**Before the**

**Federal Communications Commission**

**Washington, DC 20554**

In the Matter of )

)

Requests for Review of the )

Decision of the )

Universal Service Administrator by )

)

State of Wyoming Department ) File Nos. SLD-202111, 218236

of Administration and Information )

Cheyenne, Wyoming )

)

Schools and Libraries Universal Service ) CC Docket No. 02-6

Support Mechanism )

**order**

**Adopted: February 28, 2006 Released: February 28, 2006**

By the Chief, Wireline Competition Bureau:

**I. INTRODUCTION**

1.  The State of Wyoming Department of Administration and Information,
    Cheyenne, Wyoming (State of Wyoming), filed Requests for Review of
    decisions by the Universal Service Administrative Company (USAC or
    Administrator).[^1] The USAC decisions at issue denied funding for
    discounted services for Funding Years 2000 and 2001 of the schools
    and libraries universal service mechanism. Consistent with
    precedent, we deny the Requests for Review. On our own motion,
    however, we find that waiver of section 54.504(b) of the
    Commission's rules is in the public interest and warranted by the
    special circumstances of applicants utilizing state master contracts
    in Wyoming.

    **II. BACKGROUND**

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.[^2] The Commission's rules provide that, with one
    limited exception for existing binding contracts, an eligible
    school, library, or consortium that includes eligible schools or
    libraries must seek competitive bids for all services eligible for
    support.[^3] In accordance with the Commission's rules, an applicant
    must file with SLD, for posting to its website, an FCC Form 470
    requesting discounted services.[^4] The applicant must wait 28 days
    before entering into an agreement with a service provider for the
    requested services.[^5] A failure to wait the mandated 28 days, for
    any reason, will result in the denial of the funding request. Once
    the school or library has complied with the Commission's competitive
    bidding requirements and entered into agreements for eligible
    services, it must file an FCC Form 471 application to notify the
    Administrator of the services that have been ordered, the service
    providers with whom the applicant has entered into an agreement, and
    an estimate of funds needed to cover the discounts to be given for
    eligible services.[^6]

3.  Applicants may purchase eligible services from "master contracts"
    negotiated by a third party such as a governmental entity.[^7] The
    third party initiating the master contract must comply with the
    Commission's competitive bidding requirements and state procurement
    laws. [^8] The applicant is not required to satisfy the competitive
    bidding requirements if it takes service from a master contract that
    either has been competitively bid or qualifies for the existing
    contract exemption.[^9] If a third party has negotiated a master
    contract without complying with the competitive bidding
    requirements, then the applicant must comply with the competitive
    bidding requirements before it may receive discounts or reduced
    rates for services purchased from that master contract.[^10]

4.  The State of Wyoming was directed by the state legislature in 1997
    to establish a committee to prepare a request for proposals for a
    statewide telecommunications network for high-speed data
    transmission in every school building and two-way video capability
    in high schools.[^11] The state received and considered four
    proposals and began negotiations with US West (now Qwest) in the
    fall of 1997.[^12] The State of Wyoming signed an agreement with
    Qwest for the state master contract on April 3, 1998, for a period
    that runs from July 1, 1998 to June 30, 2003.[^13] The State of
    Wyoming sought funding in Funding Year 2000 and 2001 but was denied
    funding in both years since its contracts for new service were
    signed prior to the 28-day waiting period computed from the date of
    the posting on the FCC Form 470 on the USAC web site.[^14] The State
    of Wyoming argues that its state requirements for procurement make
    it impossible to comply with program rules and regulations for
    competitive bidding and therefore asks the Commission to reverse
    USAC's decision to deny funding.[^15] The State of Wyoming notes
    that the state cannot legally seek new bids for services provided
    under the existing contracts because it would be in breach of
    contract and the covenant of good faith inherent in all
    contracts.[^16]

    **III. DISCUSSION**

5.  Consistent with precedent, we deny the Request for Review. The State
    of Wyoming concedes that it did not comply with the Commission's
    competitive bid requirements of section 54.504(b) of the
    Commission's rules.[^17] It argues that the contract's "availability
    of funds" clause, which it claims is a standard provision in all
    state contracts, prohibits the State of Wyoming from seeking new
    bids as required under the Commission's competitive bidding
    rules.[^18] The Wireline Competition Bureau has consistently denied
    requests for review by applicants that have violated the
    Commission's competitive bidding rules by signing the FCC Form 471
    or service provider agreement before the allowable contract
    date.[^19] Because the State of Wyoming has violated the 28-day
    competitive bidding rule, we deny the Request for Review.

6.  On our own motion, however, we grant a waiver of section 54.504(b).
    Generally, the Commission's rules may be waived for good cause
    shown.[^20] Waiver of the Commission's rules is appropriate only if
    special circumstances warrant a deviation from the general rule, and
    such deviation will serve the public interest.[^21]

7.  Consistent with precedent, we conclude that waiver of section
    54.504(b) is appropriate in this instance.[^22] Under Wyoming's plan
    for a statewide telecommunications network, hundreds of public
    schools in Wyoming obtain high-speed data and video network
    equipment from the state master contracts negotiated by the state.
    Because Wyoming master contracts are not in compliance with section
    54.504(b), hundreds of public schools have been denied universal
    service support. In order to comply with the Commission's rules, the
    schools must obtain services from contracts other than the state
    master contract, which may not result in the most cost-effective
    rates, as required by the Commission's rules.[^23] In light of these
    circumstances, we find that it is appropriate, in this instance, to
    waive section 54.504(b) of the Commission's rules to permit Wyoming
    schools to submit FCC Form 471 applications using the State of
    Wyoming's master contracts with a contract award date that is less
    than 28 days after the posting of an FCC Form 470. We emphasize that
    competitive bidding rules are a central tenet of program funding and
    a tool for preventing waste, fraud and abuse. However, we find that
    there is a presumption that if an entity is in compliance with state
    procurement law, that the competitive bidding process is lawful and
    in compliance with our rules.

8.  Furthermore, we find that granting a waiver here is consistent with
    the Commission's goal of minimizing universal service costs and will
    serve the public interest. In many instances, third parties
    negotiating master contracts may be able to secure lower rates than
    the eligible entity negotiating on its own behalf.[^24] Indeed, the
    State of Wyoming states that its master contract has benefited
    hundreds of public schools in Wyoming by providing the best
    alternative for cost-effective service offerings.[^25] Without this
    waiver, schools using the State of Wyoming state master contracts
    may lose funding for essential services or have their services
    disrupted. Such a result is inconsistent with the public interest.
    The Commission recognizes the importance of applicants' compliance
    with their respective state and local procurement processes.[^26] We
    must reach a fair balance, however, between our ability to enforce
    program rules and the enforcement of state procurement laws.[^27]
    Thus, in this instance, it is in the public interest to waive
    section 54.504(b) of our rules so that Wyoming schools have the
    opportunity to receive support under the schools and libraries
    support mechanism, provided that all other E-rate application
    requirements are satisfied. We therefore grant a waiver to the State
    of Wyoming and remand the applications to USAC for further action
    consistent with this order.

    **IV. ORDERING CLAUSE**

9.  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 Requests for Review
    filed by the State of Wyoming, Cheyenne, Wyoming, on December 20,
    2002 and February 12, 2003, ARE DENIED.

10. IT IS FURTHER ORDERED, pursuant to sections 1, 4(i), 4(j) and 254 of
    the Communications Act of 1934, as amended, 47 U.S.C. §§ 151-152 and
    254, and sections 0.91, 0.291 and 1.3 of the Commission's rules, 47
    C.F.R. §§ 0.91, 0.291 and 1.3, that waiver of section 54.504(b) of
    the Commission's rules IS GRANTED to the State of Wyoming, Cheyenne,
    Wyoming, and the applications are REMANDED to SLD for further action
    consistent with this Order.

    FEDERAL COMMUNICATIONS COMMISSION

    Thomas J. Navin

> Chief
>
> Wireline Competition Bureau

[^1]: Request for Review by the State of Wyoming, to Federal
    Communications Commission, SLD File No. 202111, filed December 20,
    2002; Request for Review by the State of Wyoming, to Federal
    Communications Commission, SLD File No. 218236, filed February 12,
    2003 (collectively, Requests for Review). Section 54.719(c) of the
    Commission's rules provides that any person aggrieved by an action
    taken by a division of the Universal Service Administrative Company
    may seek review from the Commission. 47 C.F.R. § 54.719(c).

[^2]: 47 C.F.R. §§ 54.501-54.503.

[^3]: 47 C.F.R. §§ 54.504, 54.511(c).

[^4]: 47 C.F.R. § 54.504(b). S*ee also* Schools and Libraries Universal
    Service, Description of Services Requested and Certification Form,
    OMB 3060-0806 (September 1999) (FCC Form 470).

[^5]: 47 C.F.R. § 54.504(b). S*ee* Schools and Libraries Universal
    Service, Services Ordered and Certification Form, OMB 3060-0806
    (September 1999) (Funding Year 2000 FCC Form FCC 471); Schools and
    Libraries Universal Service, Services Ordered and Certification
    Form, OMB 3060-0806 (October 2000) (Funding Year 2001 FCC Form FCC
    471) (collectively, FCC Form 471).

[^6]: 47 C.F.R. § 54.504(c). *See* FCC Form 471. The FCC Form 471 is
    broken up into "blocks" that group related or interdependent
    requests for information, called "items," together.

[^7]: *See* 47 C.F.R. § 54.500(g) (defining "master contract" as a
    contract negotiated with a service provider by a third party, the
    terms and conditions of which are then made available to an eligible
    school, library, rural health care provider, or consortium that
    purchase directly from the service provider).

[^8]: *See* *Federal-State Joint Board on Universal Service, Access
    Charge Reform, Price Cap Performance Review for Local Exchange
    Carriers, Transport Rate Structure and Pricing, End User Common Line
    Charge*, CC Docket Nos. 96-45, 96-262, 94-1, 91-213, and 95-72,
    Report and Order and Fourth Order on Reconsideration, 13 FCC Rcd
    5318, 5452-53, para. 233 (1997) (*Fourth Reconsideration Order*).

[^9]: *Id*.

[^10]: *Id.*

[^11]: Requests for Review at 2-3.

[^12]: Requests for Review at 3.

[^13]: *Id*.

[^14]: Requests for Review at 4-5.

[^15]: Requests for Review at 5.

[^16]: Requests for Review at 8.

[^17]: Requests for Review at 5, 8.

[^18]: The clause states that "\[t\]his provision shall not be construed
    to permit the State to terminate this Agreement in order to acquire
    similar services from another party...." Request for Review at 4.

[^19]: *See, e.g., Request for Review by Currituck County Schools,
    Federal-State Joint Board on Universal Service, Changes to the Board
    of Directors of the National Exchange Carrier Association, Inc*.,
    File No. SLD-111040, CC Docket Nos. 96- 45 and 97-21, Order, 15 FCC
    Rcd 5564 (Com. Car. Bur. 2000); *Request for Review by Gustine
    Independent School District, Federal-State Joint Board on Universal
    Service, Changes to the Board of Directors of the National Exchange
    Carrier Association, Inc*., File No. SLD-108651, CC Docket Nos.
    96-45 and 97-21, Order, 15 FCC Rcd 8489 (Com. Car. Bur. 1999).

[^20]: 47 C.F.R. § 1.3.

[^21]: *Northeast Cellular Telephone Co. v. FCC*, 897 F.2d 1164, 1166
    (D.C. Cir. 1990) (*Northeast Cellular*).

[^22]: *See Request for Waiver of West Virginia Department of
    Education*, *Federal-State Joint Board on Universal Service, Changes
    to the Board of Directors of the National Exchange Carrier
    Association, Inc*., CC Docket No. 02-6, Order, DA 05-2179 (rel. July
    27, 2005) (*West Virginia Order*) (finding waiver of Commission
    rules is in the public interest when rules prevented schools from
    obtaining E-rate funding from a state master contract).

[^23]: *See* 47 C.F.R. § 54.511(a).

[^24]: *See Fourth Reconsideration Order*, 13 FCC Rcd at 5452, para. 232
    (concluding that allowing eligible entities to order eligible
    services from master contracts negotiated by a third party is
    consistent with the Commission's goal of minimizing universal
    service costs and therefore is also consistent with section
    254(h)(1) of the Communications Act of 1934, as amended).

[^25]: Requests for Review at 4.

[^26]: *See* 47 C.F.R. § 54.504(a); FCC Form 471, Block 6 (requiring
    applicants to certify their compliance with state and local
    procurement laws).

[^27]: *See, e.g.,* *West Virginia Order* at para. 11.