**Before the**

**Federal Communications Commission**

**Washington, DC 20554**

In the Matter of )

)

Request for Review of the )

Decision of the )

Universal Service Administrator by )

)

Worcester Public Schools ) File No. SLD-170908

Worcester, Massachusetts )

)

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: December 3, 2001 Released: December 4, 2001**

By the Accounting Policy Division, Common Carrier Bureau:

1.  Before the Accounting Policy Division (Division) is a Request for
    Review filed by Worcester Public Schools (Worcester), Worcester,
    Massachusetts, seeking review of a decision issued by the Schools
    and Libraries Division (SLD) of the Universal Service Administrative
    Company (Administrator). [^1] Worcester seeks review of SLD's denial
    of its Funding Year 3 application for discounts under the schools
    and libraries universal service mechanism.[^2] For the reasons
    discussed below, we deny the Request for Review and affirm SLD's
    decision.

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 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] SLD reviews the FCC Forms 471 that it
    receives and issues funding commitment decisions in accordance with
    the Commission's rules.

3.  In the *Fifth Reconsideration Order*, the Commission established
    rules to govern how discounts would be allocated when total demand
    exceeds the amount of funds available and a filing window is in
    effect.[^6] These rules provide that requests for telecommunications
    and Internet access service for all discount categories shall
    receive first priority for available funds (Priority One services),
    and requests for internal connections shall receive second priority
    (Priority Two services).[^7] Thus, when total demand exceeds the
    total support available, SLD is directed to give first priority for
    available funding to telecommunications service and Internet
    access.[^8] Any funding remaining is allocated to requests for
    support for internal connections, beginning with the most
    economically disadvantaged schools and libraries, as determined by
    the schools and libraries discount matrix.[^9] Schools and libraries
    eligible for a 90 percent discount would receive first priority for
    the remaining funds, which would be applied to their request for
    internal connections. To the extent that funds remain, the
    Administrator would continue to allocate funds for discounts to
    eligible applicants at each descending single discount percentage,
    *e.g.*, eighty-nine percent, eighty-eight percent, and so on until
    there are no funds remaining.[^10] In Funding Year 3, funding of
    discounted internal connections was available only for schools with
    discount rates of 82% or higher.[^11]

4.  In Funding Year 3, in an effort to ensure that the priority rules
    were not violated, SLD implemented a review procedure of
    reclassifying a request that the applicant designated
    telecommunications or Internet access (Priority One) as one seeking
    Priority Two services if any portion of the services requested were
    found to be Priority Two.[^12] Absent such a procedure, SLD would be
    unable to act on funding requests that mixed Priority One and
    Priority Two services until Priority Two availability could be
    determined with certainty. This, in turn, would create a substantial
    backlog of application reviews late in the Funding Year 3
    application review period, potentially causing funding delays
    injurious to applicants.[^13] The Common Carrier Bureau has
    previously found this SLD operating procedure for evaluating mixed
    priority requests to be a reasonable exercise of its authority.[^14]
    Accordingly, we affirm the practice here.

5.  On January 19, 2000, Worcester filed a Funding Year 3 application
    with one request, Funding Request Number (FRN) 345237, seeking
    funding for discounted telecommunications services.[^15] SLD issued
    a Funding Commitment Decision Letter denying FRN 345237, stating
    that the category of service was changed from telecommunication
    services to internal connections and that the "\[f\]unding cap will
    not provide for Internal Connections less than 81% discount to be
    funded."[^16] Worcester appealed to SLD on May 22, 2000, arguing
    that the attached documentation demonstrated that the request should
    have been changed to Internet access rather than internal
    connections.[^17] On February 20, 2001, SLD denied the appeal,
    finding that the request included maintenance of a school-owned
    router, that this service constituted internal connections, and that
    FRN 345237 was, therefore, properly recategorized as internal
    connections.[^18] SLD further stated that in Funding Year 3, there
    were insufficient funds for Funding Year 3 to provide discounts for
    internal connections requests to applicants that are below the 82%
    shared discount level.[^19] Worcester then filed the pending Request
    for Review.

6.  On review, we conclude that SLD correctly re-characterized FRN
    345237 as internal connections. Worcester does not dispute that FRN
    345237 includes the cost for the maintenance of a school-owned
    router, and the maintenance of a school-owned router is
    appropriately characterized as internal connections.[^20] Worcester
    does request that, if the cost for router maintenance cannot be
    funded, then the remainder be funded as Priority One Internet access
    service.[^21] However, as noted above, we continue to affirm SLD's
    Funding Year 3 procedure of converting a request to Priority Two if
    it contains any Priority Two services.[^22] Because Worcester
    commingled its requests for discounts for telecommunications (or
    Internet access) service and internal connections within a single
    funding request, SLD correctly placed the entire funding request
    into the internal connections category for Funding Year 3 funding.

7.  In Funding Year 3, Worcester was entitled to a 71% discount.[^23]
    Because only applicants with a discount rate of 82% or higher
    received discounted internal connections in Funding Year 3, we find
    that SLD correctly denied funding for FRN 345237.[^24]

8.  In its Request for Review, Worcester principally argues that
    Worcester's use of the router as a central gateway to connect its
    fifty-plus schools to the Internet is far more economical than
    providing each school with separate T-1 line access.[^25] Because
    the latter service would be Priority One, and thus would not be
    barred by the priority rules, Worcester argues that it should not be
    denied funding for having used a far-more cost effective method for
    achieving the same result. In this case, the denial of funding for
    the entire request could have been avoided by submitting two
    separate funding requests, one for the Priority One services, and
    the second for the Priority Two services. Through that method,
    Worcester can, in the future, obtain virtually all of the benefit of
    choosing the more economical solution.

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 Request for Review
    filed by Worcester Public Schools, Worcester, New York, on March 15,
    2001 IS DENIED.

    FEDERAL COMMUNICATIONS COMMISSION

    Mark G. Seifert

    Deputy Chief, Accounting Policy Division

    Common Carrier Bureau

[^1]: Letter from John F. Burke, Worcester Public Schools, to Federal
    Communications Commission, filed March 15, 2001 (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 (September 1999)
    (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, 9078, para. 575 (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 First Report and
    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 (November 2, 2000).

[^5]: 47 C.F.R. § 54.504(b), (c); Schools and Libraries Universal
    Service, Services Ordered and Certification Form, OMB 3060-0806
    (September 1999) (FCC Form 471).

[^6]: *Federal-State Joint Board on Universal Service*, CC Docket No.
    96-45, Fifth Order on Reconsideration and Fourth Report and Order in
    CC Docket No. 96-45, 13 FCC Rcd 14915 (1998) (*Fifth Order on
    Reconsideration*).

[^7]: 47 C.F.R. §§ 54.502, 54.503.

[^8]: The annual cap on federal universal service support for schools
    and libraries is \$2.25 billion per funding year. *See* 47 C.F.R. §
    54.507(a).

[^9]: *Fifth Order on Reconsideration*, 13 FCC Rcd at 14938, para. 36.

[^10]: 47 C.F.R. § 54.507(g)(1)(iii).

[^11]: *Federal-State Joint Board on Universal Service*, CC Docket No.
    96-45, Further Notice of Proposed Rule Making and Order, FCC 01-143,
    n. 13 (rel. April 30, 2001) (*Further Notice of Proposed
    Rulemaking*).

[^12]: *See* SLD Web Site,
    \<[http://www.sl.universalservice.org/reference/471_App_Guid_Docs/471_dozen.asp]{.underline}\>
    (last updated April 15, 1999) ("To correctly apply the Rules of
    Priority (fund Telecommunications and Internet Access first, then
    Internal Connections beginning with neediest), SLD must 'scrub'
    telecommunications and Internet Access requests to assure no
    Internal Connections are included. A piece of equipment at the
    user's location listed in one of these categories risks having the
    entire service redefined as Internal Connections."); *see also* SLD
    Web Site,
    \<[http://www.sl.universalservice.org/reference/ServCategories.asp]{.underline}\>
    (describing review procedure used in Funding Year 3 and new
    procedure applied in Funding Year 4).

[^13]: *See* SLD Web Site,
    \<[http://www.sl.universalservice.org/reference/ServCategories.asp]{.underline}\>
    ("While some applicants might prefer to wait until they know for
    sure whether funding will be sufficient to fund Internal Connections
    . . . SLD must process tens of thousands of applications and cannot
    leave these decisions until the end and still meet its goal of
    notifying applicants of the decisions on their requests before the
    start of the fund year.").

[^14]: *Request for Review by Most Holy Trinity, Federal-State Joint
    Board on Universal Service, Changes to the Board of Directors of the
    National Exchange Carrier Association, Inc.*, File No. SLD-161422,
    CC Dockets No. 96-45 and 97-21, Order, DA 01-2456 (Com. Car. Bur.
    rel. October 22, 2001). We note that, while the application of this
    procedure leads to a denial of funding in this instance, that result
    could have been avoided by submitting two separate funding requests,
    one for the Priority One services, and the second for the Priority
    Two services.

[^15]: FCC Form 471, Worcester Public School District, filed January 19,
    2000 (Worcester Form 471), at 6.

[^16]: Letter from Schools and Libraries Division, Universal Service
    Administrative Company, to John F. Burke, Worcester Public School
    District, dated May 12, 2000 (Funding Commitment Decision Letter),
    at 6.

[^17]: Letter from John F. Burke, Worcester Public School District, to
    Schools and Libraries Division, Universal Service Administrative
    Company, filed May 22, 2000 (Appeal to SLD), at 1.

[^18]: Letter from Schools and Libraries Division, Universal Service
    Administrative Company, to John F. Burke, Worcester Public School
    District, dated February 20, 2001 (Administrator's Decision on
    Appeal), at 1.

[^19]: *Id.* at 2.

[^20]: SLD Web Site, Eligible Services List,
    \<<http://www.sl.universalservice.org/data/pdf/EligibleServicesList.pdf>\>
    ("The Service Category used for labor should reflect the same
    service category of the product, or service being installed or
    maintained"); *see also* *Request for Review by East Grand School --
    SAD #14, Federal-State Joint Board on Universal Service, Changes to
    the Board of Directors of the National Exchange Carrier Association,
    Inc.*, File No. SLD-160387, CC Dockets No. 96-45 and 97-21, Order,
    DA 01-2575, para. 9 (Com. Car. Bur. rel. November 5, 2001).

[^21]: Request for Review, at 1.

[^22]: *See* *supra*, para. 4.

[^23]: Worcester Form 471, at 6.

[^24]: Administrator's Decision on Appeal, at 2.

[^25]: Request for Review, at 1.