**Before the**

**Federal Communications Commission**

**Washington, D.C. 20554**

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| In the Matter of                 | *  | CC Docket No. 02-6           |
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| Petition for Clarification or,   | ** |                              |
| in the Alternative, Waiver of    |    |                              |
| Section 54.514(a) of the         | *  |                              |
| Commission's Rules by            | *) |                              |
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| AT&T Corp.                       |    |                              |
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| Schools and Libraries Universal  | *) |                              |
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| Support Mechanism                | *  |                              |
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**ORDER**

**Adopted: March 13, 2007 Released: March 13, 2007**

By the Acting Deputy Chief, Wireline Competition Bureau:

**I. INTRODUCTION**

1.  In this Order, we grant the petition of AT&T Corp. (AT&T) for
    clarification or, in the alternative, waiver of section 54.514(a) of
    the Commission's rules, which states that service providers must
    allow the billed entity to choose the method of payment for the
    discounted services.[^1] Specifically, AT&T requests the Commission
    to clarify that AT&T's on-line reimbursement process complies with
    section 54.514(a) of the Commission's rules or, in the alternative,
    waive this rule as it applies to AT&T's reimbursement process.[^2]
    As explained below, we find that AT&T's on-line reimbursement
    process complies with the Commission's rules.[^3]

    II. **BACKGROUND**

2.  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 apply for
    discounts for eligible telecommunications services, Internet access,
    and internal connection services.[^4] Eligible schools, libraries,
    and consortia must pay the non-discount portion of services or
    products purchased with universal service discounts.[^5] In 2003, in
    the *Schools and Libraries Second Report and Order*, the Commission
    adopted section 54.514(a), which requires service providers to allow
    the applicant (billed entity) to choose the method of payment for
    the discounted services.[^6] In adopting this rule, the Commission
    stated that "providing applicants with the right to choose which
    payment method to use will help ensure that all schools and
    libraries have affordable access to telecommunications and Internet
    access services," including the most disadvantaged schools and
    libraries, which would most likely be unable to pay in full.[^7]
    Accordingly, schools and libraries may choose two payment methods to
    use to secure reimbursement from USAC for services rendered: (1) the
    FCC Form 472, Billed Entity Application for Reimbursement (BEAR)
    Form, or (2) the FCC Form 474, Service Provider Invoice (SPI)
    form.[^8] If the applicant pays the full cost of the services, then
    the applicant must submit a BEAR form to secure reimbursement from
    USAC. If the applicant pays only the reduced cost of the services
    directly to the service provider, then the service provider must
    file a SPI form with USAC to receive its reimbursement. Regardless
    of which method the applicant chooses, USAC remits the E-rate
    support payments to the service provider who in turn reimburses the
    applicant.[^9]

3.  [*AT&T's Petition*.]{.underline} In July 2003, after the Commission
    released the *Schools and Libraries Second Report and Order*, AT&T
    filed a petition for clarification with the Commission.[^10] In its
    petition, AT&T explains that, given the complexity of its many
    existing legacy billing systems, it determined that it would be both
    cost and time prohibitive to develop a billing process that would
    bill customers only the non-discounted portion.[^11] AT&T estimates
    that changes to its pre-existing billing process to bill customers
    the non-discounted portion would cost more than \$3 million.[^12]
    Thus, rather than attempting to require all applicants served by
    AT&T to use the BEAR process, and in order to provide applicants
    with a way to pay the non-discounted portion of the cost of services
    without undertaking numerous and costly changes to its existing
    billing systems, AT&T developed an on-line reimbursement process for
    schools and libraries receiving E-rate support. AT&T's system allows
    customers to request a refund from AT&T in the amount of the
    discounted portion of the cost of the services before payment of its
    AT&T bill is due.[^13] AT&T explains that, if a customer requests a
    refund of the discounted portion of the services as soon as it
    receives its AT&T bill, the customer should receive the refund
    within 6 to 10 days and in sufficient time to use the funds in
    addition to its non-discounted portion to pay the full amount of the
    invoice.[^14] Further, AT&T contends that it is working on
    implementing a universal billing system, which would have the
    capability of billing the discounted amount, tracking an applicant's
    support cap, and distinguishing E-rate discounts from AT&T-initiated
    discounts.[^15]

    **III. DISCUSSION**

4.  We grant AT&T's petition for clarification of section 54.514(a) of
    the Commission's rules, and we find that AT&T's on-line
    reimbursement process complies with the Commission's rules.[^16]
    Specifically, we conclude that, under AT&T's billing process, the
    applicant is not required to pay more than the non-discounted
    portion of the requested services to USAC from its own funds because
    AT&T covers the amount of the discounted portion pending
    reimbursement from USAC.[^17] Thus, the net effect is that the only
    cash outlay from the applicant's own funds is the amount necessary
    to pay the non-discounted portion of the services, as required by
    section 54.523 of the Commission's rules.[^18] Further, given the
    complexity of AT&T's billing systems, we find that this process
    satisfies the purpose of section 54.514(a), because applicants that
    cannot pay the service provider's bill upon receipt and must await
    reimbursement from USAC have an alternative method by which to pay
    the non-discounted portion.[^19]

**III. ORDERING CLAUSES**

5.  ACCORDINGLY, IT IS ORDERED that, pursuant to the authority contained
    in sections 1-4 and 254 of the Communications Act of 1934, as
    amended, 47 U.S.C. §§ 151-154 and 254, and pursuant to authority
    delegated in 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 Petition
    for Clarification or, in the Alternative, Waiver filed by AT&T Corp.
    IS GRANTED.

6.  IT IS FURTHER ORDERED that, pursuant to authority delegated under
    sections 0.91, 0.291 and 1.102 of the Commission's rules, 47 C.F.R.
    §§ 0.91, 0.291, 1.102, this Order SHALL BE EFFECTIVE upon release.

    FEDERAL COMMUNICATIONS COMMISSION

Renée R. Crittendon

Acting Deputy Chief

Wireline Competition Bureau

[^1]: AT&T Petition for Clarification or, in the Alternative, Waiver, CC
    Docket No. 02-6, filed July 21, 2003 (AT&T Petition); 47 C.F.R. §
    54. 5414(a). Section 1.429 of the Commission's rules provides that
    any person may petition for reconsideration of a final action in a
    proceeding conducted under this subpart. 47 C.F.R. § 1.429. Section
    1.3 of the Commission's rules allows the Commission to waive any
    provision of its rules for good cause. 47 C.F.R. § 1.3.

[^2]: AT&T Petition at 1-2.

[^3]: Because we grant AT&T's petition for clarification, we do not
    address its request, in the alternative, for a waiver of section
    54.514(a) of the Commission's rules. AT&T Petition at 1; 47 C.F.R. §
    54.514(a); *Schools and Libraries Universal Service Support
    Mechanism*, CC Docket No. 02-6, Second Report and Order and Further
    Notice of Proposed Rulemaking, 18 FCC Rcd 9202, 9217-18, paras.
    44-47 (2003) (*School and Libraries Second Report and Order*).

[^4]: 47 C.F.R. §§ 54.501-54.503.

[^5]: 47 C.F.R. § 54.523.

[^6]: *School and Libraries Second Report and Order*, 18 FCC Rcd at
    9216-29, paras. 42-51; 47 C.F.R. § 54.514(a).

[^7]: *Id*. at 9218, para. 47.

[^8]: *Id.* at 9202, 9217-19, paras. 44-50. *See also* USAC website,
    Step 11: Invoice USAC, <http://www.usac.org/sl/applicants/step11/>
    (retrieved Mar. 5, 2007).

[^9]: *See Schools and Libraries Second Report and Order*, 18 FCC Rcd at
    9217, para. 42.

[^10]: AT&T Petition at 1.

[^11]: *Id.* at 3-4.

[^12]: *Id.* at 4.

[^13]: *Id.*

[^14]: *Id.* at 4-5.

[^15]: *Id*. at 6-7.

[^16]: 47 C.F.R. § 54.514(a).

[^17]: *See* AT&T Petition at 5.

[^18]: *See id*; 47 C.F.R. § 54.523.

[^19]: 47 C.F.R. § 54.514(a). We note that AT&T has been continuously
    using this system since it filed its Petition in 2003, and we do not
    have record of any applicant complaint.