**Before the**

**Federal Communications Commission**

**Washington, DC 20554**

In the Matter of )

)

Request for Review of the )

Decision of the )

Universal Service Administrator by )

)

Project Interconnect ) Files No. SLD-146858, 146854

Brooklyn Park, Minnesota )

)

Federal-State Joint Board on ) CC Docket No. 96-45

Universal Service )

)

Changes to the Board of Directors of the ) CC Docket No. 97-21

National Exchange Carrier Association, Inc. )

**order**

**Adopted: July 10, 2001 Released: July 11, 2001**

By the Common Carrier Bureau:

1.  The Common Carrier Bureau (Bureau) has under consideration a Request
    for Review filed by Project Interconnect, Brooklyn Park, Minnesota,
    seeking review of a decision issued by the Schools and Libraries
    Division (SLD) of the Universal Service Administrative Company
    (Administrator).[^1] Project Interconnect seeks review of a Funding
    Year 2 funding commitment decision issued by SLD denying Project
    Interconnect's requests in two applications under the schools and
    libraries program.[^2] For the reasons discussed below, we grant in
    part and deny in part the Request for Review and remand the two
    applications to SLD for further review in accordance with this
    Order.

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 on eligible
    telecommunications services, Internet access, and internal
    connections.[^3] In order for an applicant to receive discounts on
    eligible services, the Commission's rules require that the applicant
    make a bona fide request for services by filing with the
    Administrator an FCC Form 470, which is posted to the
    Administrator's website for all potential competing service
    providers to review.[^4] After the FCC Form 470 is posted, the
    applicant must wait at least 28 days before entering an agreement
    for services and submitting an FCC Form 471, which requests support
    for eligible services.[^5] Using information provided by the
    applicant in its FCC Form 471, the Administrator determines the
    amount of discounts for which the applicant is eligible.[^6]

3.  Project Interconnect is a consortium of libraries and K-12 school
    districts in the metropolitan area of Minneapolis/St. Paul,
    Minnesota.[^7] Created to coordinate applications to a state
    telecommunications grant program, it subsequently expanded its
    activities to SLD applications.[^8] On April 6, 1999, it filed two
    FCC Form 471 applications seeking Funding Year 2 support on behalf
    of fifty-four Minnesota school districts and several libraries.[^9]
    In November of 1999, an SLD staff-member requested documentation
    demonstrating that the listed members were, in fact, participating
    in the consortium, and initially indicated that Project Interconnect
    could satisfy this demand by filing the letter of participation that
    each member signed upon initially joining the consortium.[^10] The
    record reflects that a few weeks later, around December 1, 1999,
    Project Interconnect received an e-mail from a different SLD staff
    member, indicating that the letters of participation were not
    sufficient, and that Project Interconnect had ten days to submit a
    Letter of Agency from each member of the consortium specifically
    granting Project Interconnect the authority to seek funding from SLD
    on the member's behalf.[^11] By December 10, 1999, Project
    Interconnect had submitted a number of such letters.[^12]

4.  On March 27, 2000, SLD issued a funding decision denying both of
    Project Interconnect's applications.[^13] It based this decision on
    its finding that at the time the applications were filed, Project
    Interconnect did not have permission to act on behalf of all of its
    members.[^14] SLD stated that "at least one member of your
    consortium was unaware of the application that you submitted, and
    you were unable to provide us with a Letter of Agency from that
    entity."[^15] SLD noted that applicants must certify on their FCC
    Form 471 that they are authorized to submit an application on behalf
    of each listed entity, and held that "since you are unable to
    support your certification, your application must be denied in
    full."[^16]

5.  On April 25, 2000, Project Interconnect appealed the decision to
    SLD.[^17] It conceded that "\[g\]iven the short time frame and
    season, \[it\] may have missed a few letters out of sixty or so
    required."[^18] However, it asserted that a complete set was
    provided with the appeal, and further argued that all members of the
    project should not be penalized because of the slow response of a
    few of the members.[^19]

6.  By decision dated September 15, 2000, SLD denied the appeal. It
    asserted that it had given Project Interconnect longer than the
    standard seven days to produce the requested documentation, and that
    although additional Letters of Agency were provided with Project
    Interconnect's appeal papers, these letters were not signed until
    April 2000 and still did not cover all of the members of the
    consortium.[^20] Project Interconnect filed the instant Request for
    Review on October 16, 2000.

7.  In its Request for Review, Project Interconnect asserts that the set
    of Letters of Agency submitted with its SLD appeal did constitute a
    complete set.[^21] It argues that throughout the process, it
    followed the procedures requested by SLD and made every attempt to
    meet SLD's documentation request.[^22] As in its previous appeal to
    SLD, it asserts that it initially failed to submit a few of the
    Letters of Agency because of the short time given to produce them,
    and that because letters were submitted on behalf of most of the
    school districts, the few letters that were late should not result
    in the denial of funds to all members.[^23] It suggests that if a
    reduction of funding is found to be appropriate, then the Commission
    should consider deleting the funding requests for those districts
    which did not provide the letters by December 10, 1999 and approve
    funding for the remainder.[^24]

8.  We initially note that SLD was acting within its authority in
    requiring Project Interconnect to produce Letters of Agency from
    each of its members expressly authorizing the consortium leader to
    submit an application on its behalf. Administration of the schools
    and libraries support mechanism is the responsibility of SLD under
    the oversight of the Schools and Libraries Committee of USAC.[^25]
    Under the rules adopted in the Commission\'s *Eighth Reconsideration
    Order*, the Schools and Libraries Committee\'s functions include
    \"development of applications and associated instructions,\"
    \"review of bills for services that are submitted by schools and
    libraries,\" and \"administration of the application process,
    including activities to ensure compliance with Federal
    Communications Commission rules and regulations.\"[^26] Thus, under
    the *Eighth Reconsideration Order*, the Commission vested in the
    Schools and Libraries Committee and SLD the responsibility for
    administering the application process for the universal service
    support mechanism for eligible schools and libraries. We find that
    requiring a consortium to submit Letters of Agency from its members
    is consistent with the authority to implement administrative
    procedures which ensure compliance with Commission rules and
    regulations as granted in the *Eighth Reconsideration Order*.

9.  The Commission's regulations allow schools and libraries to form
    consortia for purposes of seeking competitive bids on their service
    requests.[^27] However, since discounts are restricted by statute to
    "bona fide request\[s\]" for services, a consortium application may
    only be submitted on behalf of schools and libraries which have
    actually authorized the consortium to make the request.[^28] In
    Funding Year 2, this limitation was implemented in Item 29 of Block
    6 of the FCC Form 471, in which an applicant was required to certify
    that it was authorized to submit the request on behalf of the
    consortium seeking discounts.[^29] Although we have not previously
    addressed SLD's authority to demand documentation in support of the
    authority certification specifically, the Commission affirmed in
    *United Talmudical Academy* that SLD may engage in a detailed review
    of an applicant's FCC Form 471 Item 22 certification, in which the
    applicant certifies that the schools and libraries represented by
    the applicant have secured access to all of the resources necessary
    to make effective use of the services.[^30] The Commission concluded
    that a detailed review of that certification helped to ensure
    compliance with the Commission's rules and also helped to avoid
    waste, fraud and abuse in the schools and libraries universal
    service support mechanism.[^31] We find that engaging in a review of
    the Item 29 certification of FCC Form 471 serves the same purposes,
    and we therefore affirm SLD's authority to demand supporting
    documentation.

10. Project Interconnect asserted that the consortium membership forms
    which it initially offered to SLD should satisfy SLD's FCC Form 471
    Item 29 certification review because Minnesota law mandates that
    school districts, as prerequisites for receiving state funding of
    telecommunications services, become members of a consortium like
    Project Interconnect and further mandates that the consortium seek
    funding from SLD. However, we find that SLD acted reasonably in
    requiring specific Letters of Agency. The proffered membership forms
    might have established Project Interconnect's authority under state
    law to submit an application on a school district's behalf, but an
    applicant's authority under state law to represent a school or
    library is not SLD's only concern. In the case of consortia
    applications, SLD must also ensure that the consortium members are
    aware of the application to be filed and how that application
    obligates the expenditure of financial and professional resources.
    Ensuring that a school or library is aware of and approves the
    application on its behalf also helps to avoid cases of duplicative
    requests from different applicants applying on behalf of the same
    school or library.

11. Some of these potential problems regarding consortia membership are
    demonstrated in the application before us. The record reflects that,
    after receiving Project Interconnect's FCC Form 471 application, SLD
    determined that at least one school district which was claimed as a
    member was unaware that the application had been submitted on its
    behalf. In reviewing the record, we have also determined that the
    pending applications by Project Interconnect and a separate
    application by a consortium named Central Minnesota Computer Center
    sought Year 2 funding for Internet access on behalf of the Minnesota
    public schools in the Chisago Lakes school district.[^32] The
    requirement that consortium leaders provide Letters of Agency can
    help to avoid this confusion over who a school district has actually
    chosen to seek SLD funding on its behalf.[^33] We therefore find
    that SLD appropriately required that Project Interconnect submit
    Letters of Agency demonstrating that its consortium members were
    actually aware of the funding application and authorized Project
    Interconnect to submit it on their behalf.

12. We also find that SLD correctly denied funding for those school
    districts from which it received no Letter of Agency prior to making
    its funding decision.[^34] In order to ensure that implementation of
    the schools and libraries program is not unduly delayed, there
    cannot be an open-ended time period in which applicants are allowed
    to respond to requests for information.[^35] Therefore, when SLD
    requests information with respect to a consortium leader's authority
    to file an FCC Form 471 on behalf of each of its members, applicants
    must respond within a reasonable time period or risk the potential
    of denial because SLD has not established authorization by the
    members in question.[^36]

13. Project Interconnect asserts in its Request for Review that the
    additional ten days from December 1, 1999 that SLD provided to
    Project Interconnect to submit the required Letters of Agency was
    not a reasonable period of time.[^37] However, we note that the
    Administrator's decision denying the applications was not issued
    until March 27, 2000, almost four months later, and that by that
    time, five Letters of Agency from Spring Lake Park, Waconia, Chaska,
    Saint Paul, and Chisago Lakes school districts had still not been
    filed.[^38] The first four school districts did not submit Letters
    of Agency until April, 2000, as evidenced by the fact that the
    signatures on the Letters of Agency were dated in that month.[^39]
    As for the fifth, Chisago Lakes, there is no evidence in the record
    that it ever submitted a Letter of Agency, either before or after
    the SLD decision. Given the period of time between the documentation
    demand and SLD's denial of the applications, and the absence of any
    justification for the delay, we find that SLD correctly denied the
    application requests from the consortia members Spring Lake Park,
    Waconia, Chaska, Saint Paul, and Chisago Lakes.

14. However, we find that SLD should not have denied support for the
    entire consortium based on the failure of these five districts to
    submit their Letters of Agency. We note initially that the
    consortium leader, Project Interconnect, had letters of membership
    from each of its members establishing their participation in the
    consortium.[^40] Thus, there is no evidence that Project
    Interconnect was acting in bad faith in putting forward an
    application seeking support for these districts, a factor that might
    warrant a more general denial. Further, we find that Project
    Interconnect substantially complied with SLD's request by obtaining
    Letters of Agency from the vast majority of its member school
    districts in a timely fashion. We conclude that to deny the entire
    application under these circumstances would unfairly penalize the
    entire consortium where only a few members of the consortium failed
    to produce the requested documentation. Further, it would tend to
    make applicants reluctant to risk applying as consortia, in
    contravention to the Commission's stated desire to "encourage
    schools and libraries to aggregate their demand with others to
    create a consortium with sufficient demand to attract competitors
    and thereby negotiate lower rates . . . ."[^41]

15. Therefore, although we affirm SLD's denial of funding to the
    consortium members Spring Lake Park, Waconia, Chaska, Saint Paul,
    and Chisago Lakes, we reverse its denial as to the remaining members
    of the consortium, and we remand these applications to SLD for
    further review. In doing so, we make no determination as to whether
    the remaining members of the consortium are ultimately entitled to
    discounts, beyond our finding that they should not be denied on
    grounds that Project Interconnect lacks authority to make the
    applications on their behalf.

16. 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 by Project Interconnect on October 16, 2000, IS GRANTED IN
    PART AND DENIED IN PART, and these applications are remanded to SLD
    for further action consistent with this opinion.

FEDERAL COMMUNICATIONS COMMISSION

Carol E. Mattey

Deputy Chief, Common Carrier Bureau

[^1]: Letter from William R. Leto, Project Interconnect, to Federal
    Communications Commission, filed October 16, 2000 (Request for
    Review).

[^2]: Section 54.719(c) of the Commission's rules provides that any
    person aggrieved by an action taken by a division of the
    Administrator may seek review from the Commission. 47 C.F.R. §
    54.719(c).

[^3]: 47 C.F.R. §§ 54.502, 54.503.

[^4]: Schools and Libraries Universal Service, Description of Services
    Requested and Certification Form, OMB 3060-0806 (FCC Form 470); 47
    C.F.R. § 54.504(b); *Federal-State Joint Board on Universal
    Service*, CC Docket No. 96-45, Report and Order, 12 FCC Rcd 8776
    (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*, *Texas Office of
    Public Utility Counsel v. FCC*, 183 F.3d 393 (5th Cir. 1999)
    (affirming *Universal Service Order* in part and reversing and
    remanding on unrelated grounds), *cert. denied, Celpage, Inc. v.
    FCC*, 120 S. Ct. 2212 (May 30, 2000), *cert. denied,* *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 (Nov. 2,
    2000).

[^5]: 47 C.F.R. §§ 54.504(b), (c); Schools and Libraries Universal
    Service, Services Ordered and Certification Form, OMB 3060-0806 (FCC
    Form 471).

[^6]: *See* *Request for Review by Metropolitan School District of Pike
    Township*, *Federal-State Joint Board on Universal Service, Changes
    to the Board of Directors of the National Exchange Carrier
    Association, Inc.*, File No. SLD-120821, CC Dockets No. 96-45 and
    97-21, Order, 15 FCC Rcd 13891, para. 2 (rel. 2000).

[^7]: Request for Review at 1; Letter from Mary Mehsikomer, Minnesota
    Dept. of Children, Families & Learning, to Schools and Libraries
    Division, Universal Service Administrative Co., filed April 11, 2000
    (CFL Appeal Letter) at 2.

[^8]: Request for Review at 1.

[^9]: FCC Form 471, Project Interconnect, App. No. 146854, filed April
    6, 1999; FCC Form 471, Project Interconnect, App. No. 146858, filed
    April 6, 1999.

[^10]: Request for Review at 1.

[^11]: Request for Review at 1.

[^12]: *Id.*.

[^13]: Letter from Schools and Libraries Division to William R. Leto,
    Project Interconnect, dated March 27, 2000 (Decision on
    Application).

[^14]: *Id.*

[^15]: *Id.*

[^16]: *Id.*

[^17]: Letter from William R. Leto, Project Interconnect, to Schools and
    Libraries Division, Universal Service Administrative Co., filed
    April 25, 2000 (SLD Appeal).

[^18]: SLD Appeal at 1.

[^19]: SLD Appeal at 1-2.

[^20]: Letter from Schools and Libraries Division, Universal Service
    Administrative Co., to William R. Leto, Project Interconnect, dated
    September 15, 2000 (Administrator's Decision on Appeal).

[^21]: Request for Review at 2.

[^22]: *Id.*

[^23]: *Id.*

[^24]: *Id.*

[^25]: 47 C.F.R. § 54.705(a)(1) (setting forth the functions of the
    Schools and Libraries Committee) and 47 C.F.R. § 54.701(g)(i)
    (directing the Administrator to establish the Schools and Libraries
    Division, and setting forth its functions).

[^26]: 47 C.F.R. § 54.705(a)(1). *See also Changes to the Board of
    Directors of the National Exchange Carrier Association, Inc.,
    Federal State Joint Board on Universal Service, Third Report and
    Order 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, 25075-76, paras. 30-31 and 34 (1998) (*Eighth
    Reconsideration Order*) (describing the functions of the Schools and
    Libraries Committee).

[^27]: 47 C.F.R. § 54.501(d)(1).

[^28]: 47 U.S.C. § 254(h)(1)(B).

[^29]: School and Libraries Universal Service, Services Ordered and
    Certification Form, OMB 3060-0806, Block 6, Item 29 (December 1998).

[^30]: *Request for Review by United Talmudical Academy, Federal-State
    Joint Board on Universal Service, Changes to the Board of Directors
    of the National Exchange Carrier Association, Inc.*, File No.
    SLD-105791, 15 FCC Rcd 423, paras. 9, 14 (2000) (*United Talmudical
    Academy*).

[^31]: *Id.* at para. 14.

[^32]: *See* FCC Form 471, Project Interconnect, File No. SLD-146858,
    filed April 6, 1999; FCC Form 471, Central Minnesota Computing
    Center, File No. SLD-143701, filed April 6, 1999.

[^33]: Given the dual representation of the Chisago Lakes School
    District, it is interesting to note that, as discussed in greater
    detail below, Project Interconnect failed to submit a Letter of
    Agency from Chisago Lakes.

[^34]: *See* Administrator's Decision on Appeal at 1; Decision on
    Application at 1; Request for Review at 2 (conceding that Project
    Interconnect's original documentation response was "missing certain
    letters").

[^35]: *Request for Review by Nefesh Academy, Federal-State Joint Board
    on Universal Service, Changes to the Board of Directors of the
    National Exchange Carrier Association, Inc.*, File No. SLD-27881, CC
    Dockets No. 96-45 and 97-21, Order, DA 99-2284, para. 4 (Com. Car.
    Bur. rel. October 22, 1999).

[^36]: *Id.*

[^37]: Request for Review at 2 (asserting that applicant was unable to
    obtain all the Letters of Agency because of the "short period of
    time" afforded).

[^38]: These districts include 135 schools. *See* FCC Form 471, Project
    Interconnect, App. No. 146858, filed April 6, 1999.

[^39]: *See* Letter of Agency For Project Interconnect from Spring Lake
    Park Public Schools, dated April 11, 2000; Letter of Agency For
    Project Interconnect from Saint Paul Public Schools, dated April 13,
    2000; Letter of Agency for Project Interconnect from Chaska Public
    Schools, dated April 20, 2000; Letter of Agency for Project
    Interconnect from Waconia Public Schools, dated April 20, 2000.

[^40]: Request for Review at 1.

[^41]: *Universal Service Order*, 12 FCC Rcd 8776, 9027.