**Before the**

**Federal Communications Commission**

**Washington, D.C. 20554**

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| In the Matter of                 | *  | File No. SLD-449052          |
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| Request for Waiver of the        | ** | CC Docket 02-6               |
| Decision of the                  |    |                              |
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| Universal Service Administrator  | *) |                              |
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| Kan-ed, Kansas Board of Regents  | *  |                              |
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| Topeka, Kansas                   | ** |                              |
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| Schools and Libraries Universal  | *  |                              |
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**ORDER**

**Adopted: November 21, 2006 Released: November 22, 2006**

By the Commission:

**I. INTRODUCTION**

1.  In this Order, we grant partial relief to Kan-ed, Kansas Board of
    Regents (Kan-ed), which is appealing a decision by the Universal
    Service Administrative Company (USAC) that denied Kan-ed funding
    from the schools and libraries universal service support mechanism
    because USAC determined that Kan-ed failed to provide evidence of
    authority to represent its consortium members.[^1] We remand the
    underlying application to USAC for action consistent with this
    Order, and, to ensure that it is resolved expeditiously, we direct
    USAC to issue an award or a denial based on a complete review and
    analysis no later than 90 days from release of this Order.

    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.[^2] In accordance with the
    Commission's rules, an applicant must file with USAC, for posting to
    USAC's website, an FCC Form 470 requesting discounted services.[^3]
    After an applicant has entered into agreements for eligible services
    with one or more service providers, it must file an FCC Form 471
    with USAC.[^4]

3.  The Commission's rules allow schools and libraries to form consortia
    for purposes of seeking competitive bids on their service
    requests.[^5] Because 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 that have actually
    authorized the consortium to make the request.[^6] By signing the
    FCC Form 471, the applicant is certifying that it is authorized to
    submit and certify to the accuracy of the application on behalf of
    all consortium members.[^7] USAC must 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.[^8] 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.[^9] In *Project Interconnect*, the
    Wireline Competition Bureau (the Bureau) affirmed USAC's requirement
    that an applicant applying as a consortium must submit a letter of
    agency (LOA) from each of its members expressly authorizing the
    applicant to submit an application on its behalf.[^10] Specifically,
    the Bureau found that this requirement is consistent with USAC's
    authority to implement administrative procedures that ensure
    compliance with the Commission's rules and requirements as
    established in the Commission's *Eighth Reconsideration Order*.[^11]
    In lieu of an LOA, according to USAC's guidelines, "\[c\]onsortia
    which have a statutory or regulatory basis and for which
    participation by schools or libraries is mandatory" may provide
    "copies of the relevant state statute or regulation."[^12] In
    Funding Year 2005, USAC began requiring applicants to obtain signed
    LOAs from each consortium member prior to the certification date of
    their FCC Form 471.[^13]

4.  *[Kan-ed's Request for Waiver.]{.underline}* The Kansas Legislature,
    in the Kan-ed Act, empowered the Kansas Board of Regents to create a
    state-wide network to which all public and regulated private schools
    and public libraries will eventually be able to connect for
    broadband Internet and Intranet access for the purpose of distance
    learning.[^14] Section 75-7223(b) of the Kan-ed Act prohibits the
    network from impairing existing contracts for service between
    providers and schools or libraries and prohibits state ownership or
    construction of any new network facilities.[^15] Thus, the Kan-ed
    Act created a public-private partnership whereby all schools and
    libraries could request membership and apply for assistance to gain
    connectivity to the Kan-ed network through coordination with their
    local providers.[^16] In order to become a member, a school or
    library must complete a form to join the network and may renew their
    membership in subsequent years via an online form.[^17]

5.  Subsequent to the passage of the Kan-ed Act, the Kansas Board of
    Regents created an entity, Kan-ed, to contract, through competitive
    bidding, with private telecommunications and cable providers to
    create, operate and maintain the Kan-ed network.[^18] Kan-ed
    provides only the backbone, and not the individual connections, to
    each school district, school and library.[^19] Thus, Kan-ed states
    that since it provides only the backbone, its network costs are
    largely independent of the number of entities served.[^20] Kan-ed
    has applied for E-rate funds since Funding Year 2002 on behalf of
    its members under the authority of the Kan-ed Act.[^21]

6.  On January 25, 2006, USAC issued its Funding Commitment Decision
    Letter to Kan-ed, denying Kan-ed's application in its entirety
    because a substantial number of the LOAs or other documentation
    authorizing the filing of Kan-ed's FCC Form 471 were not signed
    before the FCC Form 471 certification date or were not provided to
    USAC.[^22] On March 23, 2006, Kan-ed filed with the Commission a
    Request for Waiver, appealing USAC's decision.[^23] Kan-ed contends
    that its network is successful in securing Internet and Intranet
    access in a manner that prevents duplication of requests for
    support, allows input from and cooperation with the private sector,
    and provides access to the educational benefits of distance
    learning.[^24] In addition, Kan-ed also requests that it be allowed
    to add members to Block 4 of its FCC Form 471 for Funding Year 2006
    to enable any school or library that had not signed an LOA by
    February 16, 2006, the certification date of its Funding Year 2006
    FCC Form 471 to join its consortium during the funding year and
    receive discounts.[^25]

    **III. DISCUSSION**

7.  Based on the record before us, we grant partial relief to Kan-ed,
    allowing it to file its LOAs for Funding Years 2005 and 2006 after
    the certification of its FCC Forms 471.[^26] We deny, however,
    Kan-ed's request to add members to Block 4 of its Funding Year 2006
    FCC Form 471 throughout the funding year.[^27]

8.  USAC denied Kan-ed's entire application because more than 30 percent
    of its LOAs were deemed incomplete.[^28] Section 54.504(d) of the
    Commission's rules states that, "\[i\]f 30 percent or more of a
    request for discounts made in an FCC Form 471 is for ineligible
    services, the request shall be denied in its entirety."[^29] Thus,
    the 30 percent rule ensures that applicants carefully evaluate the
    eligibility of the services for which they seek discounts. The 30
    percent rule, however, does not apply to the submission of completed
    LOAs. We find that to deny an entire application because 30 percent
    of a consortium's members either did not submit an LOA or submitted
    a deficient LOA would unfairly penalize the entire consortium where
    only a few members of the consortium fail to produce the requested
    documentation. Further, such a denial may make applicants reluctant
    to risk applying with a consortium, in contravention of 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."[^30]

9.  Given the confusion surrounding the application of the 30 percent
    rule to Kan-ed's LOAs, we now allow Kan-ed to obtain and submit to
    USAC updated LOAs for the 2005 Funding Year from all of its members
    within 30 days from the release of this Order to ensure that each
    school and library listed had actually authorized Kan-ed to apply on
    its behalf. To the extent that Kan-ed did not have LOAs for the
    entities listed in Block 4 of its Funding Year 2006 FCC Form 471
    prior to its certification date, we also allow Kan-ed 30 days from
    the date of release of this Order to obtain and submit to USAC all
    of the LOAs for its Funding Year 2006 application. If Kan-ed is
    unable to obtain LOAs from every entity listed on Block 4 of its
    Funding Year FCC Form 471 within 30 days, we direct USAC to remove
    those entities from the application and adjust Kan-ed's funding
    request accordingly, rather than deny the entire application. We
    find that denying 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.[^31] We emphasize that we are not relieving Kan-ed of
    the obligation to obtain LOAs from its members, we are merely
    granting Kan-ed additional time in which to produce to USAC proof of
    its authority to apply on behalf of its members.[^32]

10. We deny, however, Kan-ed's request to add members to Block 4 of its
    Funding Year 2006 FCC Form 471 throughout the funding year.[^33]
    Section 54.507(c) requires all applications to be submitted by a
    date determined by USAC.[^34] While we understand Kan-ed's desire to
    provide service to entities that decide to join its consortium
    during the funding year, we find that allowing Kan-ed an open-ended
    application may undermine the integrity of the E-rate application
    and disbursement process.[^35] In particular, we are concerned with
    the administrative burden on USAC of continually having to update
    and process Kan-ed's application throughout the funding year. We are
    also concerned with the ability of USAC to conduct its PIA review
    over the course of a funding year when the number of members in a
    consortium's application is constantly changing. Thus, we decline to
    allow Kan-ed to allow additional schools and libraries to join its
    consortium after the submission of its FCC Form 471 for Funding Year
    2006.

11. Accordingly, we remand the underlying application to USAC for
    further processing consistent with our actions in this Order. To
    ensure that the application is processed expeditiously, we direct
    USAC to issue an award or a denial based on a complete review and
    analysis no later than 90 days from release of this Order. We
    emphasize the limited nature of this decision. Our action here does
    not eliminate USAC's current procedure requiring that an applicant
    applying for funding on behalf of a consortium have signed LOAs in
    place prior to submitting an FCC Form 471 or demonstrate its
    authority through alternative means, such as state statute or
    regulation.[^36] We continue to require E-rate applicants to submit
    complete and timely information to USAC as part of the application
    review process.

12. Finally, we are committed to guarding against waste, fraud, and
    abuse, and to ensuring that funds disbursed through the E-rate
    universal service mechanism are used for appropriate purposes.[^37]
    Our action here in no way affects the authority of the Commission or
    USAC to conduct audits or investigations to determine compliance
    with E-rate program rules and requirements. Because audits or
    investigations may provide information showing that a beneficiary or
    service provider failed to comply with the statute or Commission
    rules, such proceedings can reveal instances in which universal
    service funds were improperly disbursed or in a manner inconsistent
    with the statute or the Commission's rules. To the extent we find
    that funds were not used properly, we will require USAC to recover
    such funds through its normal processes. We emphasize that we retain
    the discretion to evaluate the uses of monies disbursed through the
    E-rate program and to determine on a case-by-case basis whether
    waste, fraud, or abuse of program funds occurred and whether
    recovery is warranted. We remain committed to ensuring the integrity
    of the program and will continue to aggressively pursue instances of
    waste, fraud, or abuse under our own procedures and in cooperation
    with law enforcement agencies.

**IV. ORDERING CLAUSES**

13. 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 sections 1.3, and
    54.722(a) of the Commission's rules, 47 C.F.R. §§ 1.3 and 54.722(a),
    that Kan-ed, Kansas Board of Regents' Request for Waiver IS GRANTED
    IN PART AND DENIED IN PART, as described herein.

14. IT IS FURTHER 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 sections 1.3, and 54.722(a) of the
    Commission's rules, 47 C.F.R. §§ 1.3 and 54.722(a), that Kan-ed,
    Kansas Board of Regents SHALL PROVIDE to USAC evidence of
    registration of those entities listed in Block 4 of its Funding Year
    2005 FCC Form 471 and LOAs for all of its consortium members for its
    Funding Year 2006 application within 30 days from release of this
    Order.

15. IT IS FURTHER 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 sections 1.3, and 54.722(a) of the
    Commission's rules, 47 C.F.R. §§ 1.3 and 54.722(a), that Kan-ed,
    Kansas Board of Regents' Request for Waiver IS REMANDED to USAC for
    further consideration in accordance with the terms of this Order.

16. IT IS FURTHER 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, USAC SHALL COMPLETE its review of the
    underlying application of Kan-ed, Kansas Board of Regents and ISSUE
    an award or a denial based on a complete review and analysis no
    later than 90 days from release of this Order.

17. IT IS FURTHER ORDERED that this Order shall be effective upon
    release.

    FEDERAL COMMUNICATIONS COMMISSION

Marlene H. Dortch

Secretary

[^1]: Letter from Jerry Huff, Director of Business Operations &
    Planning, Kan-ed, Kansas Board of Regents, Topeka, Kansas, to
    Federal Communications Commission, Request for Waiver, File No.
    449052, CC Docket Nos. 96-45 and 02-6, filed Mar. 23, 2006 (Request
    for Waiver). 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).

[^2]: 47 C.F.R. §§ 54.501-54.503.

[^3]: The applicant must wait 28 days before entering into an agreement
    with a service provider for the requested services. 47 C.F.R. §
    54.504(b). *See also* Schools and Libraries Universal Service,
    Description of Services Requested and Certification Form, OMB
    3060-0806 (September 1999) (Funding Years 2000, 2001, 2002 FCC Form
    470); Schools and Libraries Universal Service, Description of
    Services Requested and Certification Form, OMB 3060-0806 (April
    2002) (Funding Year 2003 FCC Form 470); Schools and Libraries
    Universal Service, Description of Services Requested and
    Certification Form, OMB 3060-0806 (May 2003) (Funding Year 2004 FCC
    Form 470); Schools and Libraries Universal Service, Description of
    Services Requested and Certification Form, OMB 3060-0806 (October
    2004) (Funding Year 2005 FCC Form 470) (collectively, FCC Form 470).

[^4]: The FCC Form 471 notifies USAC of the services that have been
    ordered, the service providers with which the applicant has entered
    into an agreement, and an estimate of funds needed to cover the
    discounts to be given for eligible services. 47 C.F.R. § 54.504(c).
    *See* Schools and Libraries Universal Service, Services Ordered and
    Certification Form, OMB 3060-0806 (December 1997) (Funding Year 1999
    FCC Form 471); Schools and Libraries Universal Service, Services
    Ordered and Certification Form, OMB 3060-0806 (September 1999)
    (Funding Year 2000 FCC Form 471); Schools and Libraries Universal
    Service, Services Ordered and Certification Form, OMB 3060-0806
    (October 2000) (Funding Year 2001 FCC Form 471); Schools and
    Libraries Universal Service, Services Ordered and Certification
    Form, OMB 3060-0806 (November 2001) (Funding Year 2002 FCC Form
    471); Schools and Libraries Universal Service, Services Ordered and
    Certification Form, OMB 3060-0806 (October 2003) (Funding Year 2004
    FCC Form 471); Schools and Libraries Universal Service, Services
    Ordered and Certification Form, OMB 3060-0806 (November 2004)
    (Funding Year 2005 FCC Form 471) (collectively, FCC Form 471).

[^5]: 47 C.F.R. § 54.501(d)(1).

[^6]: 47 U.S.C. § 254(h)(1)(B).

[^7]: 47 C.F.R. § 54.501(c)(1). *See also* USAC Website, Letter of
    Agency,
    <http://www.universalservice.org/sl/tools/reference/letters-of-agency.aspx>
    (retrieved Sept. 7, 2006) (LOA Guidance); FCC Form 471, Item 33,
    Block 6.

[^8]: *Request for Review of the Decision of the Universal Service
    Administrator by Project Interconnect, Brooklyn Park, Minnesota,
    Federal-State Joint Board on Universal Service, Changes to the Board
    of Directors of the National Exchange Carrier Association*, File
    Nos. SLD-146858, 146854, CC Docket Nos. 96-45, 97-21, Order, 16 FCC
    Rcd 13655, 13659, para. 10 (Common Car. Bur. 2001) (*Project
    Interconnect Order*). The Wireline Competition Bureau was formerly
    known as the Common Carrier Bureau.

[^9]: *Id.*

[^10]: *Id*. at 13658, para. 8. USAC requires an LOA to contain the
    following five elements: the name of the person filing the
    application; the name of the person authorizing the filing of the
    application; the specific time frame the LOA covers; the signature,
    date, and title of an official who is an employee of the entity who
    is authorizing the filing of the application; and the type of
    services covered by the LOA. *See* LOA Guidance. In certain
    situations, other documentation, such as evidence that each
    consortium member knew it was represented on the application, may be
    accepted as proof of authorization. *Id*.

[^11]: *See* 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). *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, 34 (1998)
    (*Eighth Reconsideration Order*) (describing the functions of the
    Schools and Libraries Committee).

[^12]: *See* LOA Guidance.

[^13]: *See id.* *See also* February 2005 Announcements, Sample Letter
    of Agency (LOA) Available (2/1/05), available at
    <http://www.universalservice.org/sl/tools/news-archive/2005/022005.asp#020105a>
    (retrieved Sept. 7, 2006).

[^14]: Kan. Stat. Ann. § 75-7221, *et seq*. (2001). *See also* Letter
    from Hal Gardner, Executive Director, Kan-ed, Kansas Board of
    Regents, to Schools and Library Division, Universal Service
    Administrative Company, dated Sept. 4, 2005, at 1 (Gardner Letter)
    (responding to a Program Integrity Assurance (PIA) request from USAC
    for additional information concerning Kan-ed's application). The PIA
    review process examines applicants' FCC Forms 471 and other
    documentation to ensure that the discounts recipients seek are for
    eligible services, provided to eligible entities, and for eligible
    uses. During this process, USAC may ask for additional documentation
    to support the statements made in the application. *See* USAC
    Website, Program Integrity Assurance (PIA),
    <http://www.sl.universalservice.org/reference/6pia.asp> (retrieved
    Sept. 8, 2006).

[^15]: Kan. Stat. Ann. § 75-223(b)(1); Request for Waiver at 2.

[^16]: *Id.*

[^17]: E-mail from Don Dietrich, E-rate Consultant to Kan-ed, to Schools
    and Libraries Division, Universal Service Administrative Company,
    dated Sept. 16, 2005 (Dietrich E-mail). Kan-ed also states that
    these renewals are certified annually by an independent agency.
    *Id.*

[^18]: Gardner Letter at 1.

[^19]: Request for Waiver at 2.

[^20]: *Id.*

[^21]: *Id.*

[^22]: *See* Letter from Schools and Libraries Division, Universal
    Service Administrative Company, to Bradley Williams, Kan-ed, dated
    Jan. 25, 2006 (Funding Commitment Decision Letter).

[^23]: Request for Waiver at 2.

[^24]: *See* Gardner Letter at 3.

[^25]: Request for Waiver at 5. Funding Year 2006 began on July 1, 2006
    and ends on June 30, 2007.

[^26]: Request for Waiver at 2.

[^27]: *Id*. at 5.

[^28]: *See* *Id*. at 2. *See also* Funding Commitment Decision Letter
    at 5-12 ("Funding was denied because a substantial number of the
    Letters of Agency or other documentation authorizing the filing of
    the Form 471 were not signed before the 471 Certification Postmark
    Date or were not provided.") USAC's policy allows consortia which
    have a statutory or regulatory basis and for which participation by
    schools or libraries is mandatory to provide copies of the relevant
    state statute or regulation as proof of authority. *See* LOA
    Guidance. We note that Kan-ed cannot rely on its statutory authority
    to supplant the LOA requirement because membership in Kan-ed by
    schools and libraries is not mandatory. *See* Gardner Letter at 1.

[^29]: 47 C.F.R. § 54.504(d).

[^30]: *Federal-State Joint Board on Universal Service*, CC Docket No.
    96-45, Report and Order, 12 FCC Rcd 8776, 9027, para. 476 (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).

[^31]: *See Project Interconnect Order*, 16 FCC Rcd at 13661, para. 14.

[^32]: We direct USAC to accept Kan-ed's LOAs, even though they will not
    have been dated prior to the certification date of Kan-ed's FCC Form
    471.

[^33]: Request for Waiver at 2. Kan-ed may also amend its FCC Form 471
    for clerical or ministerial errors pursuant to the Commission's
    *Bishop Perry Order*. *See Request for Review of the Decision of the
    Universal Service Administrator by Bishop Perry Middle School,
    Schools and Libraries Universal Service Support Mechanism,* File
    Nos. SLD-487170, *et al.*, CC Docket No. 02-6, Order, 21 FCC Rcd
    5316 (2006) (*Bishop Perry Order*).

[^34]: 47 C.F.R. § 54.507(c). For Funding Year 2006, the FCC Form 471
    filing window closed on February 16, 2006. In the *Bishop Perry
    Order*, we allowed applicants to correct ministerial or clerical
    errors after the close of the FCC Form 471 filing window, but Kan-ed
    is requesting a waiver to make substantive changes to its
    application throughout the funding year. *See Bishop Perry Order*,
    21 FCC Rcd at 5319, para. 8.

[^35]: 47 U.S.C. § 254. *See also 1997 Universal Service Order*, 12 FCC
    Rcd at 9076-80, paras. 570-80.

[^36]: *See supra* para. 3. *See also* LOA Guidance.

[^37]: *See Bishop Perry Order*, 21 FCC Rcd 5316.