*Pages 1--6 from  Microsoft Word - Cincinnati City School District.5.26.06.RELEASED VERSION.d*
 Federal  Communications  Commission  DA  06-  1107 
 Before  the  Federal  Communications  Commission 
 Washington,  DC  20554 
 In  the  Matter  of  )  ) 
 Request  for  Review  of  a  Decision  of  the  )  Universal  Service  Administrator  by  ) 
 )  Cincinnati  City  School  District  )  File  No.  SLD-  376499 
 Cincinnati,  Ohio  )  ) 
 Schools  and  Libraries  Universal  Service  )  CC  Docket  No.  02-  6  Support  Mechanism  ) 

 ORDER 
 Adopted:  May  26,  2006  Released:  May  26,  2006 
 By  the  Chief,  Wireline  Competition  Bureau: 
 I.  INTRODUCTION 
 1.  In  this  Order,  we  grant  an  appeal  of  a  decision  by  the  Universal  Service  Administrative  Company  (USAC)  rescinding  funding  already  committed  to  the  Cincinnati  City  School  District 
 (Cincinnati  School)  for  discounted  services  under  the  schools  and  libraries  universal  service  support  mechanism.  1  We  waive  section  54.  504(  c)  of  the  Commissions  rules,  which  states  that  an  applicant  for 
 schools  and  libraries  funding  must  have  a  legally  binding  agreement  in  place  when  it  submits  its  FCC  Form  471.  2  We  remand  the  appeal  to  USAC  for  action  consistent  with  this  Order,  and,  to  ensure  that  it  is 
 resolved  expeditiously,  we  direct  USAC  to  reinstate  the  funding  commitment  no  later  than  60  days  from  release  of  this  Order. 

 II.  BACKGROUND 
 2.  Under  the  schools  and  libraries  universal  service  support  mechanism,  also  known  as  the  E-  rate  program,  eligible  schools,  libraries,  and  consortia  that  include  eligible  schools  and  libraries  may 

 apply  for  discounts  for  eligible  telecommunications  services,  Internet  access,  and  internal  connections.  3  The  Commissions  rules  provide  that,  with  one  limited  exception  for  existing,  binding  contracts,  an 
 eligible  school,  library,  or  consortium  that  includes  eligible  schools  or  libraries  must  seek  competitive  bids  for  all  services  eligible  for  support.  4  In  accordance  with  the  Commissions  rules,  an  applicant  must 

 1  Cincinnati  City  School  District  Request  for  Review,  Form  471  Application  Number  376499,  Funding  Request 
 Number  1032245,  received  March  4,  2005  (Request  for  Review).  Section  54.719(  c)  of  the  Commissions  rules  provides  that  any  person  aggrieved  by  an  action  taken  by  a  division  of  the  Universal  Service  Administrative 

 Company  may  seek  review  from  the  Commission.  47  C.  F.  R.    54.  719(  c).  2 
 47  C.  F.  R.    54.504(  c).  3 
 47  C.  F.  R.    54.  501-  54.  503.  4 
 47  C.  F.  R.    54.  504,  54.  511(  c). 
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 file  with  USAC,  for  posting  to  USACs  website,  an  FCC  Form  470  requesting  discounted  services.  5  The  applicant  must  then  wait  28  days  before  entering  into  an  agreement  with  a  service  provider  for  the 
 requested  services.  6  Once  the  school  or  library  has  complied  with  the  Commissions  competitive  bidding  requirements  and  entered  into  agreements  for  eligible  services,  it  must  file  an  FCC  Form  471  application 
 to  notify  USAC  of  the  services  that  have  been  ordered,  the  service  providers  with  whom  the  applicant  has  entered  into  an  agreement,  and  an  estimate  of  the  funds  needed  to  cover  the  discounts  to  be  given  for 
 eligible  services.  7  The  Commissions  rules  state  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  FCC  Form  471  instructions  state  that  applicants  must  have  a  signed  contract  or  a  legally  binding  agreement  with  the  service  provider  for  all  services  ordered.  9 

 3.  Cincinnati  School  has  requested  review  of  USACs  decision  to  rescind  funding  because  it  did  not  have  a  legally  binding  contract  in  place  when  it  submitted  its  FCC  Form  471  for  Funding  Year 
 2003.  10  On  January  1,  2003,  Cincinnati  School  signed  a  Purchase  Order  with  Blackwell  Consulting  Services  (BCS)  for  network  consulting  services.  11  Approximately  one  month  later,  on  February  6,  2003, 

 5  47  C.  F.  R.    54.504(  b).  See  Schools  and  Libraries  Universal  Service,  Description  of  Services  Requested  and 
 Certification  Form,  OMB  3060-  0806  (September  1999)  (Funding  Years  2000,  2001,  2002  FCC  Form  470);  Schools  and  Libraries  Universal  Service,  Description  of  Services  Requested  and  Certification  Form,  OMB  3060-  0806  (April 

 2002)  (Funding  Year  2003  FCC  Form  470);  Schools  and  Libraries  Universal  Service,  Description  of  Services  Requested  and  Certification  Form,  OMB  3060-  0806  (May  2003)  (Funding  Year  2004  FCC  Form  470);  Schools  and 
 Libraries  Universal  Service,  Description  of  Services  Requested  and  Certification  Form,  OMB  3060-  0806  (October  2004)  (Funding  Year  2005  FCC  Form  470)  (collectively,  FCC  Form  470). 
 6  47  C.  F.  R.    54.504(  b)(  4). 
 7  47  C.  F.  R.    54.504(  c).  See  Schools  and  Libraries  Universal  Service,  Services  Ordered  and  Certification  Form, 
 OMB  3060-  0806  (December  1997)  (Funding  Year  1999  FCC  Form  471);  Schools  and  Libraries  Universal  Service,  Services  Ordered  and  Certification  Form,  OMB  3060-  0806  (September  1999)  (Funding  Year  2000  FCC  Form  471); 

 Schools  and  Libraries  Universal  Service,  Services  Ordered  and  Certification  Form,  OMB  3060-  0806  (October  2000)  (Funding  Year  2001  FCC  Form  471);  Schools  and  Libraries  Universal  Service,  Services  Ordered  and  Certification 
 Form,  OMB  3060-  0806  (November  2001)  (Funding  Year  2002  FCC  Form  471);  Schools  and  Libraries  Universal  Service,  Services  Ordered  and  Certification  Form,  OMB  3060-  0806  (October  2003)  (Funding  Year  2004  FCC  Form 
 471);  Schools  and  Libraries  Universal  Service,  Services  Ordered  and  Certification  Form,  OMB  3060-  0806  (November  2004)  (Funding  Year  2005  FCC  Form  471)  (collectively,  FCC  Form  471). 
 8  47  C.  F.  R.    54.504(  c).  See  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)  (Waldwick  Order);  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)  (St.  Joseph  Order). 
 9  Instructions  for  Completing  the  Schools  and  Libraries  Universal  Service,  Services  Ordered  and  Certification  Form, 
 OMB  3060-  0806  (November  2001)  (FCC  Form  471  Instructions).  10 
 See  Letter  from  Schools  and  Libraries  Division,  Universal  Service  Administrative  Company,  to  Brian  Anderson,  Cincinnati  City  School  District,  dated  January  5,  2005  (Commitment  Adjustment  Letter). 

 11  See  Request  for  Review,  Attachment  G  (The  Board  of  Education  Cincinnati  City  School  District,  Purchase  Order 
 No.  396629,  dated  January  31,  2003)  (Purchase  Order).  The  Purchase  Order  was  contingent  upon  Cincinnati  School  receiving  an  E-  rate  discount  of  no  less  than  90  percent,  and  a  successful  negotiation  of  a  terms  and  conditions 

 contract.  Id.  Although  the  Purchase  Order  description  was  for  network  consulting  services,  the  Statement  of  Services  in  the  Consulting  Services  Agreement  included  that  the  [  c]  onsultant  shall  furnish  all  necessary  personnel, 
 facilities,  equipment  and  materials  for  performance  of  the  work  hereunder.).  Cincinnati  School  FCC  Form  471,  Blackwell  Consulting  Services  of  Ohio,  LLC  Consulting  Services  Agreement,  dated  July  2,  2003,  (BCS  Services 
 Agreement). 
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 Cincinnati  School  filed  an  FCC  Form  471  that  included  Funding  Request  Number  (FRN)  1032245  for  internal  connections  identifying  BCS  as  the  service  provider.  12  On  July  27,  2003,  Cincinnati  School 
 entered  into  a  signed  contract  with  BCS.  13  On  January  5,  2005,  USAC  notified  Cincinnati  School  that  it  was  rescinding  funding  in  full  for  FRN  1032245  due  to  the  fact  that  Cincinnati  School  did  not  have  a 
 contract  or  a  legally  binding  agreement  in  place  at  the  time  its  FCC  Form  471  was  submitted  to  USAC.  14  USAC  found  that  the  Purchase  Order  submitted  by  Cincinnati  School  did  not  constitute  a  legally  binding 
 agreement.  15  On  March  3,  2005,  Cincinnati  School  then  filed  the  instant  Request  for  Review  with  the  Commission.  16 

 4.  In  its  Request  for  Review,  Cincinnati  School  argues  that  USAC  erred  in  rescinding  funding  already  committed  for  Funding  Year  2003  based  on  a  revised  and  stronger  definition  of  what 
 constitutes  a  legally  binding  agreement.  17  Cincinnati  School  contends  that  it  fully  complied  with  both  the  letter  and  intent  of  the  rules  in  effect  at  the  time  it  submitted  its  FCC  Form  471.  18  Specifically,  Cincinnati 
 School  notes  that  it  timely  filed  an  FCC  Form  470,  adhered  to  the  Commissions  competitive  bidding  rules,  and  issued  a  Purchase  Order  prior  to  filing  an  FCC  Form  471.  19  Cincinnati  School  asserts  that, 
 during  the  17  months  between  USACs  issuance  of  its  Funding  Commitment  Decision  Letter  and  its  Commitment  Adjustment  Letter,  the  service  provider  performed  in  good  faith  more  than  $1  million 
 dollars  of  work.  20  Thus,  Cincinnati  School  requests  a  reinstatement  of  the  funding  commitment  to  cover  the  discounted  portion  of  the  work  already  performed  by  BCS.  21 

 5.  The  Commission  may  waive  any  provision  of  its  rules  on  its  own  motion  and  for  good  cause  shown.  22  A  rule  may  be  waived  where  the  particular  facts  make  strict  compliance  inconsistent  with 
 the  public  interest.  23  In  addition,  the  Commission  may  take  into  account  considerations  of  hardship, 

 12  FCC  Form  471,  Cincinnati  City  School  District,  certified  February  6,  2003  (Cincinnati  School  FCC  Form  471). 
 13  See  BCS  Services  Agreement. 
 14  See  Commitment  Adjustment  Letter.  USAC  noted  that,  prior  to  Funding  Year  2004,  the  Commission  interpreted 
 the  requirement  that  applicants  have  a  signed  contract  at  the  time  of  submission  of  an  FCC  Form  471  to  mean  that  it  could  be  a  legally  binding  agreement,  not  necessarily  a  signed  contract.  Id.  See  also  FCC  Form  471  Instructions 

 (Signed  Contracts:  You  MUST  have  a  signed  contract  (or  legally  binding  agreement  between  you  and  your  service  provider  preparatory  to  a  formal  signed  contract)  for  all  services  you  order  on  your  Form  471  .  .  .). 
 15  Commitment  Adjustment  Letter. 
 16  See  Request  for  Review. 
 17  Request  for  Review  at  2. 
 18  Id.  In  fact,  Cincinnati  School  argues  that  the  submission  of  a  Purchase  Order  is  consistent  with  written  direction 
 given  to  service  providers  by  USAC  in  December  2002  that  stated  that  examples  of  a  legally  binding  agreement  include:  a  Purchase  Order,  a  bid  signed  by  both  the  applicant  and  the  service  provider,  or  a  letter  from  the 

 applicants  purchasing  department  awarding  the  bid  to  the  named  service  provider.  See  Request  for  Review  at  3,  Attachment  (Minutes  from  Wednesday  Service  Provider  Conference  Call    December  18,  2002)  at  2. 
 19  Id. 
 20  Id.  at  4;  see  Letter  from  Schools  and  Libraries  Division,  Universal  Service  Administrative  Company,  to  Brian 
 Anderson,  Cincinnati  City  School  District,  dated  June  30,  2003  (Funding  Commitment  Decision  Letter);  Commitment  Adjustment  Letter. 

 21  Request  for  Review  at  5. 
 22  47  C.  F.  R.    1.3. 
 23  Northeast  Cellular  Telephone  Co.  v.  FCC,  897  F.  2d  1164,  1166  (D.  C.  Cir.  1990)  (Northeast  Cellular). 
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 equity,  or  more  effective  implementation  of  overall  policy  on  an  individual  basis.  24  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.  25 
 III.  DISCUSSION 
 6.  We  grant  the  appeal  of  the  decision  by  USAC  rescinding  funding  to  Cincinnati  School  for  discounted  services  under  the  E-  rate  program.  26  Based  upon  the  facts  and  circumstances  of  this  case,  we 

 find  that  good  cause  exists  to  waive  section  54.504(  c)  of  the  Commissions  rules,  which  states  that  an  applicant  for  E-  rate  funding  must  have  a  legally  binding  contract  in  place  when  it  submits  its  FCC  Form 
 471.  27 
 7.  Competitive  bidding  requirements  are  necessary  to  ensure  more  efficient  pricing  for  telecommunications  and  information  services  purchased  by  schools  and  libraries.  Section  54.504(  c) 

 requires  that  an  applicant  have  a  signed  contract  in  place  before  filing  its  FCC  Form  471.  28  The  record  demonstrates  that  while  Cincinnati  School  technically  missed  the  program  deadline  for  having  a  written 
 contract  in  place  at  the  time  it  submitted  its  FCC  Form  471,  Cincinnati  School  had  a  legally  binding  agreement  in  place  during  Funding  Year  2003  and  before  the  vendor,  BCS,  began  providing  services.  29 
 Cincinnati  Schools  FCC  Form  471  was  certified  approximately  one  month  after  signing  a  valid  Purchase  Order  and  prior  to  BCS  performing  services.  30  We  find,  therefore,  that  in  this  case  the  policy  behind  the 
 rule  was  satisfied  even  if  Cincinnati  School  did  not  technically  meet  the  requirements  of  the  rule.  31 
 8.  We  emphasize  that  our  competitive  bidding  rules  are  a  central  tenet  of  the  E-  rate  program,  and  a  tool  for  preventing  waste,  fraud  and  abuse.  Here,  we  note  there  is  no  evidence  in  the 

 record,  at  this  time,  that  Cincinnati  School  engaged  in  activity  intended  to  defraud  or  abuse  the  E-  rate  program.  Finally,  we  find  that,  for  this  applicant,  denying  its  requests  for  funding  would  create  undue 
 hardship  and  prevent  it  from  receiving  E-  rate  funding  for  work  already  performed  by  BCS.  Accordingly,  we  find  that  good  cause  exists  to  grant  Cincinnati  School  a  waiver  of  section  54.504(  c)  of  the 
 Commissions  rules,  and  remand  this  appeal  to  USAC  for  further  processing  consistent  with  our 

 24  WAIT  Radio  v.  FCC,  418  F.  2d  1153,  1157,  (D.  C.  Cir.  1969),  affd  459  F.  2d  1203  (D.  C.  Cir.  1972). 
 25  Northeast  Cellular,  897  F.  2d  at  1166. 
 26  Request  for  Review. 
 27  47  C.  F.  R.    54.504(  c). 
 28  Id. 
 29  See  Request  for  Review.  Cincinnati  School  also  had  a  signed  contract  in  place  prior  to  the  submission  of  its  FCC 
 Form  486.  Id.  at  3.  The  FCC  Form  486  (Receipt  of  Service  Confirmation  Form)  is  used  by  the  Billed  Entity  who  filed  an  FCC  Form  471  on  behalf  of  an  eligible  school,  school  district,  library,  or  a  consortium  of  those  entities  to 

 inform  USAC  when  the  Billed  Entity  and/  or  the  eligible  entities  that  it  represents  is  receiving,  is  scheduled  to  receive,  or  has  received  service  in  the  relevant  Funding  Year  from  the  named  service  provider(  s). 

 See  http://  www.  universalservice.  org/_  res/  documents/  sl/  pdf/  486i.  pdf  (retrieved  April  28,  2006).  30 
 See  Cincinnati  School  FCC  Form  471;  Purchase  Order;  Request  for  Review  at  5.  31 
 See  Requests  for  Waiver  of  the  Decision  of  the  Universal  Service  Administrator  by  the  Illinois  School  for  the  Visually  Impaired,  Schools  and  Libraries  Universal  Service  Support  Mechanism,  File  No.  SLD-  419654,  CC  Docket 

 No.  02-  6,  Order,  DA  06-  785,  para.  7  (Wireline  Comp.  Bur.  rel.  April  3,  2006). 
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 decision.  32  To  ensure  that  it  is  resolved  expeditiously,  we  direct  USAC  to  reinstate  the  funding  commitment  no  later  than  60  days  from  the  release  of  this  Order. 
 9.  We  note,  however,  the  limited  nature  of  this  decision.  As  stated  above,  our  competitive  bidding  rules  are  necessary  to  ensure  more  efficient  pricing  for  telecommunications  and  information 
 services  purchased  by  schools  and  libraries.  33  Although  we  grant  Cincinnati  Schools  appeal,  our  action  here  does  not  eliminate  the  requirement  that  applicants  have  a  signed  contract  in  place  when  submitting 
 an  FCC  Form  471.  34  We  continue  to  require  E-  rate  applicants  to  submit  complete  and  accurate  contract  information  to  USAC  as  part  of  the  application  review  process. 

 10.  Finally,  we  are  committed  to  guarding  against  waste,  fraud,  and  abuse,  and  to  ensuring  that  funds  disbursed  through  the  E-  rate  universal  service  mechanism  are  used  for  appropriate  purposes. 
 We  emphasize  that  we  retain  the  discretion  to  evaluate  the  uses  of  monies  disbursed  through  the  E-  rate  mechanism  and  to  determine  on  a  case-  by-  case  basis  whether  waste,  fraud,  or  abuse  of  program  funds 
 occurred  and  whether  recovery  is  warranted.  If  we  find  that  funds  were  not  used  properly,  we  will  require  USAC  to  recover  such  funds  through  its  normal  processes.  Although  we  grant  the  appeal  addressed  here, 
 we  reserve  the  right  to  conduct  audits  and  investigations  to  determine  compliance  with  the  program  rules  and  requirements. 

 IV.  ORDERING  CLAUSES 
 11.  ACCORDINGLY,  IT  IS  ORDERED  that,  pursuant  to  the  authority  contained  in  sections  1-  4  and  254  of  the  Communications  Act  of  1934,  as  amended,  47  U.  S.  C.    151-  154  and  254,  and 

 pursuant  to  authority  delegated  in  sections  0.91,  0.291,  1.3  and  54.  722(  a)  of  the  Commissions  rules,  47  C.  F.  R.    0.  91,  0.291,  1.3  and  54.722(  a),  that  the  Request  for  Review  filed  by  Cincinnati  City  School 
 District  IS  GRANTED. 
 12.  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  pursuant  to 

 authority  delegated  in  sections  0.91,  0.  291,  1.  3  and  54.722(  a)  of  the  Commissions  rules,  47  C.  F.  R.    0.91,  0.291,  1.3  and  54.722(  a),  that  section  47.  C.  F.  R.    54.504(  c)  IS  WAIVED. 

 13.  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  pursuant  to 
 authority  delegated  in  sections  0.91,  0.  291,  1.  3  and  54.722(  a)  of  the  Commissions  rules,  47  C.  F.  R.    0.91,  0.291,  1.  3  and  54.  722(  a),  that  the  Request  for  Review  filed  by  Cincinnati  City  School  District  IS 
 REMANDED  to  USAC  for  further  consideration  in  accordance  with  the  terms  of  this  Order. 
 14.  IT  IS  FURTHER  ORDERED  that,  pursuant  to  the  authority  contained  in  sections  1-  4  and  254  of  the  Communications  Act  of  1934,  as  amended,  47  U.  S.  C.    151-  154  and  254,  and  pursuant  to 

 authority  delegated  in  sections  0.91,  0.  291,  1.  3  and  54.722(  a)  of  the  Commissions  rules,  47  C.  F.  R.    0.91,  0.291,  1.  3  and  54.  722(  a),  USAC  SHALL  REINSTATE  the  funding  commitment  no  later  than  60 
 calendar  days  from  release  of  this  Order. 

 32  See  47  C.  F.  R.    54.  504(  c). 
 33  Supra  para.  7. 
 34  See  47  C.  F.  R.    54.  504(  c). 
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 15.  IT  IS  FURTHER  ORDERED  that  this  Order  SHALL  BE  EFFECTIVE  upon  release. 
 FEDERAL  COMMUNICATIONS  COMMISSION 

 Thomas  J.  Navin  Chief 
 Wireline  Competition  Bureau 
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