**Before the**

**Federal Communications Commission**

**Washington, D.C. 20554**

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| In the Matter of                 | * | File No. SLD-153862          |
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| Request for Review of the        | ) | CC Docket No. 96-45          |
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| Decision of the                  | * | CC Docket No. 97-21          |
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| Universal Service Administrator  | * |                              |
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| Fairfax County Public Library    | * |                              |
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| Fairfax, Virginia                |   |                              |
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**ORDER**

**Adopted: March 28, 2001 Released: March 29, 2001**

By the Accounting Policy Division, Common Carrier Bureau:

1.  In this Order, we deny a Request for Review filed by the Fairfax
    County Public Library (Fairfax), Fairfax, Virginia,[^1] seeking
    review of a funding commitment decision issued by the Schools and
    Libraries Division (SLD) of the Universal Service Administrative
    Company (Administrator) pursuant to a funding request for internal
    connections.[^2]

2.  Under the schools and libraries universal service support mechanism,
    eligible schools, libraries, and consortia that include eligible
    schools and libraries, may apply for discounts for eligible
    telecommunications services, Internet access, and internal
    connections.[^3] The instant appeal arises from SLD's denial of
    Fairfax's Year 2 application for discounted internal connections,
    Funding Request Numbers (FRNs) 298505 and 298506, on the grounds
    that a significant portion of Fairfax's funding requests included
    products ineligible for discounts.[^4] In particular, SLD stated
    that speakerphones are ineligible for discounts. Fairfax filed an
    appeal with SLD on November 19, 1999.[^5] SLD denied Fairfax's
    appeal on May 5, 2000, reiterating that a significant portion of
    Fairfax's funding request included products ineligible for
    discounts.[^6]

3.  Fairfax filed the instant appeal with the Commission on May 22,
    2000.[^7] In this appeal, Fairfax states that SLD's decision to deny
    Fairfax's funding request was arbitrary and should be reversed. In
    particular, Fairfax argues that: (1) SLD unfairly penalized Fairfax
    simply because it submitted separate funding requests, on a
    site-specific basis, rather than requesting all discounts for
    services in one funding request; (2) Fairfax made a good-faith
    effort to exclude ineligible services and would have excluded the
    speakerphones in question if they had been cited on the list of
    eligible and ineligible services that was published by SLD; (3) it
    is arbitrary to reject funding requests based on a threshold of 30
    percent ineligibility, especially where estimates are concerned;
    and (4) SLD has no statutory authority to deny funding for otherwise
    eligible internal connections just because a single component may be
    ineligible.[^8]

4.  We have reviewed Fairfax's appeal and conclude that SLD properly
    denied Fairfax's applications for discounts. We reject Fairfax's
    argument that it was unfairly penalized for submitting separate
    funding requests. Fairfax was well aware of SLD's policies regarding
    ineligible services,[^9] but nonetheless chose to file separate
    funding requests, further exposing itself to the possibility that
    certain locations could be denied funding while others might be
    granted funds. Fairfax concedes that it filed separate funding
    requests for accounting and budgetary convenience, not because it
    was required to do so by SLD.[^10]

5.  We also reject Fairfax's claim that it could not have reasonably
    known that speakerphones were ineligible for discounts because they
    were not cited in SLD's list of eligible and ineligible services. In
    the *Universal Service Order*, the Commission determined that
    support for internal connections will not be available to finance
    the purchase of equipment that is not needed to transport
    information to individual classrooms, such as personal computers,
    fax machines or modems.[^11] Consistent with this determination, the
    Commission's Common Carrier Bureau (Bureau) issued a Public Notice
    stating that "telephone handsets" are not eligible for support.[^12]
    In its Request for Review, Fairfax concedes that its "E-Rate
    consultant advised it that the speakerphones would probably be
    excluded as ineligible."[^13] In particular, Fairfax's consultant,
    Funds for Learning, advised Fairfax that "under the SLD rules, the
    costs of speaker phones should \[be\] excluded. . . . \[T\]he
    requests for the Kingstowne and Great Falls libraries should be
    reduced by \$6,035.63 each."[^14] Given the clear Commission
    precedent, we find no merit in Fairfax's argument that it could not
    have known that speakerphones were ineligible for discounts.

6.  We also reject Fairfax's allegation that it is arbitrary to reject
    funding requests based on a threshold of 30 percent ineligibility.
    The \"30 percent policy\" is not a Commission rule, but rather is an
    SLD operating procedure established pursuant to Commission
    policy.[^15] This operating procedure, used during SLD\'s
    application review process, enables SLD to efficiently process
    requests for funding for services that are eligible for discounts
    but that also include some ineligible components. If 30 percent or
    less of the request is for funding of ineligible services, SLD
    normally will consider the application and issue a funding
    commitment for the eligible services. If more than 30 percent of the
    request is for funding of ineligible services, SLD will deny the
    funding request in its entirety. The 30 percent policy allows SLD to
    efficiently process requests for funding that contain only a small
    amount of ineligible services without expending significant fund
    resources working with applicants that are requesting funding of
    ineligible services. Thus, contrary to Fairfax's claim of
    arbitrariness, we find SLD's 30 percent policy to be reasonable and
    prudent.

7.  Finally, we reject Fairfax's claim that SLD has no statutory
    authority to deny funding for otherwise eligible internal
    connections just because a single component may be ineligible. SLD
    implements the schools and libraries universal service mechanism
    under Commission guidance. The Commission's rules repeatedly state
    that universal service funds support only eligible services.[^16] In
    this vein, the Commission has stated that schools and libraries may
    not receive full support for contracts that provide only a single
    price for a package that bundles services eligible for support with
    those that are not eligible for support.[^17] Applicants are
    instructed that any ineligible services must be identified and
    segregated from services eligible for funding.[^18] In its FCC Form
    471, Fairfax included a single price for a contract that includes
    both eligible and ineligible products. Given Commission rules and
    precedent, SLD properly denied Fairfax's entire funding request.
    Therefore, SLD clearly has authority, under these limited
    circumstances, to deny funding requests that include both eligible
    and ineligible services, and we reject Fairfax's claims to the
    contrary.

8.  ACCORDINGLY, IT IS ORDERED, pursuant to authority delegated under
    sections 0.91, 0.291, and 54.722(a) of the Commission's rules, 47
    C.F.R. §§ 0.91, 0.291, and 54.722(a), that the Request for Review
    filed on May 22, 2000 by Fairfax County Public Schools, Fairfax,
    Virginia, IS DENIED.

FEDERAL COMMUNICATIONS COMMISSION

Mark G. Seifert

Deputy Chief, Accounting Policy Division

> Common Carrier Bureau

[^1]: *Request for Review by Fairfax County Public Library, of Decision
    of Universal Service Administrato*r, CC Docket Nos. 97-21 and 96-45,
    filed May 22, 2000 (Request for Review).

[^2]: *See* Letter from Schools and Libraries Division, Universal
    Service Administrative Company, to W. Joseph Coleman Jr., Fairfax
    County Public Library, issued October 26, 1999 (Funding Commitment
    Decision Letter); Letter from Schools and Libraries Division,
    Universal Service Administrative Company, to W. Joseph Coleman Jr.,
    Fairfax County Public Library, issued May 5, 2000 (Administrator's
    Decision on Appeal).

[^3]: 47 C.F.R. §§ 54.502, 54.503.

[^4]: *See* Funding Commitment Decision Letter at 4-5.

[^5]: Letter from W. Joseph Coleman Jr., Fairfax County Public Library,
    to Schools and Libraries Division, Universal Service Administrative
    Company, filed November 19, 1999 (SLD Letter of Appeal).

[^6]: *See* Administrator's Decision on Appeal at 1.

[^7]: *See* Request for Review.

[^8]: *See id.* at 3-5.

[^9]: *See id.* at 3, 5.

[^10]: *See id.* at 2.

[^11]: *See Federal-State Joint Board on Universal Service*, CC Docket
    No. 96-45, Report and Order, 12 FCC Rcd 8776, 9021, para. 460 (1997)
    (Universal Service Order), as corrected by *Federal-State Joint
    Board on Universal Service*, CC Docket No. 96-45, Errata, FCC 97-157
    (rel. June 4, 1997), *affirmed in part in Texas Office of Public
    Utility Counsel v. FCC*, 183 F.3d 393 (5th Cir. 1999), *cert. denied
    in Celpage, Inc. v. FCC*, 120 S. Ct. 2212 (May 30, 2000), *cert.
    denied in AT&T Corp. v. Cincinnati Bell Tel. Co.*, 120 S. Ct. 2237
    (June 5, 2000), *cert. dismissed, GTE Service Corp. v. FCC*, 121 S.
    Ct. 423 (November 2, 2000).

[^12]: *See Common Carrier Bureau Reiterates Services Eligible for
    Discounts to Schools and Libraries*, CC Docket No. 96-45, Public
    Notice, DA 98-1110 (rel. Jun. 11, 1998).

[^13]: Request for Review at 3.

[^14]: Facsimile Transmission from Sara Fitzgerald, Funds for Learning,
    to Joe Spakowski, Fairfax County Public Library (transmitted Oct.
    13, 1999).

[^15]: *See Changes to the Board of Directors of the National Exchange
    Carrier Association, Inc., Federal-State Joint Board on Universal
    Service*, CC Docket Nos. 97-21 and 96-45, Third Report and Order in
    CC Docket No. 97-21 and Fourth Order on Reconsideration in CC Docket
    No. 97-21 and Eighth Order on Reconsideration in CC Docket No.
    96-45, 13 FCC Rcd 25058 (1998).

[^16]: 47 C.F.R. §§54.502, 54.503.

[^17]: *See Universal Service Order*, 12 FCC Rcd at 9022, para. 461-62.

[^18]: *See* Instructions for Completing the Schools and Libraries
    Universal Service Services Ordered and Certification Form (FCC Form
    471), OMB Approval No. 3060-0806 (December 1998) at pp. 15-16.