**Before the**

**Federal Communications Commission**

**Washington, DC 20554**

In the Matter of )

)

Request for Review of a )

Decision of the )

Universal Service Administrator by )

)

Grand Rapids Public Schools ) File No. SLD-524297

Grand Rapids, Michigan )

)

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

Support Mechanism )

**order**

**Adopted: October 30, 2008 Released: October 30, 2008**

By the Acting Chief Telecommunications Access Policy Division, Wireline
Competition Bureau:

**I. INTRODUCTION**

1.  In this order, we grant a request by Grand Rapids Public Schools,
    Grand Rapids, Michigan, (Grand Rapids) seeking review of a decision
    by the Universal Service Administrative Company (USAC) denying
    funding for discounted services under the schools and libraries
    universal service mechanism (also known as the E-rate program).[^1]
    USAC denied funding on the ground that Grand Rapids' Funding Year
    2006 application violated the Commission's competitive bidding
    requirements. We find that Grand Rapids should be allowed to correct
    the error on its FCC Form 471 that served as the basis for USAC's
    denial of funding. We therefore grant Grand Rapids' request for
    review and remand the underlying application to USAC for further
    action consistent with this order. To the extent necessary, we waive
    section 54.504(c) of the Commission's rules to allow Grand Rapids to
    amend its original FCC Form 471 application submitted to USAC.[^2]
    To ensure that the underlying application is resolved expeditiously,
    we direct USAC to complete its review of the underlying application
    and issue an award or denial based upon a complete review and
    analysis no later than 60 calendar days from the release date of
    this order.[^3]

    **II. BACKGROUND**

2.  Under the E-rate program, eligible schools, libraries, and consortia
    that include eligible schools and libraries may apply for discounts
    for eligible telecommunications services, Internet access, and
    internal connections.[^4] The Commission's rules provide that an
    eligible school, library, or consortium must seek competitive bids
    for all services eligible for support.[^5] In accordance with the
    Commission's rules, an applicant must file with USAC an FCC Form 470
    requesting services.[^6] After the FCC Form 470 is posted to USAC's
    web site, the applicant must wait 28 days before entering into an
    agreement with a service provider for the requested services and
    submitting an FCC Form 471.[^7] Section 54.504(c) of the
    Commission's rules also states that the FCC Form 471 requesting
    support for the services ordered by the applicant shall be submitted
    "upon signing a contract for eligible services."[^8] Specifically,
    the instructions for the FCC Form 471 state that applicants must
    have a "signed contract" or a "legally binding agreement" with the
    service provider "for all services" ordered on the FCC Form 471.[^9]

3.  To ensure that applicants are in compliance with our competitive
    bidding rules, applicants must file a new FCC Form 470 when the
    existing contract ends.[^10] Specifically, when a contract expires
    at the end of the original term, the applicant must post a new FCC
    Form 470 for services provided beyond the contract expiration
    date.[^11] An applicant does not need to post a new FCC Form 470
    each year when it has a multi-year contract or when exercising a
    contract's voluntary renewal provision if the applicant indicated
    that it was seeking a contract with those terms when it originally
    filed the FCC Form 470.[^12]

4.  *[Request for Review.]{.underline}* Grand Rapids requests review of
    USAC's decision to deny funding on the ground that Grand Rapids'
    Funding Year 2006 application violated the Commission's competitive
    bidding requirements.[^13] Specifically, USAC concluded that Grand
    Rapids did not provide a sufficient explanation for the lapse in
    time between the posting date of the FCC Form 470 referenced on
    Grand Rapids' Funding Year 2006 application (*i.e*., December
    6, 2001) and the contract award date (CAD) (*i.e*., July 10, 2003),
    during USAC's Program Integrity Assurance (PIA) review process.[^14]

5.  In its request for review, Grand Rapids explains the reason for the
    delay between the posting date of the FCC Form 470 referenced on
    Grand Rapids' Funding Year 2006 application and the CAD.[^15] First,
    Grand Rapids contends that it initially referenced the wrong FCC
    Form 470 on its Funding Year 2006 application.[^16] Grand Rapids
    states that, when asked to provide the correct FCC Form 470 during
    the PIA review process, it supplied another incorrect FCC Form
    470.[^17] Grand Rapids now maintains, on appeal, that the correct
    establishing FCC Form 470 for the services at issue is FCC Form 470
    \# 930410000393393, posted on December 6, 2001, with an allowable
    contract date of January 3, 2002.[^18] Second, Grand Rapids asserts
    that AT&T, now Comcast Business Communications, Inc., was the only
    service provider to submit a bid in response to that posting.[^19]
    Under the bid, services were to commence July 1, 2002, with a
    contract expiration date of June 30, 2007.[^20] Grand Rapids states
    that it accepted AT&T's bid on January 15, 2002, but could not
    legally enter into a contract until it obtained USAC's approval of
    funding and approval by its governing school board.[^21] Grand
    Rapids asserts that it received approvals from USAC and the
    governing school board on July 1, 2002, and July 15, 2002,
    respectively.[^22] According to Grand Rapids, however, it was unable
    to sign a service agreement with AT&T until March 23, 2003,
    approximately 16 months after the posting date of its FCC Form
    470.[^23] Grand Rapids explains that it became necessary to
    investigate the long-term viability of the network equipment used to
    provide the services at issue.[^24] Grand Rapids states that the
    investigation took several months to complete, which accounts for
    the lapse in time between the FCC Form 470 posting date and the date
    the contract was signed.[^25]

    **III. DISCUSSION**

6.  Consistent with our obligation to conduct a *de novo* review of
    appeals of decisions made by USAC, we grant Grand Rapids' request
    for review.[^26] In particular, based on the facts and circumstances
    of this case, we find that the mistakes at issue here are
    sufficiently similar to those in the *Bishop Perry Order*,
    warranting a waiver of section 54.504(c) of the Commission's
    rules.[^27] Grand Rapids committed unintentional, clerical errors
    when it initially inserted the incorrect FCC Form 470 number on its
    Funding Year 2006 application, and again when responding to PIA
    requests for additional information. We do not believe, however,
    that these mistakes warrant the complete rejection of Grand Rapids'
    application for E-rate funding. Rather, based on the record before
    us, we find that Grand Rapids complied with core program
    requirements.[^28] Specifically, we find that Grand Rapids posted an
    FCC Form 470 to USAC's web site soliciting bids for the services at
    issue and waited 28 days before entering into an agreement with a
    service provider for the requested services. Additionally, we find
    that Grand Rapids had a signed multi-year contract as of March 2003,
    well before the time Grand Rapids submitted its Funding Year 2006
    application to USAC. Importantly, Grand Rapids' appeal does not
    involve a misuse of funds and there is no evidence in the record
    that Grand Rapids engaged in activity to defraud or abuse the E-rate
    program. Thus, we find that denying Grand Rapids' request for
    funding would create undue hardship and prevent these otherwise
    eligible schools from receiving E-rate funding.

7.  As the Commission recently noted, the E-rate program is fraught with
    complexity from the perspective of beneficiaries, resulting in a
    significant number of applications for E-rate support being denied
    for ministerial or clerical errors.[^29] We find that the action we
    take here promotes the statutory requirements of section 254(h) of
    the Communications Act of 1934, as amended (the Act), by helping to
    ensure that Grand Rapids obtains access to discounted
    telecommunications and information services.[^30] Although
    processing standards are necessary for the efficient administration
    of the program, rigid adherence to such application procedures in
    this case would result in an outcome conflicting with the statutory
    goal mandated by Congress of preserving and advancing universal
    service among schools and libraries most in need of support. As we
    consider fundamental reform to the schools and libraries universal
    service mechanism, the public interest and goals of the Act are best
    served by allowing Grand Rapids to substitute the incorrect FCC Form
    470 with the correct establishing FCC Form 470 on its amended FCC
    Form 471 application. We therefore grant Grand Rapids' request and
    remand its application to USAC for further action consistent with
    this order.[^31] In remanding this application to USAC, we make no
    finding as to the ultimate eligibility of the services or the
    petitioner's application.[^32] We remind USAC of its obligation to
    independently determine whether the disbursement of universal
    service funds would be consistent with program requirements,
    Commission rules and orders, or applicable statutes and to decline
    to disburse funds where this standard is not met. To ensure that the
    underlying application is resolved expeditiously, we direct USAC to
    complete its review of the underlying application and issue an award
    or denial based upon a complete review and analysis no later than 60
    calendar days from the release date of this order.

8.  We emphasize the limited nature of this decision. We recognize that
    the Commission's filing deadlines and procedural rules are necessary
    for the efficient administration of the E-rate program. Thus, while
    we grant this appeal and waive section 54.504(c) of the Commission's
    rules, we continue to require E-rate applicants to timely submit
    complete and accurate information to USAC as part of the application
    process.

9.  Finally, we are committed to guarding against waste, fraud, and
    abuse, and ensuring that funds disbursed through the E-rate program
    are used for appropriate purposes.[^33] Although we grant the appeal
    addressed here, this action in no way affects the authority of the
    Commission or USAC to conduct audits and investigations to determine
    compliance with the E-rate program rules and requirements. Because
    audits or investigations may provide information showing that a
    beneficiary or service provider failed to comply with the statute or
    Commission rules, such proceedings can reveal instances in which
    universal service funds were improperly disbursed or in a manner
    inconsistent with the statute or the Commission's rules. To the
    extent we find that funds were not used properly, we will require
    USAC to recover such funds through its normal processes. We
    emphasize that we retain the discretion to evaluate the uses of
    monies disbursed through the E-rate program and to determine on a
    case-by-case basis that waste, fraud, or abuse of program funds
    occurred and that recovery is warranted. We remain committed to
    ensuring the integrity of the program and will continue to
    aggressively pursue instances of waste, fraud, or abuse under our
    own procedures and in cooperation with law enforcement agencies.

## IV. ORDERING CLAUSES

10. ACCORDINGLY, IT IS ORDERED, pursuant to the authority contained in
    sections 1-4 and 254 of the Communications Act of 1934, as amended,
    47 U.S.C. §§ 151-154 and 254, and pursuant to authority delegated
    under sections 0.91, 0.291, and 54.722(a) of the Commission's rules,
    47 C.F.R. §§ 0.91, 0.291, 54.722(a), that the request for review
    filed by Grand Rapids Public Schools on June 8, 2007, IS GRANTED.

11. IT IS FURTHER ORDERED that, pursuant to the authority contained in
    sections 1-4 and 254 of the Communications Act of 1934, as amended,
    47 U.S.C. §§ 151-154 and 254, and sections 1.3 and 54.722(a) of the
    Commission's rules, 47 C.F.R. §§ 1.3 and 54.722(a), section
    54.504(c) of the Commission's rules, 47 C.F.R. § 54.504(c) IS WAIVED
    to the extent provided herein.

12. IT IS FURTHER ORDERED, pursuant to the authority contained in
    sections 1-4 and 254 of the Communications Act of 1934, as amended,
    47 U.S.C. §§ 151-154 and 254, and pursuant to authority delegated
    under sections 0.91, 0.291, and 54.722(a) of the Commission's rules,
    47 C.F.R. §§ 0.91, 0.291, 54.722(a), that USAC SHALL COMPLETE its
    review of the remanded application and SHALL ISSUE an award or a
    denial based on a complete review and analysis no later than 60
    calendar days from the release date of this order.

13. IT IS FURTHER ORDERED, pursuant to sections 1.102(b)(1) of the
    Commission's rules, 47 C.F.R. § 1.102(b)(1), that this order SHALL
    BE EFFECTIVE upon release.

    FEDERAL COMMUNICATIONS COMMISSION

    Jennifer K. McKee

    Acting Chief

    Telecommunications Access Policy

    Wireline Competition Bureau

[^1]: Letter from Ronald Basso, Basso and Basso Legal Services, LLC, on
    behalf of Grand Rapids Public Schools, to Office of the Secretary,
    Federal Communications Commission, CC Docket No. 02-6 (June 8, 2007)
    (Request for Review). In this order, we use the term "appeals" to
    generally refer to requests for review of decisions by USAC. Section
    54.719(c) of the Commission's rules provides that any person
    aggrieved by an action taken by a division of USAC may seek review
    from the Commission. 47 C.F.R. § 54.719(c).

[^2]: 47 C.F.R. § 54.504(c) (providing that applicants shall submit a
    completed FCC Form 471 application to USAC).

[^3]: In performing a complete review and analysis of each underlying
    application, USAC shall either grant the underlying application
    before it, or, if denying the application, provide the applicant
    with any and all grounds for denial.

[^4]: 47 C.F.R. §§ 54.502, 54.503.

[^5]: 47 C.F.R. §§ 54.504, 54.511(c).

[^6]: 47 C.F.R. § 54.504(b); s*ee* *also* Schools and Libraries
    Universal Service, Description of Services Requested and
    Certification Form, OMB 3060-0806 (October 2004) (FCC Form 470).

[^7]: 47 C.F.R. § 54.504(b)(4); s*ee* *also* Schools and Libraries
    Universal Service, Services Ordered and Certification Form, OMB
    3060-0806 (November 2004) (FCC Form 471).

[^8]: 47 C.F.R. § 54.504(c); s*ee also Request for Review of Waldwick
    School District, Schools and Libraries Universal Service Support
    Mechanisms*, File No. SLD-234540, CC Docket No. 02-6, Order, 18 FCC
    Rcd 22994, 22995, para. 3 (Wireline Comp. Bur. 2003); *Request for
    Review of St. Joseph High School, Schools and Libraries Universal
    Service Support Mechanisms*, File No. SLD-234540, CC Docket Nos.
    96-45, 97-21, Order, 17 FCC Rcd 22499, 22500-01, para. 4 (Wireline
    Comp. Bur. 2002).

[^9]: Instructions for Completing the Schools and Libraries Universal
    Service, Services Ordered and Certification Form, OMB 3060-0806
    (November 2004) (FCC Form 471 Instructions).

[^10]: *See Request for Review of New Albany-Floyd County Consolidated
    School Corporation, Schools and Libraries Universal Service Support
    Mechanisms*, File No. SLD-287615, CC Docket No. 02-6, Order, 20 FCC
    Rcd 8159, 8160-61, para. 5 (Wireline Comp. Bur. 2005).

[^11]: *Id*; *see also* USAC website, Contract Guidance,
    http://www.universalservice.org/sl/applicants/step04/contract-guidance.aspx
    (retrieved Aug. 11, 2008).

[^12]: *See* USAC website, Contract Guidance,
    http://www.universalservice.org/sl/applicants/step04/contract-guidance.aspx
    (retrieved Aug. 11, 2008).

[^13]: *See* Letter from Schools and Libraries Division, Universal
    Service Administrative Company, to Rex James Theten, Grand Rapids
    Public Schools (dated Apr. 10, 2007) (regarding FCC Form 471 \#
    524297, Funding Request Number 1463942).

[^14]: *Id.*

[^15]: *See* Request for Review.

[^16]: *See* *id*. at 2; *see also* FCC Form 471, Grand Rapids Public
    Schools (filed Feb. 15, 2006).

[^17]: *See* Request for Review at 2.

[^18]: *Id.*; *see also* FCC Form 470, Grand Rapids Public Schools
    (posted Dec. 6, 2001) (FCC Form 470 \# 930410000393393).

[^19]: *See* Request for Review at 3. AT&T submitted a bid in response
    to Grand Rapids' FCC Form 470 \# 930410000393393 on January 10,
    2002. *Id.*

[^20]: *Id.* at Exhibit F.

[^21]: *Id*. at 3.

[^22]: *Id.* at Exhibits I and J.

[^23]: *Id.* at 3. The service agreement provided a 60-month term and a
    service start date of June 23, 2003. *Id.*

[^24]: *Id*.

[^25]: *Id*. at 3-4, 6.

[^26]: *See* 47 C.F.R. § 54.723.

[^27]: *See* 47 C.F.R. §54.504(c); *Request for Review of the Decision
    of the Universal Service Administrator by Bishop Perry Middle
    School, et al., Schools and Libraries Universal Service Support
    Mechanism,* File Nos. SLD-487170, *et al.*, CC Docket No. 02-6,
    Order, 21 FCC Rcd 5316, para. 1 (2006) (*Bishop Perry Order*). The
    Commission may waive any provision of its rules on its own motion
    and for good cause shown. 47 C.F.R. § 1.3. A rule may be waived
    where the particular facts make strict compliance inconsistent with
    the public interest. *Northeast Cellular Telephone Co. v. FCC*, 897
    F.2d 1164, 1166 (D.C. Cir. 1990) (*Northeast Cellular*). In
    addition, the Commission may take into account considerations of
    hardship, equity, or more effective implementation of overall policy
    on an individual basis. *WAIT Radio v. FCC*, 418 F.2d 1153, 1157
    (D.C. Cir. 1969), *affirmed by* *WAIT Radio v. FCC*, 459 F.2d 1203
    (D.C. Cir. 1972). In sum, waiver is appropriate if special
    circumstances warrant a deviation from the general rule, and such
    deviation would better serve the public interest than strict
    adherence to the general rule. *Northeast Cellular*, 897 F.2d at
    1166.

[^28]: *See* Request for Review at 2; *see also* FCC Form 471, Grand
    Rapids Public Schools (filed Feb. 15, 2006).

[^29]: *Bishop Perry Order*, 21 FCC Rcd 5316. As noted in the *Bishop
    Perry Order*, many applicants contend that the application process
    is complicated and time-consuming. *Id*. at 5319-20, para. 9. The
    Commission has started a proceeding to address, among other things,
    modifying the application and competitive bidding process for the
    schools and libraries support mechanism. *See* *Comprehensive Review
    of Universal Service Fund Management, Administration, and Oversight,
    Federal-State Joint Board on Universal Service, Schools and
    Libraries Universal Service Support Mechanism, Rural Health Care
    Support Mechanism, Lifeline and Linkup, Changes to the Board of
    Directors of the National Exchange Carrier Association, Inc.,* WC
    Docket Nos. 05-195, 02-60, 03-109, CC Docket Nos. 96-45, 02-6,
    97-21, Notice of Proposed Rulemaking and Further Notice of Proposed
    Rulemaking, 20 FCC Rcd 11308 (2005).

[^30]: 47 U.S.C. § 254(h). The Telecommunications Act of 1996, Pub. L.
    No. 104-104, 110 Stat. 56, amended the Communications Act of 1934.

[^31]: We estimate that the appeal granted in this order involves an
    application for approximately \$412,000 in funding. We note that
    USAC has already reserved sufficient funds to address outstanding
    appeals. *See, e.g.,* Universal Service Administrative Company,
    Federal Universal Service Support Mechanisms Fund Size Projections
    for the Fourth Quarter 2008 (Aug. 1, 2008). Thus, we determine that
    the action we take today should have minimal impact on the universal
    service fund as a whole.

[^32]: Additionally, nothing in this order is intended: (1) to authorize
    or require payment of any claim that previously may have been
    released by a service provider or applicant, including in a civil
    settlement or plea agreement with the United States; or (2) to
    authorize or require payment to any person or entity that has been
    debarred from participation in the E-rate program.

[^33]: *See Bishop Perry Order,* 21 FCC Rcd at 5320, para. 11 (finding
    no evidence of waste, fraud or abuse, misuse of funds or a failure
    to adhere to core program requirements).