analysis in the following four areas:
     First, we invite data regarding the gap between schools' 
and libraries' current connectivity and the specific connectivity 
targets we adopt here. In particular, we request this data with respect 
to WAN connections and Internet connections, using those terms as 
defined in the accompanying Report and Order. Several states and 
providers have submitted such data already. We invite further 
submissions, as well as analyses of what overall conclusions can be 
drawn from the existing data. How is the accelerated deployment of 
internal connections that the accompanying Report and Order promotes 
likely to affect the pace at which high-speed connectivity needs to 
school and library premises grow?
     Second, we seek specific information on how much funding 
is needed to bridge those gaps in light of likely pricing for broadband 
services--both WAN and Internet--taking into account the significant 
new efficiency measures we adopt here, as well as general industry 
trends in broadband pricing over time.
     Third, we seek further comment on the per-student and per-
square foot budgets we have adopted for internal connections funding 
for funding years 2015 and 2016, whether these budgets should be 
continued in future funding years, and the closely related question of 
the $1 billion funding target we adopt for category two services. Will 
these budgets be sufficient to meet schools and libraries need for Wi-
Fi and other internal connections? Are they too generous? Are there 
other approaches we can take to ensuring sufficient funding for 
category two services?
     Finally, we seek comment on the sufficiency of the 
significant funding freed up by the reforms adopted herein to meet 
these needs. In particular, we seek comment on the extent to which 
focusing the program on broadband frees sufficient funding to meet long 
term connectivity needs.
    4. We also seek comment on how the substantial reduction in the 
real purchasing power of the E-rate budget since the program's creation 
should affect our analysis. As several commenters have noted, the E-
rate cap was not adjusted for inflation between 1998 and 2010. By most 
general measures of inflation, this resulted in an approximately $800-
900 million reduction in the real purchasing power of E-rate funding. 
We seek additional comment on this issue.

B. Ensuring That Multi-Year Contracts Are Efficient

    5. As part of our continuing efforts to promote cost-effective 
purchasing, we propose to limit E-rate support to eligible services 
purchased under contracts of no more than five years, including 
voluntary extensions. We propose to exempt from this requirement 
contracts that require large capital investments to install new 
facilities expected to have a useful life of 20 years or more. 
Currently, our rules do not specify a maximum length for contracts for 
E-rate supported services, but as the Commission explained in the E-
rate Modernization NPRM, 78 FR 51597, August 20, 2013, we seek to 
balance the advantages that longer term contracts give applicants 
against the opportunity that shorter term contracts give applicants to 
take advantage of rapidly falling prices in a dynamic marketplace.
    6. In the E-rate Modernization NPRM, the Commission sought comment 
on whether it should limit the maximum term (including voluntary 
extensions) of multi-year contracts that applicants may enter into for 
E-rate-supported services to three years. We agree with those 
commenters who argue that a three-year maximum contract length does not 
adequately balance the needs of applicants against the benefits of 
regular contract negotiations. Some commenters suggested that five 
years was the right length for E-rate supported contracts.

[[Page 49038]]

However, the record is not particularly robust on how a five-year 
maximum contract length would affect schools' and libraries' ability to 
purchase from state master contracts, which often exceed five years, or 
to enter into contracts that seek to spread the cost of infrastructure 
builds over many years. Therefore, we invite commenters to revisit the 
issue of maximum contract length, and we seek comment on the benefits 
and drawbacks of our new proposal.
    7. Commenters generally agree that the markets for E-rate supported 
services, both broadband services and internal connections, are 
dynamic, and prices, particularly of broadband services on a per-
megabit-basis, have consistently been declining over time. As a result, 
shorter-term contracts allow applicants to take advantage of falling 
market prices, and protect applicants from being locked into prices 
substantially higher than the market rate. On the other hand, we are 
mindful of the importance of multi-year agreements to schools and 
libraries and the benefits these agreements provide, including cost 
efficiencies. Commenters also report that having the flexibility to 
enter into multi-year agreements can allow applicants to negotiate more 
favorable terms over the life of the contract. Furthermore, multi-year 
agreements can increase administrative efficiencies for applicants and 
vendors because they do not have to rebid contracts annually. Moreover, 
we are revising our rules to simplify the process for seeking E-rate 
support for multi-year contracts of five years or less. On the issue of 
whether five years strikes the right balance, we seek comment on 
whether there are particular E-rate supported services for which we 
should require shorter maximum contract lengths because the price of 
such services is so dynamic or for other reasons. We seek comment on 
what such services might be, and why we should require all contracts 
for such services to be less than five years, and how much less. Are 
there services for which we should allow longer maximum contract 
lengths? What might such services be and why should we allow longer 
maximum contract lengths for such services? How long should the maximum 
contract length be for such services?
    8. State and other master contracts. We believe that limiting most 
contracts for E-rate supported services to five years generally strikes 
the right balance between the interests described. However, we seek 
comment on how this approach will affect schools' and libraries' 
current procurement processes, and in particular how it will affect 
their ability to purchase from state or other master contracts, service 
agreements, or joint purchasing agreements. Some commenters have 
expressed concern that the maximum length of a contract for E-rate 
supported services should be determined by--or at least should not 
conflict with--state and local procurement decisions and laws. As a 
practical matter, no commenter has offered an example of a state law 
that would require service contracts to extend beyond five years and 
the record demonstrates that many of these state and local procurement 
laws do not allow contracts beyond five years. If a state has a 
requirement that would conflict with a maximum duration that we set, we 
seek comment on whether we should grant applicants in that state a 
waiver of this rule or select a longer duration, consistent with the 
laws and rules in all states. Are there other reasons that we should 
allow E-rate applicants to purchase E-rate supported services using 
state and other master contracts, service agreements or joint 
purchasing agreements with terms that are longer than five years?
    9. Alternatives to maximum duration. We also seek comment on other 
ways to achieve our goal of ensuring that schools and libraries can 
take advantage of falling prices for E-rate supported services while 
minimizing administrative burdens. For example, would it be sufficient 
to require that contracts for E-rate supported services include a 
provision requiring the applicant to renegotiate the contract or 
otherwise seek lower prices at least once every five years? How could 
we ensure such renegotiation results in the best possible pricing for 
E-rate supported services? Alternatively, might we permit longer-term 
contracts for E-rate services if they include provisions that would 
help ensure that applicants enjoyed the benefits of declining prices of 
bandwidth and their likely increasing demand for it? Thus, should we 
allow a contract that sets a fixed price for an increasing level of 
bandwidths over the term of the contract, based on applicants' 
anticipated needs and the rapid declining price of bandwidth?
    10. New builds. We also seek comment on our proposal to allow 
longer contracts for services that require infrastructure build-outs. 
We recognize that long-term contracts may be the most efficient way to 
contract for the installation of a new dedicated fiber connection, or 
other such facility, which is likely to have a useful life of 20 years 
or more. However, in response to the E-rate Modernization NPRM, we 
received no comments arguing that providers need the flexibility to 
offer such long-term contracts, or that applicants need the option of 
long-term contracts to purchase affordable services. We therefore seek 
focused comment on how to ensure the most effective competition for the 
provision of new fiber builds, or other such infrastructure projects.
    11. The E-rate program currently provides support for special 
construction charges separate from the charges for recurring services. 
Does this obviate the need for longer-term contracts? We also seek 
comment on whether the winner of an initial short term contract would 
likely face any serious competition over subsequent terms, once it had 
recovered its capital investment. We seek comment on whether a 20-year 
contract might be most likely to allow a service provider to amortize 
its installation costs once over the entire contract, while some 
indexing or similar arrangement could provide E-rate applicants with 
the increasing bandwidths they would likely desire over the period at 
no additional cost above the costs of upgrading the electronics to 
provide the higher bandwidth.
    12. Assuming that we adopt some restriction on the duration of 
contracts for E-rate services discussed, we recognize some existing 
long-term contracts for E-rate supported services are likely to violate 
such new restrictions. While we would require all new contracts 
executed after the effective date of the proposed rule to be in 
compliance, we seek comment on whether we should grandfather existing 
E-rate contracts, and if so, for how long a period of time. We also 
seek comment on whether, if we did not grandfather such contracts, we 
would have legal authority to require existing long-term contracts to 
comply with a limitation. Further, we seek comment on whether, if we do 
have such authority, we should set a date by which parties would be 
able to amend existing contracts to comply with such a limitation, and 
if so, how much time we should allow for such amendments.

C. Standardizing the Collection of NSLP Data

    13. As part of our continuing efforts to streamline the 
administration of the E-rate program, we propose to standardize USAC's 
collection of data about participation in the United States Department 
of Agriculture's (USDA's) NSLP for purposes of calculating schools' and 
libraries' E-rate discount rates. Currently schools use NSLP data to 
determine their level of economic disadvantage for the E-rate program 
by measuring the percentage of student

[[Page 49039]]

enrollment that is eligible for free or reduced price lunch under NSLP 
or a federally approved alternative mechanism. We propose to 
standardize USAC's collection of NSLP data by requiring schools to use 
the NSLP information reported by state agencies to USDA's Food and 
Nutrition Service (FNS) and by requiring schools that participate in 
NSLP to use NSLP data for purposes of determining their discount rate. 
Both measures will simplify the application process for schools and 
libraries, reduce the administrative burden on USAC, and reduce the 
risk of applicant error in calculation of NSLP participation that can 
have negative consequences for applicant funding requests.
    14. State Reported NSLP Data. We propose to require schools and 
libraries that use NSLP data to calculate their E-rate discount rates 
using the school district's NSLP information that is reported by their 
state agency to FNS. Currently, only some schools and libraries use 
state-reported NSLP data when calculating their discount rates. By 
November 15th of each year, after requisite income verifications are 
complete, states report their consolidated NSLP eligibility data to FNA 
using Form FNS 742--School Food Authority (SFA) Verification Collection 
Report.
    15. We propose to require schools and libraries to use state 
reported NSLP data on the basis that it should reflect the most 
accurate and verifiable accounting of a district's NSLP participation 
rate. Requiring the use of state reported data should reduce the 
frequency with which USAC issues commitment adjustment decision letters 
after it has identified an error in a school or school district's 
discount eligibility reporting. We seek comment on the benefits and 
drawbacks to this proposal. Do all states and territories report NSLP 
data to FNS by November 15th every year? In the accompanying Report and 
Order we have required school districts to apply for E-rate support 
using the district-wide average of their student population's NSLP 
eligibility. Is state reported NSLP data available on a district-wide 
basis and is it calculated in a way that is consistent with our new 
discount rate calculation rules? When does state reported NSLP data 
become available to schools? Can libraries access information about 
state-reported NSLP data? Would the requirement to use state-reported 
NSLP data impact Tribal schools and libraries, and if so, how so? Is 
there alternative reporting data that would better reflect the level of 
economic disadvantage for Tribal schools and libraries? Is there other 
better reporting data that we should use for any other set of schools?
    16. If we use state reported data for determining E-rate discount 
rates, that data would always be a year behind. Should there be a 
process through which school districts can use more current information 
that is subject to the same level of review as the state reported NSLP 
data? What should that process be? We also seek comment on how the use 
of state reported NSLP data impacts schools' and libraries' E-rate 
application process. Would the use of state reported NSLP data provide 
an advantage for some school districts over others? Does the 
requirement to use this data unfairly favor certain types of applicants 
over others? Are there additional reasons why state reported data would 
disadvantage schools or libraries or complicate the application 
process? Commenters should explain any response and provide specific 
examples.
    17. In the accompanying Report and Order, we adopted USDA's CEP 
allowing participating schools to use their CEP data and multiplier to 
determine eligibility for E-rate support. The E-rate program also 
accepts information from schools and school districts participating in 
USDA's Provision 1, 2 and 3. How would schools and school districts 
participating in these alternative NSLP provisions (CEP and Provisions 
1, 2 and 3) be affected by a state reported data requirement?
    18. Mandatory use of NSLP data for schools that participate in the 
NSLP. We next propose to require schools that participate in the NSLP 
to use their NSLP eligibility data when calculating their E-rate 
discount rate. Currently, under the E-rate program, even schools that 
participate in the NSLP can choose to use a federally approved 
alternative mechanism, such as a survey, as a proxy for poverty when 
calculating E-rate discount rates. Requiring schools that participate 
in NSLP to use NSLP eligibility rates to calculate their discount rates 
will further simplify the application process for the schools and it 
will also speed review of applications as income surveys and other 
alternatives are more time-consuming to review. It will also help 
ensure the program's integrity by protecting against waste, fraud, and 
abuse. We seek comment on the benefits and drawbacks to this proposal. 
We seek comment on whether there are additional considerations for why 
an NSLP participant may need to use an alternative method for discount 
calculation.

D. Encouraging Consortium Participation

    19. By aggregating purchasing across many schools and libraries, 
consortia can drive down the prices of E-rate supported services. In 
the accompanying E-rate Modernization Order, we adopted changes to our 
rules to encourage consortium purchasing. In the interest of doing more 
to encourage consortia, we seek further comment on how to break down 
barriers to schools and libraries joining consortia. Specifically, we 
propose to change the way consortia discount rates are calculated and 
also seek comment on additional ways to encourage consortium 
participation.
1. Consortium Discount Rate Calculations
    20. Under the current rules, a consortium lead calculates the 
consortium discount rate by taking a simple average of the discount 
rates of all the consortium members. The Commission has said that 
consortium leads are expected to adjust the discount rate received by 
each member to more closely reflect that member's individual discount 
rate. Despite that direction from the Commission, commenters suggest 
that consortium leads sometimes assign the consortium discount rate to 
all members regardless of members' individual discount rate, which 
deters high-discount rate applicants from joining consortia because the 
consortium discount rate is often lower than their own rate. Moreover, 
even if a consortium lead tries to adjust the discount rate received by 
each applicant to more accurately reflect what the discount rates would 
be outside of the consortium, the mix of applicants and the types of 
services selected may make it impossible for a consortium lead to give 
every applicant the discount rate to which it would have been entitled 
if it had applied for services on its own. Indeed, the current 
consortium calculation formula permits and encourages consortia to 
inflate their discount rate by taking on high-discount members with few 
students because each member has the same impact on the consortium 
discount rate regardless of its student count. For the same reason, the 
current calculation discourages consortia from taking on smaller 
members whose discount rate is lower than the consortium's average 
without the additional district, school, or library.
    21. We therefore propose to require consortia with only schools or 
school districts to use a weighted average formula that would account 
for the

[[Page 49040]]

number of students in each member school or school district as well as 
the individual discount levels. Under this proposal, a consortium lead 
would calculate the consortium discount rates by multiplying each 
member's individual discount rate by its number of students, adding 
those figures for each member and then dividing by the total number of 
students in the consortium. After determining the consortium discount 
rate, the consortium lead could then adjust each member's funding so 
that it better reflects each member's individual discount rate. We seek 
comment on whether we should require the consortium lead to adjust each 
member's funding. By using the weighted average, consortia should be 
better able to allocate the funding according to each applicant's own 
discount rate. We seek comment on the benefits and drawbacks of such an 
approach, and on whether it would encourage more schools and school 
districts to join consortia. We also seek comment on whether there are 
any safeguards we need to put in place to ensure that consortia leads 
equitably allocate funding. Some services, such as fiber backbone 
access, are shared among consortium members, which makes it difficult 
for consortium leads to determine the proportion of the service each 
member uses. Are there additional issues we need to consider for such 
shared services?
    22. For consortia composed of schools and libraries or just 
libraries, we seek comment on how best to calculate a weighted average 
discount rate, given that libraries do not have student counts. We 
propose to count each 50 square feet of library space as one student 
for the consortium discount rate calculation. For example, a library 
with 5000 feet of library space would count as 100 students in the 
discount calculation (5000 divided by 50). If that library had a 50 
percent discount rate and formed a consortium with a school district 
with 500 students and an 80 percent discount rate, the consortium 
discount rate would be 75 percent. We seek comment on the benefits and 
drawbacks to this approach. Would a formula based on number of patrons, 
volumes of books or another square footage benchmark be better 
substitutes for student count? Are there any other better and/or 
simpler alternatives?
    23. We also seek comment on how common it is for consortium leads 
to re-adjust the consortium discount rate for each member to more 
accurately reflect that member's individual discount rate. 
Additionally, we seek comment on how common it is for consortia to seek 
to inflate their discount rates by adding high-discount members with 
few students. If consortium leads neglect to re-adjust each member's 
discount rate, would the weighted approach we propose be sufficient to 
encourage high-discount applicants with many students to join 
consortia?
    24. Using a weighted average of the discount rate of all consortium 
members should reduce the risk that any one member's discount rate is 
greatly different than if the member did not join the consortium. There 
will continue to be circumstances, however, under which an applicant's 
discount rate is still reduced by virtue of joining the consortium. 
Therefore, in the alternative, we seek comment on whether we should 
require consortium leads to submit applications for E-rate support that 
would ensure each consortium member receives the exact discount rate it 
would be entitled to if it were to apply for services on its own. To do 
this, the consortium lead would create separate funding requests in an 
application for each group of consortium members who share the same 
discount rate. For example, the consortium lead would group into one 
funding request all consortium members with an 80 percent discount rate 
and all consortium members with a 60 percent discount rate into another 
funding request. Under the new district-wide discount calculation we 
introduce in the accompanying Report and Order, there would only be a 
limited number of discount rate groups in each consortium because most 
discount rates will be the round numbers in the discount matrix. To the 
extent a consortium application included shared services, the lead 
would explicitly cost-allocate those services among the different 
funding requests. We expect that this approach would encourage 
consortium participation for high-discount entities by guaranteeing 
them the same discount rate as a consortium member that they would have 
as an individual applicant. We seek comment on this alternative. Would 
ensuring that high-discount applicants receive the same discount rate 
whether they apply for services as a consortium member or individual 
applicant encourage consortium participation for high-discount 
applicants? Would grouping discounts by funding request be too 
administratively burdensome for consortium leads? We understand that 
some consortia have only one payer and that this grouped approach would 
not provide them with any additional benefit. We seek comment on how 
common it is for a consortium to have one payer. Would the benefit to 
consortia with multiple payers outweigh the administrative burden on 
consortia with multiple payers?
    25. We seek comment on the advantages and disadvantages of these 
options and welcome suggestions for other methods for calculating 
consortium discount rates.

2. Additional Ways to Encourage Consortium Participation

    26. We seek comment on additional programmatic or rules changes we 
can adopt to encourage consortium participation.
    27. For example, to ensure that applicants receive the most cost-
effective services possible, should we require applicants to consider 
services on all master contracts available to them in the bid 
evaluation process? What would be the advantages and disadvantages of 
such a rule? How could we ensure that applicants would be aware of the 
services available to them on master contracts? Would requiring 
applicants to consider options from all master contracts available to 
them in their bid evaluations be unduly burdensome for small 
applicants? What can we do to accommodate the unique financial 
constraints that schools and libraries on some Tribal lands deal with 
and the unique relationships among Tribal Nations. Should we, for 
example, establish different consortia rules for schools and libraries 
on Tribal lands or operated by Tribal Nations? What should such rules 
be?
    28. The Education Coalition has proposed a model that would provide 
an additional 5 percent discount rate for consortia meeting minimum 
size standards. The Education Coalition's specific proposed 
requirements for receiving an additional incentive are that the 
participating entities (1) serve at least 30 percent of the students in 
a state, include at least 30 percent of the local education agencies in 
the state, or be designated as a consortium by the state, (2) document 
the participation of individual entities, (3) maintain a level of 
governance, (4) perform large-scale, centralized procurement that 
results in master contracts, and (5) open participation to all eligible 
schools and libraries, including public charter schools and private 
schools. We seek comment on the Educations Coalition's proposal and 
more generally on the merits of providing an additional 5 percent 
incentive for consortia.
    29. Would applicants be more likely to form consortia if an 
additional 5 percent discount were available for consortia? Should the 
discount of consortia be limited to the otherwise-

[[Page 49041]]

applicable top discount rate, regardless of the additional discount 
(i.e., top discount of 90 percent for category one purchases and 85 
percent for category two purchases)? The Education Coalition contends 
that high-performing state and large regional consortia have a track 
record of lowering prices. Should demonstrated effectiveness in 
lowering prices be a condition of any additional consortium discount? 
For example, should an additional discount only be available to 
consortia that show that their pricing is at least 10 percent better 
than the state average? Would the minimum size thresholds in this 
proposal ensure that consortia are large enough to receive significant 
discounts? Would states designate small groups that do not have much 
bulk buying power as consortia so that they can take advantage of the 
additional discount? Should we therefore limit or eliminate the 
separate state designation prong of the Education Coalition proposal? 
How would the Education Coalition's proposal affect those E-rate 
participants who, because of their geographic location, receive the 
best prices from smaller, local service providers? The Education 
Coalition's proposal would allow libraries to participate in consortia 
eligible for an additional discount rate, but only if the libraries 
participate in consortia with schools and school agencies. Are there 
ways it should be modified to ensure libraries can get the benefits of 
such consortia? For example, should we require that all such consortia 
make their prices available to all libraries within the area 
encompassed by the consortium, and allow libraries to take advantage of 
these contracts without conducting a separate bidding process? Should 
there be an alternative approach that allows for consortia made up only 
of libraries or only of schools? How would this proposal affect schools 
and libraries on Tribal lands or operated by Tribal Nations? We also 
seek comment on any administrative challenges that consortia face that 
were not raised in comments to the E-rate Modernization NPRM. What 
rules can the Commission enact to alleviate those issues?
    30. Other commenters have proposed that we permit private-sector 
entities to join consortia with E-rate participants. Our rules now 
prevent ineligible private sector entities from joining such consortia 
unless the pre-discount prices for interstate services are at tariffed 
rates. We seek comment on the potential advantages and disadvantages of 
permitting private sector entities to join E-rate consortia.
    31. Would a consortium consisting of E-rate participants and 
private-sector entities provide the economy of scale sufficient to 
reduce the cost of E-rate eligible services and encourage E-rate 
participants to join consortia, particularly in rural areas? Is there 
any data or other information showing the impact on connectivity or 
pricing that allowing this consortium combination? What safeguards 
would we have to put in place to ensure that the Fund does not support 
services used by ineligible entities? Would prohibiting private-sector 
consortium members from using membership in the consortium to evade 
generally tariffed rates be a sufficient safeguard? In rural areas 
where abundant fiber is available for private-sector entities but not 
for schools and libraries, are there additional rule changes that we 
can implement to allow schools and libraries to gain access to that 
fiber?

E. Ensuring Support for Libraries is Sufficient

    32. As part of our effort to ensure affordable access to robust 
connectivity for all libraries, we seek additional focused comment on 
the funding eligible libraries need in order to deploy robust LANs/
WLANs within their buildings and the best method(s) to calculate 
libraries' internal connections budgets. In the accompanying Report and 
Order, we set a pre-discount budget of $2.30 per square foot for 
libraries with a pre-discount funding floor of $9,200 in category two 
support available for each library over five years for those libraries 
that apply for E-rate support in funding years 2015 and/or 2016. In so 
doing, we have recognized that the record of library funding needs for 
internal connections is not as robust as we would like, and not all 
parties agree with the square-foot based budgeting approach we have 
chosen to adopt. We therefore seek additional focused comment on the 
approach we use to calculate libraries' budgets.
    33. In particular, we seek additional comment on whether we should 
adopt another metric in addition to or instead of square footage to set 
library budgets. Should we establish more than one method of 
establishing a library's budget and give libraries the option to choose 
a method based on their particular community, architecture, and service 
levels? If we allow libraries the option to choose between different 
methods, should we libraries be locked in to the selected budget each 
subsequent funding year or should libraries be able to select a method 
each funding year?
    34. We also seek additional comment on the appropriate funding 
amount for each library. Some commenters suggest that a $2.30 per 
square foot pre-discount budget is not enough support to ensure that 
libraries are able to deploy the necessary networks to meet the needs 
of their communities. In particular, the Urban Libraries Council argues 
that libraries should receive E-rate funding of no less than $4.00 per 
square foot. In light of these comments, we seek additional data on 
efficient library deployments. We also seek additional data on the LAN/
WLAN deployment costs in small libraries, and whether the $9,200 
funding floor adopted above is either too high or too low.

II. Procedural Matters

A. Initial Regulatory Flexibility Act Analysis

    35. 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 the Further Notice of Proposed Rulemaking (FNPRM). 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 FNPRM. The Commission will send a copy of the FNPRM, including 
this IRFA, to the Chief Counsel for Advocacy of the Small Business 
Administration (SBA). In addition, the FNPRM and IRFA (or summaries 
thereof) will be published in the Federal Register.
    36. 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

    37. This FNPRM is a part of the Commission's continual efforts to 
improve the E-rate program. In the accompanying Report and Order, we 
adopt the goals for the E-rate program (1) ensure affordable access to 
high-speed broadband sufficient to support

[[Page 49042]]

digital learning in schools and robust connectivity for all libraries, 
(2) maximize the cost-effectiveness of spending for E-rate supported 
purchases, and (3) make the E-rate application process and other E-rate 
processes fast, simple and efficient.
    38. The rules we propose in this FNPRM will enable us to meet these 
goals. Specifically, we propose to require that multi-year contracts be 
competitively bid at least every five years, require applicants to use 
state-audited National School Lunch Plan (NSLP) data when calculating 
discount rates and require consortia to calculate discount rates using 
a weighted average of the discount rates of all consortium members.

C. Legal Basis

    39. The legal basis for the FNPRM 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

    40. We have described in detail in the Final Regulatory Flexibility 
Analysis in this proceeding, supra, the categories of entities that may 
be directly affected by our proposals. For this Initial Regulatory 
Flexibility Analysis, we hereby incorporate those entity descriptions 
by reference.

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

    41. Several proposals under consideration in the FNPRM may, if 
adopted, result in additional recordkeeping requirements for small 
entities, but other proposals will reduce recordkeeping requirements 
for small entities.
1. Proposed Rules That Lessen Reporting Burdens
    42. Efficient use of NSLP data. Our proposal that E-rate applicants 
be required to use state-audited NSLP data to determine their E-rate 
discount rates will reduce administrative burdens on applicants because 
they will no longer be permitted to use federally-approved alternatives 
such as surveys to determine discount rates.
2. Proposed Rules that Increase Reporting Burdens
    43. Multi-year contracts. Our proposal to require certain contracts 
to be open to competitive bidding at least once in every five year 
period could increase recordkeeping requirements by requiring 
applicants to solicit and evaluate bids for E-rate support more 
frequently than they would without the rule. Overall, the benefit the 
Fund will realize in ensuring that applicants take advantage of falling 
market prices outweighs the burden on this requirement.
    44. Consortium discount rates. Our proposal to require consortia to 
calculate discount rates using a weighted average of all consortium 
members could increase recordkeeping requirements by making the 
discount rate formula more complex for certain consortia. The benefit 
of encouraging consortia participation by ensuring that consortium 
members receive discount rates closer to their individual discount 
rates outweighs this burden.

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

    45. 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.''
    46. We proposed alternatives and sought comment on alternatives to 
our proposals that would be less burdensome to small entities. For 
example, we seek comment extending the duration between re-bidding on 
contracts that would index terms to market prices and bandwidths and 
contracts for fiber builds. Additionally, we seek comment on an 
alternative discount calculation that could reduce recordkeeping 
requirements for small applicants.
    47. As noted, 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 FNPRM, 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

    48. None.
    49. It Is Ordered that the Commission's Consumer and Governmental 
Affairs Bureau, Reference Information Center, Shall Send a copy of this 
Further Notice of Proposed Rulemaking, including the Initial Regulatory 
Flexibility Analysis, to the Chief Counsel for Advocacy of the Small 
Business Administration.

H. Initial Paperwork Reduction Act Analysis

    50. The FNPRM 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

    51. Permit-But-Disclose. The proceeding this FNPRM 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

[[Page 49043]]

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 rule Sec.  
1.1206(b). In proceedings governed by rule 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.

J. Comment Filing Procedures

    52. Comments and Replies. We invite comment on the issues and 
questions set forth in the FNPRM 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 FNPRM by September 
15, 2014 and may file reply comments by September 30, 2014. All filings 
related to this FNPRM 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).
    53. 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].
    54. 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.
    55. 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 FNPRM in order to facilitate our internal 
review process.
    56. For additional information on this proceeding, contact James 
Bachtell at (202) 418-2694 or Kate Dumouchel at (202) 418-1839 in the 
Telecommunications Access Policy Division, Wireline Competition Bureau.

III. Ordering Clauses

    57. According, It Is Ordered, that pursuant to the authority 
contained in sections 1 through 4, 201 through 205, 254, 303(r), and 
403 of the Communications Act of 1934, as amended, 47 U.S.C. 151-154, 
201-205, 254, 303(r), and 403, and section 706 of the 
Telecommunications Act of 1996, 47 U.S.C. 1302, this Further Notice of 
Proposed Rulemaking is Adopted effective September 18, 2014.
    58. It Is Further Ordered that the Commission's Consumer and 
Governmental Affairs Bureau, Reference Information Center, Shall Send a 
copy of the Further Notice of Proposed Rulemaking, including the 
Initial Regulatory Flexibility Act Analysis, to the Chief Counsel for 
Advocacy of the Small Business Administration.

Federal Communications Commission.
Sheryl D. Todd,
Deputy Secretary.

Proposed Rules

    For the reasons discussed in the preamble, the Federal 
Communications Commission proposes to amend 47 CFR part 54, 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.  54.505 by revising paragraph (b)(4) to read as follows:


Sec.  54.505  Discounts.

* * * * *
    (b) * * *
    (4) School districts, library systems, consortia, library consortia 
and other billed entities shall calculate discounts on supported 
services described in Sec.  54.502(b) that are shared by two or more or 
their schools, libraries or consortium members by calculating a 
weighted average based on the number of students in each consortium 
member. The weighted average shall be calculated by multiplying each

[[Page 49044]]

member's individual discount rate by its number of students, adding 
those figures for each member and then dividing by the total number of 
students in the consortium. Libraries that are consortium members shall 
substitute 50 square feet of library space for each student.
* * * * *
[FR Doc. 2014-18936 Filed 8-18-14; 8:45 am]
BILLING CODE 6712-01-P