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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**NOTICE OF PROPOSED RULEMAKING**

**Adopted: July 25, 2008 Released: July 31, 2008**

**Comment Date: (30 days after publication in the Federal Register)**

**Reply Comment Date: (45 days after publication in the Federal
Register)**

By the Commission:

# introduction

1.  In this Notice of Proposed Rulemaking (NPRM), we seek comment on
    whether certain services should be designated as eligible for
    funding under the schools and libraries universal service support
    mechanism, also known as the E-rate program. We seek comment on
    whether, beginning in Funding Year 2009, the Eligible Services List
    (ESL) should include filtering software, a broader classification of
    basic telephone service, dark fiber, text messaging, firewall
    service, anti-virus/anti-spam software, scheduling services,
    telephone broadcast messaging, and certain wireless Internet access
    applications.[^1] In addition, we seek comment on whether to retain
    interconnected Voice over Internet Protocol (interconnected VoIP) as
    an eligible service for future funding years.[^2] During the
    pleading cycles established for the Funding Years 2007 and 2008
    ESLs, numerous parties commented on the need to make these services
    eligible for E-rate program discounts.[^3] We now seek comment on
    whether these services may be supported and whether support for
    these services will encourage access to advanced telecommunications
    and information services for public and non-profit elementary and
    secondary school classrooms and libraries.[^4]

# background

2.  Under the E-rate program, eligible schools, libraries, and consortia
    that include eligible schools and libraries may receive discounts
    for eligible telecommunications services, Internet access, and
    internal connections.[^5] Section 254 of the Communications Act of
    1934, as amended (the Act), gives the Commission the authority to
    designate "telecommunications services" and certain additional
    services eligible for support under the E-rate program.[^6] The
    Commission has also determined that it has the authority to
    designate services eligible for schools and libraries support as
    part of its authority to enhance, to the extent technically feasible
    and economically reasonable, access to advanced telecommunications
    and information services for all public and non-profit elementary
    and secondary school classrooms and libraries.[^7]

3.  Since the initial implementation of the E-rate program in 1998, the
    Universal Service Administrative Company (USAC) has developed
    various procedures and guidelines, consistent with the Commission's
    rules and requirements, for applicants to ensure that funding is
    provided only for eligible services.[^8] Initially, the Commission
    directed USAC, in consultation with the Commission, to determine
    whether particular services fell within the eligibility criteria
    established under the 1996 Act and the Commission's rules and
    policies.[^9] Applicants or service providers could appeal to the
    Commission a determination by USAC that a given service was
    ineligible for discounts only after a requested service was
    rejected.[^10]

4.  USAC began to update, on an annual basis, and to post to its
    website, a list of services eligible for funding.[^11] In
    consultation with the Wireline Competition Bureau, USAC updated the
    ESL to reflect any changes in rules that had occurred during the
    previous year and to address issues that arose in the application
    review process. The ESL indicates whether specific products or
    services are eligible to receive discounts under the E-rate
    program.[^12] The ESL is divided into several categories --
    telecommunications service, Internet access, internal connections,
    basic maintenance of internal connections, and miscellaneous.

5.  On December 23, 2003, the Commission adopted section 54.522 of its
    rules, formalizing the process for updating the ESL for the E-rate
    program.[^13] Specifically, section 54.522 requires the Commission
    to seek comment on USAC's proposed ESL and to issue a Public Notice
    attaching the final ESL for the upcoming funding year at least 60
    days prior to the opening of the funding window for the E-rate
    program.[^14] This process was adopted to provide greater
    transparency to the development of the ESL, simplify program
    administration, and facilitate the ability of both vendors and
    applicants to determine what services are eligible for
    discounts.[^15] It also provides applicants and service providers an
    opportunity to bring to the Commission's attention areas of
    ambiguity in the application of program rules in a rapidly changing
    marketplace.[^16]

6.  Pursuant to the Commission's rules, the Commission released Public
    Notices seeking comment on USAC's proposed ESL for Funding Years
    2007 and 2008.[^17] The final 2007 and 2008 ESLs and accompanying
    Public Notices were released on October 19, 2006 and October 19,
    2007, respectively.[^18] To facilitate the application processes for
    Funding Years 2007 and 2008, we authorized USAC to open the annual
    application filing windows in November and waived, on our own
    motion, section 54.522 of the Commission's rules requiring
    publication of the ESL at least 60 days prior to the commencement of
    the filing windows.[^19]  We concluded that this action would
    facilitate the application process for E-rate beneficiaries applying
    for monies.[^20] In revising the 2007 and 2008 ESLs, we noted that
    the proceedings were limited to determining what services are
    eligible under the Commission's current rules and were not intended
    to be a vehicle for changing eligibility rules.[^21] Therefore, we
    indicated that those comments not addressed in the ESLs may be more
    appropriately filed for the Commission's consideration in the
    general docket for the E-rate program.[^22]

# Discussion

7.  In this NPRM, we seek comment on a number of issues raised by the
    commenters that may not have been addressed as part of the ESL
    process for 2008 or prior years. Specifically, we seek comment on
    whether to include interconnected VoIP service, filtering, dark
    fiber, and other services in the ESL, in future funding years. We
    also seek comment on which rules, if any, would need to be amended
    to effectuate any changes made as a result of this NPRM. For
    instance, sections 54.502 and 54.503 describe services that can be
    provided by telecommunications carriers while section 54.517
    describes what services can be provided by non-telecommunications
    carriers. Should we reorganize or restructure the rules relating to
    the eligible services and the ESL to better inform applicants of
    which services are supported?

## Interconnected VoIP Service

8.  Interconnected VoIP service is defined as a service that: (1)
    enables real-time, two-way voice communications; (2) requires a
    broadband connection from the user's location; (3) requires Internet
    protocol-compatible customer premises equipment (CPE); and (4)
    permits users generally to receive calls that originate on the
    public switched telephone network and to terminate calls to the
    public switched telephone network.[^23]

9.  The Commission has addressed interconnected VoIP services in various
    contexts other than E-rate eligible services in recent years. For
    example, in May 2005, the Commission adopted the *VoIP 911 Order* in
    the *IP‑Enabled Services* proceeding.[^24] Declining to determine
    the statutory classification of interconnected VoIP services at that
    time, the Commission asserted its ancillary jurisdiction under Title
    I of the 1996 Act to require interconnected VoIP service providers
    to supply 911 emergency calling capabilities to their
    customers.[^25] Subsequently, in August 2005, the Commission found
    that the Communications Assistance for Law Enforcement Act (CALEA)
    applies to providers of interconnected VoIP service.[^26]

10. In June 2006, the Commission established universal service
    obligations for providers of interconnected VoIP service.[^27] The
    Commission required providers of interconnected VoIP services to
    contribute to the Universal Service Fund (USF) on an interim basis
    in order to sustain the USF.[^28] Again, the Commission did not
    classify interconnected VoIP service as either a telecommunications
    service or an information service.[^29] It did, however, for
    purposes of finding permissive authority under section 254(d) of the
    Act, find that interconnected VoIP providers are providers of
    interstate telecommunications.[^30] In 2007, the Commission also
    extended local number portability obligations to interconnected VoIP
    providers and extended the disability access requirements that
    currently apply to telecommunications service providers and
    equipment manufacturers to interconnected VoIP providers.[^31]

11. Consistent with these recent Commission actions, interconnected VoIP
    service was included as an eligible service in the 2007 and 2008
    ESLs.[^32] The Commission has not yet determined if interconnected
    VoIP services are telecommunications services or information
    services. Consequently, the 2007 and 2008 ESLs listed interconnected
    VoIP services under the "Miscellaneous" category.[^33] In completing
    their applications, applicants are permitted to seek support for
    interconnected VoIP service as an Internet access service.

12. We now find it appropriate to address the issue of the inclusion of
    interconnected VoIP service in future funding years in the universal
    service program in the E-rate context. As established by section
    254(c)(3) of the Act, the Commission may designate additional
    services for universal service support.[^34] Furthermore, the Act
    also authorizes the Commission to establish competitively neutral
    rules to enhance access to advanced telecommunications and
    information services.[^35] We tentatively conclude that
    interconnected VoIP service should be designated as a supported
    service for the E-rate program. In the *2006 Interim Contribution
    Methodology Order*, the Commission required interconnected VoIP
    service providers to contribute to the USF.[^36] The policy of
    competitive neutrality would support a finding that providers of
    interconnected VoIP services should also be able to participate in
    the universal service E-rate program and, consequently, that
    interconnected VoIP service be included in the ESL.[^37] We also
    agree with commenters that the inclusion of interconnected VoIP
    service as an eligible service enhances the options available to
    schools and libraries to effectuate meaningful communications among
    parents, teachers, and school and library administrators.[^38]
    Further, as the Commission also noted in the *2006 Interim
    Contribution Methodology Order*, the use of and revenue from
    interconnected VoIP services has grown dramatically in recent
    years.[^39] The number of interconnected VoIP service subscribers
    grew from about 150,000 at the end of 2003 to 4.2 million at the end
    of 2005.[^40] Thus, we believe that schools and libraries could
    benefit from the same cost efficiencies and service features that
    have led many consumers to choose this technology. Moreover, because
    interconnected VoIP components are eligible under the E-rate program
    as Internal Connections components, schools and libraries might
    realize cost savings in using interconnected VoIP both for internal
    connections and external communications, were interconnected VoIP
    service designated an eligible service.

13. We tentatively conclude that it is administratively and
    operationally appropriate for interconnected VoIP service requests
    to be processed as a Priority 1 service.[^41] We seek comment on
    this tentative conclusion. If interconnected VoIP service is deemed
    an eligible service, we also seek comment on how USAC would
    implement this tentative conclusion. For example, is it appropriate
    for applicants to label interconnected VoIP service as an Internet
    access service when applying for E-rate program funding? If so,
    should we require applicants requesting funding for interconnected
    VoIP services to certify to Children's Internet Protection Act
    (CIPA) requirements? [^42] All schools and libraries seeking funding
    for Internet access or internal connections under the E-rate program
    must have technology that blocks or filters Internet access to
    obscenity, pornography, and material deemed harmful to minors under
    the CIPA.[^43] Applicants seeking funding only for
    telecommunications services do not have to comply with CIPA.[^44]
    Should we require applicants requesting funding for interconnected
    VoIP services to comply with CIPA if the applicant does not also
    receive E-rate funds for Internet access, Internet service, or
    internal connections?[^45] As noted earlier, the 2008 ESL identifies
    interconnected VoIP service under the miscellaneous category.[^46]
    As the Commission explained in the *VoIP 911 Order*, customers who
    purchase interconnected VoIP service receive a service that "enables
    a customer to do everything (or nearly everything) the customer
    could do using an analog telephone."[^47] We therefore seek comment
    on whether "Miscellaneous" is the appropriate category for
    interconnected VoIP services or if another category would be more
    appropriate. If a commenter believes that another category is more
    appropriate, we ask that the commenter identify the appropriate
    category and explain why such category is more appropriate. Finally,
    we seek comment on the effect, if any, that the removal of
    interconnected VoIP service from the 2009 ESL would have on the
    E-rate program or upon applicants that rely on this service.

## Filtering Software

14. We seek comment on whether stand-alone filtering software should be
    funded under the E-rate program. Filtering software protects users
    from inappropriate content by selectively blocking certain words or
    Internet sites.[^48] Currently, e-mail software or other eligible
    components that include content filtering as an integral component
    part are eligible, but a separately priced content filtering module
    or product is not eligible.[^49] In 2001, the Commission determined
    that CIPA prohibited the use of E-rate funding for filtering
    software.[^50] Section 1721(g) of CIPA states that funds from the
    Elementary and Secondary Act of 1965 or the Library Services and
    Technology Act may be used to purchase filtering technology
    necessary to meet the requirements of CIPA, but "\[n\]o other
    sources of funds for the purchase or acquisition of such measures
    are authorized by this title, or the amendments made by this
    title."[^51] The Commission interpreted this passage to mean that no
    sources of funds other than that those explicitly listed in CIPA,
    which did not include E-rate program funds, could be used for the
    purchase of filtering software to comply with CIPA.[^52]

15. We seek comment on the Commission's prior interpretation of section
    1721(g) of CIPA and whether it should be reconsidered. Specifically,
    parties are asked to comment on whether this provision explicitly
    prohibits E-rate program funding from being used for filtering
    software or whether the statute can be interpreted so that the
    Commission is not precluded from funding filtering software through
    the E-rate program. Parties should also comment on the legislative
    history of CIPA. For instance, the Senate Report on CIPA legislation
    envisioned that universal service subsidies could be used to cover
    the cost of the software or technology necessary to comply with the
    bill's requirements.[^53] Additionally, we seek comment on whether
    other sources of federal funding are not sufficient. We also seek
    comment on whether schools and libraries have an additional need for
    subsidized filtering services because Congress requires content
    filtering for the receipt of E-rate funding.[^54] Under the language
    in the ESL, applicants must determine whether filtering is performed
    as an ancillary function for an already-eligible function, or
    whether it is distinct content filtering software.[^55] We further
    seek comment on whether making filtering eligible may help
    streamline the application review process by reducing the
    administrative effort and costs associated with determining whether
    a school or library is seeking E-rate funding for costs associated
    with stand-alone filtering services. We also seek comment on whether
    classifying stand-alone filtering services as eligible for E-rate
    support would also reduce confusion for applicants.[^56]

## Basic Telephone Service

16. We seek comment on whether the definition of "basic" telephone
    service should be expanded to include additional services under the
    E-rate program. The Commission requires participating schools and
    libraries to base their requests for discounts on an approved
    technology plan,[^57] unless they are seeking discounts on "basic
    local, cellular, PCS, and/or long distance telephone service and/or
    voicemail only."[^58] The purpose of technology plans is to ensure
    that applicants make appropriate decisions regarding the services
    for which they seek discounts.[^59] In the 2008 ESL, the Commission
    classified Centrex service as "basic" telephone service for purposes
    of the E-rate program with the intention of eliminating the
    requirement that applicants file a technology plan for Centrex
    service.[^60] We now seek comment on whether the classification of
    basic telephone service should extend beyond Centrex service to
    include other services, such as a Private Branch eXchange (PBX), key
    systems, T1 lines, and interconnected VoIP and Primary Rate
    Interface (PRI) trunk lines connecting a PBX to the Public Switched
    Telephone Network (PSTN), for purposes of also exempting these
    services from the technology plan requirement.[^61] One commenter
    specifically notes that "basic" telephone service should include T1
    lines since broadband is a basic requirement for cost-effective
    telecommunications services.[^62] As indicated above, the purpose of
    technology plans is to ensure that applicants make appropriate
    decisions regarding the services for which they seek discounts.
    Therefore, we seek comment on whether applicants will continue to
    sufficiently align their funding requests with their service needs
    if we classify these services as "basic" telephone service for
    purposes of eliminating the technology plan requirement. Further,
    the Commission has classified PBX and key systems, like most
    on-premises equipment, as Priority 2 internal connections and not as
    Priority 1 telecommunications services.[^63] We seek comment on
    whether it is appropriate to expand the definition to classify
    certain Priority 2 services as "basic" telephone service, a Priority
    1 service.[^64] Accordingly, commenters should discuss how any
    changes to the definition of "basic" telephone service to include
    certain Priority 2 services affect the Commission's determination
    that facilities located on an applicant's premises are presumed to
    be Priority 2 internal connections.[^65]

## Dark Fiber

17. We seek comment on whether unlit (dark) fiber should be eligible for
    discounts under the E-rate program.[^66] Dark fiber was
    conditionally eligible for E-rate discounts prior to Funding Year
    2004.[^67] In the *Schools and Libraries* *Third Report and Order*,
    released in 2003, however, the Commission found that dark fiber was
    not eligible for discounts and sought comment on whether dark fiber
    should be funded under the E-rate program.[^68] We now incorporate
    that record into this proceeding and ask commenters to refresh the
    record on whether dark fiber should be included as an eligible
    service. While the statutory classification of dark fiber remains an
    open issue, we note that if dark fiber were eligible for E-rate
    discounts, the service could be supported under the Act as an
    "additional" service,[^69] rather than as a "telecommunications
    service."[^70] As such, we seek comment on whether dark fiber should
    be classified under the miscellaneous category or some other
    category of service. We also seek comment on technological or other
    changes that have occurred since we last sought comment on this
    issue in 2003. Commenters should address whether these changes alter
    the Commission's prior conclusion that only a functioning (lit)
    fiber optic service provided by a telecommunications service
    provider or Internet access provider should be eligible for E-rate
    support. We also seek comment on whether we should permit funding
    for dark fiber, pursuant to section 254(h), to provide additional
    flexibility to applicants in meeting their communications
    needs.[^71] Further, we seek comment on whether, if we decide to
    permit funding of dark fiber, any limitations should be adopted to
    preclude discounts on the full cost of dark fiber network buildout
    when the applicant will not be utilizing the full capacity of that
    network.

## Other Services

18. We seek comment on whether several individual services---text
    messaging, firewall, anti-virus/anti-spam software, scheduling
    services and telephone broadcast messaging---should be eligible for
    the E-rate program under section 254(c)(3) of the Act.[^72] We seek
    comment on whether funding these services through E-rate will
    encourage access to advanced telecommunications and information
    services for public and non-profit elementary and secondary school
    classrooms and libraries.[^73] We also seek comment on how schools
    and libraries would use these services and whether the use would be
    for "educational purposes," as required by our rules.[^74] For the
    services discussed in this section, we seek comment on how each
    service, if it is added to the ESL, should be categorized.[^75]
    Specifically, commenters should indicate whether the service should
    be categorized as a telecommunications service, Internet access
    service, and/or listed in the miscellaneous category. Should we
    require applicants requesting funding for the services discussed in
    this section to certify to CIPA requirements? [^76] As discussed
    above, we note that all schools and libraries seeking funding for
    Internet access or internal connections under the E-rate program
    must have technology that blocks or filters Internet access to
    obscenity, pornography, and material deemed harmful to minors under
    the CIPA.[^77] Applicants seeking funding only for
    telecommunications services do not have to comply with CIPA.[^78]
    Should we require applicants requesting funding for the services
    discussed in this section to comply with CIPA if the applicant does
    not also receive E-rate funds for Internet access, Internet service,
    or internal connections?[^79]

19. *Text Messaging.* We seek comment on whether text messaging should
    be an eligible service. Text messaging, known as short message
    service or SMS, is a service that allows short messages, typically
    up to 160 characters, to be sent to and from handheld wireless
    devices.[^80] For example, text messaging service could be used to
    provide parental notification services and systems, which can be a
    valuable tool for reaching out to the community in the event of an
    emergency. Several parties have argued that the ineligibility of
    text messaging is inconsistent with the treatment of other eligible
    messaging services, and that this inconsistency creates difficulty
    for USAC in assessing eligibility and confusion for E-rate
    applicants, who may consider these services as functionally
    equivalent.[^81] For example, while text messaging has not been
    included in the ESL, e-mail and paging, two services that also
    transmit alphanumeric messages electronically between users, are
    eligible for E-rate support.[^82] Thus, we specifically seek comment
    on the extent to which SMS is functionally equivalent to e-mail and
    paging and how the current eligibility of these two messaging
    services should affect our treatment of text messaging as an
    eligible service. Because text messaging is often bundled with other
    eligible telecommunications services, we seek comment on whether
    including text messaging as an eligible service would reduce the
    burden and administrative costs for applicants, service providers
    and USAC.[^83]

20. *Firewall.* We seek comment on whether separately priced firewall
    services should be eligible under the E-rate program, as recommended
    by a number of commenters.[^84] Firewall service is described as "a
    hardware and software combination that sits at the boundary between
    an organization's network and the outside world, and protects the
    network against unauthorized access or intrusions."[^85] In the 2007
    ESL, the Commission clarified that only basic firewall services that
    are provided as a standard component of a vendor's Internet access
    service are eligible for E-rate program discounts.[^86] Commenters
    have contended that the eligibility of firewall service is now
    ambiguous and confusing.[^87] For example, one commenter noted that
    the current definition of firewall service is vague and does not
    define what constitutes "basic" firewall protection.[^88] We seek
    comment on whether a new definition of eligible firewall services
    should be adopted and whether it should include such technology as
    intrusion prevention devices, network access control, firewall
    traversal, and deep packet inspection devices.[^89] Commenters
    should also identify any technologies other than these that should
    be considered for funding. We ask commenters to provide a proposed
    definition and to explain why such definition is appropriate.

21. *Anti-Virus/Anti-Spam Software*. We seek comment on whether we
    should extend E-rate program eligibility to anti-virus and anti-spam
    software. Currently, only network operating system software and
    server-based e-mail and voice mail software are eligible for E-rate
    funds.[^90] Software that protects computer components from viruses
    and spam e-mails is ineligible for E-rate support.[^91] Commenters
    note that anti-virus software is now required for the reliable
    delivery of data and that anti-spam measures are necessary for the
    effective distribution of e-mail.[^92] Thus, we seek comment on
    whether the increased prevalence of viruses and spam justify
    including as an eligible service software that protects equipment at
    schools and libraries from these threats.

22. *Scheduling Services.* We seek comment on whether to allow
    scheduling services to be eligible for E-rate support. Scheduling
    software allows schools and libraries more efficiently to use video
    teleconferencing for distance learning by controlling the video
    linkage between the classrooms and the originating video feed,
    sometimes coordinating between hundreds of locations.[^93]
    Scheduling services were explicitly made ineligible in Funding Year
    2006.[^94] Many commenters, however, have noted that scheduling
    software is a necessary component of distance learning,[^95] which
    is eligible as a digital transmission service in the
    telecommunications services category.[^96] Thus, we seek comment on
    whether video and voice conferencing services, which are eligible
    services, require scheduling software as an essential component of
    the services. We seek comment on how scheduling software is similar
    or different from other telecommunications components that are
    eligible.

23. *Telephone Broadcast Messaging.* We seek comment on whether
    telephone broadcast messaging should be eligible for E-rate support.
    Telephone broadcast messaging allows pre-recorded messages to be
    sent over phone lines to individuals concerning school delays or
    closures, reported absences, upcoming activities and events, and
    emergencies.[^97] For example, telephone broadcast messaging service
    could be used to provide parental notification services and systems,
    which can be a valuable tool for reaching out to the community in
    the event of an emergency. We seek comment on a proposal to include
    broadcast telephone messaging in the ESL.[^98] We note that
    broadcast telephone messaging is not a component part of telephone
    service and is not a "custom calling feature" or other service
    component typically associated with an eligible telecommunications
    service. We thus ask commenters to address how this may affect our
    analysis in considering broadcast telephone messaging as eligible
    for E-rate support.

24. *Wireless Internet Access Applications*. We seek comment on whether
    certain wireless Internet access applications should be eligible for
    E-rate support. Currently, wireless Internet access service that is
    used for an educational purpose is eligible in the same manner that
    wired Internet access is eligible.[^99] The Commission has
    determined that, to qualify as an educational purpose under the
    E-rate program, an activity must be integral, immediate, and
    proximate to the education of students in the case of schools, or
    integral, immediate, and proximate to the provision of library
    services to library patrons in the case of libraries.[^100]
    Activities that occur on library or school property are presumed to
    be integral, immediate, and proximate to the education of students
    or the provision of library services to patrons.[^101] Although the
    Commission has previously found that wireless services used on
    library or classroom property are presumed to be eligible, we seek
    comment on various technologies that are used away from the library
    or school property.[^102] Specifically, commenters note that
    wireless Internet access services can now be used on school buses to
    transmit information about emergencies or disturbances, track
    students entering or leaving buses with electronic radio frequency
    identification (RFID) cards, and locate buses with GPS technology
    that identifies and transmits the location of each bus.[^103]
    Additionally, commenters assert that wireless Internet access
    technology, via handsets, can allow school officials to make crime
    database queries, receive weather alerts, and coordinate emergency
    management planning with police and fire departments.[^104] The
    Commission has previously held that a bus driver's use of wireless
    telecommunications services while delivering students to and from
    school is considered an educational purpose.[^105] We thus seek
    comment on whether these wireless Internet access applications
    indicated above or similar services offered off-premises serve an
    "educational purpose" as defined by the Commission.[^106] Commenters
    should discuss how these wireless Internet access applications are
    similar or different from other currently eligible services which
    are used off-site for educational purposes.

# PROCEDURAL MATTERS

## Initial Regulatory Flexibility Analysis 

25. As required by the Regulatory Flexibility Act of 1980, as
    amended,[^107] the Commission has prepared an Initial Regulatory
    Flexibility Analysis (IRFA) for this NPRM, of the possible
    significant economic impact on a substantial number of small
    entities by the policies and rules proposed in this NPRM. The IRFA
    is in Appendix B. Written public comments are requested on this
    IRFA. Comments must be identified as responses to the IRFA and must
    be filed by the deadlines for comments on the Notice. The Commission
    will send a copy of the Notice, including this IRFA, to the Chief
    Counsel for Advocacy of the Small Business Administration.[^108] In
    addition, the Notice and IRFA (or summaries thereof) will be
    published in the Federal Register.[^109]

## Paperwork Reduction Act Analysis

26. This document does not contain proposed information collection(s)
    subject to the Paperwork Reduction Act of 1995 (PRA), Public Law
    104-13. In addition, therefore, it does not contain any new or
    modified "information collection burden for small business concerns
    with fewer than 25 employees," pursuant to the Small Business
    Paperwork Relief Act of 2002, Public Law 107-198, see 44 U.S.C.
    3506(c)(4).

## *Ex Parte* Presentations

27. These matters shall be treated as a "permit-but-disclose" proceeding
    in accordance with the Commission's *ex parte* rules.[^110] Persons
    making oral *ex parte* presentations are reminded that memoranda
    summarizing the presentations must contain summaries of the
    substance of the presentations and not merely a listing of the
    subjects discussed. More than a one or two sentence description of
    the views and arguments presented is generally required.[^111] Other
    requirements pertaining to oral and written presentations are set
    forth in section 1.1206(b) of the Commission's rules.[^112]

## Comment Filing Procedures

28. We invite comment on the issues and questions set forth in the NPRM
    and IRFA contained herein. Pursuant to sections 1.415 and 1.419 of
    the Commission's rules,[^113] interested parties may file comments
    on this NPRM within 30 days after publication in the Federal
    Register and may file reply comments within 45 days after
    publication in the Federal Register. **All filings related to this
    NPRM shall refer to CC Docket No. 02-6.**

Comments may be filed using: (1) the Commission's Electronic Comment
Filing System (ECFS), (2) the Federal Government's eRulemaking Portal,
or (3) by filing paper copies. *See Electronic Filing of Documents in
Rulemaking Proceedings*, 63 FR 24121 (1998).

-   Electronic Filers: Comments may be filed electronically using the
    Internet by accessing the ECFS: <http://www.fcc.gov/cgb/ecfs/> or
    the Federal eRulemaking Portal:
    [http://www.regulations.gov](http://www.regulations.gov/). Filers
    should follow the instructions provided on the website for
    submitting comments.

    -   For ECFS filers, if multiple docket or rulemaking numbers appear
        in the caption of this proceeding, filers must transmit one
        electronic copy of the comments for each docket or rulemaking
        number referenced in the caption. In completing the transmittal
        screen, filers should include their full name, U.S. Postal
        Service mailing address, and the applicable docket or rulemaking
        number. Parties may also submit an electronic comment by
        Internet e-mail. To get filing instructions, filers should send
        an e-mail to <ecfs@fcc.gov>, and include the following words in
        the body of the message, "get form." A sample form and
        directions will be sent in response.

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-   Paper Filers: Parties who choose to file by paper must file an
    original and four copies of each filing. If more than one docket or
    rulemaking number appears in the caption of this proceeding, filers
    must submit two additional copies for each additional docket or
    rulemaking number.

> Filings can be sent by hand or messenger delivery, by commercial
> overnight courier, or by first-class or overnight U.S. Postal Service
> mail (although we continue to experience delays in receiving U.S.
> Postal Service mail). All filings must be addressed to the
> Commission's Secretary, Office of the Secretary, Federal
> Communications Commission.

-   The Commission's contractor will receive hand-delivered or
    messenger-delivered paper filings for the Commission's Secretary at
    236 Massachusetts Avenue, NE, Suite 110, Washington, DC 20002. The
    filing hours at this location are 8:00 a.m. to 7:00 p.m. All hand
    deliveries must be held together with rubber bands or fasteners. Any
    envelopes must be disposed of [before]{.underline} entering the
    building.

-   Commercial overnight mail (other than U.S. Postal Service Express
    Mail and Priority Mail) must be sent to 9300 East Hampton Drive,
    Capitol Heights, MD 20743.

-   U.S. Postal Service first-class, Express, and Priority mail must be
    addressed to 445 12^th^ Street, SW, Washington DC 20554.

People with Disabilities: To request materials in accessible formats for
people with disabilities (braille, large print, electronic files, audio
format), send an e-mail to <fcc504@fcc.gov> or call the Consumer &
Governmental Affairs Bureau at 202-418-0530 (voice), 202-418-0432 (tty).

29. Parties must also send a courtesy copy of their filing to Antoinette
    Stevens, Telecommunications Access Policy Division, Wireline
    Competition Bureau, Federal Communications Commission, 445 12^th^
    Street, S.W., Room 5-B540, Washington, D.C. 20554. Antoinette
    Stevens's e-mail address is Antoinette.Stevens@fcc.gov and telephone
    number is (202) 418-7387.

30. Filings and comments are also available for public inspection and
    copying during regular business hours at the FCC Reference
    Information Center, Portals II, 445 12th Street, S.W., Room CY-A257,
    Washington, D.C., 20554. Copies may also be purchased from the
    Commission's duplicating contractor, BCPI, 445 12th Street, S.W.,
    Room CY-B402, Washington, D.C. 20554. Customers may contact BCPI
    through its website: [www.bcpiweb.com](http://www.bcpiweb.com/), by
    e-mail at <fcc@bcpiweb.com>, by telephone at (202) 488-5300 or (800)
    378-3160, or by facsimile at (202) 488-5563.

31. Comments and reply comments must include a short and concise summary
    of the substantive arguments raised in the pleading. Comments and
    reply comments must also comply with section 1.49 and all other
    applicable sections of the Commission's rules.[^114] We direct all
    interested parties to include the name of the filing party and the
    date of the filing on each page of their comments and reply
    comments. All parties are encouraged to utilize a table of contents,
    regardless of the length of their submission. We also strongly
    encourage parties to track the organization set forth in the NPRM in
    order to facilitate our internal review process.

32. For further information, contact Gina Spade at (202) 418-7105, or
    James Bachtell at (202) 418-2694 in the Telecommunications Access
    Policy Division, Wireline Competition Bureau.

# Ordering Clauses

33. Accordingly, IT IS ORDERED that, pursuant to the authority contained
    in sections 1 through 4, 201-205, 254, 303(r), and 403 of the
    Communications Act of 1934, as amended by the Telecommunications Act
    of 1996, 47 U.S.C. §§ 151 through 154, 201 through 205, 254, 303(r),
    and 403, and section, this Notice of Proposed Rulemaking IS ADOPTED.

34. IT IS FURTHER ORDERED that the Commission's Consumer and
    Governmental Affairs Bureau, Reference Information Center, SHALL
    SEND a copy of this Notice of Proposed Rulemaking, including the
    Initial Regulatory Flexibility Analysis, to the Chief Counsel for
    Advocacy of the Small Business Administration.

    FEDERAL COMMUNICATIONS COMMISSION

    Marlene H. Dortch

    Secretary

    **APPENDIX A**

    **List of Commenters**

    Parties Filing Comments in Response to the July 2006 Public Notice

    Commenters

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1.  Arkansas Department of Information Systems & Arkansas Department of
    Education

2.  Avaya, Inc.

3.  ComputerLand Network Technologies of East Texas

4.  Council of the Great City Schools

5.  Embarq Corporation

6.  E-Rate Service Provider Forum

7.  Funds for Learning

8.  General Communication, Inc.

9.  IBM Global Services

10. Iowa Department of Education

11. Leib Lurie

12. North Carolina Public Schools

13. Nsight Telservices

14. On-Tech Consulting, Inc.

15. Sprint Nextel Corporation

16. SECA

17. Tandberg

18. Tropos Networks

19. Wisconsin Department of Administration & Wisconsin Department of
    Public Instruction

    Reply Commenters

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1.  Alaska Department of Education and Early Development/Alaska State
    Library

2.  AT&T, Inc.

3.  Greg Weisiger

4.  Kellogg & Sovereign Consulting, LLC

5.  North Carolina Department of Public Instruction/North Carolina
    Office of Information Technology Services

6.  NTI Group, Inc.

7.  Salina-Spavinaw Telephone Company

8.  SECA

9.  Wisconsin Department of Public Instruction

    Parties Filing Comments in Response to the July 2007 Public Notice

    Commenters

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1.  Computer Consulting & Network Design, Inc.

2.  eDimension Consulting

3.  Embarq Corporation

4.  E-Rate Central

5.  eRate Consulting Services LLC

6.  E-rate Service Providers Association

7.  First Communications, LLC

8.  Funds for Learning, LLC

9.  Kellogg & Sovereign Consulting, LLC

10. LiveAir Networks

11. Los Angeles Unified School District

12. New York City Department of Education

13. On-Tech Consulting, Inc.

14. South Carolina Budget and Control Board

15. Sprint Nextel Corporation

16. SECA

17. Wisconsin Department of Public Instruction

    Reply Commenters

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1.  Cleveland Metropolitan School District

2.  Kellogg & Sovereign Consulting, LLC

3.  On-Tech Consulting, Inc.

4.  Verizon Wireless

    **APPENDIX B**

    **Initial Regulatory Flexibility Analysis**

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35. As required by the Regulatory Flexibility Act (RFA),[^115] the
    Commission has prepared this Initial Regulatory Flexibility Analysis
    (IRFA) of the possible significant economic impact on small entities
    by the policies and rules proposed in the NPRM. Written public
    comments are requested on this IRFA. Comments must be identified as
    responses to the IRFA and must be filed by the deadlines for
    comments on the NPRM provided below in Section B. The Commission
    will send a copy of the NPRM, including this IRFA, to the Chief
    Counsel for Advocacy of the Small Business Administration
    (SBA).[^116] In addition, the NPRM and IRFA (or summaries thereof)
    will be published in the Federal Register.[^117]

### Need for, and Objectives of, the Proposed Rules

36. The Commission is required by section 254 of the Act to promulgate
    rules to implement the universal service provisions of section 254.
    On May 8, 1997, the Commission adopted rules to reform its system of
    universal service support mechanisms so that universal service is
    preserved and advanced as markets move toward competition.[^118]
    Specifically, 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 receive discounts for eligible telecommunications
    services, Internet access, and internal connections.[^119] Since the
    initial implementation of the E-rate program, USAC has developed
    various procedures and guidelines, consistent with the Commission's
    rules and requirements, for applicants to ensure that funding is
    provided only for eligible services.[^120]

37. Pursuant to the Commission's rules, the Commission released Public
    Notices seeking comment on USAC's proposed ESL for Funding Years
    2007 and 2008.[^121] The ESL indicates whether specific products or
    services may be able to receive discounts under the E-rate
    program.[^122] The final 2007 and 2008 ESLs and accompanying Public
    Notices were released on October 19, 2006 and October 19, 2007,
    respectively.[^123] In revising the 2007 and 2008 ESLs, we noted
    that the proceedings were limited to determining what services are
    eligible under the Commission's current rules and were not intended
    to be a vehicle for changing eligibility rules.[^124] Therefore, we
    indicated that those comments not addressed in the ESLs may be more
    appropriately filed for the Commission's consideration in the
    general docket for the E-rate program.[^125] In this NPRM, we seek
    comment on the eligibility of certain services under the E-rate
    program raised by the commenters that may not have been addressed as
    part of the 2008 or prior ESLs. Specifically, we seek comment on
    whether to include filtering software, an expanded classification of
    basic telephone service, dark fiber, text messaging, firewall
    service, anti-virus/anti-spam software, scheduling services,
    telephone broadcast messaging, and certain wireless Internet access
    applications in the ESL beginning in Funding Year 2009. We also seek
    comment on whether to retain interconnected Voice over Internet
    Protocol (interconnected VoIP) as an eligible service for future
    funding years.

### Legal Basis

38. The legal basis for this NPRM is contained in sections 1 through 4,
    201 through 205, 254, 303(r), and 403 of the Communications Act of
    1934, as amended by the Telecommunications Act of 1996, 47 U.S.C. §§
    151 through 154, 201 through 205, 254, 303(r), and 403, and section
    1.411 of the Commission's rules, 47 C.F.R. § 1.411.

### Description and Estimate of the Number of Small Entities to Which Rules Will Apply

39. The RFA directs agencies to provide a description of and, where
    feasible, an estimate of the number of small entities that may be
    affected by the proposed rules, if adopted.[^126] The RFA generally
    defines the term "small entity" as having the same meaning as the
    terms "small business," "small organization," and "small
    governmental jurisdiction."[^127] In addition, the term "small
    business" has the same meaning as the term "small business concern"
    under the Small Business Act.[^128] A small business concern is one
    that: (1) is independently owned and operated; (2) is not dominant
    in its field of operation; and (3) satisfies any additional criteria
    established by the SBA.[^129] Nationwide, there are a total of
    approximately 22.4 million small businesses, according to SBA
    data.[^130] A small organization is generally "any not-for-profit
    enterprise which is independently owned and operated and is not
    dominant in its field."[^131] Nationwide, as of 2002, there were
    approximately 1.6 million small organizations.[^132] "Small
    governmental jurisdiction"[^133] generally means "governments of
    cities, counties, towns, townships, villages, school districts, or
    special districts, with a population of less than 50,000."[^134]
    Census Bureau data for 2002 indicate that there were 87,525 local
    governmental jurisdictions in the United States.[^135] We estimate
    that, of this total, 84,377 entities were "small governmental
    jurisdictions."[^136] Thus, we estimate that most governmental
    jurisdictions are small.

40. Small entities potentially affected by the proposals herein include
    eligible schools and libraries and the eligible service providers
    offering them discounted services, including telecommunications
    service providers, Internet Service Providers (ISPs), and vendors of
    the services and equipment used for internal connections.[^137]

#### Schools and Libraries

41. Under the E-rate program, which provides universal service support
    for elementary and secondary schools and libraries, an elementary
    school is "a non-profit institutional day or residential school that
    provides elementary education, as determined under state law."[^138]
    A secondary school is defined as "a non-profit institutional day or
    residential school that provides secondary education, as determined
    under state law," and not offering education beyond grade 12.[^139]
    For-profit schools and libraries, and schools and libraries with
    endowments in excess of \$50 million are not eligible to receive
    discounts under the program, nor are libraries whose budgets are not
    completely separate from any schools.[^140] Certain other statutory
    definitions apply as well.[^141] The SBA has defined as small
    entities elementary and secondary schools and libraries having \$6.5
    million or less in annual receipts.[^142] In funding year 2005 (July
    1, 2005 to June 30, 2006) approximately 15,050 school districts,
    6,547 individual schools, 3,641 library and library consortiums, and
    449 school and library consortiums received funding under the E-rate
    program.[^143] Although we are unable to estimate with precision the
    number of these entities that would qualify as small entities under
    SBA's definition, we estimate that fewer than 15,050 school
    districts, 6,547 individual schools, 3,641 library and library
    consortiums, and 449 school and library consortiums would be
    affected annually by the rules proposed in this NPRM, under current
    operation of the program.

#### Telecommunications Service Providers

42. *Incumbent Local Exchange Carriers (LECs).* Neither the Commission
    nor the SBA has developed a size standard for small incumbent local
    exchange services. The closest size standard under SBA rules is for
    Wired Telecommunications Carriers. Under that size standard, such a
    business is small if it has 1,500 or fewer employees.[^144]
    According to Commission data, 1,303 incumbent carriers reported that
    they were engaged in the provision of local exchange services.[^145]
    Of these 1,303 carriers, an estimated 1,020 have 1,500 or fewer
    employees and 283 have more than 1,500 employees. Consequently, the
    Commission estimates that most providers of incumbent local exchange
    service are small businesses that may be affected by the rules and
    policies adopted herein.

43. We have included small incumbent local exchange carriers in this RFA
    analysis. A "small business" under the RFA is one that, *inter
    alia*, meets the pertinent small business size standard (*e.g.*, a
    telephone communications business having 1,500 or fewer employees),
    and "is not dominant in its field of operation."[^146] The SBA's
    Office of Advocacy contends that, for RFA purposes, small incumbent
    local exchange carriers are not dominant in their field of operation
    because any such dominance is not "national" in scope.[^147] We have
    therefore included small incumbent carriers in this RFA analysis,
    although we emphasize that this RFA action has no effect on the
    Commission's analyses and determinations in other, non-RFA contexts.

44. *Interexchange Carriers*. Neither the Commission nor the SBA has
    developed a definition of small entities specifically applicable to
    providers of interexchange services (IXCs). The closest applicable
    definition under the SBA rules is for wired telecommunications
    carriers.[^148] This provides that a wired telecommunications
    carrier is a small entity if it employs no more than 1,500
    employees.[^149] According to the Commission's *2005 Trends Report*,
    316 companies reported that they were engaged in the provision of
    interexchange services.[^150] Of these 316 IXCs, an estimated 292
    have 1,500 or few employees and 24 have more than 1,500
    employees.[^151] Consequently, the Commission estimates that most
    providers of interexchange services are small businesses that may be
    affected by the rules and policies adopted herein.

45. *Competitive Access Providers*. Neither the Commission nor the SBA
    has developed a definition of small entities specifically applicable
    to competitive access services providers (CAPs). The closest
    applicable definition under the SBA rules is for wired
    telecommunications carriers.[^152] This provides that a wired
    telecommunications carrier is a small entity if it employs no more
    than 1,500 employees.[^153] According to the *2005* *Trends Report*,
    769 CAPs and competitive local exchange carriers (competitive LECs)
    reported that they were engaged in the provision of competitive
    local exchange services.[^154] Of these 769 CAPs and competitive
    LECs, an estimated 676 have 1,500 or few employees and 93 have more
    than 1,500 employees.[^155] Consequently, the Commission estimates
    that most providers of competitive exchange services are small
    businesses that may be affected by the rules and policies adopted
    herein.

46. *Cellular and Wireless Providers*. Neither the Commission nor the
    SBA has developed a definition of small entities specifically for
    wireless telephony. The closest definition is the SBA definition for
    cellular and other wireless telecommunications.[^156] Under this
    definition, a cellular licensee is a small entity if it employs no
    more than 1,500 employees.[^157] According to the *2005 Trends
    Report*, 437 providers classified themselves as providers of
    wireless telephony, including cellular telecommunications, Personal
    Communications Service, and Specialized Mobile Radio (SMR) Telephony
    Carriers.[^158] Of these 437 wireless telephony providers, an
    estimated 260 have 1,500 or few employees and 177 have more than
    1,500 employees.[^159] Consequently, the Commission estimates that
    more than half of the providers of wireless telephony services are
    small businesses that may be affected by the rules and policies
    adopted herein.

47. *Other Wireless Services*. Neither the Commission nor the SBA has
    developed a definition of small entities specifically applicable to
    wireless services other than wireless telephony.[^160] The closest
    applicable definition under the SBA rules is again that of cellular
    and other wireless telecommunications, under which a service
    provider is a small entity if it employs no more than 1,500
    employees.[^161] According to the *2005 Trends Report*, 33 providers
    classified themselves as wireless data carriers or other mobile
    service providers.[^162] Of these 33 providers, and estimated 32
    have 1,500 or few employees and 1 has more than 1,500
    employees.[^163] Consequently, the Commission estimates that most
    providers of wireless services other than wireless telephony are
    small businesses that may be affected by the rules and policies
    adopted herein.

48. *Private and Common Carrier Paging.* In the *Paging Third Report and
    Order*, we developed a small business size standard for "small
    businesses" and "very small businesses" for purposes of determining
    their eligibility for special provisions such as bidding credits and
    installment payments.[^164] A "small business" is an entity that,
    together with its affiliates and controlling principals, has average
    gross revenues not exceeding \$15 million for the preceding three
    years. Additionally, a "very small business" is an entity that,
    together with its affiliates and controlling principals, has average
    gross revenues that are not more than \$3 million for the preceding
    three years. An auction of Metropolitan Economic Area licenses
    commenced on February 24, 2000, and closed on March 2, 2000.[^165]
    Of the 985 licenses auctioned, 440 were sold. Fifty-seven companies
    claiming small business status won. At present, there are
    approximately 24,000 Private-Paging site-specific licenses and
    74,000 Common Carrier Paging licenses. According to Commission data,
    408 carriers reported that they were engaged in the provision of
    either paging and messaging services or other mobile services.[^166]
    Of those, the Commission estimates that 402 are small, under the SBA
    approved small business size standard.[^167]

#### Internet Service Providers

49. Under the category of Internet service provider, a small business is
    one having annual receipts of \$23 million or less.[^168] According
    to SBA's most recent data, there are a total of 2,829 firms with
    annual receipts of less than \$10 million, and an additional 111
    firms with annual receipts of \$10 million or more.[^169] Thus, the
    number of On-line Information Services firms that are small under
    the SBA's \$18 million size standard is between 2,829 and 2,940.
    Further, some of these Internet Service Providers (ISPs) might not
    be independently owned and operated. Consequently, we estimate that
    there are fewer than 2,940 small entity ISPs that may be affected by
    the decisions and rules of the present action.

#### Vendors of Internal Connections

50. *Communications Equipment Manufacturers*. The Commission has not
    developed a definition of small entities applicable to the
    manufacturers of internal network connections. The most applicable
    definitions of a small entity are the definitions under the SBA
    rules applicable to manufacturers of "Radio and Television
    Broadcasting and Wireless Communications Equipment Manufacturing"
    and "Other Communications Equipment Manufacturing."[^170] According
    to the SBA\'s regulations, manufacturers of these types of
    communications equipment must have 750 or fewer employees in order
    to qualify as a small business.[^171] The most recent available
    Census Bureau data indicates that there are 1,187 companies with
    fewer than 1,000 employees in the United States that manufacture
    radio and television broadcasting and communications equipment, and
    271 companies with less than 1,000 employees that manufacture other
    communications equipment.[^172] Some of these manufacturers might
    not be independently owned and operated. Consequently, we estimate
    that there are fewer than 1,458 small entity internal connections
    manufacturers that may be affected by the decisions and rules of the
    present action.

51. *Wireless Communications Equipment Manufacturers*. The SBA has
    established a small business size standard for radio and television
    broadcasting and wireless communications equipment manufacturing.
    Under this standard, firms are considered small if they have 750 or
    fewer employees.[^173] Census Bureau data for 1997 indicate that,
    for that year, there were a total of 1,215 establishments[^174] in
    this category.[^175] Of those, there were 1,150 that had employment
    under 500, and an additional 37 that had employment of 500 to 999.
    The percentage of wireless equipment manufacturers in this category
    is approximately 61 percent,[^176] so the Commission estimates that
    the number of wireless equipment manufacturers with employment under
    500 was actually closer to 706, with an additional 23 establishments
    having employment of between 500 and 999. Given the above, the
    Commission estimates that the majority of wireless communications
    equipment manufacturers are small businesses.

### Description of Projected Reporting, Recordkeeping, and Other Compliance Requirements

52. The specific proposals under consideration in the NPRM would not, if
    adopted, result in additional recordkeeping requirements for small
    businesses.

### Steps Taken to Minimize Significant Economic Impact on Small Entities, and Significant Alternatives Considered

53. The RFA requires an agency to describe any significant alternatives
    that it has considered in reaching its proposed approach, which may
    include the following four alternatives (among others): (1) the
    establishment of differing compliance and reporting requirements or
    timetables that take into account the resources available to small
    entities; (2) the clarification, consolidation, or simplification of
    compliance or reporting requirements under the rule for small
    entities; (3) the use of performance, rather than design, standards;
    and (4) an exemption from coverage of the rule, or part thereof, for
    small entities.[^177]

54. In this NPRM, we seek comment on a number of issues raised by the
    commenters that may not have been addressed as part of the ESL
    proceedings. Specifically, we seek comment on whether to include
    interconnected VoIP service, filtering software, dark fiber, and
    other services in future funding years. We tentatively conclude that
    interconnected VoIP service should be eligible for discounts under
    the E-rate program. We tentatively conclude that it is
    administratively and operationally appropriate for interconnected
    VoIP service requests to be processed as a Priority 1 service. We
    seek comment on this tentative conclusion. If interconnected VoIP
    service is deemed an eligible service, we also seek comment on how
    USAC would implement this tentative conclusion. We believe that the
    inclusion of interconnected VoIP service will not have an adverse
    impact on small entities. We welcome, however, comments from parties
    that have opinions different from those reached in this analysis.

55. We also seek comment on whether several individual
    services---filtering software, an expanded classification of basic
    telephone service, dark fiber, text messaging, firewall service,
    anti-virus/anti-spam software, scheduling services, telephone
    broadcast messaging, and certain wireless Internet access
    applications---should be eligible for E-rate program eligibility. We
    believe that, if eligible, the benefits conferred by making these
    services eligible will not have an adverse impact on small entities.
    We welcome, however, comments from parties that have opinions
    different from those reached in this analysis.

56. We believe our proposals and tentative conclusions will have a
    similar impact on both small and large schools and libraries,
    because both small and large schools and libraries will benefit
    equally from the possible addition of eligible services available
    under the E-rate program. Because this NPRM does not propose
    additional regulation for service providers and equipment vendors,
    these small entities will also experience no additional burden. We
    believe that small schools and libraries, as well as small service
    providers and equipment vendors, will benefit if we add more
    services to the eligible services list because it will open up more
    opportunities for small businesses to participate in the E-rate
    program. Therefore, we do not discuss any alternatives to the
    proposals contained in this NPRM. We invite commenters, in
    responding to the questions posed and tentative conclusions in the
    NPRM, to discuss any economic impact that such changes may have on
    small entities.

### Federal Rules that may Duplicate, Overlap, or Conflict with the Proposed Rules

57. None.

[^1]: Funding Year 2009 will start on July 1, 2009, and end on June 30,
    2010.

[^2]: The 2008 ESL includes interconnected VoIP service. *See* Eligible
    Services List, Schools and Libraries Support Mechanism for Funding
    Year 2008,
    <http://www.usac.org/_res/documents/sl/pdf/els_archive/2008-eligible-services-list.pdf>,
    at 21 (retrieved July 25, 2008) (2008 ESL).

[^3]: A list of commenters is attached as Appendix A.

[^4]: 47 U.S.C. § 254(c); 47 U.S.C. § 254(h)(2)(A).

[^5]: 47 C.F.R. §§ 54.502, 54.503, 54.517.

[^6]: 47 U.S.C. § 254(c)(1), (c)(3).

[^7]: 47 U.S.C. § 254(h)(2)(A); s*ee Federal-State Joint Board on
    Universal Service*, CC Docket No. 96-45, Report and Order, 12 FCC
    Rcd 8776, 9008-9015, paras. 436-449 (1997) (*Universal Service
    Order*), *aff'd in part*, *Texas Office of Public Utility Counsel v.
    FCC*, 183 F.3d 393, 440-42 (5th Cir. 1999) (affirming *Universal
    Service Order* in part and reversing and remanding on unrelated
    grounds); *see also* 47 U.S.C. § 254(c)(3).

[^8]: USAC is an independent, not-for-profit corporation designated as
    the administrator of the federal Universal Service Fund (USF) by the
    Commission. *See* *Changes to the Board of Directors of the National
    Exchange Carrier Association*, Third Report and Order in CC Docket
    No. 97-21, 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, 25063-66, paras. 10-14 (1998); 47 C.F.R. § 54.701(a).

[^9]: *See Schools and Libraries Universal Service Support Mechanism*,
    CC Docket No. 02-6, Second Report and Order and Further Notice of
    Proposed Rule Making, 18 FCC Rcd 9202, 9213, para. 31 (2003)
    (*Schools and Libraries Second Report and Order*); *see also* 47
    U.S.C. § 254; Telecommunications Act of 1996, Pub. L. No. 104-104,
    110 Stat. 56 (1996) (1996 Act).

[^10]: *Schools and Libraries Second Report and Order*, 18 FCC Rcd at
    9213, para. 31.

[^11]: *See* USAC website, Eligible Services List,
    <http://www.usac.org/sl/tools/eligible-services-list.aspx>
    (retrieved July 25, 2008).

[^12]: *Id.*

[^13]: *See* 47 C.F.R. § 54.522; *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, 26929, para. 40 (2003) (*Schools and Libraries Third Report
    and Order*). Funding Year 2005 was the first funding year for which
    this process was implemented.

[^14]: 47 C.F.R. § 54.522.

[^15]: *Schools and Libraries Third Report and Order*, 18 FCC Rcd at
    26929, para. 40.

[^16]: *Id.* In the *Universal Service Fund Comprehensive Review NPRM*,
    the Commission sought comment on, among other things, whether to
    make changes to the ESL process. *Comprehensive Review of Universal
    Service Fund Management, Administration, and Oversight*, 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, 11323-11326, paras. 34-43 (2005)
    (*Universal Service Fund Comprehensive Review NPRM*).

[^17]: *Pleading Cycle Established for Eligible Services List for
    Universal Service Mechanism for Schools and Libraries*, CC Docket
    No. 02-6, 21 FCC Rcd 8412, Public Notice (2006) (July 2006 Public
    Notice); *Comment Sought on Draft Eligible Services List for School
    and Libraries Universal Service Mechanism*, CC Docket No. 02-6, 22
    FCC Rcd 14134, Public Notice (2007) (July 2007 Public Notice).

[^18]: *See* Eligible Services List, Schools and Libraries Support
    Mechanism for Funding Year 2007,
    <http://www.usac.org/_res/documents/sl/pdf/els_archive/2007-eligible-services-list.pdf>,
    (retrieved July 25, 2008) (2007 ESL); *Release of Funding Year 2007
    Eligible Services List for Schools and Libraries Universal Service
    Mechanism*, CC Docket No. 02-6, Public Notice, 21 FCC Rcd 12310
    (2006) (Oct. 2006 Public Notice); 2008 ESL; *Release of Funding Year
    2007 Eligible Services List for Schools and Libraries Universal
    Service Mechanism*, CC Docket No. 02-6, Public Notice, 22 FCC Rcd
    18751 (2007) (Oct. 2007 Public Notice).

[^19]: *See* Oct. 2006 Public Notice; Oct. 2007 Public Notice; *see
    also* 47 C.F.R. § 1.3 (providing that the Commission's rules may be
    waived for good cause).

[^20]: *See* Oct. 2006 Public Notice at 1; Oct. 2007 Public Notice at 2.

[^21]: *See* Oct. 2006 Public Notice at 1; Oct. 2007 Public Notice at 2.

[^22]: *See* Oct. 2006 Public Notice at 1; Oct. 2007 Public Notice at 2.
    As noted above, during the pleading cycles established for the ESLs,
    numerous parties commented on the need to make certain services
    eligible for E-rate program discounts. We incorporate the comments
    filed into this proceeding, as well as comments filed in prior years
    that relate to the issues addressed in this NPRM.

[^23]: 47 C.F.R. § 9.3. *See IP-Enabled Services*, *E911 Requirements
    for IP-Enabled Service Providers*, WC Docket Nos. 04-36, 05-196,
    First Report and Order and Notice of Proposed Rulemaking, 20 FCC Rcd
    10245, 10257-58, para. 24 (2005) (*VoIP 911 Order*) (defining
    "interconnected VoIP service"), *aff'd sub nom. Nuvio Corp. v. FCC*,
    473 F.3d 302 (D.C. Cir. 2006).

[^24]: *See generally* *VoIP 911 Order*, 20 FCC Rcd 10245.

[^25]: *Id*. at 10246, para. 1.

[^26]: *See Communications Assistance for Law Enforcement Act and
    Broadband Access and Services*, ET Docket No. 04‑295, RM-10865,
    First Report and Order and Further Notice of Proposed Rulemaking, 20
    FCC Rcd 14989, 14991-92, para. 8 (2005) (*CALEA First Report and
    Order*), *aff'd*, *American Council on Education v. FCC*, No.
    05-1404 (D.C. Cir. June 9, 2006). Based on the independent language
    of the CALEA statute, the Commission found that providers of
    interconnected VoIP services satisfy CALEA's definition of
    "telecommunications carrier" because these services replace
    significant functions of traditional telephone service, including
    circuit-switched voice service. *See id.* at 15001, 15003‑04,
    15009-10, paras. 23, 27-31, 42.

[^27]: *Universal Service Contribution Methodology*, WC Docket No.
    06-122, Report and Order and Notice of Proposed Rulemaking, 21 FCC
    Rcd 7518 (2006) (*2006 Interim Contribution Methodology Order*).

[^28]: *Id.* at 7536, para. 34.

[^29]: *Id.* at 7537, para. 35.

[^30]: *See id.* at 7538, paras. 38-39.

[^31]: *See Telephone Number Requirements for IP-Enabled Services
    Providers*, WC Docket Nos. 07-243, 07-244, 04-36, CC Docket Nos.
    95-116, 99-200, Report and Order, Declaratory Ruling, Order on
    Remand, and Notice of Proposed Rulemaking, 22 FCC Rcd 19531 (2007);
    *IP-Enabled Services*, WC Docket No. 04-36, WT Docket No. 96-198, CG
    Docket No. 03-123, CC Docket No. 92-105, Report and Order, 22 FCC
    Rcd 11275 (2007).

[^32]: 2007 ESL at 19; 2008 ESL at 21.

[^33]: 2007 ESL at 19; 2008 ESL at 21.

[^34]: 47 U.S.C. § 254(c)(3).

[^35]: *See* 47 U.S.C. § 254(h)(2)(A).

[^36]: *2006 Interim Contribution Methodology Order*, 21 FCC Rcd at
    7536, para. 34.

[^37]: *See* On-Tech Consulting, Inc. Comments at 4 (stating that
    because the Commission has determined that VoIP providers must pay
    into the USF as if their service were a telecommunications service,
    their service should be treated as a telecommunications service when
    it comes to payments from the USF). All comments cited in the NPRM
    are comments filed in response to the July 2006 Public Notice unless
    otherwise identified. *See also* 47 U.S.C. § 254(h)(2).

[^38]: Nsight Teleservices Comments at 2; SECA Comments at 8.

[^39]: *See* *2006 Interim Contribution Methodology Order*, 21 FCC Rcd
    at 7520, para. 3.

[^40]: *2006 Interim Contribution Methodology Order*, 21 FCC Rcd at
    7420, para. 3 (citing Telecommunications Industry Association, TIA's
    2006 Telecommunications Market Review and Forecast, 71 (2006) (TIA
    2006 Report)).

[^41]: Priority 1 services are telecommunications services, voice mail,
    and Internet access pursuant to section 54.507(g)(1)(i) of our
    rules.

[^42]: 47 U.S.C. § 254(h), 254(l). Congress included CIPA as part of the
    Consolidated Appropriations Act, 2001. Pub. L. No. 106-554 §§ 1731
    *et seq*.

[^43]: 47 U.S.C. § 254(h), 254(l).

[^44]: 47 U.S.C. § 254(h)(5)(A)(ii), 254(h)(6)(A)(ii).

[^45]: *See* 47 U.S.C. § 254(h)(5)(A)(ii), 254(h)(6)(A)(ii).

[^46]: *See* *supra* para. 11; 2008 ESL at 21.

[^47]: *See CALEA First Report and Order*, 20 FCC Rcd at 15009, para.
    42; *VoIP 911 Order*, 20 FCC Rcd at 10256-57, para. 23 (footnote
    omitted).

[^48]: 2008 ESL at 34.

[^49]: *Id.* at 11, 14, 25.

[^50]: *See* *Federal-State Joint Board on Universal Service, Children's
    Internet Protection Act*, CC Docket No. 96-45, Report and Order, 16
    FCC Rcd 8182, 8204, para. 54 (2001) (*CIPA Order*).

[^51]: CIPA § 1721(g).

[^52]: *See* *CIPA Order*, 16 FCC Rcd at 8204, para. 54.

[^53]: [S. Rep. No]{.smallcaps}. 106-141, at 10, 13, 106th Cong. (1999)
    (noting that "the Universal Service subsidy may be used to cover the
    cost of the acquisition of the software or technology necessary to
    comply with requirements added by the bill").

[^54]: *See* On-Tech Consulting, Inc. Comments at 3; s*ee* *also* 2008
    On-Tech Consulting Inc. Comments at 3 (noting that Congress clearly
    indicated that content filtering is a necessary part of data
    distribution for a school or library).

[^55]: *See, e.g.,* 2008 ESL at 11*.*

[^56]: S*ee* Council of the Great City Schools Comments at 5.

[^57]: 47 C.F.R. §§ 54.504(b)(2)(iii)-(iv), 54.508; *Federal-State Joint
    Board on Universal Service*, CC Docket No. 96-45, Report and Order,
    12 FCC Rcd 8776, 9077, para. 572 (1997) (*Universal Service Order*)
    (subsequent history omitted).

[^58]: 47 C.F.R. § 54.504(b)(2)(iv); 2008 ESL at 3-4; *see also*
    *Request for Review of the Decision of the Universal Service
    Administrator by United Talmudical Academy, Federal-State Joint
    Board on Universal Service, Changes to the Board of Directors of the
    National Exchange Carrier Association*, CC Docket Nos. 96-45, 97-21,
    Order, 16 FCC Rcd 18812, 18816, para. 11 (Com. Car. Bur. 2001).

[^59]: See 47 C.F.R. § 54.504(b)(2)(iii).

[^60]: 2008 ESL at 3; Oct. 2007 Public Notice at 1. Centrex service is a
    telecommunications service, and thus is classified as Priority 1.

[^61]: *See* 2008 E-Rate Central Comments at 1-3; 2008 Wisconsin
    Department of Public Instruction Comments at 1; 2008 eRate
    Consulting Services, LLC Comments at 1; 2008 On-Tech Consulting,
    Inc. Comments at 5. PRI trunk lines are Priority 1 services. *See*
    2008 ESL.

[^62]: *See* 2008 eRate Consulting Services, LLC Comments at 1.

[^63]: *Schools and Libraries* *Third Report and Order*, 18 FCC Rcd at
    26931, para. 47; *Petition for Waiver by Sprint Corporation,
    Federal-State Joint Board on Universal Service,* Order, 22 FCC Rcd
    5353, 5354, para. 3 (Wireline Comp. Bur. 2007) (*Sprint Petition
    Order*); *see also* 47 C.F.R. §§ 507(g)(i), (ii) (noting that
    telecommunications services, voice mail, and Internet access receive
    first priority for funding and the remaining funds go to internal
    connections).

[^64]: Prior to December 1, 2003, USAC treated payments for leases of
    PBX and key systems as payments for part of end-to-end
    telecommunications service arrangements, *i.e*., Priority 1
    services. *Sprint Petition Order*, 22 FCC Rcd at 5354, paras. 2-3.

[^65]: *See, e.g.,* *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,
    Federal-State Joint Board on Universal Service*, *Changes to the
    Board of Directors of the National Exchange Carrier Association,
    Inc*., CC Docket Nos. 96-45 and 97-21, Order, 14 FCC Rcd 13734,
    13753-54, paras 37-38 (1999) (*1999 Tennessee Order*); *Schools and
    Libraries* *Third Report and Order*, 18 FCC Rcd at 26930-31, para.
    46.

[^66]: The Commission first sought comment on dark fiber in the *Schools
    and Libraries* *Third Report and Order. Schools and Libraries*
    *Third Report and Order*, 18 FCC Rcd at 26943-44, paras. 76-77.

[^67]: The ESL for Funding Year 2002 stated that "\[s\]ervice providers
    can lease fiber capacity that does not include modulating
    electronics to schools and libraries, if the applicant provides the
    electronics to modulate the fiber." *See* USAC website, 2003
    Eligible Services List,
    <http://www.universalservice.org/_res/documents/sl/pdf/ESL_archive/EligibleServicesList_101802.pdf>,
    at 33 (retrieved July 25, 2008).

[^68]: *Schools and Libraries* *Third Report and Order*, 18 FCC Rcd at
    26943-44, paras. 76-77. The ESL released for Funding Year 2004
    stated that "\[t\]he FCC has not resolved whether unlit dark fiber
    is a telecommunications service. Pending resolution of this issue,
    it is not eligible for funding." *See* USAC website, 2004 Eligible
    Services List,
    <http://www.universalservice.org/_res/documents/sl/pdf/ESL_archive/EligibleServicesList_101003.pdf>,
    at 30 (retrieved July 25, 2008). In other proceedings, dark fiber
    has been treated differently depending on context. *See Southwestern
    Bell Tel. Co. v. FCC*, 19 F.3d 1475 (D.C. Cir. 1994) (finding that
    the Commission had failed to provide a sufficient analysis for
    concluding that dark fiber service was a common carrier service and
    suspending the Commission order pending proceedings on remand);
    Instructions to the Telecommunications Reporting Worksheet, FCC Form
    499-A, March 2006, at 24 (instructing universal service contributors
    not to include revenues for dark fiber services as
    telecommunications revenues). *But see* *Deployment of Wireline
    Services Offering Advanced Telecommunications Capability*, Fourth
    Report and Order, 16 FCC Rcd 15435, 15473-74, paras. 74-75 and n.189
    (2001) (declaring that a dark fiber service with respect to
    cross-connects is a common carrier service under the second prong of
    *NARUC II. See National Ass\'n of Regulatory Util. Comm\'rs v. FCC,*
    533 F.2d 601,608-609 (D.C. Cir. 1976) (*NARUC II*)).

[^69]: 47 U.S.C. § 254(c)(3).

[^70]: 47 U.S.C. § 254(c)(1).

[^71]: *See* 47 U.S.C. § 254.

[^72]: 47 U.S.C. § 254(c)(3).

[^73]: *See* 47 U.S.C. § 254(h).

[^74]: "Educational Purposes" are defined as activities that are
    integral, immediate, and proximate to the education of students or
    to the provision of library services to library patrons. *See* 47
    C.F.R. 54.500(b).

[^75]: For example, text messaging could be categorized similarly to
    voice mail, which is listed in the 2008 ESL under the miscellaneous
    category.  2008 ESL at 22. The provision for voice mail service in
    the 2008 ESL indicates that, if voice mail is provided by a
    telecommunications carrier, it should be requested under the
    telecommunications category of service, and if the voice mail is
    provided by any provider that is not a telecommunications carrier,
    it should be requested under the Internet access category of
    service. *Id*.

[^76]: 47 U.S.C. § 254(h), 254(l).

[^77]: *See* para. 13, *supra*; *see also* 47 U.S.C. § 254(h), 254(l).

[^78]: 47 U.S.C. § 254(h)(5)(A)(ii), 254(h)(6)(A)(ii).

[^79]: *See* 47 U.S.C. § 254(h)(5)(A)(ii), 254(h)(6)(A)(ii).

[^80]: *See* <http://electronics.howstuffworks.com/sms.htm> (retrieved
    July 25, 2008).  The 160-character conventional limit is not
    absolute and may actually vary depending on the network, phone
    model, and particular wireless carrier.  *Id*.

[^81]: *See* Council of the Great City Schools Comments at 4; Funds for
    Learning Comments at 4-5; Kellogg & Sovereign Consulting, LLC Reply
    Comments at 1-2; 2008 On-Tech Consulting, Inc. Reply Comments at 3;
    SECA Comments at 5-6; Sprint Nextel Corporation Comments at 3; 2008
    Sprint Nextel Corporation Comments at 3-4.

[^82]: *See* 2008 ESL at 3, 6.

[^83]: For example, service providers and USAC must examine wireless
    telecommunications invoices to identify and remove text messaging
    charges. As SMS becomes an increasingly popular service and is used
    in connection with other service offerings, billing may become
    increasingly complex.

[^84]: *See* E-Rate Service Provider Forum Comments at 5; Funds for
    Learning Comments at 2-4; 2008 Funds for Learning Comments at 8-11;
    Kellogg & Sovereign Consulting, LLC Reply Comments at 3; On-Tech
    Consulting, Inc. Comments at 4.

[^85]: 2008 ESL at 34.

[^86]: 2007 ESL at 6-7.

[^87]: *See* Funds for Learning Comments at 2-4; 2008 Funds for Learning
    Comments at 9; On-Tech Consulting, Inc. Comments at 4.

[^88]: Funds for Learning Comments at 3; 2008 Funds for Learning
    Comments at 9.

[^89]: *See* Funds for Learning Comments at 3; 2008 Funds for Learning
    Comments at 11. According to Funds for Learning, these technologies
    offer better protection for schools and libraries than a "basic"
    firewall service. For example, intrusion prevention is a network
    security technology that makes access control decisions based on the
    content of a data stream, providing substantially better data
    protection than traditional firewalls. Funds for Learning Comments
    at 3*.* *But* s*ee* 2008 On-Tech Consulting, Inc. Reply Comments at
    4 (noting that these systems should not yet be eligible because they
    are not standard network security components).

[^90]: 2008 ESL at 8.

[^91]: *Id.* at 15.

[^92]: 2008 eDimension Consulting Comments at 2; On-Tech Consulting,
    Inc. Comments at 3; 2008 On-Tech Consulting, Inc. Comments at 3.

[^93]: Wisconsin Department of Administration & Wisconsin Department of
    Public Instruction Comments at 3.

[^94]: Eligible Services List, Schools and Libraries Support Mechanism
    for Funding Year 2006,
    <http://www.usac.org/_res/documents/sl/pdf/ESL_archive/EligibleServicesList_041206.pdf>,
    at 9 (retrieved July 25, 2008) (2006 ESL).

[^95]: *See* Alaska Department of Education and Early Development Reply
    Comments at 1-2; Arkansas Department of Information Systems & the
    Arkansas Department of Education Comments at 2-3; General
    Communication, Inc. Comments at 1-4; SECA Reply Comments at 1-2;
    State of Iowa Comments at 1-2; Wisconsin Department of
    Administration & Wisconsin Department of Public Instruction Comments
    at 1-3.

[^96]: 2007 ESL at 2-3.

[^97]: Leib Lurie Comments at 1-2.

[^98]: *Id*.

[^99]: *See* 2008 ESL at 7; *Schools and Libraries Second Report and
    Order*, 18 FCC Rcd at 9211, para. 26 (noting that eligibility is not
    determined by the type of technology, but by "whether the service in
    question is integral, immediate, and proximate to the provision of
    education or library services").

[^100]: 47 C.F.R. § 54.500(b); *Schools and Libraries Second Report and
    Order*, 18 FCC Rcd at 9208-09, 9211, paras. 17-21, 26.

[^101]: *Schools and Libraries Second Report and Order*, 18 FCC Rcd at
    9208-09, 9211, paras. 17-21, 26.

[^102]: *Schools and Libraries Second Report and Order*, 18 FCC Rcd at
    9211, para. 26.

[^103]: 2008 Sprint Nextel Corporation Comments at 1-2; 2008 Verizon
    Wireless Reply Comments at 1-5.

[^104]: 2008 Sprint Nextel Corporation Comments at 1-2; 2008 Verizon
    Wireless Reply Comments at 3-4.

[^105]: *Schools and Libraries Second Report and Order*, 18 FCC Rcd at
    9209, fn.28. Other examples included a library staff person's use of
    wireless telecommunications service on a library's mobile library
    unit van, and the use by teachers or other school staff of wireless
    telecommunications service while accompanying students on a field
    trip or sporting event. *Id.*

[^106]: 47 C.F.R. § 54.500(b); s*ee also* *Schools and Libraries Second
    Report and Order*, 18 FCC Rcd at 9208, para. 17. While not used
    offsite, commenters also seek comment on a service that allows
    school administrators, traveling from classroom to classroom, to
    record teacher and pupil assessment information electronically and
    transmit the data via the Internet to the appropriate database. 2008
    Sprint Nextel Corporation Comments at 1-2; 2008 Verizon Wireless
    Reply Comments at 3-4

[^107]: 5 U.S.C. § 603.

[^108]: *See* 5 U.S.C. § 603(a).

[^109]: *Id.*

[^110]: 47 C.F.R. §§ 1.1200-1.1216.

[^111]: 47 C.F.R. § 1.1206(b)(2).

[^112]: 47 C.F.R. § 1.1206(b).

[^113]: 47 C.F.R. §§ 1.415, 1.419.

[^114]: *See* 47 C.F.R. § 1.49.

[^115]: *See* 5 U.S.C. § 603. The RFA, *see* 5 U.S.C. §§ 601 -- 612, has
    been amended by the Small Business Regulatory Enforcement Fairness
    Act of 1996 (SBREFA), Pub. L. No. 104-121, Title II, 110 Stat. 857
    (1996).

[^116]: *See* 5 U.S.C. § 603(a).

[^117]: *See* 5 U.S.C. § 603(a).

[^118]: *Universal Service Order*, 12 FCC Rcd 8776.

[^119]: 47 C.F.R. §§ 54.502, 54.503.

[^120]: *See* USAC website, Eligible Services List,
    <http://www.usac.org/sl/tools/eligible-services-list.aspx>
    (retrieved July 25, 2008).

[^121]: July 2006 Public Notice, 21 FCC Rcd 8412; July 2007 Public
    Notice, 22 FCC Rcd 14134.

[^122]: July 2006 Public Notice, 21 FCC Rcd 8412; July 2007 Public
    Notice, 22 FCC Rcd 14134.

[^123]: 2007 ESL; Oct. 2006 Public Notice, 21 FCC Rcd 12310; 2008 ESL;
    Oct. 2007 Public Notice, 22 FCC Rcd 18751.

[^124]: *See* Oct. 2006 Public Notice at 1; Oct. 2007 Public Notice at
    2.

[^125]: *See* Oct. 2006 Public Notice at 1; Oct. 2007 Public Notice at
    2.

[^126]: 5 U.S.C. § 603(b)(3).

[^127]: 5 U.S.C. § 601(6).

[^128]: 5 U.S.C. § 601(3) (incorporating by reference the definition of
    "small business concern" in 15 U.S.C. § 632). Pursuant to the RFA,
    the statutory definition of a small business applies "unless an
    agency, after consultation with the Office of Advocacy of the Small
    Business Administration and after opportunity for public comment,
    establishes one or more definitions of such term which are
    appropriate to the activities of the agency and publishes such
    definition(s) in the Federal Register." 5 U.S.C. § 601(3).

[^129]: Small Business Act, 15 U.S.C. § 632.

[^130]: *See* SBA, Programs and Services, SBA Pamphlet No. CO-0028, at
    40 (July 2002).

[^131]: 5 U.S.C. § 601(4).

[^132]: Independent Sector, The New Nonprofit Almanac & Desk Reference
    (2002).

[^133]: 47 C.F.R. § 1.1162.

[^134]: 5 U.S.C. § 601(5).

[^135]: U.S. Census Bureau, Statistical Abstract of the United States:
    2006, Section 8, page 272, Table 415.

[^136]: We assume that the villages, school districts, and special
    districts are small, and total 48,558. *See* U.S. Census Bureau,
    Statistical Abstract of the United States: 2006, section 8, page
    273, Table 417. For 2002, Census Bureau data indicate that the total
    number of county, municipal, and township governments nationwide was
    38,967, of which 35,819 were small. *Id.*

[^137]: 47 C.F.R. §§ 54.502, 54.503, 54.517(b).

[^138]: 47 C.F.R. § 54.500(c).

[^139]: 47 C.F.R. § 54.500(k).

[^140]: 47 C.F.R. § 54.501.

[^141]: *See id.*

[^142]: 13 C.F.R. § 121.201, North American Industry Classification
    System (NAICS) Code 611110.

[^143]: USAC website, 2005 USAC Annual Report,
    <http://www.usac.org/_res/documents/about/pdf/annual-report-2005.pdf>,
    at 45 (retrieved July 25, 2008).

[^144]: 13 C.F.R. § 121.201, NAICS code 517110.

[^145]: FCC, Wireline Competition Bureau, Industry Analysis and
    Technology Division, "Trends in Telephone Service" at Table 5.3,
    Page 5-5 (June 2005) (*2005 Trends Report*). This source uses data
    that are current as of October 1, 2004.

[^146]: 5 U.S.C. § 601(3).

[^147]: *See* Letter from Jere W. Glover, Chief Counsel for Advocacy,
    SBA, to William E. Kennard, Chairman, FCC, dated May 27, 1999. The
    Small Business Act contains a definition of "small business
    concern," which the RFA incorporates into its own definition of
    "small business." *See* U.S.C. § 632(a) (Small Business Act); 5
    U.S.C.

     § 601(3) (RFA). SBA regulations interpret "small business concern"
    to include the concept of dominance on a national basis. 13 C.F.R. §
    121.102(b).

[^148]: 13 C.F.R. § 121.201, NAICS Code 517110.

[^149]: *Id.*

[^150]: *2005 Trends Report*, Table 5.3, page 5-5.

[^151]: *Id.*

[^152]: 13 C.F.R. § 121.201, NAICS Code 517110.

[^153]: *Id.*

[^154]: *2005 Trends Report*, Table 5.3, page 5-5.

[^155]: *Id.*

[^156]: 13 C.F.R. § 121.201, NAICS Code 517212.

[^157]: *Id.*

[^158]: *2005 Trends Report*, Table 5.3, page 5-5.

[^159]: *Id.*

[^160]: The Commission has adopted a number of service-specific
    definitions of small businesses for various categories of wireless
    service, principally in the context of the Commission's rules
    governing spectrum auctions. *See* *Assessment and Collection of
    Regulatory Fees for Fiscal Year 2001*, MD Docket No. 01-76, Report
    and Order, 16 FCC Rcd 13525, Attachment A, paras. 31-54 (2001). For
    purposes of administering the E-rate program, however, we find that
    it is appropriate to address the various non-telephony wireless
    services as a group.

[^161]: 13 C.F.R. § 121.201, NAICS Code 517212.

[^162]: *2005 Trends Report*, Table 5.3, page 5-5.

[^163]: *Id.*

[^164]: *Amendment of Part 90 of the Commission\'s Rules To Provide for
    the Use of the 220-222 MHz Band by the Private Land Mobile Radio
    Service*, PR Docket No. 89-552, GN Docket No. 93-252, PP Docket No.
    93-253, Third Report and Order and Fifth Notice of Proposed
    Rulemaking, 12 FCC Rcd 10943, 11068-70 paras. 291-295 (1997), 62 FR
    16004 (Apr. 3, 1997), at paras. 291-295.

[^165]: *Revision of Part 22 and Part 90 of the Commission's Rules to
    Facilitate Future Development of Paging Systems*, WT Docket No.
    96-18, PR Docket No. 93-253, Memorandum Opinion and Order on
    Reconsideration and Third Report and Order, 14 FCC Rcd 10030, at
    para. 98 (1999).

[^166]: *2005 Trends Report*, Table 5.3, page 5-5.

[^167]: *Id*.

[^168]: 13 C.F.R. § 121.201, NAICS Code 518111.

[^169]: 1997 Census Report, Establishment and Firm Size, U.S. Census
    Bureau, U.S. Department of Commerce, Economics and Statistics
    Administration, Document EC97S51S-SZ,
    \<<http://www.census.gov/prod/ec97/97s51-sz.pdf>\>, at 24.

[^170]: 13 C.F.R. § 121.201, NAICS Code 334220, 334290.

[^171]: *Id.*

[^172]: 1997 Economic Census, Manufacturing, Industry Series, Radio and
    Television Broadcasting and Wireless Communications Equipment
    Manufacturing, Document No. E97M-3342B (August 1999), at 14; 1997
    Economic Census, Manufacturing, Industry Series, Other
    Communications Equipment Manufacturing, Document No. EC97M-3342C
    (September 1999), at 14 (both available at
    \<[http://www.census.gov/prod/www/abs/97ecmani.html]{.underline}\>).

[^173]: 13 C.F.R. § 121.201, NAICS Code 334220.

[^174]: The number of "establishments" is a less helpful indicator of
    small business prevalence in this context than would be the number
    of "firms" or "companies," because the latter take into account the
    concept of common ownership or control. Any single physical
    locations for an entity is an establishment, even though that
    location may be owned by a different establishment. Thus, the
    numbers given may reflect inflated numbers of businesses in this
    category, including the numbers of small businesses. In this
    category, the Census breaks-out data for firms or companies only to
    give the total number of such entities for 1997, which was 1,089.

[^175]: U.S. Census Bureau, 1997 Economic Census, Industry Series:
    Manufacturing, "Industry Statistics by Employment Size," Table 4,
    NAICS code 334220 (issued August 1999).

[^176]: *Id*. Table 5, "Industry Statistics by Industry and Primary
    Product Class Specialization: 1997."

[^177]: *See* 5 U.S.C. § 603(c).