**Before the**

**Federal Communications Commission**

**Washington, DC 20554**

In the Matter of )

)

Request for Review of the )

Decision of the )

Universal Service Administrator by )

)

Quinter Public Schools )

Unified School District No. 293 ) File No. SLD-421315

Quinter, Kansas )

)

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

Support Mechanism )

**order**

**Adopted: December 4, 2006 Released: December 4, 2006**

By the Chief, Wireline Competition Bureau:

1.  In this Order, we grant a Request for Review filed by Quinter Public
    Schools Unified School District No. 293 (Quinter) seeking review of
    a decision by the Schools and Libraries Division of the Universal
    Service Administrative Company (USAC).[^1] The USAC decision at
    issue denied funding for discounted services in Funding Year 2004 of
    the schools and libraries universal service mechanism. As explained
    below, we find that special circumstances exist to justify remanding
    the application associated with this appeal to USAC for further
    action consistent with this Order. To ensure that Quinter's
    underlying application is resolved expeditiously, we direct USAC to
    initiate contact with Quinter as outlined in this order within 14
    days from the release of this Order and issue a decision based on a
    complete review and analysis no later than 90 days from the release
    of this Order.

2.  Under the schools and libraries universal service support mechanism,
    commonly referred to as the E-rate program, eligible schools,
    libraries, and consortia that include eligible schools and libraries
    may apply for discounts on eligible telecommunications services,
    Internet access, and internal connections.[^2] The Commission vested
    in USAC the responsibility for administering the application process
    for the universal service support mechanism.[^3] Accordingly, USAC
    reviews the applications for discounts that it receives, and issues
    funding commitments in accordance with the Commission's rules. Under
    the schools and libraries universal service support mechanism,
    applicants may only seek support for eligible services.[^4] Pursuant
    to its operating procedures, USAC performs a Program Integrity
    Assurance (PIA) review to verify that the discounts recipients seek
    are for eligible services, provided to eligible entities, and for
    eligible uses.[^5]

3.  In its Funding Year 2004 application, filed on February 3, 2004,
    Quinter sought discounts for an annual lease and monthly service to
    provide Interactive Video for instructional purposes (or distance
    learning).[^6] In the Item 21 Attachment to Quinter's FCC Form 471,
    Quinter indicated that the request for discounts included on-premise
    termination equipment and a fiber lease.[^7] The amount of
    pre-discount funding requested in Quinter's application was
    \$16,599.[^8] During PIA review, Quinter was instructed that the
    on-premise equipment would be presumed to be internal connections
    unless the presumption could be overcome.[^9] To evaluate Quinter's
    request, USAC posed questions based on indicia set forth in the
    *Tennessee Order* to determine whether on-premises equipment should
    be funded as internal connections or funded as telecommunications or
    Internet access.[^10] On December 7, 2005, USAC requested that
    Quinter submit a diagram to depict the location of the requested
    leased equipment, including the line of demarcation, and the
    location of the requested leased fiber.[^11] USAC also provided the
    cite to a webpage that provides sample diagrams and recommended that
    Quinter look at the diagrams and adapt them to Quinter's
    situation.[^12] On December 14, 2004, Quinter submitted the
    requested diagrams and stated that the type of fiber it was
    requesting was single mode fiber that connects the central office to
    the high school's classroom.[^13] On January 5, 2005, USAC sought
    additional information asking for the location of the line of
    demarcation on the diagrams Quinter had submitted and the location
    of a second classroom depicted on the diagram.[^14] On January 6,
    2005, Quinter submitted a revised diagram depicting the line of
    demarcation and stating there was not a second classroom at
    Quinter.[^15] Although USAC determined that Quinter provided the
    correct responses to USAC's questions during PIA review, it
    determined that because the diagrams indicated multiple demarcations
    into the local area network (LAN), the application failed the test
    set out in the *Tennessee Order*.[^16] By letter dated May 10, 2005,
    USAC denied Quinter's application for discount funding on the ground
    that requests for internal connections were not funded at Quinter's
    discount level.[^17]

4.  On June 22, 2005, Quinter appealed USAC's decision, asserting that
    its application sought discounts for telecommunications rather than
    internal connections.[^18] USAC denied the appeal on August 30,
    2005, finding that Quinter's diagrams showed more than one
    demarcation point and that USAC was unable to determine the
    demarcation point where the service provider responsibility ends and
    district responsibility begins.[^19] The Administrator's Decision on
    Appeal also stated that Quinter's funding request included costs for
    a district-provided wide area network (WAN), which is an ineligible
    service.[^20] On September 27, 2005, Quinter sent a subsequent
    appeal letter to USAC claiming that Quinter had made a mistake on
    its diagram in drawing the demarcation point.[^21] It attached a new
    drawing and asserted that the drawing showed a separation between
    the Distance Learning Circuit and the LAN.[^22] Quinter also
    proposed that USAC may have confused this funding request with
    another because USAC mentioned a "district provided WAN" as an
    ineligible service in its Administrator's Decision Letter on
    Appeal.[^23] Quinter reiterated that its funding request was for a
    lease for a Distance Learning Circuit.[^24] USAC dismissed Quinter's
    Second USAC Appeal as moot.[^25] On March 18, 2005, Quinter filed
    the instant Request for Review. 

5.  In its Request for Review, Quinter argues that, in the revised
    drawing, the demarcation point shows a separation between the
    Distance Learning Circuit and the LAN.[^26] Quinter again raises its
    concern that USAC has described its service request as a 100 percent
    ineligible district-provided WAN.[^27] In this Request for Review,
    Quinter further re-asserts that this service request was for a lease
    for a distance learning circuit and not a WAN and that USAC may have
    been confused when it was reviewing another service request of
    Quinter's which was for a WAN.[^28]

6.  We have reviewed the underlying record and conclude that this
    application and revised diagram should be remanded to USAC. As
    discussed above, USAC determined that although Quinter answered the
    *Tennessee Order* questions and satisfied the criteria, Quinter's
    service request was not eligible as telecommunications solely based
    on the diagrams it submitted.[^29] Additionally, by dismissing
    Quinter's Second USAC Appeal as moot, USAC did not review Quinter's
    revised diagram, which Quinter claims shows a clear demarcation
    point. Because Quinter's answers to the questions from the
    *Tennessee Order* were apparently inconsistent with the diagrams
    Quinter submitted, we find that USAC should have contacted Quinter
    again to determine with certainty whether Quinter had rebutted the
    presumption that facilities located on an applicant's premises
    should be presumed to be internal connections. Had USAC done so,
    Quinter could have provided the revised diagrams Quinter submitted
    with its Second USAC Appeal, which may have explained the apparent
    inconsistency. We therefore grant Quinter's appeal and remand
    Quinter's application to USAC with instructions for USAC to
    reconsider the entire application, including Quinter's Second USAC
    Appeal, and to conduct outreach to determine whether Quinter's
    request should have remained in the telecommunications category as
    claimed by Quinter. Such outreach should include, but should not be
    limited to, assisting Quinter in constructing a diagram that
    accurately depicts the location of its equipment and demarcation
    point(s).[^30]

7.  In remanding this matter to USAC, we make no findings as to the
    ultimate eligibility of the requested services.[^31] The
    inconsistency between USAC's interpretation of Quinter's diagram and
    Quinter's correct answers to the questions based on the *Tennessee
    Order* criteria indicates that USAC should have conducted a more
    detailed inquiry to determine whether Quinter's request was for
    telecommunications or internal connections. While USAC may
    ultimately find that Quinter does not adequately rebut the internal
    connections presumption, we find that USAC does not yet have enough
    information to make that determination. Further, as the Commission
    considers additional steps to reform and improve the E-rate program
    in the *Comprehensive Review* proceeding, we find that the public
    interest and the goals of section 254(h) of the Communications Act
    are best served by requiring USAC to reconsider Quinter's
    application, including the revised diagram filed with Quinter's
    Second USAC Appeal, and to work with Quinter to determine if indeed
    its request should be considered eligible telecommunications.[^32]

8.  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 Quinter Public Schools Unified School District No. 293,
    Quinter, Kansas, on October 3, 2005, IS GRANTED and REMANDED to USAC
    for further action consistent with this decision.

9.  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 initiate contact with
    Quinter Public Schools Unified School District No. 293 within 14
    days from the release of this Order and ISSUE a decision based on a
    complete review and analysis no later than 90 calendar days from the
    release of this Order.

10. IT IS FURTHER ORDERED that this Order SHALL BE EFFECTIVE upon
    release.

    FEDERAL COMMUNICATIONS COMMISSION

> Thomas J. Navin
>
> Chief, Wireline Competition Bureau

[^1]: Letter from Schools and Libraries Division, Universal Service
    Administrative Company, to Allaire T. Homburg, Quinter Public
    Schools Unified School District No. 293, dated Aug. 30, 2005
    (Administrator's Decision on Appeal); Letter from Allaire T.
    Homburg, Quinter Public Schools Unified School District No. 293, to
    Federal Communications Commission, filed Oct. 3, 2005 (Request 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, 54.502, 54.503.

[^3]: 47 C.F.R. § 54.705(a)(1). The Schools and Libraries Committee
    oversees the administration of the schools and libraries support
    mechanism. *Id*. *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).
    Under the rules adopted in the Commission's Eighth Reconsideration
    Order, the Schools and Libraries Committee's functions include, but
    are not limited to, "development of applications and associated
    instructions," and "administration of the application process,
    including activities to ensure compliance with Federal
    Communications Commission rules and regulations."

[^4]: *See* 47 C.F.R. § 54.504; Instructions for Completing the Schools
    and Libraries Universal Service, Services Ordered and Certification
    Form, OMB 3060- 0806, at 20 (October 2003) (FCC Form 471
    Instructions) (stating that applicants may not seek support for
    ineligible services, entities and uses). *See also* USAC website,
    \<http://www.sl.universalservice.org/data/pdf/i471y7.pdf\>.

[^5]: *See* USAC website, PIA,
    \<http://www.sl.universalservice.org/reference/6pia.asp\>.

[^6]: *See* FCC Form 471, Quinter Public Schools Unified School District
    No. 293, filed February 3, 2004 (Quinter FCC Form 471). The Funding
    Request Number (FRN) at issue in this case is 1162690.

[^7]: *See* Quinter FCC Form 471, Item 21 Attachment. Quinter attached a
    certification to its Item 21 Attachment stating that: 1) The
    on-premise equipment will be provided by the same service provider
    that provides the eligible telecommunications or Internet access
    service of which the on-premise equipment is a part; 2) Ownership of
    the equipment will not transfer to the school in the future, and the
    relevant contract or lease does not include an option to purchase
    the equipment by the school; 3) The school has no contractual right
    to exclusive use of the equipment; 4) Upfront capital charges of the
    on-premise equipment are less than 67% of total charges (recurring
    plus non-recurring) in the funding year; 5) The equipment will not
    be used by the school for any purpose other than the receipt of the
    eligible telecommunications or Internet access service; 6) The Local
    Area Network for data communications of the school is functional
    without dependence on the equipment; 7) Responsibility for
    maintaining the equipment rests with the service provider, not the
    school. *Id.*

[^8]: *Id.*

[^9]: *See* Letter from Schools and Libraries Division, Universal
    Service Administrative Company, to Evone Waggoner, Quinter Public
    Schools Unified School District No. 293, dated Oct. 27, 2004
    (October 27 PIA Review Letter). In the *Tennessee Order*, the
    Commission determined that a facility located on an applicant's
    premises should be presumed to be a component of internal
    connections, but that an applicant may rebut that presumption. *See
    Request for Review by the Department of Education of the State of
    Tennessee of the Decision of the Universal Service Administrator,
    Request for Review by Integrated Systems and Internet Solutions,
    Inc., of the Decision of the Universal Service Administrator,
    Request for Review by Education Networks of America of the Decision
    of the Universal Service Administrator,* CC Docket Nos. 96-45 and
    97-21, Order, 14 FCC Rcd 13734, at 13753-54, paras. 37-38 (1999)
    (*Tennessee Order*). In analyzing the facts presented in the
    *Tennessee Order,* the Commission concluded that this presumption
    had been rebutted. *See* *Schools and Libraries Universal Service
    Support Mechanism*, CC Docket No. 02-6, Third Report and Order and
    Second Further Notice of Proposed Rulemaking, 18 FCC Rcd 26912, at
    26930-31, para. 46 (2003). The Commission found that certain indicia
    supported its conclusion that the facilities should be deemed as
    part of an end-to-end service. *Id.* Such indicia included the fact
    that the applicant's internal connections would function without
    dependence on the service provider's equipment, ownership of the
    facility, the lack of a lease-purchase arrangement, the lack of an
    exclusivity arrangement, and the fact that the service provider was
    responsible for maintenance of the facility. *Id.* Although the
    Commission concluded that it is administratively efficient for USAC
    to use the factors relied upon in the *Tennessee Order* as a
    processing standard, it also found that the Commission did not
    establish a per se requirement in the *Tennessee Order* that an
    applicant must meet all factors in order to receive discounts on
    service provider charges for the cost of leasing on-premises
    equipment. *Id.* at paras. 46-47**.**

[^10]: Specifically, USAC asked the following questions: 1) Is the
    leased on-premise equipment an integral component of a
    Telecommunications or Internet access service (Quinter responded:
    "Telecommunications"); 2) Will the leased on-premise equipment be
    provided by the same service provider that provides the associated
    Telecommunications Service or Internet access service? (Quinter
    responded: "Yes"); 3) Does the responsibility for maintaining the
    equipment rest with the service provider? (Quinter responded "Yes");
    4) Will ownership of the equipment transfer to the school or library
    in the future? (Quinter responded "No"); 5) Does the relevant
    contract or lease include an option for the applicant to purchase
    the equipment? (Quinter responded "No"); 6) Will the leased
    equipment be used at the applicant site for any purpose other than
    receipt of the eligible Telecommunications Services or Internet
    access of which it is a part? (Quinter responded "No"); 7) Will the
    school's or library's internal data communications network function
    without dependence on the equipment? (Quinter responded "Yes"); 8)
    Are there any contractual, technical, or other limitations that
    would prevent the service provider from using the leased on-premise
    data communications equipment in part for other customers? (Quinter
    responded "No"). October 27 PIA Review Letter at 3. Quinter sent the
    responses noted above to the October 27 PIA Review Letter on
    November 1, 2004. *See* Letter from Evone Waggoner, Quinter Public
    Schools Unified School District No. 293, to Douglas May, Schools and
    Libraries Division, Universal Service Administrative Company, dated
    Nov. 1, 2004.

[^11]: *See* E-mail from Schools and Libraries Division, Universal
    Service Administrative Company, to Evone Waggoner, Quinter Public
    Schools Unified School District No. 293, dated Dec. 8, 2004.

[^12]: *Id.* The current equivalent to this webpage is
    *http://www.universalservice.org/sl/applicants/step06/on-premise-priority1-equipment.aspx#5.*

[^13]: *See* Facsimile from Evone Waggoner, Quinter Public Schools
    Unified School District No. 293, to Douglas May, Schools and
    Libraries Division, Universal Service Administrative Company, dated
    Dec. 14, 2004.

[^14]: *See* E-mail from Schools and Libraries Division, Universal
    Service Administrative Company, to Evone Waggoner, Quinter Public
    Schools Unified School District No. 293, dated Jan. 5, 2005.

[^15]: *See* Facsimile from Evone Waggoner, Quinter Public Schools
    Unified School District No. 293, to Douglas May, Schools and
    Libraries Division, Universal Service Administrative Company, dated
    Jan. 6, 2005. Quinter stated that there is not a second classroom at
    this time and that the diagram provided was to show how a second
    classroom would be configured in its network.

[^16]: Tennessee Diagrams for USAC Review, Application No. 421315
    Quinter USD 293, dated Mar. 17, 2005. (USAC Review Memorandum).

[^17]: Letter from Schools and Libraries Division, Universal Service
    Administrative Company, to Evone Waggoner, Quinter Public Schools
    Unified School District No. 293, dated May 10, 2005, at 5 (Funding
    Commitment Decision Letter). USAC reclassified the funding request
    from telecommunications to internal connections which meant that it
    would be processed at a 65% discount, which was below the funding
    threshold for internal connections in Funding Year 2004. *See* USAC
    Review Memorandum. If USAC had approved the request as
    telecommunications, it would have been funded because
    telecommunications and Internet access requests have priority
    funding over internal connections.

[^18]: Letter from Allaire T. Homburg, Quinter Public Schools, to
    Schools and Libraries Division, Universal Service Administrative
    Company, dated Jun. 22, 2005 (Quinter USAC Appeal). Quinter claimed
    that its request was incorrectly changed to internal connections
    during the review process and is eligible for funding under the
    category telecommunications based on the definitions of ITV,
    On-Premise Equipment for End-to-End Service, and Distance Learning
    Circuits, and Digital Transmission Services from the Eligible
    Services List (ESL). *Id.* Quinter stated that the service would not
    be providing connectivity within school grounds.

[^19]: Letter from Schools and Libraries Division, Universal Service
    Administrative Company, to Allaire T. Homberg, Quinter Public
    Schools Unified School District No. 293, dated Aug. 30, 2005, at 2
    (Administrator's Decision on Appeal).

[^20]: *Id.*

[^21]: Letter from Allaire T. Homburg, Quinter Public Schools Unified
    School District No. 293, to Schools and Libraries Division,
    Universal Service Administrative Company, dated Sept. 27, 2005
    (Second USAC Appeal).

[^22]: *Id.*

[^23]: *Id.*

[^24]: *Id.*

[^25]: Letter from Schools and Libraries Decision, Universal Service
    Administrative Company, to Allaire T. Homberg, Quinter Public
    Schools Unified School District No. 293, dated October 28, 2005
    (Second Administrator's Decision on Appeal) . USAC claimed that the
    issue raised had been resolved in the Administrator's Decision
    Letter on Appeal released on Aug. 30, 2005.

[^26]: *Id.*

[^27]: *Id.*

[^28]: *Id.*

[^29]: *See* USAC Review Memorandum.

[^30]: Merely referring Quinter to a webpage of sample diagrams does not
    qualify as the outreach we are requiring by this Order. *See* E-mail
    from Schools and Libraries Division, Universal Service
    Administrative Company, to Evone Waggoner, Quinter Public Schools
    Unified School District No. 293, dated Dec. 8, 2004. Instead, we
    require USAC to contact Quinter with any questions it has about the
    Quinter diagrams until USAC has full understanding of the
    configuration of Quinter's service request.

[^31]: We are committed to guarding against waste, fraud and abuse, and
    ensuring that finds disbursed through the E-rate program are used
    for appropriate purposes.

[^32]: *See* 47 U.S.C. § 254(h). The Commission has started a proceeding
    to address, among other things, changes that may need to be made to
    the application and disbursement process for the schools and
    libraries support mechanism. *See Comprehensive Review of Universal
    Service Fund Management, Administration, and Oversight,
    Federal-State Joint Board on Universal Service, Schools and
    Libraries Universal Service Support Mechanism, Rural Health Care
    Support Mechanism, Lifeline and Linkup, Changes to the Board of
    Directors of the National Exchange Carrier Association, Inc.,* WC
    Docket Nos. 05-195, 02-60, 03-109, CC Docket Nos. 96-45, 02-6,
    97-21, Notice of Proposed Rulemaking and Further Notice of Proposed
    Rulemaking, 20 FCC Rcd 11308 (2005) (*Comprehensive Review*).