Federal Register / Vol. 80, No. 23 / Wednesday, February 4, 2015 / Rules and Regulations 5961 

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* P = Sites with partial deletion(s). 

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[FR Doc. 2015–02266 Filed 2–3–15; 8:45 am] 

BILLING CODE 6560–50–P 

FEDERAL COMMUNICATIONS 

COMMISSION 

47 CFR Part 54 

[WC Docket Nos. 10–90 and 13–184; FCC 

14–189] 

Modernization of the Schools and 

Libraries ‘‘E-rate’’ Program and 

Connect America Fund 

AGENCY: Federal Communications 

Commission. 

ACTION: Final rule. 

SUMMARY: In this document, the Federal 

Communications Commission 

(Commission) takes the next critical 

steps to modernize the Universal 

Service Fund’s Schools and Libraries 

program, known as E-rate. Building on 

the E-rate Modernization Order, the 

Commission adopted in July, the 

improvements to the program that the 

Commission adopts in this Order seek to 

close the high-speed connectivity gap 

between rural schools and libraries and 

their urban and suburban counterparts, 

and provide sufficient and certain 

funding for high-speed connectivity to 

and within all eligible schools and 

libraries. The Commission takes these 

actions to ensure the continued success 

of the E-rate program as it transitions 

from supporting legacy services to 

focusing on meeting the high-speed 

broadband connectivity needs of 

schools and libraries consistent with the 

recently adopted program goals and 

long-term connectivity targets. In the 

Order on Reconsideration, the 

Commission grants in part the petitions 

for reconsideration of the areas 

designated as urban for purposes of the 

E-rate program. The Commission also 

denies petitions for reconsideration of 

the document retention period, the 

phase out of support for telephone 

components and other services, and 

funding commitments that cover 

multiple years. At the same time, the 

Commission clarifies our cost 

effectiveness test for individual data 

plans and the cost allocation rules for 

circuits carrying voice services. 

DATES: Effective March 6, 2015, except 

for amendments to §§ 54.313(e)(2) and 

(f)(1), 54.503(c)(1), and 54.504(a)(1)(iii), 

which are subject to the PRA and OMB 

approval of the information collection 

requirements. FCC will publish a 

document in the Federal Register 

announcing the effective date. The 

amendments to §§ 54.308(b), 54.309(b), 

54.505(b)(3) introductory text and 

(b)(3)(i), and 54.507(a) introductory text, 

(a)(1), and (c) are effective on July 1, 

2015; and amendments to §§ 54.505(b) 

introductory text, (c), and (f) and 54.518 

are effective on July 1, 2016. 

FOR FURTHER INFORMATION CONTACT: Kate 

Dumouchel, Wireline Competition 

Bureau, Telecommunications Access 

Policy Division, at (202) 418–7400 or 

TTY: (202) 418–0484. 

SUPPLEMENTARY INFORMATION: This is a 

summary of the Commission’s Second 

Report and Order and Order on 

Reconsideration, in WC Docket Nos. 10– 

90 and 13–184; FCC 14–189, adopted on 

December 11, 2014 and released on 

December 19, 2014. The full text of this 

document is available for public 

inspection during regular business 

hours in the FCC Reference Center, 

Room CY–A257, 445 12th Street SW., 

Washington, DC 20554. Or at the 

following Internet address: https://

apps.fcc.gov/edocs_public/attachmatch/

FCC-14-189A1.pdf. 

I. Introduction 

1. In the Second E-rate Modernization 

Report and Order (Order) and Order on 

Reconsideration, we take the next 

critical steps to modernize the Universal 

Service Fund’s Schools and Libraries 

program, known as E-rate. Building on 

the E-rate Modernization Order we 

adopted in July, the improvements to 

the program that we adopt in this Order 

seek to close the high-speed 

connectivity gap between rural schools 

and libraries and their urban and 

suburban counterparts, and provide 

sufficient and certain funding for highspeed connectivity to and within all 

eligible schools and libraries. We take 

these actions to ensure the continued 

success of the E-rate program as it 

transitions from supporting legacy 

services to focusing on meeting the 

high-speed broadband connectivity 

needs of schools and libraries consistent 

with the recently adopted program goals 

and long-term connectivity targets. 

2. Through the changes we make to 

the E-rate program, we take further steps 

forward in our effort to modernize the 

program and place it on firm footing to 

meet the program goals. As the changes 

made in this Order and the E-rate 

Modernization Order are implemented, 

we will continue to identify additional 

steps that can to be taken to further 

modernize the E-rate program and 

achieve our goals of: (1) ensuring 

affordable access to high-speed 

broadband; (2) maximizing the costeffectiveness of spending for E-rate 

supported purchases; and (3) making 

the E-rate application process and other 

E-rate processes fast, simple, and 

efficient. We recognize that these 

changes will require adjustments by 

applicants, service providers, and other 

stakeholders, and in conjunction with 

USAC we commit to ensure that 

sufficient training and educational 

resources are provided to assist these 

groups during this transition. Finally, as 

always, we welcome feedback from 

applicants, service providers, teachers, 

librarians, state and local governments, 

and all other stakeholders on additional 

measures to reach our goals faster and 

improve the E-rate program. 

II. Maximizing Schools’ and Libraries’ 

Options for Purchasing Affordable 

High-Speed Broadband Connectivity 

3. We focus in this section on 

providing schools and libraries, 

particularly those in rural areas, more 

options for purchasing affordable highspeed broadband connections. We agree 

with the many commenters who make 

clear that in order to meet the 

Commission’s connectivity targets, in 

addition to increased funding, we must 

make changes to the program to meet 

the need for affordable high-speed 

connectivity to schools and libraries. 

The CoSN Survey identifies the monthly 

cost of recurring Internet access services 

and an inability to pay for the capital or 

non-recurring costs to get high-speed 

connections as the two biggest barriers 

to increasing connectivity to schools. 

Likewise, the American Library 

Association (ALA), the Public Library 

Association, and others indicate that 

lack of access to broadband 

infrastructure and the high costs of 

recurring services hamper libraries’ 

ability to meet our E-rate goals. As ALA 

has explained, our nation’s libraries 

depend on affordable, scalable, highcapacity broadband in order to complete 

education, jumpstart employment and 

entrepreneurship, and foster individual 

empowerment and engagement. To meet 

the connectivity targets we adopted in 

the E-rate Modernization Order, 

substantial numbers of schools and 

libraries will need to find vendors 

willing and able to provide affordable 

high-speed connections to their 

buildings and be able to afford the 

recurring costs of those high-speed 

connections. 

4. Over the course of the last 18 years, 

the Commission has recognized the 

importance of giving local school 

districts and libraries the flexibility to 

purchase E-rate supported services that 

meet their needs. With rare exceptions, 

however, the program has not adopted 

new tools for applicants to use in 


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purchasing connectivity. The actions we 

take today give applicants more options 

for purchasing connectivity and 

represent a crucial step in meeting our 

first goal for the E-rate program: 

ensuring affordable access to high-speed 

broadband sufficient to support digital 

learning in schools and robust 

connectivity for all libraries. 

5. The E-rate program historically has 

fully funded all priority one (now 

category one) funding requests, which 

include funding requests for high-speed 

broadband connections to schools and 

libraries. Despite the program’s history 

of funding all priority one requests, the 

record demonstrates that a substantial 

percentage of U.S. schools do not meet 

the short term Internet Access 

connectivity target of 100 Mbps per 

1,000 users that we adopted in the Erate Modernization Order. Similarly, the 

record demonstrates that most libraries 

do not meet our short-term connectivity 

targets. In addition, by not effectively 

enabling E-rate applicants to undertake 

large construction projects, purchase 

dark fiber and consider self-construction 

of high-speed networks, our current 

rules and procedures prevent some 

applicants from choosing the most costeffective options for increasing the highspeed broadband connections to their 

school and library buildings. 

6. We therefore take actions targeted 

at closing the rural connectivity gap and 

increasing affordable high-speed 

broadband connections to schools and 

libraries. First, we direct USAC to 

suspend its policy requiring applicants 

to amortize over multiple years upfront 

charges for category one special 

construction exceeding $500,000 while 

allowing applicants to pay the nondiscounted portion of category one 

special construction charges over four 

years. Next, in limited circumstances 

and with appropriate safeguards, we 

adopt changes to the E-rate program’s 

rules to equalize the treatment of lit and 

dark fiber, to allow applicants to selfconstruct and operate connections to 

their school and library buildings, and 

to incentivize federal-state cooperation 

in deploying broadband infrastructure 

to schools and libraries in hard to 

connect areas. Finally, we establish an 

obligation for recipients of high-cost 

support to offer broadband service to 

requesting eligible schools and libraries 

at rates reasonably comparable to rates 

charged in urban areas. 

7. We direct USAC, working with the 

Wireline Competition Bureau (Bureau) 

and the Office of the Managing Director 

(OMD), to implement the changes we 

make to the program in this Order. In so 

doing, we reaffirm our delegation of 

authority to the Bureau to issue orders 

interpreting our E-rate rules and 

otherwise provide clarification and 

guidance in the case of any ambiguity 

that may arise as necessary to ensure 

that support for services provided to 

schools and libraries operate to further 

the goals we have adopted for the E-rate 

program. We also direct the Bureau, 

working with OMD and other 

Commission staff, to make changes to 

the E-rate information collections, as 

needed, and to provide direction to 

USAC to implement the changes. 

8. These actions will result in 

increased high-speed broadband 

connections to schools and libraries in 

all areas in furtherance of the E-rate 

program’s Internet access and WAN/

last-mile goals and are consistent with 

section 254 of the Act, which, inter alia, 

directs the Commission to ‘‘enhance, to 

the extent technically feasible and 

economically reasonable, access to 

advanced telecommunications and 

information services’’ for schools and 

libraries. Moreover, these changes will 

allow applicants more flexibility to 

pursue the most cost-effective option for 

connecting schools and library 

buildings. Although these incentives 

will likely have the greatest effect on 

broadband availability and affordability 

in rural and high-cost areas, they will 

also give E-rate applicants in urban 

areas more purchasing options. 

9. We are cognizant of the fact that 

some commenters have expressed 

concerns that the cumulative effect of 

the actions we take in this order to 

facilitate greater use of E-rate dollars for 

special construction charges could 

result in insufficient funds being 

available for other category one 

expenses and category two costs. In 

order to address these concerns, we 

require USAC to report to the Bureau if 

E-rate commitments for special 

construction charges resulting from the 

rules we adopt today exceed ten percent 

of the total E-rate cap for any given 

funding year. In determining whether a 

report is required, USAC shall consider 

the commitments for special 

construction charges for dark fiber, selfconstruction, and for special 

construction that takes advantage of 

state matching funds for a given funding 

year. Any such report shall also provide 

information to the Bureau concerning 

the cost-effectiveness of the special 

construction projects to which USAC 

has committed funding. That report 

shall be informed by the work done on 

cost-effective analysis as provided for in 

this Order. The Bureau shall present the 

findings to the full Commission for its 

consideration of the impact of special 

construction charges on the long-term 

financial viability of the program and 

the ability of the Commission to meet 

the E-rate program goals adopted in the 

July E-rate Modernization Order. 

A. Making the Payment Options for 

Special Construction Charges More 

Flexible (WC Docket 13–184) 

10. To help applicants overcome the 

cost barrier to high-speed broadband 

deployment projects, we make a set of 

administrative and rule changes that 

will help schools and libraries more 

easily undertake projects requiring 

special construction charges. First, we 

direct USAC to temporarily suspend its 

policy of requiring applicants to 

amortize large non-recurring category 

one charges to encourage vendors to bid 

on E-rate projects requiring special 

construction. Second, we allow 

applicants to pay the non-discounted 

share of category one special 

construction charges over four years 

rather than requiring schools or libraries 

working with limited budgets to pay the 

entirety of their share in a single year. 

We anticipate these changes will 

provide the right incentives to schools 

and libraries to consider necessary 

broadband infrastructure deployments 

and will attract a diverse slate of 

vendors to such projects from which the 

applicants can choose. 

1. Suspending USAC’s Multi-Year 

Amortization Policy for Non-Recurring 

Construction Costs 

11. To encourage efficient investment 

in high-speed broadband infrastructure, 

including the deployment of fiber, we 

direct USAC to suspend for four years 

its policy of requiring applicants to 

amortize large category one nonrecurring charges. Encouraging 

construction of high-speed connections 

to schools and libraries is a crucial part 

of our effort to ensure that all schools 

and libraries achieve our connectivity 

targets. Suspending the amortization 

requirement will give applicants the 

flexibility to plan large construction 

projects knowing they can recover the Erate supported portion of any nonrecurring costs upfront, thus providing 

greater certainty regarding funding and 

removing this potential barrier to 

infrastructure investment. 

12. We are comfortable taking this 

step not only because it will encourage 

deployment but also because the 

concerns described by the Commission 

in 2000 that caused USAC to institute 

this restriction have proven to be not 

well-founded. In the Brooklyn Order, 

the Commission expressed concern that 

large upfront payments for nonrecurring services could create a critical 

drain on the Fund, thereby limiting the 

number of schools and libraries that 


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Federal Register / Vol. 80, No. 23 / Wednesday, February 4, 2015 / Rules and Regulations 5963 

would receive funding. To prevent such 

an occurrence, the Commission held 

that applicants must amortize upfront 

non-recurring charges when such 

charges vastly exceed the monthly 

recurring charges of the relevant service. 

In response to this general direction, 

USAC implemented a policy requiring 

applicants to amortize upfront or nonrecurring charges of $500,000 or more 

over a period of at least three years. 

13. Large upfront payments have not 

proven to be a drain on the Fund, and 

would not have been even if they had 

not been amortized. Moreover, we agree 

with commenters that argue that 

suspension of this amortization policy is 

likely to incentivize efficient 

investments in infrastructure, including 

the deployment of fiber. As commenters 

point out, USAC’s current amortization 

policy requires many service providers 

to obtain financing for special 

construction projects, who then pass 

along the costs of this financing to 

applicants in the form of larger monthly 

recurring costs. Consequently, USAC’s 

current amortization policy may 

actually increase the total costs borne 

both by applicants and the program. In 

addition, ALA and other commenters 

indicate that lack of certainty about the 

ability to recover costs in future funding 

years may deter some applicants from 

investing in large infrastructure projects 

that will be amortized over future 

funding years. 

14. Some commenters express the 

same concern articulated by the 

Commission in the Brooklyn Order, that 

if large numbers of applicants seek 

support for substantial upfront 

construction charges, the Commission 

could receive a drastic increase in 

category one requests. For that reason, 

we choose to test the impact of 

abolishing the amortization requirement 

by temporarily suspending the 

requirement for the next four funding 

years. We are confident that temporarily 

suspending the amortization 

requirement will not create risk of 

insufficient category one support 

available for other schools and libraries, 

particularly in light of the increase in 

the E-rate funding cap that we adopt 

today. In the E-rate Modernization 

Order, we began the process of focusing 

E-rate support on high-speed broadband 

for our nation’s schools and libraries. In 

this Order, as discussed in more detail 

below, we are raising the annual E-rate 

cap, in part to ensure there are sufficient 

category one funds available to meet the 

build-out costs of connecting currently 

underserved schools and libraries. 

Moreover, while some providers will 

offer an upfront payment option, we 

recognize that in other instances 

providers will continue to incorporate 

the cost of building out to schools and 

libraries into their recurring charges. In 

addition, because applicants are 

responsible for paying the nondiscounted portion of the services they 

purchase, we expect that this 

requirement will deter some applicants 

from undertaking expensive 

construction projects. Applicants also 

remain subject to the requirement to 

select the most cost-effective service 

offering, which will further dampen the 

likelihood of a drastic increase in 

category one requests. 

15. We therefore direct USAC to 

suspend application of its multi-year 

amortization policy for funding years 

2015 through 2018 and to allow 

applicants to seek support for upfront or 

non-recurring charges without imposing 

any amortization requirements. In 

evaluating this USAC requirement, we 

considered a permanent end to the 

requirement instead of merely 

suspending its application. However, 

we are cognizant of the interest reflected 

in the Brooklyn Order of balancing the 

immediate needs of some E-rate 

applicants against the needs of all of the 

applicants. We therefore adopt the 

additional safeguard of suspending 

rather than eliminating USAC’s 

amortization policy for the limited 

duration of the next four funding years. 

We expect that USAC will keep the 

Bureau apprised of how many and to 

what extent applicants utilize this 

suspension for the deployment of 

infrastructure. We also direct the Bureau 

to revise our data collection to collect 

such information beginning in funding 

year 2016. We believe this balanced 

approach will provide us with sufficient 

data to determine the best course 

forward for subsequent funding years. 

2. Allowing Applicants To Pay the NonDiscounted Portion of Non-Recurring 

Construction Costs Over Multiple Years 

16. To address the challenge some 

applicants face in having sufficient 

funds to pay the non-discounted portion 

of special construction charges, we 

allow applicants to enter into an 

installment payment plan with their 

service providers for the non-discounted 

portion of category one special 

construction charges beginning in 

funding year 2016. Currently, applicants 

must pay the entire non-discounted 

portion of a special construction project 

to the service provider within 90 days 

of delivery of service. However, the 

record demonstrates that obtaining 

funding to pay the entire nondiscounted share of special construction 

charges is a major barrier to high speed 

connectivity for some schools and 

libraries. To help schools and libraries 

overcome this barrier, we will allow 

them to pay the non-discounted portion 

of special construction charges in 

installment payments of up to four years 

from the first day of the relevant 

funding year. Pursuant to our direction 

above to USAC to suspend its 

amortization policy, applicants will be 

able to seek the discounted portion of 

those same category one special 

construction charges during a single 

funding year. 

17. Applicants who are interested in 

this flexible payment arrangement must 

specifically include this request in their 

bids on their FCC Forms 470. By 

notifying all potential bidders of their 

interest, applicants will ensure that 

vendors know and understand all 

expected terms and conditions of the 

school or library’s bid and that all 

potential service providers who are 

willing to offer an installment payment 

option will be on notice of the 

applicant’s interest and will bid 

accordingly. 

18. Service providers are under no 

obligation to allow this payment 

arrangement and should not do so in the 

absence of such a request on an 

applicant’s FCC Form 470. However, 

those that do offer installment payments 

in response to an FCC Form 470 seeking 

bids that include this option must 

specify in their bid submission whether 

they are willing to allow this payment 

arrangement and must also disclose all 

material terms of that arrangement, 

including any interest rate they would 

charge the applicant and the term of the 

installment payment plan they are 

offering. 

19. We recognize that allowing 

applicants greater flexibility to pay the 

non-discounted cost of special 

construction charges combined with the 

other changes we make in this Order 

could increase demand for category one 

support. However, a temporary increase 

in the demand to the Fund for special 

construction charges will ultimately be 

beneficial to E-rate applicants and the 

stability of the Fund. It will result in 

more students and library patrons 

enjoying access to scalable, high-speed 

broadband connections and we expect 

increasing flexibility for applicant’s 

non-recurring payments for special 

construction will allow applicants to 

structure the agreements with service 

providers so as to lower future costs for 

recurring services. Moreover, the 

increase in the E-rate funding cap we 

adopt today should alleviate concerns 

resulting from any temporary increase 

in demand for special construction 

charges. 


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20. As with our suspension of the 

amortization requirement, we expect 

that USAC will keep the Bureau 

apprised of how many and to what 

extent applicants utilize this installment 

payment option for the deployment of 

infrastructure. We also direct the Bureau 

to consider how best to modify our data 

collections to capture information about 

the extent to which applicants take 

advantage of this option and to require 

reporting and certifications by 

applicants and service providers 

regarding the payment of the applicant’s 

non-discounted share of special 

construction charges. 

21. We also amend § 54.504(a)(1)(iii) 

to require applicants that take advantage 

of this flexible payment option to certify 

on their FCC Forms 471 that they are 

able to pay all required installment 

payments. Our rule currently requires 

applicants to certify that they are able to 

pay the discounted charges for eligible 

services from funds to which access has 

been secured in the current funding 

year. This change is necessary because 

applicants on an installment plan may 

not have secured all of their nondiscounted payments in the applicable 

funding year. 

22. We also take this opportunity to 

remind applicants and vendors that it is 

a violation of our competitive bidding 

rules for service providers to offer to pay 

the non-discounted portion of E-rate 

supported services, and a violation of 

our gift rules and the prohibition on the 

receipt of rebates for services or 

products purchased with E-rate 

discounts to forgive payment of such 

charges or to accept such payment 

forgiveness. By extension, service 

providers that accept installment 

payments of the non-discounted share 

of E-rate supported services cannot 

forgive any or all such payments. 

Because interest and finance charges are 

not eligible for E-rate support, 

applicants may not seek support for 

these charges. Additionally, we remind 

applicants and service providers that 

our document retention rules require 

them to maintain records of payments 

made so that USAC can verify that an 

applicant has paid its full nondiscounted share. Applicants should 

also be prepared to provide 

documentation verifying their 

agreements with service providers for an 

installment payment plan. 

B. Modifying the Commission’s Eligible 

Services List and Rules To Expand 

Access To Low Cost Fiber (WC Docket 

13–184) 

23. To further expand the competitive 

options for schools and libraries seeking 

high-speed broadband connectivity and 

to drive down broadband costs for 

applicants and the Fund, we amend our 

eligible services list, effective in funding 

year 2016, to equalize the E-rate 

program’s treatment of lit and dark fiber; 

amend our rules to allow applicants to 

construct their own fiber networks 

under limited circumstances; and incent 

states to identify and provide financial 

assistance for last-mile connections to 

underserved schools and libraries. 

1. Equalizing the Treatment of Lit and 

Dark Fiber 

24. First, we adopt the Commission’s 

proposal in the E-rate Modernization 

NPRM, 78 FR 51597, August 20, 2013, 

to equalize the E-rate program’s 

treatment of lit and dark fiber. Citing the 

cost savings and bandwidth upgrades 

that dark fiber can provide, school, 

library, and local government 

commenters from urban and rural areas 

across the country overwhelmingly 

support equalizing the treatment of lit 

and dark fiber. The availability of a full 

dark fiber option will help some E-rate 

applicants attract multiple competitive 

bids for construction and deployment 

and will drive down broadband costs for 

schools and libraries, as well as the Erate program. We will equalize the 

treatment of dark and lit fiber beginning 

in funding year 2016. 

25. Dark-fiber leases and other darkfiber service agreements are commercial 

arrangements in which a broadband 

customer purchases use of a portion of 

a provider-owned and maintained fiber 

network separately from the service of 

lighting (i.e. transmitting information 

over) that fiber. Many competitive 

providers now offer such arrangements. 

In the Schools and Libraries Sixth 

Report and Order, 75 FR 75393, 

December 3, 2010, the Commission 

concluded that expanding access to 

such arrangements would ‘‘increase 

competition among providers of fiber 

and ensure[ ] that schools and libraries 

. . . pay less for the same or greater 

bandwidth,’’ and therefore added dark 

fiber to the E-rate eligible services list. 

The Commission limited dark-fiber 

support in several ways, however, 

‘‘pending further inquiry into the 

potential impact on the E-rate fund’’ of 

fully equalizing the treatment of lit and 

dark fiber services. The E-rate program 

currently supports the recurring costs of 

leasing lit and dark fiber as category one 

services. When a school or library leases 

lit fiber, the modulating electronics 

necessary to light that fiber are funded 

as a category one service. By contrast, a 

school or library that leases dark fiber 

currently cannot receive category one 

support for the modulating electronics 

necessary to light the fiber. In addition, 

the E-rate program currently provides 

category one support for all ‘‘special 

construction charges’’ for leased lit 

fiber, but does not support special 

construction charges for leased dark 

fiber beyond a school or library’s 

property line. Having now developed a 

further record on this issue, we 

conclude that leveling the playing field 

between lit and dark fiber will expand 

options for applicants and will likely 

reduce costs for the Fund. 

26. We received widespread support 

from a broad cross-section of E-rate 

stakeholders—from schools and state Erate experts to municipalities and 

carriers—who believe the equalization 

of the treatment of lit and dark fiber in 

the E-rate program carries substantial 

benefits. Commenters contend, for 

example, that funding dark fiber on an 

equal footing with lit fiber will provide 

more choices and lower costs to schools 

and libraries seeking enhanced 

connections. The city of Boston points 

out that ‘‘distinguishing between lit and 

dark fiber serves no useful purpose’’ in 

the E-rate program and that dark fiber 

should be placed on an equal footing 

with lit fiber if it is the proper solution 

to the needs of the school or library. 

State-level E-rate coordinators take a 

similar view, as do competitive 

providers. 

27. While most schools and libraries 

seeking high-speed broadband purchase 

lit fiber services, the record makes clear 

that dark fiber can be a powerful option 

for a significant minority to drive down 

broadband costs while increasing 

capacity. For example, Maine, which 

purchases school and library 

connectivity through a statewide 

consortium, has leased 1 Gbps dark fiber 

circuits to 75 schools across the state. 

Maine reports that because its dark-fiber 

service provider charges on a per-mile 

basis rather than based on bandwidth 

used, the state consortium’s allinclusive cost for 1 Gbps connectivity to 

these 75 schools is approximately $500 

to $750 per-school per-month—roughly 

the same per-circuit price the state 

consortium pays for one percent of that 

bandwidth (10 Mbps) for lit circuits 

from other providers. Similarly, the 

University System of Georgia’s 

statewide research and education 

network, PeachNet, is employing a dark 

fiber solution to significantly increase 

the high-speed broadband connectivity 

to local school districts. Beginning July 

2015, PeachNet will increase the 

broadband connectivity to each local 

school district from 3 Mbps per school 

to 100 Mbps per schools while reducing 

the Georgia Department of Education’s 

per Mbps costs by 96 percent. 


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28. Dark-fiber services can also be a 

cost-effective option for smaller, rural 

districts that otherwise face challenges 

affording high-speed circuits. For 

example, the Newton Public School 

District, an 11-school district centered 

in Newton, Kansas, recently upgraded to 

a district-wide 1 Gbps WAN while 

decreasing costs by moving to a darkfiber solution. Likewise, the Morgan 

County and Bleckley County school 

systems in Georgia, which each serve 

rural populations, connect their schools 

through cable-provided dark fiber at 

speeds of 1 to 10 Gbps. Weslaco ISD, 

located in the south Texas Rio Grande 

Valley, serves a largely poor and 

minority population, including many 

migrant families and relies on dark-fiber 

leases to connect several of its 17 school 

sites to its central network operations 

center. 

29. Equalizing the treatment of lit and 

dark fiber is also consistent with the 

Commission’s approach in the 

Healthcare Connect Order, 78 FR 38606, 

June 27, 2013. There, guided by the 

principle that ‘‘providing flexibility for 

HCPs [health care providers] to select a 

range of services . . . will maximize the 

impact of Fund dollars (and scarce HCP 

resources),’’ the Commission concluded 

that ‘‘supporting dark fiber provides an 

additional competitive option to help 

HCPs obtain broadband in the most 

cost-effective manner available in the 

marketplace.’’ In particular, and in 

contrast to the current E-rate rules, the 

Healthcare Connect Order authorized 

support for special construction charges 

for both lit and dark fiber, as well as for 

the installation of equipment and 

services ‘‘necessary to make [dark fiber] 

service functional,’’ including 

modulating electronics. 

30. Following this recent precedent 

and given the broad support in the 

record, we will equalize the treatment of 

dark- and lit-fiber services within E-rate, 

beginning in funding year 2016. 

Specifically, adopting the Commission’s 

proposal in the E-rate Modernization 

NPRM, we will provide category one 

support for special construction charges 

for leased dark fiber, as we do for leased 

lit fiber, and we will provide category 

one support for the modulating 

electronics necessary to light leased 

dark fiber. 

31. To prevent applicants from using 

E-rate discounts to acquire unneeded 

capacity or warehouse dark fiber for 

future use, we maintain the safeguards 

that the Commission adopted in the 

Schools and Libraries Sixth Report and 

Order, and extend those it adopted in 

the Healthcare Connect Order to E-rate. 

First, to prevent warehousing of excess 

fiber capacity, applicants cannot receive 

E-rate funding for recurring costs 

associated with dark fiber until it is lit, 

and applicants may only receive 

funding for special construction charges 

for dark fiber if it is lit within the same 

funding year. 

32. To provide applicants sufficient 

time to complete special construction 

projects before a funding year begins, 

we codify the bulk of USAC’s current 

policy regarding special construction 

charges. Specifically, we allow category 

one infrastructure costs incurred six 

months prior to that funding year, 

provided the following conditions are 

met: (1) The construction takes place 

only after selection of the service 

provider pursuant to a posted FCC Form 

470 (or any successor form); (2) a 

category one recurring service must 

depend on the installation of the 

infrastructure; and (3) the actual service 

start date of that recurring service is on 

or after the start of the funding year 

(July 1). We also direct USAC to accept 

invoices for special construction charges 

meeting these conditions dated during 

this period of time before the start of the 

funding year. However, applicants that 

choose to start construction before they 

receive a funding commitment bear the 

risk that their funding request will not 

be granted. Because special construction 

charges for leased dark fiber are now 

eligible for category one support, 

applicants seeking support for special 

construction for dark fiber may avail 

themselves of this limited exception for 

early construction. In addition, as in the 

Healthcare Connect Order, we will also 

allow applicants to receive up to a oneyear extension to light fiber if they 

demonstrate that construction was 

unavoidably delayed due to weather or 

other reasons. 

33. Second, to ensure that applicants 

treat the price of eligible products and 

services as the primary factor in 

selecting winning bids, we adopt 

measures to ensure that applicants fairly 

compare dark fiber with other options. 

If a school or library intends to seek 

support for special construction charges 

associated with dark fiber, it must also 

solicit proposals to provide the needed 

services over lit fiber. Similarly, if a 

school or library intends to seek support 

to lease and light dark fiber, the schools 

or library must also solicit proposals to 

provide the needed services over lit 

fiber over a time period comparable to 

the duration of the dark-fiber lease or 

IRU. In addition, if an applicant intends 

to request support for equipment and 

maintenance costs associated with 

lighting dark fiber, it must include these 

elements in the same application as the 

dark fiber so that USAC can easily 

review all costs together. These 

safeguards amply address concerns that 

schools and libraries could choose darkfiber solutions when not the most costeffective solution, that they will exclude 

certain costs when comparing dark- and 

lit-fiber solutions, or that they will 

warehouse spare capacity. Indeed, the 

safeguards reflect the suggestions of 

many of the commenters who raised 

these concerns in the record. 

34. USTelecom argues that the 

protections adopted in the Healthcare 

Connect Order will prove insufficient in 

the E-rate context because ‘‘USACconducted cost-effectiveness reviews 

[are] not viable for the E-rate program’’ 

and ‘‘the E-rate program—at least as it 

is currently structured—provides fewer 

incentives for applicants to make costeffective choices than the Healthcare 

Connect Fund’’ because the top 

discount rate is higher. We find both 

arguments unpersuasive. While it is true 

that the top discount rate in the E-rate 

program is higher than the discount rate 

for recipients of Healthcare Connect 

funds, E-rate discounts vary, resulting in 

a substantial number of E-rate 

applicants receiving discount rates 

below those discount rates received by 

rural health care providers. In addition, 

all E-rate applicants are required to 

engage in cost-effective purchasing. 

Further, USAC routinely conducts costeffectiveness reviews of E-rate 

applications every year and we are 

confident it can do so for applicants 

choice of dark-fiber solutions, just as it 

does for all the other purchasing 

decisions applicants make. 

35. Incumbent providers also assert 

that equalizing the treatment of lit and 

dark fiber ‘‘undermines national 

broadband policy’’ because it ‘‘takes 

traffic away from actual or potential last 

mile facilities of broadband service 

providers, which frustrates their ability 

to utilize schools as anchor tenants for 

broadband investment in surrounding 

communities, especially in low density 

areas.’’ It is our view that vibrant 

competition on an even playing field 

generally brings the lowest prices and 

best promotes ‘‘national broadband 

policy.’’ Accordingly, within a 

framework that treats lit- and darkservices equally, incumbents are free to 

offer dark-fiber service themselves, or to 

price their lit-fiber service at 

competitive rates to keep or win 

business—but if they choose not to do 

so, it is market forces and their own 

decisions, not the E-rate rules, that 

‘‘frustrate[] their ability to utilize 

schools as anchor tenants.’’ Nor does it 

‘‘take[] traffic away from actual or 

potential last mile facilities of 

broadband service providers,’’ if a 

competitor wins school and library 


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business, for competitive providers of 

dark-fiber service are also ‘‘broadband 

service providers,’’ and our role in the 

E-rate context is to encourage 

participation in the E-rate program and 

foster access to broadband by schools 

and libraries, and not favor one provider 

over another. 

36. Finally, USTelecom reiterates its 

statutory argument from past 

proceedings that the Act prohibits 

support for dark fiber because it is not 

a ‘‘service’’ under section 254. The 

Commission has rejected this 

interpretation on multiple prior 

occasions, and commenters neither offer 

new arguments nor identify new facts 

that would warrant revisiting this 

conclusion. USTelecom contends that 

even if dark fiber itself qualifies for 

support, modulating electronics 

necessary to light dark fiber and special 

construction charges for leased dark 

fiber do not, because whereas ‘‘dark 

fiber is part of the transmission path 

that enables the requisite functionality 

(delivery of voice, video and/or data) to 

be delivered to the classroom,’’ 

modulating electronics and special 

construction charges are ‘‘unrelated to 

the transmission of information to 

individual classrooms.’’ USTelecom 

provides no explanation for this 

assertion, however, nor can we imagine 

any. Lighting dark fiber ‘‘enables the 

requisite functionality (delivery of 

voice, video and/or data)’’ to just the 

same extent as the dark fiber itself. 

Indeed, modulating electronics are a 

critical component of the E-rate 

supported bundle when broadband is 

sold as a lit-fiber service. Likewise, just 

as special construction charges for lit 

fiber are eligible because they are part 

of the cost of bringing broadband 

connections to school and library 

buildings, so too are special 

construction charges for dark fiber. 

Further, we continue to believe that 

dark fiber does enhance access to 

advanced telecommunications and 

information services consistent with 

section 254(h)(2)(A). Therefore, 

consistent with our policy conclusion 

that lit- and dark-fiber services should 

be treated equally, we see nothing in the 

statute that would require us to draw a 

distinction. 

2. Permitting Self-Construction of HighSpeed Broadband Networks 

37. We also promote high-speed 

broadband connectivity by permitting 

applicants to construct their own or 

portions of their own networks when 

self-construction is the most costeffective solution. We agree with 

commenters that argue that allowing Erate applicants to own all or portions of 

their own networks can help deliver the 

most cost-effective broadband services 

and provide financial stability for 

certain E-rate recipients. We also agree 

with commenters that argue for 

safeguards to make sure that selfconstruction is only available in limited 

circumstances when it is demonstrated 

to be the most cost-effective solution. As 

with our equalization of lit and dark 

fiber, we allow the self-construction 

option beginning in funding year 2016. 

38. Providing support for the selfconstruction of high-speed broadband 

networks is also consistent with the 

Communications Act, as the 

Commission recently found in the 

Healthcare Connect Order: 

[S]ection 254(h)(2) provides ample 

authority for the Commission to provide 

universal service support for HCP access to 

advanced telecommunications and 

information services, including by providing 

support to HCP-owned network facilities. 

Nothing in the statute requires that such 

support be provided only for carrier-provided 

services. Indeed, prohibiting support for 

HCP-owned infrastructure when selfconstruction is the most cost-effective option, 

would be contrary to the command in section 

254(h)(2)(A) that support be ‘‘economically 

reasonable.’’ 

We find this reasoning equally 

applicable to self-construction 

undertaken by schools and libraries that 

participate in the E-rate program, and 

we further find that the record now 

before us demonstrates that support for 

the self-construction of high-speed 

broadband networks will fulfill the 

mandate of section 254(h)(2)(A). As 

explained above, for example, we are 

adopting safeguards to ensure that selfconstruction is available only in limited 

circumstances when it is demonstrated 

to be the most cost-effective solution to 

obtain high-speed broadband. The 

record shows that under these 

circumstances, support for selfconstruction will be ‘‘economically 

reasonable,’’ while also fulfilling the 

statutory mandate that we enhance, ‘‘to 

the extent technically feasible . . ., 

access to advanced telecommunications 

and information services for all public 

and nonprofit elementary and secondary 

classrooms . . . and libraries.’’ 

39. Self-construction can be a useful 

tool for some schools and libraries when 

they receive insufficient responses to 

their FCC Form 470 and associated 

requests for proposals (RFPs). Testing 

the benefits of allowing selfconstruction, the Commission permitted 

applicants to construct their own 

networks in the Rural Health Care Pilot 

Program that preceded the Healthcare 

Connect Order. Eight of the 50 pilot 

program participants elected to use 

support for self-construction for parts of 

their networks, with two of those 

participants opting to construct their 

whole networks. The participants found 

self-construction to be a useful tool for 

cost-effective network deployment. 

Because of the success of the Rural 

Health Care Pilot Program, the 

Commission adopted rules permitting 

self-construction, subject to certain 

safeguards, for the Rural Health Care 

Program participants in the Healthcare 

Connect Order. We follow the model the 

Commission adopted in the Healthcare 

Connect Order here, to ensure that the 

Fund supports self-construction only 

when it is the most cost-effective option. 

40. Some commenters express 

concern about the cost-effectiveness of 

self-construction and the quality of 

service it would provide and either 

oppose a self-construction option or 

request safeguards to ensure that 

schools and libraries only have the 

option of self-construction when it is 

the most cost-effective approach. Other 

commenters argue that we should 

impose a cap on self-construction, as the 

Commission did in the Rural Health 

Care Program. Additionally, NCTA 

recommends that we only authorize 

funding for self-construction by schools 

and libraries where they can 

demonstrate that (1) there are no 

commercial alternatives; (2) there are no 

more cost-effective methods to receive 

high-speed broadband; and (3) they 

have the expertise to handle the burden 

of operating and maintaining a fiber 

network. For its part, expressing 

concern about overbuilding, NTCA has 

argued that self-construction should 

only be allowed where an applicant has 

sought broadband services from existing 

providers and networks, and 

connectivity is not available from those 

providers and their networks; the 

existing provider is given the 

opportunity to demonstrate that it can 

provide the broadband service at target 

speeds within 180 days; there is a 

meaningful matching funds 

requirement; applicants are prohibited 

from using revenue from excess capacity 

as a source of matching funds; and 

applicants demonstrate that they have 

selected the option that will be most 

cost-effective over the life of the asset. 

41. We agree with many of the 

concerns expressed by commenters, 

particularly those aimed at ensuring that 

self-construction is only undertaken 

when it is the most cost-effective option, 

but we do not agree with all of the 

limitations on self-construction 

suggested by commenters. Therefore, we 

adopt safeguards ensuring that 

applicants seek E-rate support for selfconstruction only when it is the most 


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cost-effective option, and requiring that 

they actually use the self-constructed 

facilities, but do not adopt many of the 

other limitations on self-construction 

suggested by commenters. 

42. In allowing self-construction 

under certain circumstances, we adopt 

several safeguards to ensure that the 

self-construction option will be 

available only when it is necessary to 

enable applicants to access fiber at costeffective rates. First, as the Commission 

did for the Rural Health Care Program, 

we allow self-construction only where 

self-construction is demonstrated to be 

the most cost-effective option after 

competitive bidding. USAC already has 

experience in evaluating costeffectiveness for large-scale projects 

from the Rural Health Care Program. 

Applicants interested in pursuing selfconstruction must solicit bids for both 

service and construction in the same 

FCC Form 470 and must provide 

sufficient detail so that costeffectiveness can be evaluated based on 

the total cost of ownership over the 

useful life of the facility for applicants 

who pursue the self-construction 

option. As the Commission did in the 

Healthcare Connect Order, we permit 

applicants who have received no bids 

on a services-only posting to pursue a 

self-construction option through a 

second posting for the same funding 

year. 

43. Second, as with applicants that 

seek E-rate support for dark fiber, to 

ensure that we are paying for necessary 

services, applicants may only receive 

funding for self-construction if the 

facilities are built and used within the 

same funding year. Pursuant to the 

prohibition against reselling service 

purchased with E-rate discounts, 

applicants may only receive E-rate 

support for services that they use. In 

Section II.B.1, we codified a limited 

exception to allow funding for special 

construction charges for projects started 

up to six months in advance of the 

funding year, provided the following 

conditions are met: (1) The construction 

begins only after selection of the service 

provider pursuant to a posted FCC Form 

470 (or any successor form); (2) a 

category one recurring service must 

depend on the installation of the 

infrastructure; and (3) the actual service 

start date is after the start of the funding 

year (July 1). This exception applies to 

self-construction. As we do with dark 

fiber, we will also allow applicants to 

receive up to a one-year extension of the 

service start date if they demonstrate 

that construction was unavoidably 

delayed due to weather or other reasons. 

44. Third, the E-rate program rules 

require applicants to secure all of the 

resources necessary to make effective 

use of the services they purchase. We 

are confident that allowing schools and 

libraries to select a self-construction 

option with these meaningful safeguards 

will give applicants that have been 

unable to find providers willing to build 

affordable high-speed connections 

another option for purchasing such 

connections. 

45. We do not adopt NTCA’s 

proposals that we give existing 

providers a separate opportunity to 

demonstrate that they are able to 

provide service at the targeted speeds, 

because to do so would interfere with 

the competitive bidding process, which 

is the E-rate program’s primary tool for 

ensuring schools and libraries select the 

most cost-effective option. Moreover, 

because E-rate applicants’ requests for 

bids are publicly available, providers all 

have an equal opportunity to bid to 

provide E-rate services, and we expect 

that where there are existing providers 

and networks capable of providing 

service at the targeted speeds, they will 

be well situated to offer very 

competitive pricing through the 

competitive bidding process. 

46. At this time, we also decline the 

suggestion that we set a cap on the 

amount of funding available for selfconstruction projects. The first goal we 

adopted for the E-rate program in the Erate Modernization Order is ensuring 

that schools and libraries have 

affordable access to high-speed 

broadband. The record is clear that selfconstruction can provide one method 

for some schools and libraries to achieve 

that goal. Setting a cap on selfconstruction would create funding 

uncertainty for those schools and 

libraries that want to explore whether 

self-construction would be the most 

cost-effective option for them. In 

recognition of commenters’ concerns 

about the amount of funding spent on 

self-construction above, we have 

directed USAC and the Bureau to report 

on the impact on the Fund of special 

construction charges, including those 

for self-construction. 

47. We also decline to adopt 

USTelecom’s suggestion that, if we 

make a self-construction option 

available, we target it to schools and 

libraries that do not have broadband and 

are located in rural areas. We do expect 

that the self-construction option will be 

most appealing to schools and libraries 

in rural areas that have not been able to 

purchase affordable high-speed 

broadband. We also expect that 

providers that already provide fiberbased services to a school or library 

should almost always be able to offer 

the most competitive pricing to that 

school or library. However, we decline 

to limit the self-construction option to 

applicants without broadband and in 

rural areas because there are schools 

and libraries that currently have 

broadband access, including in nonrural areas, that may be able to purchase 

more affordable broadband services if 

they take advantage of the selfconstruction option. Moreover, having 

self-construction as an option for all 

schools and libraries will help drive 

competition, thereby maximizing the 

cost-effective use of E-rate funding, 

which is one of the goals that we have 

adopted for the program. 

48. A commenter raised concerns that 

permitting self-construction of networks 

could violate the Antideficiency Act 

because it would require long-term 

commitments. Consistent with the rules 

of the E-rate program, applicants will 

receive funding for self-construction for 

one funding year at a time only, so there 

is no danger of long-term, unfunded 

commitments that could violate the 

Antideficiency Act. 

3. Additional Discounts When States 

Match Funds for High-Speed Broadband 

Construction 

49. To break down barriers to highspeed broadband access in rural, Tribal, 

and other unserved areas, we will 

provide additional category one funding 

to match state funding for special 

construction charges to connect schools 

and libraries to high-speed broadband 

services that meet the long term 

capacity targets we adopted in the E-rate 

Modernization Order. The record 

demonstrates that additional funds are 

needed for fiber builds and that states 

can play a powerful role catalyzing 

construction of high-speed broadband 

connections to schools and libraries. For 

example, the state of North Carolina has 

invested approximately $150 million in 

broadband deployment and, as a result 

of this investment, 98 percent of North 

Carolina schools have a fiber 

connection. Maine has been able to 

connect a significant portion of its 

schools by constructing its own fiber 

loop. Additionally, California recently 

budgeted $26.7 million for grants for 

last-mile build-out projects for public 

school districts, county offices of 

education, and direct-funded charter 

schools. 

50. In light of the role states can and 

do play in spurring broadband 

connectivity, some commenters 

suggested that we increase the discount 

rate for one-time capital investments to 

build out statewide fiber networks, 

while others suggested a separate fund 

or priority for capital investments. We 

agree that states are well-situated to 


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bolster high-speed broadband 

construction to schools and libraries. To 

encourage state participation, beginning 

in funding year 2016, we will increase 

an applicant’s discount rate for special 

construction charges up to an additional 

10 percent in order to match state 

funding the applicant receives on a onedollar-to-one-dollar basis. Working in 

tandem, this additional state and E-rate 

program funding will reduce the money 

owed by applicants for what would 

otherwise be the applicant’s nondiscount share to connect schools and 

libraries to high-speed broadband 

services. By way of example, an 

applicant with a 90 percent discount 

rate would receive its 90 percent 

discount on the E-rate eligible 

construction and, if the state provided 

an additional contribution to the project 

(such as 5 percent of the total project 

cost), the Fund will match the state’s 

contribution (here, an additional 5 

percent of the total project cost). A 

network with a 60 percent discount rate, 

would receive its 60 percent discount 

plus an additional 10 percent if the state 

were to contribute 10 percent of the cost 

of the build-out. States may contribute 

more than 10 percent funding to the 

project but the E-rate program will limit 

its match to 10 percent of the project 

cost (in addition to the existing program 

discount rate). Because this match will 

only be available for special 

construction charges, applicants should 

create separate funding requests on their 

FCC Forms 471 for special construction 

and for recurring charges. As we 

monitor the impact of this category one 

match on the E-rate program, we may 

consider increasing the maximum 

match. 

51. We expect this additional funding 

will encourage states to identify highspeed connectivity gaps—those schools 

and libraries that do not have access to 

affordable high-speed connectivity—and 

address them. We recently aggregated 

the data submitted in the E-rate 

modernization proceeding into two 

maps that allow users to view the 

percentage of public schools with fiber 

connectivity at the district-wide level 

and the number of annual visits to the 

library system. In order to assist states 

in identifying the gaps in their highspeed connectivity and compare their 

success at closing those gaps with other 

states, we will maintain and continue to 

update those maps through at least the 

next three funding years. Furthermore, 

consistent with the reporting and 

transparency provisions we adopted in 

the E-rate Modernization Order, we will 

work to populate the maps with more 

detailed information based on the E-rate 

applications received beginning in 

funding year 2015. 

52. In recognition of the unique 

government-to-government relationship 

of Tribal nations to our federal 

government, and the challenges that 

Tribal nations face in obtaining 

broadband for their schools and 

libraries, we will match funding for 

construction of high-speed connections 

for Tribal schools and libraries from 

states, Tribal governments, or other 

federal agencies. Schools operated by or 

receiving funding from the Bureau of 

Indian Education and schools operated 

by Tribal Nations will also be eligible to 

receive matched funds from these 

additional sources. Eligible libraries that 

are funded by or operated by Tribal 

governments will also be eligible for 

these additional sources of matched 

funds. As with non-Tribal schools and 

libraries, we will provide an additional 

match of up to 10 percent for high-speed 

connection construction that meets our 

E-rate connectivity targets. 

53. A few commenters have expressed 

concern that by allowing this limited 

matching program, some applicants will 

not be required to pay for any portion 

of the special construction charges 

eligible for such a match, and that 

requiring applicants to pay their nondiscounted share is an important 

safeguard in the E-rate program. We 

decline to require that some portion of 

the non-discount share be paid by the Erate applicant when the state 

government, or where applicable 

another federal agency or tribal 

government is willing to pay some or all 

of the applicant’s non-discount share of 

special construction charges. Our 

current rules already allow for state 

agencies to pay the full amount of an 

applicant’s non-discounted share of Erate supported services, and therefore 

the matching program does not create 

additional concerns in this regard. To 

the extent that another governmental 

entity pays a portion of the cost of the 

E-rate supported service, that entity will 

have an incentive to ensure that the 

applicant engages in cost effective 

purchasing. However, as with the other 

options we adopt to increase broadband 

connectivity to schools and libraries, we 

also establish some limitations to 

safeguard the E-rate program. First, to 

ensure that this funding promotes 

adequate connectivity, only projects that 

provide broadband that meets the 

capacity goals and measures that we 

adopted in the E-rate Modernization 

Order will be eligible for the matching 

funding. In addition, to prevent 

excessive or duplicative funding during 

a high-speed broadband connection’s 

useful life, any school or library 

connection that is built with matching 

funds will be ineligible to receive 

additional matching funds for special 

construction to the same buildings from 

the E-rate program for 15 years. 

C. Ensuring Affordable Broadband 

Service to Schools and Libraries in 

High-Cost Areas (WC Docket No. 10–90) 

54. To ensure that schools and 

libraries have access to affordable 

broadband service in high-cost areas, we 

establish an obligation for recipients of 

high-cost support to offer broadband 

service in response to a posted FCC 

Form 470 to eligible schools and 

libraries at rates reasonably comparable 

to rates charged to schools and libraries 

in urban areas for similar services. We 

agree with commenters that such an 

obligation will assist us in narrowing 

the connectivity gap between rural and 

urban schools and libraries and help 

rural schools and libraries achieve the 

connectivity targets we adopted in the 

E-rate Modernization Order. 

55. In the USF/ICC Transformation 

Order, 76 FR 73829, Nov. 29, 2011, the 

Commission unanimously stated its 

expectation that eligible 

telecommunications carriers would offer 

broadband to community anchor 

institutions in rural and high-cost areas 

at speeds greater than the minimum 

broadband performance standards. The 

Commission further stated its 

expectation that eligible 

telecommunications carriers would 

provide such offerings ‘‘at rates that are 

reasonably comparable to comparable 

offerings to community anchor 

institutions in urban areas.’’ In the April 

2014 Connect America Order and 

FNPRM, 79 FR 39163, July 9, 2014, we 

sought comment on how best to ensure 

that this expectation is fulfilled. Having 

developed a more fulsome record on 

this issue, we conclude that establishing 

a defined obligation for recipients of 

high-cost support to offer broadband 

service at affordable rates to requesting 

schools and libraries is the most 

effective way to ensure that this 

expectation is fulfilled for schools and 

libraries, and thereby ensure that the 

high-cost program is working in 

harmony with the E-rate program. 

56. There is record support from 

stakeholders representing schools and 

carriers for obligating high-cost 

recipients to offer broadband services to 

schools and libraries. For example, the 

Schools, Health & Libraries Broadband 

(SHLB) Coalition and the State E-rate 

Coordinators Alliance (SECA) 

recommend ‘‘that recipients of Connect 

America Fund funding should be 

required to serve anchor institutions 

with high-speed bandwidth as a 


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condition of receiving funding.’’ 

Similarly, a group comprised of rural 

carrier associations, including NTCA— 

The Rural Broadband Association and 

WTA—Advocates for Rural Broadband, 

supports a ‘‘requirement that any USF/ 

CAF recipient offer [broadband] services 

. . . to most, if not all, anchor 

institutions in the supported areas.’’ 

Other commenters urge the Commission 

to ensure that the high-cost program 

brings affordable broadband services to 

schools and libraries in rural areas. 

57. Imposing an obligation on 

recipients of high-cost support to offer 

affordable high-speed services in 

response to a posted FCC Form 470 to 

schools and libraries also makes the 

most efficient use of limited universal 

service support while ensuring 

affordable access to broadband service 

to eligible schools and libraries. In highcost, hard to serve areas, we expect that 

recipients of high-cost support will be 

best situated to offer affordable 

broadband service to eligible school and 

libraries. Obligating these recipients to 

offer affordable services to schools and 

libraries in high-cost areas increases the 

likelihood that schools and libraries will 

receive affordable broadband service at 

the lowest cost to the E-rate program. At 

the same time, this obligation decreases 

the likelihood that limited E-rate 

support will be spent to overbuild the 

networks of high-cost recipients in some 

rural and high-cost areas while schools 

and libraries in other high-cost areas 

remain unconnected. 

58. We are not persuaded by those 

commenters that argue against any 

obligation to offer broadband services to 

anchor institutions. For example, 

USTelecom argues that the obligation to 

provide service should not apply when 

additional construction is required to 

connect an anchor institution. We 

conclude, however, that eligible 

telecommunications carriers (ETCs) 

subject to this obligation remain free to 

charge reasonable special construction 

charges to schools and libraries, and 

those schools and libraries, in turn, will 

be able to receive support for those 

charges through the E-rate program. 

Consequently, there is no reason that 

this obligation should not apply in those 

instances when additional construction 

is required to connect a school or 

library. While we allow special 

construction charges to be funded by the 

E-rate program, those charges would be 

limited to what is necessary to provide 

the additional capacity to the requesting 

school and library from existing fiber 

backhaul in the vicinity of the school or 

library: essentially, the incremental cost 

of a spur to serve the school or library. 

Price cap carriers that elect to make a 

state-level commitment for Connect 

America Phase II model-based support 

will be required to report annually the 

geocoded locations where service is 

newly available, so we will be able to 

identify where service meeting our 

targets should be available for schools 

and libraries. 

59. We also are not persuaded by the 

Utilities Telecom Council argument that 

the Commission should refrain from 

adopting set standards for anchor 

institutions until more data is available 

and the need for support for anchor 

institutions is better understood. The 

Commission expressly established a 

performance goal of ensuring universal 

availability of broadband for anchor 

institutions in the USF/ICC 

Transformation Order. With respect to 

schools and libraries, the Commission 

already has adopted defined 

connectivity targets for schools and 

libraries based on comments in the 

record. Our action to impose this 

obligation on high-cost recipients is 

designed to ensure that the high-cost 

and E-rate programs work effectively 

together. We therefore are not persuaded 

by ADTRAN’s argument that we should 

rely only on the E-rate program to 

ensure increased bandwidth and 

relative affordability for anchor 

institutions. Our record indicates that 

more needs to be done to close the 

connectivity gap so that schools and 

libraries in rural, high-cost areas can 

meet our connectivity goals. We 

conclude that obligating recipients of 

high-cost support to offer broadband 

services in response to a posted FCC 

Form 470 to eligible schools and 

libraries at affordable rates is an 

economically efficient method for us to 

fulfill the universal service mandate and 

meet our connectivity goals. 

60. Under the obligation we establish 

here, high-cost recipients will be 

obligated to bid on category one 

telecommunications and Internet access 

services in response to the posting of an 

FCC Form 470 requesting such services 

for eligible schools and libraries located 

in the areas where the carrier is 

receiving high-cost support. Further, to 

ensure that schools and libraries in rural 

and high-cost areas receive reasonably 

comparable services at rates reasonably 

comparable to those services paid by 

libraries and schools in urban areas, we 

also take steps to establish reasonably 

comparable benchmarks for broadband 

services offered to schools and libraries 

by high-cost recipients. 

61. Applicability. This obligation to 

offer broadband service in response to a 

posted FCC Form 470 to schools and 

libraries will apply to all recipients of 

high-cost support that are subject to 

broadband performance obligations to 

serve fixed locations—specifically, rateof-return carriers that receive support 

from the high-cost program, price cap 

carriers that elect to make a state-level 

commitment for Connect America Phase 

II model-based support, price cap 

carriers serving the non-contiguous 

United States that elect to receive frozen 

support in lieu of model-based support 

for Phase II, and competitive bidders 

that are awarded support in the Connect 

America Fund Phase II competitive 

bidding process. As a condition of 

receiving high-cost support, carriers 

receiving high-cost support must submit 

bids in response to the posting of an 

FCC Form 470 requesting broadband 

service to an eligible school, library or 

consortia located in the geographic area 

where the carrier receives high-cost 

support. The obligation to bid on 

broadband service in response to a 

posted FCC Form 470 extends only to 

those schools, libraries and consortia 

that are eligible for participation in the 

E-rate program and that seek bids on 

category one broadband services in a 

given funding year by posting an FCC 

Form 470. The Bureau may refer any 

carrier that refuses to bid in response to 

a request from an eligible school or 

library to provide category one services 

at rates reasonably comparable to those 

paid by libraries and schools in urban 

areas to the Enforcement Bureau for 

further action as appropriate. 

62. Minimum Levels of Service. We 

require high-cost support recipients to 

offer high-speed broadband connections 

sufficient to meet the targets set forth in 

the E-rate Modernization Order, when 

requested by schools and libraries in a 

posted FCC Form 470. Consistent with 

the approach established for the 

Connect America Fund, we emphasize 

that providers remain free to offer a 

range of service offerings to meet the 

needs of their customer base, in 

addition to the service offering meeting 

the minimums we established in the Erate Modernization Order. Eligible 

schools and libraries remain free to 

request and purchase the services that 

meet their specific needs. Our intention 

here is to create a framework that will 

enable schools and libraries to have 

access to services meeting the E-rate 

program’s connectivity targets at 

affordable rates. 

63. Timing. This obligation to offer 

broadband services in response to a 

posted FCC Form 470 to eligible schools 

and libraries for price cap carriers that 

elect to make a state-level commitment 

for Connect America Phase II model 

support, price cap carriers serving the 

non-contiguous United States that elect 

to receive frozen support in lieu of 


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model-based support for Phase II, and 

existing rate-of-return carrier ETCs will 

become effective no sooner than E-rate 

funding year 2016, which commences 

July 1, 2016. For ETCs that are awarded 

Phase II support through a competitive 

bidding process, this obligation will 

become effective in the first E-rate 

funding year after their support is 

authorized. We recognize, however, that 

it may not be possible to offer service 

meeting the E-rate modernization 

connectivity targets as soon as this 

obligation becomes effective in 

geographic areas that do not yet have 

the necessary fiber backhaul facilities. 

In the Connect America Order we adopt 

today, we establish graduated interim 

milestones for price cap carriers 

accepting the offer of Phase II modelbased support, with the first enforceable 

interim deadline at the end of calendar 

year 2017 and completion of 

deployment not required until 

December 31, 2020. We recognize that 

construction to extend fiber deeper into 

networks to meet Phase II obligations 

will be an ongoing project over the 

course of the Phase II term for price cap 

carriers accepting the state-level 

commitment. It is likely, therefore, that 

Phase II construction to extend fiber 

facilities to the general vicinity of a 

particular school or library seeking more 

robust capacity through the E-rate 

program will not occur until 2017 or 

later. We do not intend to disrupt the 

orderly implementation of the 

construction cycle for Connect America 

Phase II. To the extent additional 

network construction is necessary to 

reach a requesting school or library, we 

encourage high-cost recipients 

expeditiously to complete deployment 

of facilities and ensure the necessary 

fiber backhaul is installed where 

needed. 

64. We will continue to provide a 

more flexible approach to rate-of-return 

carriers, which are obligated to extend 

broadband service upon reasonable 

request for service and within a 

reasonable amount of time. Consistent 

with the framework established in the 

April 2014 Connect America Fund 

Order, a request to serve would be 

deemed reasonable to the extent 

anticipated revenues (both end user 

revenues and other federal and state 

universal service support under existing 

rules) are sufficient to cover the 

incremental cost of extending service to 

the requesting school or library. If the 

available revenues are insufficient, then 

a request would not be deemed 

reasonable. To the extent any high-cost 

recipient has the facilities in place to 

provide service at the requisite speeds 

to an eligible school or library in 

geographic areas where it receives 

funding, we expect such carrier to offer 

such service in response to a request 

from such school or library in the 

funding year that the request is made. 

65. Reasonable Comparability 

Benchmarks. To ensure that schools and 

libraries are able to purchase broadband 

offerings at rates that are reasonably 

comparable to similar offerings to 

schools and libraries in urban areas, we 

direct the Bureau to develop national 

benchmarks for broadband services 

offered to schools and libraries. Offering 

services in response to a posted FCC 

Form 470 at the reasonable 

comparability benchmarks will be a 

condition of receiving high-cost support 

for those ETCs subject to this obligation, 

and will not constitute a rebate to the 

price of service. The benchmark price 

offered will constitute the full retail 

price before taking into account any 

universal service support. 

66. The April 2014 Connect America 

Order and FNPRM sought comment on 

how best to ensure that we fulfill the 

expectation that schools and libraries 

are able to purchase broadband offerings 

at rates that are reasonably comparable 

to similar offerings to schools and 

libraries in urban areas. The Bureau 

should build upon this record by 

seeking more focused comment on 

proposed benchmarks. Specifically, the 

Bureau should rely upon data obtained 

from FCC Forms 471 submitted by 

urban schools, libraries, and consortia to 

develop these reasonable comparability 

benchmarks, as well as any other 

publicly available data sources, and 

should provide an opportunity for 

public comment on its proposed 

methodology and benchmarks before 

adopting the benchmarks. Upon 

adoption of such benchmarks, recipients 

of high-cost support subject to an 

obligation to provide fixed broadband 

will be obligated to offer services at or 

below these benchmarks in response to 

the posting of an FCC Form 470 

requesting broadband service to an 

eligible school or library in the 

geographic areas where the carrier 

receives high-cost support for the next 

funding year. The Bureau should use a 

similar methodology to prepare 

benchmarks in subsequent funding 

years. 

67. We also believe that this approach 

will ensure that support to those ETCs 

required to offer the benchmarked rates 

will continue to be sufficient for 

purposes of section 254. While we 

recognize that capital costs are higher in 

high-cost areas, no commenters suggest 

that recurring operating costs are 

significantly higher in high-cost areas 

than compared to urban areas. Because 

E-rate applicants can seek support for 

special construction charges, as that 

term is used in the E-rate context, ETCs 

subject to the benchmark requirements 

will be able to assess reasonable special 

construction charges to schools and 

libraries that solicit bids for broadband 

services. Moreover, the national 

benchmarks developed by the Bureau 

will be reasonably comparable, but not 

identical, to rates charged for similar 

offerings to schools and libraries in 

urban areas. The combination of the 

availability of special construction 

charges and reasonable comparability 

benchmarks will ensure that universal 

service support received by ETCs 

remains sufficient for purposes of 

section 254. 

68. Tariffed Services. Those carriers 

that offer broadband services pursuant 

to tariffs must comply with our tariffing 

rules implemented pursuant to sections 

201 through 203 of the Act. The 

benchmark rates established pursuant to 

this Order for broadband services 

provided to schools and libraries will 

likely vary from rates charged for 

similar services to other customers. To 

the extent this is the case, we evaluate 

whether it potentially raises concerns 

under section 202(a), which forbids 

‘‘unreasonable discrimination’’ in rates 

charged to customers, and section 

201(b), which requires rates to be ‘‘just 

and reasonable,’’ as well as our tariffing 

rules. For the reasons described below, 

we conclude that the action we take 

today does not raise such concerns. 

69. To ensure that incumbent local 

exchange carriers can offer services to 

schools and libraries consistent with the 

requirements of this Order and the Act, 

we rely on the flexibility provided 

under section 201(b) to decide that it is 

just and reasonable for carriers to 

provide broadband services at rates 

specific to the class of educational 

customers to which carriers must offer 

benchmarked rates. Section 201(b) 

provides that ‘‘communications by wire 

or radio subject to this chapter may be 

classified into day, night, repeated, 

unrepeated, letter, commercial, press, 

Government, and such other classes as 

the Commission may decide to be just 

and reasonable, and different charges 

may be made for the different classes of 

communications.’’ Accordingly, in 

conjunction with the process for 

establishing the benchmark rates, we 

delineate here, pursuant to section 

201(b) of the Act, a class of educational 

customers to whom the benchmarked 

rates may be offered. We delegate 

authority to the Bureau to provide other 

guidelines as necessary to implement 

the objectives described above as part of 


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the process of seeking public comment 

on the analysis underlying the rate 

benchmarks. For example, the Bureau 

may consider establishing streamlined 

procedures to enable those carriers that 

offer broadband services pursuant to 

tariffs to easily revise or re-file new 

interstate tariffs. Additionally, the 

Bureau should determine whether there 

may be certain carriers for whom 

application of the rate benchmarks 

would be impracticable or unduly 

burdensome and, if so, if there are 

alternate methods to ensure that such 

carriers are providing eligible E-rate 

applicants with rates that are reasonably 

comparable to similar offerings to 

schools and libraries in urban areas. 

70. We find that it is just and 

reasonable under section 201(b) for 

carriers to provide service at rates 

specific to the class of educational 

customers to which carriers must offer 

benchmarked rates. This action furthers 

significant universal service principles 

that schools and libraries obtain access 

to advanced telecommunications 

services and access to 

telecommunications services and 

information services at rates that are 

reasonably comparable to those charged 

for similar services in urban areas. By 

making a benchmarked rate available to 

eligible schools and libraries, in highcost areas we will ensure that the 

universal service program complies 

with these statutory goals, as well as the 

Commission’s stated expectation that 

eligible telecommunications carriers 

provide broadband to community 

anchor institutions at reasonably 

comparable rates. Based on the record, 

we proceed incrementally, focusing for 

now specifically on schools and 

libraries rather than on broader 

categories of entities within the scope of 

section 254’s objectives. By requiring 

carriers to offer services at rates specific 

to schools and libraries, we will 

advance the objectives of section 254; 

that fact, coupled with the flexibility 

afforded the Commission under the 

‘‘just and reasonable’’ standard of 

section 201(b), persuades us that 

carriers’ provision of service at rates 

specific to schools and libraries is not at 

odds with section 201(b). We conclude 

for the same reasons that carriers’ 

compliance with the requirements 

adopted here do not violate section 

202(a). 

III. Adjusting The E-Rate Cap To Meet 

The Program’s Connectivity Goals (WC 

Docket 13–184) 

71. Ensuring that schools and libraries 

will be able to meet the high-speed 

connectivity targets we have set for the 

E-rate program will require a 

combination of continued efforts to 

lower the prices paid for school and 

library broadband connectivity and an 

increase in E-rate support necessary to 

meet growing bandwidth demands of 

schools and libraries. In this Order and 

in the E-rate Modernization Order, we 

have taken several steps to maximize 

the cost-effectiveness of E-rate 

supported purchases, including a 

pricing transparency requirement and 

several program changes in this Order 

that will have the effect of increasing 

competitive options, and thus lowering 

prices, for schools and libraries to meet 

their connectivity needs. However, the 

record demonstrates that as more 

schools and libraries upgrade their 

broadband infrastructure and expand 

robust Wi-Fi access into every 

classroom and library space, bandwidth 

demands of schools and libraries will 

outpace any expected savings that can 

be accomplished through program 

efficiencies and declining per megabit 

pricing. Even with a more efficient Erate program that achieves substantial 

cost-savings, funding above the current 

E-rate cap will be necessary if we seek 

to connect more schools and libraries at 

the targeted bandwidth levels. Based on 

an extensive record that includes more 

than 2,800 comments, 600 ex parte 

presentations, and two cost estimates, 

we raise the annual E-rate program cap 

to $3.9 billion in funding year 2015. 

Commenters stress the importance of 

providing certainty to schools and 

libraries that sufficient funding will be 

available for both connectivity to and 

within schools and libraries. For the 

reasons explained below, we agree that 

raising the cap, in conjunction with the 

other work we have done to improve Erate purchasing, is the best way to 

provide such certainty as well as to 

meet the goals we have set for the 

program. 

72. The E-rate funding cap has gone 

virtually unchanged for 17 years. In 

1997, the Commission adopted a $2.25 

billion annual funding cap for the E-rate 

program, based on demand estimates 

provided by McKinsey, Rothstein 

Thesis, and the National Commission on 

Library and Information Science 

(NCLIS) Report. Since then, however, 

actual demand for E-rate support has 

exceeded that cap in all but one funding 

year. In recent funding years, there has 

been little or no funding available for 

the internal connections necessary to 

deliver broadband into classrooms and 

libraries. 

73. Throughout the program’s history, 

the Commission has made various 

efforts to spread E-rate dollars to more 

applicants, such as, for example, by 

limiting applicants to applying for 

discounts on internal connections to 

twice every five years. In 2010, it also 

began adjusting the E-rate cap to 

account for annual inflation to try to 

gradually align the program’s needs 

with available funding. Even with these 

changes, the program, while successful, 

was falling short of its potential. Based 

on the record created in response to the 

E-rate Modernization NPRM, earlier this 

year we took steps to restructure the Erate program. In the E-rate 

Modernization Order, we phased out 

support for outdated, non-broadband 

services, shifting the focus to high-speed 

broadband, with a particular focus on 

how the E-rate program distributes 

funding for internal connections. We 

also made needed reforms to encourage 

cost-effective purchasing, including 

setting sufficient budgets for internal 

connections, known as category two 

services, and establishing pricing 

transparency. These major policy 

changes were a necessary first step on 

the path to ensuring that the program 

has the necessary resources to meet the 

goals we have adopted for the E-rate 

program. 

74. At the same time, we sought 

comment on the future funding levels 

needed for the E-rate program in order 

to meet the established goals. We 

invited stakeholders to submit data on 

the gap between schools’ and libraries’ 

current connectivity and the specific 

targets set out in the Order, as well as 

information on how much funding 

would be needed to bridge that gap 

within the E-rate program. In August, 

the Bureau released a Staff Report 

summarizing a portion of the large 

amount of data gathered in the record in 

order to assist parties considering 

responses to the E-rate Modernization 

FNPRM, 79 FR 49036, August 19, 2014. 

In conjunction with the Staff Report, 

Commission staff released two maps 

providing a visualization of the fiber 

connectivity to schools and libraries 

based on data in the record, and have 

continued to update those maps to 

reflect additional data stakeholders have 

submitted. 

75. Based on the substantial record 

developed in this proceeding, in this 

section we set out the anticipated costs 

to meet the goal of ensuring affordable 

access to high-speed broadband 

sufficient to support digital learning in 

schools and robust connectivity for all 

libraries. First, in order to provide 

certainty and administrative simplicity 

to applicants and to the Fund, we 

extend for three additional years, with 

a small modification, the category two 

budget approach we adopted in the Erate Modernization Order for funding 

costs for internal connections for 


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schools and libraries. Taking this 

change into account, we set out the 

projected costs of category two services 

to the E-rate program over the next five 

funding years. Next, we discuss the 

factors that will impact the cost of 

category one services in order to ensure 

schools and libraries can meet the 

connectivity targets we adopted in the 

E-rate Modernization Order. Based on 

these projections, and to help provide 

more certainty regarding the availability 

of E-rate support, we raise the annual Erate cap to $3.9 billion beginning in 

funding year 2015. Setting the cap at 

this level is based on a substantial 

amount of data and analysis and reflects 

our judgment of the amount of funding 

that will be necessary to meet the longterm broadband connectivity targets for 

all schools and libraries, including 

internal connections, non-recurring 

infrastructure upgrades, and significant 

increases in monthly recurring Internet 

access charges. 

A. Ensuring Certainty for Applicants 

Seeking Support for Category Two 

Services 

76. Schools. First, we agree with those 

commenters that stress the importance 

of predictability and certainty by 

extending the applicant budgets for 

schools established in the E-rate 

Modernization Order for category two 

services. In July, we adopted a two-year 

test period for the pre-discount 

applicant budgets for category two 

services for funding years 2015 and 

2016. Applicants that receive 

commitments for category two support 

in either of those funding years will be 

subject to the five-year budget. To make 

the test period for the budget-based 

approach to awarding category two 

support consistent with the full fiveyear cycle that such budgets are based 

on, we expand the test-period for three 

additional years through funding year 

2019. 

77. In the E-rate Modernization Order, 

we explained that we were confident 

that we could meet the $1 billion target 

for two years. However, we noted that 

the longer-term funding available for 

category two budgets is linked to the 

broader question of the long-term 

funding needs of the E-rate program, 

and we sought comment on these 

funding needs of the program. As the 

record demonstrates, without the 

changes that we make today, applicants 

who do not seek or receive category two 

support in funding years 2015 or 2016 

would face uncertainty about whether 

they will be able to receive E-rate 

support to meet the Wi-Fi needs of their 

students and patrons in later years. By 

addressing the longer-term funding 

needs of the program and extending 

these category two budgets for three 

additional funding years in this Order, 

we help ensure sufficient funding for 

category two services, increase certainty 

for applicants about the availability of 

funding beyond funding years 2015 and 

2016, and simplify the administration 

for USAC. 

78. A sufficiently funded, multi-year 

budgeted approach for category two 

funding provides both certainty and 

flexibility for applicants. This 

combination allows applicants to 

request support only for what they need 

when they need it, rather than seek 

funding for unnecessary components 

out of fear that there will not be support 

in the next funding year. It also helps us 

achieve our goal of ensuring affordable 

access to high-speed connectivity 

within schools and libraries, by 

providing broader and more equitable 

support for the internal connections 

necessary to support digital learning. 

79. Some commenters argue the perstudent budgets should be discontinued 

and replaced with a funding cap 

increase alone. We disagree and restate 

our firm belief that raising the funding 

cap alone will not ensure that schools 

and libraries can purchase affordable 

internal connections. Raising the cap 

without any additional policies or limits 

on how the program funds internal 

connections does not address the 

challenges faced by applicants created 

by widely variable costs for similar 

services, inefficient network planning, 

or incentives at the top discount levels 

of the E-rate program to engage in 

wasteful purchasing. We also firmly 

disagree with the assertion that perstudent budgets provide ‘‘[t]oo little 

discount funding’’ to all applicants and 

are inequitable. These budgets maintain 

the program’s historic focus on the 

highest poverty schools and libraries by 

continuing to use concentrations of 

poverty to determine the discount level 

available and the priority of applicants. 

At the same time, the five-year budgets 

promote cost-effective spending by 

focusing E-rate dollars on the internal 

connections that are essential for 

wireless networks, and therefore, allow 

us to provide a sufficient and 

predictable amount to deploy Wi-Fi to 

students and library patrons throughout 

the nation, and not just to the applicants 

at the highest discount levels. 

80. We reaffirm the $150 per student 

pre-discount budget, with a $9,200 prediscount funding floor, as a reasonable 

limit on the amount of E-rate discounts 

available to schools, consistent with 

data in the record showing local area 

networks (LAN) and wireless LAN 

(WLAN) deployments in classrooms 

across a number of school districts 

across varied geographies. In 

conjunction with other measures taken 

in the E-rate Modernization Order, such 

as pricing transparency to help arm 

applicants with information to make 

smart purchasing decisions and 

lowering the maximum discount rate 

from 90 to 85 percent to encourage 

applicants to pursue the most costeffective options, this $150 per student 

budget provides a sufficient amount of 

support for the necessary internal 

connections. Some applicants urge us to 

recognize that the internal connections 

needs of schools are not uniform. While 

the E-rate Modernization Order 

recognized that there are different 

construction materials or variations in 

labor costs, the majority of costs for 

LANs are for commodity equipment, 

which sees nationwide pricing and 

competitive markets. We again decline 

to set out separate budgets for schools 

in different situations, apart from the 

adjustments for poverty and rurality that 

our system of discounts already 

provides. We expect the Bureau to 

closely monitor these budget levels as 

described below. 

81. We take this opportunity to revisit 

the issue of how schools should count 

students that attend multiple schools. 

Consistent with our desire to ensure 

sufficient funding for the number of 

students using the internal connections 

at a school, in the E-rate Modernization 

Order we explained that ‘‘[s]tudents 

who attend multiple schools . . . may 

be counted be both schools in order to 

ensure appropriate LAN/WLAN 

deployment for both schools.’’ We now 

clarify that schools should include in 

their student count, for purposes of 

calculating category two budgets, 

students that attend part-time only 

when doing so regularly increases the 

maximum number of students on the 

school premises at the same time, 

during the school day. This means that 

students who attend a virtual class that 

originates at a school, but who are not 

on the school premises cannot be 

counted in that school’s student count. 

We also note that students attending 

after-school activities or after-school 

events cannot be included in the 

student counts. Schools should also be 

prepared to demonstrate their student 

count calculations during PIA review 

and if they count part-time students to 

demonstrate how those students 

regularly increase the maximum number 

of students on the school premises at 

the same time during the school day. 

82. Libraries. We also extend for three 

additional funding years, with a small 

upwards adjustment for libraries in 

more urbanized areas, the pre-discount 


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budget for libraries that we adopted for 

funding years 2015 and 2016 in the Erate Modernization Order. We adopted a 

$2.30 per square foot pre-discount 

budget for libraries in that Order, with 

a funding floor of $9,200, representing 

a reasonable pre-discount budget level, 

consistent with data submitted into the 

record prior to its adoption. Having 

sought further comment specifically on 

the issue of user density in urban 

libraries because ‘‘the record of library 

funding needs for internal connections 

[was] not as robust as we would like,’’ 

we now adopt a separate budget of $5.00 

per square foot for libraries located in 

cities and urbanized areas with a 

population of 250,000 or more, as 

identified by the Institute of Museum 

and Library Services (IMLS) locale 

codes of 11, 12, and 21. 

83. Calculating the library budget 

based on square footage continues to 

provide the E-rate program a simple, 

fast, and efficient mechanism for 

libraries and USAC, consistent with the 

Commission’s third goal for the 

program. There is broad support in the 

record for the position that the library 

budget should be greater for urban 

libraries, because these libraries serve 

more people per square foot than other 

communities and Wi-Fi performance 

may be impacted by a high density of 

users at one time. There is also support 

in the record for considering the number 

of users or connected devices when 

setting the category two library budget, 

particularly for large urban libraries. We 

agree that usage density may increase 

the cost of internal connections. 

However, as the record indicates, there 

is not a standardly reported metric on 

the number of Wi-Fi users in libraries 

that would provide a simple and 

predictable formula for all libraries. We 

therefore decline to adopt the proposals 

that seek a different budget calculation 

based on daily visitors or public 

computer users, because using those 

metrics would impose new 

administrative burdens on libraries, 

would be difficult to administer, could 

improperly incent purchasing 

unnecessary public computers, and 

would delay application review by 

being difficult to verify. Square footage 

continues to present the best option for 

providing a sufficient budget for 

libraries that is simple for applicants to 

calculate and simple for USAC to 

administer. 

84. Because we agree that usage 

density increases the cost of internal 

connections and the record supports a 

decision that usage density is greater in 

large urban libraries, we elect to 

increase the pre-discount per-square 

foot library budget for libraries in the 

most densely populated areas to $5.00 

per square foot over five years. The 

Urban Libraries Council (ULC) suggests 

a category two pre-discount budget of 

between $5.00 and $7.00 per square foot 

for urban libraries, a number of other 

commenters support an increase to at 

least $4.00 per square foot. We take into 

account this range of estimates that have 

been submitted into the record, along 

with the lack of precise evidence that 

would militate in favor of picking a 

specific estimate. As such, in order to be 

fiscally cautious, we adopt a value 

toward the bottom end of the range of 

$5.00 per square foot as the pre-discount 

budget for the most urban libraries. 

85. To determine which libraries get 

the benefit of the increased per-squarefoot budget, we look to the IMLS 

classification of libraries. IMLS assigns 

locale codes in order to identify the type 

of geographic areas in which a library 

outlet is located, using the same 

methodology as the National Center for 

Education Statistics’ Common Core of 

Data datasets. It divides geographic 

areas into four categories—city, 

suburban, town, and rural, each with 

three subcategories. We agree with 

ULC’s recommendation that we provide 

higher funding per square foot for those 

libraries located in the most densely 

populated areas using the IMLS locale 

codes of ‘‘11—City, Large,’’ ‘‘12—City, 

Midsize,’’ and ‘‘21—Suburb, Large.’’ 

These three locale codes capture 

urbanized areas within principal cities 

with a population over 100,000 and 

those areas outside of a principal city, 

but within an urbanized area with a 

population of over 250,000, which are 

the most densely populated areas. These 

locale codes therefore provide a 

reasonable proxy for identifying 

libraries that may see a higher density 

of users per square foot. As described 

below, the Bureau will continue to 

evaluate these library budgets for 

category two services. We also take this 

opportunity to remind library 

applicants, regardless of their category 

two budget levels or square footage, of 

the obligation to select the most costeffective service offered and to consider 

price as the primary factor. 

86. Our decision to extend both of 

these five-year pre-discount budgets for 

schools and libraries by three additional 

funding years reflects our concern that 

using applicant budgets for only two 

funding years will be inadequate to 

provide certainty for applicants making 

purchasing decisions. Additionally, it 

reflects our finding that these budgets 

are sufficient and that extending them 

will simplify the administration of the 

program and provide clarity and 

certainty to schools and libraries. We 

agree with commenters that extending 

the applicant five-year budgets will 

increase certainty about how applicants 

and certain services will be treated 

beyond funding year 2016 and whether 

funding will be available. We are 

particularly concerned that applicants 

could decide to delay seeking funding 

for needed internal connections in 

funding years 2015 or 2016 because they 

would like to see if there is additional 

funding in funding year 2017. Further, 

this extension simplifies administration 

of the program for both applicants and 

USAC by treating all applicants the 

same, regardless of when they receive Erate support for category two services. 

87. To ensure that the applicant 

budget remains effective at 

accomplishing our goal of ensuring 

affordable access to high-speed 

broadband sufficient to support digital 

learning, we expect the Bureau to 

monitor these applicant budgets and 

provide a report on their sufficiency to 

the Commission before the opening of 

the filing window for funding year 2019. 

This analysis is important for two 

reasons. First, information 

demonstrating the success, or lack 

thereof, of this approach to providing 

support for internal connections will 

provide the Commission with data to 

determine if the category two budget 

approach should be made permanent. 

Second, if the Commission does not 

extend the budget approach beyond 

funding year 2019, the information 

learned during the test-period will 

provide significant information to assist 

USAC in making sure that category two 

requests continue to be cost-effective. 

88. Therefore, working with OMD and 

USAC, the Bureau shall analyze the data 

from applicants for trends across 

different types of applicants or regions 

of the nation, particularly those schools 

that serve students with special 

education services. This may include 

evaluation of FCC Form 471 pricing data 

received from applicants to ensure that 

cost-effective offers are reaching 

applicants in all parts of the country. In 

particular, our record on the costs for 

urban libraries that see higher density 

bandwidth demands is not as robust as 

our other data. Therefore, as part of our 

existing direction to seek feedback on 

sufficiency of LAN/WLAN capacity, we 

also direct the Bureau to analyze the 

applicant requests from funding years 

2015 through 2018 for libraries serving 

different population sizes, so that we 

have information needed to assess 

whether the category two library budget 

is reasonable. The Bureau may consider 

including in its analysis passive data 

measurements in order to measure the 


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impact of the number of users on the 

Wi-Fi deployments. 

89. Basic Maintenance, Managed WiFi, and Caching. Because we extend 

these category two applicant budgets, 

we also extend the eligibility for basic 

maintenance, managed internal 

broadband services, and caching 

through funding year 2019. These 

services provide benefits to applicants 

seeking flexibility in how to set up their 

networks, but we had concerns about 

how to prevent unnecessary or wasteful 

spending especially given that many 

managed Wi-Fi agreements run over 

multiple years. The applicant budgets 

continue to ‘‘mitigate some of our 

concerns about waste or abuse’’ as long 

as they are in effect. We direct the 

Bureau to include these eligible services 

on the Eligible Services List accordingly 

in funding years 2016 through 2019. 

90. We also note commenters’ concern 

that caching services and managed WiFi are additional costs for category two 

services not accounted for in the 

budgets. We extend the eligibility of 

these services in order to provide 

additional choices for applicants 

seeking the most cost-effective 

technology options for their unique 

situations. For instance, a small school 

district or library system without a 

technology director may find managed 

Wi-Fi allows it to more quickly deploy 

advanced LANs by spreading its costs 

over a multi-year contract and relying 

on the technical expertise of the 

managed Wi-Fi provider. Similarly, a 

school may decide that it is makes sense 

to incorporate caching into its 

connectivity plans and wants to seek Erate support for those services. These 

services, however, are not essential 

components for all applicants seeking to 

deploy Wi-Fi, and we therefore do not 

further increase the applicant budgets to 

account for them. 

91. Category Two Costs. We find that 

the $1 billion annual target budget set 

for category two services in the E-rate 

Modernization Order is sufficient to 

provide the E-rate support needed for a 

five-year deployment of LANs and 

WLANs. In July, we stated that the 

question of available funds for these 

five-year budgets was closely linked 

with the long-term funding for the E-rate 

program. We therefore applied the fiveyear budgets to applicants that received 

E-rate support for category two services 

in funding years 2015 and/or 2016, 

pending resolution of the program’s 

overall funding needs. Having now 

extended these category two applicant 

budgets for all applicants for three 

additional funding years, we reaffirm 

the funding level for the E-rate support 

for category two budgets, based on the 

analysis set out in the E-rate 

Modernization Order. We also index the 

category two budget target and the 

applicant budgets to inflation. 

92. This $1 billion annual target for 

category two services provides greater 

access to E-rate support for both schools 

and libraries. From funding years 2008 

through 2012, the program provided Erate discounts for internal connections 

of between $700 million and $1.2 

billion. However, this funding provided 

support for less than 11 percent of the 

more than 100,000 schools participating 

in the program each year and less than 

four percent of public libraries. With the 

adoption of pre-discount budgets 

sufficient to deploy LANs and WLANs 

and a $1 billion target, the program will 

be able to support an average of 10 

million students each funding year at 

different discount levels, providing 

broader and more equitable support 

across the nation. Additionally, 

targeting a consistent amount of support 

each year allows us to reduce 

fluctuations in the contribution factor 

and uncertainty over availability of 

funding that had previously existed in 

the E-rate program. 

93. Although some commenters 

express concern that $5 billion in 

category two support over five years is 

insufficient to reach the schools and 

libraries at the lowest discount levels, 

we restate our finding that the funding 

target will provide sufficient funding to 

applicants seeking category two 

support. First, we disagree with 

assertions from commenters that the 

EducationSuperHighway/CoSN Ongoing 

Cost Model’s $1.6 billion in annual 

costs for category two services is the 

appropriate measure. That model was 

one of several data points used in 

determining the category two budgets 

for schools. In particular, commenters 

point to analysis done by Funds for 

Learning that assumes all applicants 

will apply and all applicants will 

request the entirety of their budgets 

each year. We disagree with these 

assumptions. In the E-rate 

Modernization Order, we noted that 

some schools and libraries will not seek 

funding and others will seek less than 

the full budgeted amount. Additionally, 

the average size of the requests per 

student in the lower discount levels is 

well below $150 per student, and we do 

not expect a dramatic increase in the 

size of requests per student from such 

applicants. We note, as one example, 

that data in the record showed managed 

Wi-Fi contracts for as low as $19 per 

student annually, which is less than 65 

percent of the available budget over five 

years. 

94. We recognize that there is pent up 

demand and that applicants may seek a 

larger portion of the budget early on in 

the five-year cycle, leaving applicants at 

the lower discount levels with some 

uncertainty about future funding. 

However, by extending applicant 

budgets for three more funding years 

and increasing the size of the E-rate cap 

to help meet both category one and 

category two demand below, we provide 

much-needed certainty to applicants, 

allowing them to take advantage of the 

flexibility the five year budgets offer. 

Indeed, providing needed flexibility is 

one of the benefits of these multi-year 

budgets. School districts with a large 

number of schools may simply be 

unable to deploy networks in every 

school for a number of reasons, 

including their own budget match and 

the ability of a vendor to install to every 

school. Similarly, applicants that 

request support for a managed Wi-Fi 

solution may end up requesting just a 

portion of their budget each of the five 

funding years, leaving additional 

funding for applicants at a lower 

discount level. For these reasons, we 

expect category two applicant requests 

to be reasonable and that the Bureau 

will monitor these budgets closely. 

B. Meeting Applicants’ Needs for 

Category One Support 

95. Having set an annual category two 

budget target of $1 billion, we now turn 

our focus to determining how meeting 

the long-term broadband connectivity 

targets that we set in the E-rate 

Modernization Order will drive future 

funding needs for category one services. 

The record demonstrates that growth in 

demand for category one funding will be 

driven by a combination of: (i) Requests 

for support for non-recurring 

infrastructure upgrades; and (ii) the 

growing demand for high speed 

bandwidth connectivity to schools and 

libraries, both of which will lead to 

increasing monthly recurring charges for 

WAN and Internet connections. The 

increase in monthly recurring charges 

for WAN and Internet connectivity will 

come from schools and libraries that 

already have connections capable of 

meeting E-rate connectivity targets and 

from those that are newly able to 

purchase high-speed connections as a 

result of the changes to the E-rate 

program that we adopt today. Moreover, 

by targeting funding to Wi-Fi in the Erate Modernization Order and extending 

the budgets for internal broadband 

connections in this Order, we will 

ensure that more schools and libraries 

have robust internal connections, which 

will fuel their demand for high-speed 

WAN and Internet connectivity. Taking 


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into account data in the record and the 

anticipated savings from steps we have 

taken to refocus E-rate funding on 

broadband and encourage program 

efficiencies, we discuss these increasing 

costs for category one services below. 

1. Projecting Schools’ and Libraries’ 

Future Connectivity Demands 

96. We first evaluate the future 

connectivity demands of schools and 

libraries, both in terms of their needs for 

new infrastructure and their needs for 

services provided over that 

infrastructure. On the one hand, 

stakeholders report that prices per 

megabit for high-speed broadband have 

consistently declined each year. At the 

same time, as demonstrated below, 

increases in bandwidth demand greatly 

offset this decline in per megabit 

pricing; thus, the total amounts paid by 

schools and libraries for their recurring 

monthly broadband services will 

continue to increase. Indeed, in a recent 

survey of school district administrators 

and school technology leaders 

conducted by CoSN, many schools 

signaled that they would need more 

bandwidth in the very near future. For 

example, 83 percent of respondents 

expect to need additional bandwidth 

over the next three years and almost 

two-thirds report that they do not have 

sufficient bandwidth for the next 18 

months. Moreover, the schools’ 

anticipated demand is for significantly 

greater bandwidth. Over the next 18 

months, 25 percent of respondents 

expect 100 to 500 percent bandwidth 

growth and another 24 percent expect 

20 to 100 percent bandwidth growth. 

97. By working to ensure that schools 

and libraries have access to affordable 

high-speed broadband connectivity, we 

also contribute to their increase in 

demand for those high-speed 

connections. For example, our 

commitment to consistently provide at 

least $1 billion in funding for school 

and library Wi-Fi networks will fuel 

additional usage and demand. As 

schools and libraries deploy 

increasingly robust Wi-Fi networks, the 

ability of more students, teachers and 

library patrons to use their schools’ and 

libraries’ internal networks will require 

the delivery of greater bandwidth to 

those schools and libraries. For 

instance, data from North Carolina 

demonstrate that some school districts 

are seeing Internet bandwidth usage 

growth of nearly 50 percent on an 

annual basis, regardless of whether the 

school is implementing a one-to-one 

device deployment initiative, is several 

years into such a program, or lacks a 

specific program. Similar data from 

Washington indicate that average 

annual usage growth was over 40 

percent from 2009 and 2014. 

98. In addition, earlier in this Order 

we adopt several policy and 

administrative changes that will provide 

a range of options to support more 

applicants’ efforts to obtain sufficiently 

robust broadband connectivity to their 

buildings. Encouraging schools and 

libraries to undertake those types of 

projects and as a result closing the gap 

between those schools and libraries 

with high-speed connections and those 

without will further increase the 

demand for E-rate support. The extent to 

which we are able to achieve the first 

goal that we set out for the E-rate 

program—ensuring affordable access to 

high-speed broadband sufficient to 

support digital learning in schools and 

robust connectivity for all libraries—is 

highly dependent on how much 

category one funding is available for 

schools and libraries to pay for the 

upfront deployment costs of scalable 

connections to currently unserved and 

underserved schools and libraries. 

While we take steps above to encourage 

such deployment, the record clearly 

demonstrates that the amount of money 

needed for such deployment is closely 

linked to the number of additional 

schools and libraries that get connected 

to high-speed broadband. 

99. Based on the data in the record, 

we find that over a third of schools do 

not have access to fiber to the building, 

and an even greater percentage of 

libraries lack high-speed connectivity. 

While the dataset underlying our 

calculations on fiber access does not 

contain connectivity data from every 

school and every library across the 

nation, it is an unprecedented and rich 

source of information about school and 

library connectivity. Stakeholders have 

submitted data on existing connectivity 

since the beginning of this proceeding 

in the middle of 2013, and in August, 

Commission staff published the Fiber 

Connectivity Maps, which continue to 

be updated with new data. We therefore 

disagree with commenters that argue 

that we should wait for additional data 

on the fiber connectivity gap or that the 

gap is so small that it does not require 

additional funding to bridge it. Based on 

the many sources in the record agreeing 

that there is a significant connectivity 

gap to close, this dataset provides a 

reasonable baseline on which to rely in 

order to ensure the E-rate cap is set 

sufficiently high to provide certainty on 

future availability of funding necessary 

to achieve long-term connectivity 

targets. 

100. Based on the findings set out 

above, the record shows the costs for 

category one services will increase over 

the next five years as more schools and 

libraries get access to high-speed 

connections and bandwidth demand 

continues to increase. We have an 

obligation to balance having a specific, 

predictable, and sufficient support 

mechanism with our ‘‘responsibility to 

be a prudent guardian of the public’s 

resources.’’ Using estimates in the 

record on the costs for category one 

recurring and non-recurring costs 

consistent with our findings above, we 

balance these two concerns by setting a 

cap on the E-rate program that provides 

sufficient certainty of availability of 

funds over the next five funding years, 

while limiting the impact on end users 

in the near-term. 

101. Commenters submitted two cost 

estimates on connectivity to schools and 

libraries into the record: The ESH/CoSN 

Connectivity Model and the SHLB 

Coalition Model. The ESH/CoSN 

Connectivity Model provides a 

projection of both recurring and nonrecurring costs for public schools to 

meet the connectivity targets over five 

years. The model takes into account 

data on current connectivity, predicted 

bandwidth demand growth, declining 

recurring prices per megabit, and 

estimated non-recurring prices to close 

the gap of schools without access to 

high-speed connectivity. It also 

accounts for variation in connectivity 

needs of differently-sized schools. Using 

these data, it estimates the cost for five 

different scenarios, projecting differing 

costs depending on the number of 

schools that become connected. ESH 

also filed a supplementary analysis of 

the recurring costs for private schools 

and libraries. The SHLB Coalition 

Model, prepared by CTC Technology & 

Energy, sets out an estimate of capital 

expenditures needed to connect fiber to 

unserved, eligible public schools, 

private schools, and libraries. Using an 

engineering-based approach, the model 

divides the nation into eight different 

standardized geographies, ranging from 

dense urban areas to isolated schools in 

desert areas. Their model then projects 

a low and a high estimate for nonrecurring costs to connect public and 

private schools in each of these different 

geographies, and a separate estimate for 

the costs to connect libraries. 

a. Recurring Costs 

102. We first consider the modeled 

recurring costs for high-speed 

connectivity. The ESH/CoSN 

Connectivity Model addresses recurring 

costs for public schools, and its analysis 

is consistent with other evidence in the 

record. For each of its five funding 

scenarios, the model accounts for 

differing bandwidth needs by school 


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district size, service mixes, and pricing. 

Consistent with the data in the record, 

it takes into account an annual decline 

in per megabit pricing of approximately 

10 percent and an annual increase in 

bandwidth demand of up to 50 percent. 

As a result, it projects an increase in 

pre-discount recurring costs from 

approximately $2.1 billion in funding 

year 2015 to $2.8 billion in funding year 

2018 for public schools. 

103. We next turn to the recurring 

costs for private schools and for 

libraries. In a supplemental analysis, 

ESH estimates that it will cost $446 

million annually in pre-discount 

recurring costs for private schools by 

funding year 2018. For libraries, ESH 

projects $298 million annually in prediscount recurring costs based on its 

pricing assumptions for public schools. 

Adding these estimates to the public 

school recurring projection, the sum of 

the projections for funding year 2018 of 

total recurring costs rises to $3.60 

billion. We increase this funding year 

2018 estimate by nine percent in order 

to project costs over the five-year period 

for which we have set connectivity 

targets (funding years 2015 to 2019). 

The resulting projection for recurring 

pre-discount costs for public schools, 

private schools, and libraries in funding 

year 2019 is $3.92 billion. However, as 

discussed below, ESH also assumes that 

policy decisions can drive cost-efficient 

purchasing which will reduce these prediscount costs. 

104. In addition to recurring costs for 

high-speed connectivity, there will also 

be savings of over $3 billion in the next 

five years to the E-rate program due to 

the phase down of voice services. 

Commenters point out that additional 

savings are possible. The post-discount 

costs to the E-rate fund are estimated to 

decrease from approximately $450 

million in funding year 2015 to 

approximately $25 million in funding 

year 2018. We acknowledge these costs 

to the program over the next four 

funding years. 

b. Non-Recurring Costs 

105. We next review the estimates in 

the record of the non-recurring costs, or 

capital expenditures, that are needed to 

connect schools and libraries to highspeed broadband meeting the program’s 

connectivity targets over the next five 

years. The ESH/CoSN Connectivity 

Model includes an estimate for new 

builds that are paid for through 

recurring charges. By doing this, it 

recognizes that many schools and 

libraries pay a monthly price that 

includes both the capital deployment 

costs and the ongoing operational costs. 

At the same time, the models provide 

projections of one-time costs that would 

be sufficient to close the gap. While 

there may be applicants or service 

providers that prefer to include the 

capital costs as a portion of the annual 

price for the life of the contract, the 

ESH/CoSN Connectivity Model provides 

a way to separate out these capital costs 

for the schools located in the most 

expensive areas, where the higher cost 

of buildout is more likely to require 

additional special construction charges. 

The changes we adopt in Section II will 

provide greater opportunities for 

applicants and service providers to take 

advantage of special construction. The 

ESH/CoSN Connectivity Model 

demonstrates that the cost to the 

program increases as a greater 

percentage of schools get high-speed 

connections. To connect between 99.7 

and 100 percent of public schools with 

more than 100 students, the ESH/CoSN 

Connectivity Model provides a range of 

non-recurring pre-discount costs of 

between $600 and $810 million 

annually if divided evenly over the next 

five funding years. 

106. These projections for public 

schools costs are generally consistent 

with the cost estimates provided by the 

SHLB Coalition for both public and 

private schools. The SHLB Coalition 

Model provides a low and a high 

estimate for non-recurring costs for fiber 

deployment to both public and private 

schools that would range from $800 

million to $1.15 billion in pre-discount 

costs if divided evenly over the next five 

funding years. It also projects 

approximately $135 million annually 

over five funding years to connect 

unserved libraries across the country to 

fiber. The record indicates that a 

reasonable estimate of non-recurring 

pre-discount costs for both schools and 

libraries is between $935 million and 

$1.29 billion annually over five years. 

2. Driving Down Category One Prices 

Through Efficiencies 

107. We also conclude that recent 

program changes will result in an 

additional reduction in the cost to the 

Fund as applicants have more 

opportunities to find cost-effective 

options. We strongly agree with 

commenters that argue that 

programmatic change, further 

streamlining, and continuing efforts to 

reduce waste, fraud, and abuse, such as 

greater enforcement of the lowest 

corresponding price, is needed to 

produce savings to the E-rate program. 

While the precise level of savings from 

cost efficiencies is difficult to predict, 

there is record support for a finding that 

they could achieve savings of as much 

as 10 to 25 percent on the cost of 

broadband. ESH provides an analysis of 

the potential impact of several different 

policy scenarios that each could result 

in significant pricing efficiencies, such 

as equalizing the treatment of lit and 

dark fiber and increasing pricing 

transparency. Similarly, increased 

planning and purchasing at the state 

level has also been shown to result in 

greater bandwidth at lower per-megabit 

prices, which is an added benefit of 

increasing state involvement in the Erate program by providing a bump in 

support for infrastructure upgrades 

where states provide additional support. 

Because the record demonstrates that 

our various changes will result in 

efficiencies lowering program costs, we 

find it reasonable to assume savings of 

up to 15 percent of projected demand 

for category one costs due to our 

reforms. 

C. Adjusting the E-Rate Cap To Provide 

Certainty of Sufficient Available 

Funding To Achieve Program Goals 

108. To ensure sufficient funding is 

available over the next five years to 

meet our program goals and 

connectivity targets, we adjust the E-rate 

cap to $3.9 billion plus annual 

inflationary changes. Raising the annual 

E-rate funding cap to $3.9 billion will 

allow us to meet our target of providing 

at least $1 billion in category two 

support annually while fully funding 

category one demand, consistent with 

the cost estimates modeled by 

commenters and partially offset by 

potential efficiencies. There is wide 

support in the record for an increase in 

E-rate funding to help schools and 

libraries meet the program’s 

connectivity targets, and we find that 

raising the cap to $3.9 billion will 

ensure a specific, sufficient, and 

predictable level of funding available as 

schools and libraries seek support for 

robust Wi-Fi networks within their 

buildings and seek high-speed 

connections to their buildings for years 

to come. 

109. In addition to making it possible 

to close the high-speed connectivity 

gap, raising the annual cap to $3.9 

billion will provide certainty about the 

availability of funding for those 

applicants planning now to purchase 

high-speed broadband connectivity to 

schools and libraries. It will also 

provide certainty about the availability 

of funds for applicants seeking to take 

advantage of the changes to category 

two funding by adjusting the cap in 

funding year 2015. Commenters are in 

agreement that there is pent up demand 

for category two services, and providing 

more than the $1 billion target level in 

support for internal connections will 


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allow more applicants to close their WiFi gaps sooner and more efficiently. The 

availability of additional funds should 

allay concerns that applicants below the 

highest discount bands will not have 

access to category two funds in the near 

future. For these two reasons, we also 

disagree with commenters that urge us 

to delay adjusting the cap until all 

program changes have been 

implemented or more data is available. 

110. Raising the annual E-rate cap to 

$3.9 billion allows us to provide 

certainty to the applicant community, 

allowing local decision-makers to 

proceed at the pace that best serves their 

students and patrons. In doing so, we do 

not expect that program demand will 

immediately reach that funding level. 

Indeed, there is no way to perfectly 

predict what precisely individual 

schools and libraries will seek support 

for or when unserved schools will 

gather the resources to pay the nondiscounted portion of special 

construction charges. For instance, we 

have already identified sufficient 

unspent funds to be confident in 

funding for category two services in 

funding years 2015 and 2016, and it will 

take significant planning and time to 

take advantage of the measures set out 

in Section II. However, the record is 

clear that demand for and costs 

associated with high-speed broadband 

services will continue to grow, and we 

find that raising the cap now to $3.9 

billion will provide needed room for 

future E-rate funding needs. We balance 

this cap increase with our efforts to 

ensure fiscal prudence and we direct 

USAC to collect program funds based 

only on actual projected demand rather 

than collecting the full $3.9 billion 

without regard to applicant needs. 

Providing USAC with this flexibility 

will allow the Fund to accommodate 

fluctuations or changes in actual 

demand in the coming years without 

over-collection of funds. In order to 

facilitate this process and consistent 

with program practice, we amend the 

rules to only allow applications to be 

filed within the filing window. We 

disagree with commenters that argue 

that we should wait to address longterm funding needs until the Federal 

State Joint Board makes 

recommendations on contributions 

reform. Because demand for category 

one support will not increase 

dramatically in the short-term, we do 

not see a benefit in delaying this change 

when we have the ability to provide 

certainty about future availability of 

funding to schools and libraries making 

plans about connectivity for the next 

five years. 

111. Additionally, we recognize that 

end users ultimately bear the cost of 

supporting universal service, through 

carrier charges. However, we must 

balance our need for fiscal prudence 

with the demonstrated needs of the Erate program, for which we have a 

statutory mandate to ‘‘establish rules 

. . . to enhance, to the extent 

technically feasible and economically 

reasonable, access to advanced 

telecommunications and information 

services.’’ We adopted the program goal 

of ensuring affordable access to highspeed broadband sufficient to support 

digital learning in schools and robust 

connectivity to all libraries recognizing 

the critical role the E-rate program plays 

in the lives of students and 

communities. Having already taken 

steps to focus support on high-speed 

broadband and set out measures to 

increase cost efficiencies, this cap 

adjustment provides E-rate applicants 

with the certainty needed to plan how 

to increase connectivity to schools and 

libraries in the most cost-effective 

manner. Finally, setting a funding level 

that has sufficient flexibility for these 

plans should also drive long-term 

efficiencies in the program. 

112. Finally, some commenters 

recommend that the Commission double 

the cap, which is currently $2.4 billion, 

to meet recent demand. We decline to 

raise the cap to $4.8 billion based on 

recent demand. Since the funding year 

2014 application window closed, we 

have modernized the program to focus 

support on high-capacity broadband 

services by eliminating support for 

legacy services, beginning with the 

phase out of support for voice services 

and imposing budget discipline on 

category two services. Raising the cap 

based on demand for a differently 

structured program would not make 

sense. We find instead that a program 

cap set using projected costs for the 

services the program now supports and 

taking into account efficiencies through 

recent policy changes is a more 

appropriate means to measure necessary 

program size and ensure we exercise 

fiscal prudence. 

IV. Establishing a Performance 

Management System at USAC To 

Advance the Goals of the E-Rate 

Program (WC Docket 13–184) 

113. In this section, we direct USAC 

to develop a robust performance 

management system to advance the 

goals we adopted for the E-rate program 

in the E-rate Modernization Order and 

to analyze, on an ongoing-basis, the 

effectiveness of USAC’s administration 

of the E-rate program. Performance 

management is a process by which 

entities focus their resources on the 

achievement of strategic goals and 

objectives, including by the 

development of long-term strategic 

plans and by the rigorous tracking of 

performance data. As the administrator 

of the E-rate program, USAC’s 

performance is integral to the success of 

the program. Moreover, as a result of the 

transparency requirements we adopted 

in the E-rate Modernization Order, the 

improved data collection that will result 

from that order, and our direction to 

USAC to modernize its information 

technology (IT) system, USAC will have 

access to information that will be 

crucial in measuring our success toward 

reaching the E-rate program goals and it 

is essential that they make information 

available to schools, libraries, the 

Commission, and all other stakeholders 

interested in updates about our progress 

towards meeting those goals. Therefore, 

in developing and implementing its 

performance management system, we 

direct USAC to work with staff from 

OMD and the Bureau to formulate a 

detailed plan that includes both 

immediate and long-term metrics 

directed at finding new ways to further 

the E-rate program goals. 

A. Components of the Performance 

Management System 

114. We delegate to the Bureau and 

OMD oversight of the development and 

implementation of USAC’s performance 

management system. In addition to 

directing USAC to develop a 

performance management system for its 

administration of the E-rate program, we 

provide direction on a range of 

components that USAC must include in 

the system. At the same time we 

recognize that USAC’s performance 

management system must be flexible 

and adaptive, and we expect USAC, in 

consultation with staff of the Bureau 

and of OMD, to continue to update its 

performance management system, as 

appropriate. 

115. Impact of E-rate modernization. 

In this Order, as we did in the E-rate 

Modernization Order, we adopt a 

number of programmatic changes aimed 

at reaching the goals we adopted for the 

E-rate program. We have directed 

USAC, working with Commission staff, 

to implement those changes. 

Recognizing that some of those changes 

will be more successful than others, and 

that future Commissions will want to be 

able to evaluate the success of those 

initiatives, we direct USAC to 

incorporate in its performance 

management system an ongoing analysis 

of the impact of those changes on 

reaching the goals that we adopted for 

the E-rate program in the E-rate 


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Modernization Order, as well as USAC’s 

success at implementing those changes. 

116. Impact of and further 

improvements to USAC’s updated IT 

system. USAC’s performance 

management system should also include 

ongoing evaluation of USAC’s success 

in upgrading its IT system, and moving 

towards all-electronic filings by E-rate 

stakeholders and all-electronic 

notifications by USAC. As we directed 

in the July E-rate Modernization Order, 

all applicants must file electronically 

their applications for E-rate support for 

this coming funding year. As USAC 

considers what more it can do to ease 

the administrative burden on applicants 

through its upgraded IT system, it must 

develop a plan to migrate the filing of 

all E-rate appeals and invoices to 

electronic formats, and should make 

that possible by or before the start of 

funding year 2017. 

117. Simplifying calculation of 

discount rates. To further streamline the 

application process, particularly for 

school districts and library systems, we 

instruct USAC, as part of its 

performance management system, to 

enable applicants to more easily manage 

the discount calculation process in 

advance of the application filing 

window. USAC should establish the 

appropriate timeframe for billed entities 

to update their discount information in 

USAC’s online system, as well as a 

process for billed entities to certify to 

the accuracy of such information prior 

to the opening of the application 

window. USAC’s system should then be 

able to assist applicants in determining 

their discount rate based on such 

information, and pre-populate that 

information based on the information 

provided by the billed entities. At the 

same time, we remind applicants that 

they remain responsible for ensuring 

that they are seeking the appropriate 

discount rate and they are responsible 

for repayment in the event of any error 

in the calculation of the discount rate 

whether caused by the applicant or by 

USAC. 

118. Online competitive bidding. In 

order to assist applicants in maximizing 

the cost-effectiveness of spending for Erate supported services, as part of its 

performance management system, 

USAC should explore the possibility of 

providing online tools to improve the 

competitive bidding process. We agree 

with commenters who contend that the 

competitive bidding process should 

encourage and facilitate participation in 

the E-rate program by service providers. 

We therefore direct USAC to work with 

OMD and the Bureau to determine the 

feasibility and effectiveness of online 

tools to assist applicants with the 

competitive bidding process, including 

online bid and review tools to assist 

applicants in obtaining multiple bids 

and selecting the most cost-effective 

services, and to reduce administrative 

costs and burdens associated with 

competitive bidding. To expose 

applicants to more purchasing options, 

USAC should also explore the provision 

of tools to promote and facilitate 

increased involvement by service 

providers, and to provide more visibility 

into options for purchasing the specific 

products and services for which 

applicants are requesting proposals in 

ways that are consistent with fair and 

open competitive bidding requirements 

that are fundamental to the E-rate 

program. 

119. Improving the administrative 

experience of program participants. As 

part of its ongoing work to make the Erate application process and other E-rate 

processes faster, simpler, and more 

efficient USAC should assess 

organizational options for placing 

greater emphasis on improving the endto-end administrative experience of 

program participants, including 

applications, appeals, invoices, and 

audits. For example, USAC should 

assess the value of designating senior 

management directly responsible to the 

CEO to be responsible for championing 

outreach and simplification strategies to 

benefit program participants and to 

ensure that as much time, energy, and 

financial resources as possible go to 

achieving program goals rather than to 

cumbersome administrative processes. 

USAC should also solicit input from 

program beneficiaries and other 

stakeholders and use that input in 

evaluating, on an ongoing basis, its 

provision of customer support to E-rate 

applicants. USAC should incorporate 

performance metrics related to customer 

service into its overall performance 

management plan, and work with 

Commission staff to identify 

improvement recommendations. These 

recommendations should be considered 

at the highest levels of management and 

given the appropriate consideration for 

implementation, consistent with 

appropriate processes for coordination 

and approval by the Commission of 

review procedures, and the success of 

improving the customer service 

experience should be a key component 

of USAC’s performance management 

system. 

120. Maximizing the cost-effectiveness 

of E-rate supported purchases. As part 

of its performance management system, 

USAC should analyze how its 

administration of the program can 

further the goal of maximizing the costeffectiveness of E-rate supported 

purchases. For example, USAC should 

analyze its approach to costeffectiveness reviews, and find ways to 

share information with applicants and 

vendors about its approach to such 

reviews, in order to encourage costeffective purchasing by applicants. We 

direct the Bureau and OMD to oversee 

USAC’s interpretation and application 

of cost effectiveness to ensure alignment 

with the program goals we have set, 

with particular emphasis on ensuring 

the cost effectiveness of the new 

methods of supporting category one and 

category two services provided in the Erate Modernization Order as well as this 

Order. 

121. USAC should also explore ways 

to assist schools and libraries in 

receiving access to neutral, expert 

technical assistance. We agree with 

those commenters who argue that 

technical assistance is critical to 

building an efficient internal network. 

We have heard, however, from many 

parties that such technical experience is 

often not available within a school 

district or library system, especially 

those located in rural areas. In situations 

where affordable technical assistance is 

not available, USAC, as the expert 

administrator of the program, has an 

important role to play given its focus on 

efficiently serving applicants while 

verifying compliance with program 

rules. In keeping with the 

recommendations of many commenters, 

we encourage USAC to work with 

existing entities at the state and 

municipal level to develop best 

practices and supporting technical 

information, and to consider developing 

its own in-house advisors to provide 

this support. We direct USAC to work 

with OMD and the Bureau to set the 

financial and operational parameters for 

providing such assistance and to 

provide guidance to applicants on the 

role and responsibilities of USAC when 

offering such assistance. As part of that 

oversight, we also direct the Bureau, 

working with OMD and USAC, to 

develop reference prices or other 

guidelines for E-rate supported 

purchases that could provide guidance 

both to applicants about prices that are 

likely to be considered cost-effective 

and to USAC in prioritizing applications 

for additional scrutiny for costeffectiveness. 

122. Data tracking and analysis. As 

part of its performance management 

system, USAC should review its data 

tracking and reporting capabilities to 

confirm that it tracks and reports the 

data necessary to measure progress 

toward E-rate program goals. We direct 

USAC, working with OMD and the 

Bureau, to create a comprehensive and 


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efficient data reporting structure, to 

develop IT tools that facilitate analysis 

of all program data, and to increase 

public availability of such data to 

increase transparency and enable 

beneficiaries and other stakeholders 

both to assess progress by schools and 

libraries in obtaining access to highspeed broadband connectivity and to 

obtain detailed information from which 

to determine the cost effectiveness of 

spending for E-rate products and 

services by beneficiaries. 

123. Increased program efficiencies. 

USAC also should review its pre- and 

post-commitment procedures and 

identify additional opportunities for 

data analysis, improved compliance 

oversight, and realization of increased 

efficiency and streamlining of processes 

for the review of applications and the 

commitment and disbursement of funds. 

This review should encompass both 

USAC’s direct staff as well as contract 

services such as those used in 

application in-take and processing. We 

direct USAC to work with Commission 

staff to identify areas in which a more 

common-sense and flexible 

administrative approach would best 

advance program goals while still 

remaining consistent with program rules 

set by the Commission. 

124. Financial management. Finally, 

it is crucial that USAC include financial 

management as a component of its 

performance management system. The 

Commission has directed USAC to 

prepare financial statements for the 

USF, including the E-rate program, 

consistent with generally accepted 

accounting principles for federal 

agencies (Federal GAAP) and to keep 

the USF in accordance with the United 

States Standard General Ledger 

(USSGL). Working with OMD and other 

Commission staff, USAC should review 

and update its processes for evaluating 

and recommending the amounts that 

should be reserved to fund pending 

appeals, pending applications, and 

undisbursed funding commitments. We 

note that, for those appeals that may 

require additional commitments and 

disbursements in the unlikely event that 

the amounts held in reserve are not 

sufficient, the Commission has 

authorized USAC to use funds budgeted 

for subsequent funding years to fund 

discounts for successful appeals from 

prior funding years. For the pending 

applications and undisbursed funding 

commitments, we similarly authorize 

USAC to use funds budgeted for 

subsequent funding years to fund 

discounts for those applications and 

undisbursed funding commitments from 

prior funding years, in the unlikely 

event the amounts held in reserve are 

not sufficient. 

B. Expanding Commission Oversight of 

USAC’s Administrative Performance 

125. We also delegate authority to the 

Bureau and OMD to ensure that 

beginning in funding year 2015 USAC 

conducts an annual performance review 

of progress against program goals and 

creates a forward-looking strategic plan 

for how USAC will expand and sustain 

performance improvements. The Bureau 

and OMD should work together to assist 

USAC in developing the measures that 

should be included in USAC’s annual 

performance review. USAC must report 

at a minimum on the following 

components of the program’s 

administration: Pending applications; 

pending invoices, with specific 

information about those that were 

delayed or rejected; USAC’s strategy to 

reduce any backlog of applications, 

invoices or other necessary USAC 

approvals for applicant and service 

provider changes to requested funding; 

and an annual analysis of the program 

integrity assurance (PIA) program and 

invoicing procedures to determine if 

they are properly designed and 

calibrated to efficiently process 

applications and invoices while 

protecting against waste, fraud and 

abuse in the program. 

126. Additionally, in the E-rate 

Modernization Order, we directed 

USAC to collect additional connectivity 

data from applicants, noting that this 

collection will provide useful and 

useable information to USAC and to the 

Commission about what is working and 

what needs to be improved. USAC 

should work with Commission staff to 

analyze and report the results of this 

data collection in this performance 

analysis. 

V. Filing Deadlines for Appeals 

127. In the E-rate Modernization 

Order, we revised § 54.719 of our rules 

to require parties aggrieved by an action 

taken by a division of USAC, including 

the Schools and Libraries Division, to 

first seek review of that decision by 

USAC before filing an appeal with the 

Commission. We also explained that 

because USAC cannot waive our rules, 

parties seeking a waiver of our rules 

must seek relief directly from the 

Commission or the Bureau. We now 

clarify that affected parties have 60 days 

from the issuance of the decision to file 

an appeal, either with USAC in the case 

of requests for review, or the 

Commission or Bureau in the case of 

requests for waiver. Additionally, 

parties that file a request for review with 

USAC and receive an adverse outcome 

have 60 days from the issuance of that 

decision to file a request for review with 

the Commission. 

VI. Order on Reconsideration 

A. Introduction 

128. In this section, we address 

various petitions for reconsideration of 

the E-rate Modernization Order and 

provide clarification on several issues 

raised by the Verizon Petition. Our rules 

allow any interested party to file a 

petition for reconsideration, and 

provide that a petition for 

reconsideration which relies on facts or 

arguments not previously presented to 

the Commission shall be granted only 

where the facts or arguments relate to 

new events or changed circumstances, 

were unknown and not readily 

ascertainable by petitioners, or the 

Commission determines that the public 

interest requires them to be 

reconsidered. 

129. Having considered the petitions 

for reconsideration, and all oppositions 

and replies filed in response to those 

petitions, we: 

• Grant in part the petitions for 

reconsideration filed by SECA, the Utah 

Education Network, NTCA/Utah Rural 

Telecom Association, and the West 

Virginia Department of Education 

(WVDE) seeking reconsideration of the 

areas that we have designated as urban 

for purposes of the E-rate program; 

• deny USTelecom’s request that we 

reconsider our decision to change the Erate program’s document retention 

period from five years to 10 years; 

• deny requests by SECA, Verizon, 

and WVDE that we phase out E-rate 

support for components of telephone 

service and voicemail on the same 

schedule as voice service, and Verizon’s 

request that we reconsider our decision 

to eliminate funding for email offered as 

part of an Internet access service; 

• deny requests by Verizon, SECA, 

and WVDE that we direct USAC to make 

category two funding commitments that 

cover multiple-years; 

• clarify our cost-effectiveness test for 

data plans and air cards for mobile 

devices and our cost allocation rules for 

circuits that carry both voice and data 

traffic as requested by Verizon; and 

• clarify for Verizon the E-rate 

Modernization Order’s category two 

funding availability and policy on 

applicant prioritization. We also clarify 

for Verizon that the $150 budget over 

five years applies to both managed and 

non-managed Wi-Fi. 

B. Urban and Rural Designations 

130. On reconsideration, we modify 

§ 54.505(b)(3) of our rules so that 


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starting in funding year 2015 an 

individual school or library will be 

designated as ‘‘urban’’ if located in an 

‘‘Urbanized Area’’ or an ‘‘Urban 

Cluster’’ with a population equal to or 

greater than 25,000, as determined by 

the most recent rural-urban 

classification by the U.S. Census Bureau 

(Census Bureau). Any individual school 

or library not designated as ‘‘urban’’ will 

be designated as ‘‘rural.’’ We make this 

change to our rules on reconsideration 

because petitioners have convincingly 

demonstrated that numerous schools 

and libraries located in small towns and 

remote areas where it is more expensive 

to receive E-rate funded services would 

be classified as urban and ineligible for 

additional E-rate support provided to 

rural applicants under the urban 

designation we adopted in the E-rate 

Modernization Order. In making this 

change on reconsideration, we grant in 

part the petitions for reconsideration 

filed by SECA, NTCA/Utah Rural 

Telecom Association, WVDE, and the 

Utah Education Network. While we 

change how individual sites are 

classified as urban or rural, we retain 

the current rule that any school district 

or library system must have a majority 

of schools or libraries in a rural area that 

meets our new urban/rural definition to 

qualify for the additional rural discount. 

131. In the E-rate Modernization 

Order, we made two changes to the way 

applicants determine whether they are 

eligible for the rural discount. We first 

adopted the Census Bureau definition of 

rural and urban which classifies only 

communities with fewer than 2,500 

people as rural. Under the Census 

Bureau definition, the term ‘‘urban’’ 

includes ‘‘urbanized areas,’’ which are 

defined as the densely settled core of 

census tracts or blocks with at least 

50,000 people, and ‘‘urban clusters,’’ 

with 2,500 to 50,000 people, along with 

adjacent territories containing nonresidential urban land uses as well as 

territory with low population density 

included to link outlying densely settled 

territory with the densely settled core. 

‘‘Rural’’ encompasses all population, 

housing, and territory not included 

within an urban area. We found that the 

adoption of the Census Bureau 

definitions of urban and rural was 

simpler for applicants than other 

alternatives and the data more current 

than the previous outdated definition. 

Also in the E-rate Modernization Order, 

we changed the criteria a school district 

or library system must use to determine 

whether it qualifies as rural for the Erate program, concluding that school 

districts and library systems would only 

be eligible for the rural discount if more 

than 50 percent of individual schools or 

libraries within that district or system 

are classified as rural. 

132. As petitioners have explained, 

the population cutoff of 50,000 people 

combined with the requirement that a 

majority of all schools or libraries that 

are part of a school district or library 

system be classified as rural in order to 

qualify the school district or library 

system for the additional rural discount 

rate leaves a substantial number of 

school districts and library systems with 

schools or libraries in sparsely 

populated areas ineligible for the 

additional rural funding. For example, 

petitioners point out that as a result of 

the definition adopted in the E-rate 

Modernization Order: 

• Schools in St. Mary’s, West 

Virginia, a community with 1,860 

people that is 20 miles from the nearest 

urbanized area, are part of the Pleasants 

County School District that, under the 

new rural definition, would be 

reclassified as urban. 

• School districts in Iowa would be 

newly designated as urban, including 

the Bellevue Community School 

District, with an enrollment of only 700 

students and located in Bellevue, a town 

of 2,543 people. 

• Some of the most remote areas of 

the country situated in Alaska, 

including the communities of Barrow, 

Bethel, Ketchikan, Kotzebue, Nome and 

Sitka, have school districts that would 

be reclassified as urban. 

133. Three of the four petitions for 

reconsideration on this issue initially 

requested that the definition of rural 

include all schools and libraries in 

‘‘urban clusters.’’ However, those 

petitioners modified their requests and 

joined with the fourth petitioner, the 

Utah Education Network, and a 

constituency of organizations 

representing schools, libraries, E-rate 

coordinators, rural telecommunications 

carriers, and other E-rate stakeholders, 

to recommend that the Commission 

consider a population threshold of 

25,000 or greater as urban, and all other 

areas as rural for purposes of the E-rate 

program. No parties in the record have 

opposed this recommendation. 

134. We agree with petitioners and 

other stakeholders that this new 

definition of rural is appropriate for 

ensuring support is targeted to areas 

where E-rate supported services are 

more costly. Other federal programs 

have used a similar population cutoff to 

designate whether an area is rural or 

urban. For example, the Commission 

adopted 25,000 as the population 

threshold when it revised its rural area 

definition for the rural health care 

universal service support mechanism 

(Rural Health Care Program) in 2004, 

essentially including as rural all census 

tracts that do not contain any 

population concentrations greater than 

25,000. In adopting the Rural Health 

Care Program’s rural definition, the 

Commission noted that ‘‘[w]hile 

choosing the threshold is not an exact 

science, we believe urban areas above 

this size possess a critical mass of 

population and facilities.’’ In looking to 

other agencies, the U.S. Department of 

Education’s National Center for 

Education Statistics (NCES) classifies 

‘‘small towns’’ as any incorporated or 

Census-defined place with fewer than 

25,000 people. Some other federal 

programs have established even broader 

definitions of rural than the one we 

adopt today. For example, the 2014 

Farm Bill included a provision related 

to the U.S. Department of Agriculture 

Rural Housing Program that increased 

the minimum rural population 

threshold for that program from 25,000 

to 35,000. 

135. Modifying our definition to treat 

areas with populations of less than 

25,000 as rural achieves the policy 

objectives established in the E-rate 

Modernization Order by creating a rural 

definition based on regularly adjusted 

U.S. Census data while remaining 

simple and easy to administer. The 

Census Bureau already provides a 

spreadsheet of all urbanized areas and 

urban clusters with the populations of 

the towns and cities listed. To further 

eliminate any confusion regarding 

implementation of this new definition, 

the Commission will direct USAC to 

identify the areas that are rural for the 

purposes of the E-rate program and post 

a tool on its Web site as soon as it is 

practically possible. Going forward, we 

direct USAC to update the tool as 

necessary to reflect the most recent 

decennial census data and nationwide 

population estimates and update its 

system within 90 days of any change. 

However, we once again remind 

applicants that they have an obligation 

to ensure that they are seeking the 

correct discount rate. 

136. In taking this action, we find that 

any additional burden on the Fund is 

justified by the overwhelming evidence 

in the record demonstrating that the 

rural definition adopted in the E-rate 

Modernization Order excluded many 

applicants located in areas that are more 

expensive to serve because of their 

remote geography. Further, we believe 

that this change, by ensuring that many 

more schools and libraries have the 

benefit of additional funding to 

compensate for their rural geography, 

fully satisfies section 254(h)(1)(B) of the 

Act, which requires that the E-rate 


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discount must be an amount that is 

‘‘appropriate and necessary to ensure 

affordable access to and use of such 

services.’’ 

137. Finally, we take this opportunity 

to eliminate an obsolete reference to the 

definition of what constitutes a rural 

area for the purposes of the E-rate 

program in § 54.5 of our rules. The Erate definitions are properly found at 

54.505(b) of our rules. However, the 

‘‘Terms and definitions’’ section, found 

in § 54.5 of our rules, also defines ‘‘rural 

area’’ for the E-rate program. While we 

could also amend the definition in 54.5 

of our rules and make it parallel to the 

definition in § 54.505(b), we think that 

the better course is to have the 

definition only in that section of our 

rules that is E-rate specific. We therefore 

amend § 54.5 to eliminate the reference 

to the E-rate definition of rural. 

C. Document Retention Period 

138. We deny the USTelecom Petition 

seeking reconsideration of our extension 

of the E-rate document retention period 

from five to 10 years. The arguments 

offered by USTelecom were either 

sufficiently considered in this 

proceeding or do not raise new issues 

sufficient to warrant reconsideration. In 

the E-rate Modernization Order we 

concluded that the current five-year 

document retention requirement is not 

adequate for purposes of litigation 

under the False Claims Act (FCA). We 

also explained that a 10-year retention 

period will benefit program integrity 

and that electronic storage capabilities 

will minimize the administrative 

burden and cost for applicants and 

vendors. This decision is consistent 

with our adoption of 10-year document 

retention requirements for other 

universal service programs in the USF/ 

ICC Transformation Order and the 

Lifeline Reform Order, 77 FR 25609, 

May 1, 2012. 

139. In its petition, USTelecom argues 

that document retention requirements 

are not necessary for compliance with 

the FCA and that existing case law 

‘‘provides no basis for the Commission 

to claim a need for extended document 

retention periods in order to comply 

with the FCA.’’ We find it unnecessary 

to reach these arguments because our 

decision to adopt a 10-year document 

retention period is justified on several 

other independent grounds unrelated to 

the FCA. These non-FCA grounds are 

sufficient in and of themselves to justify 

a 10-year document retention period. In 

particular, we continue to find that: 

• Even outside the FCA context, a 

longer document retention period will 

help the Commission guard against 

waste, fraud, and abuse in the universal 

service program by ensuring that 

evidence will be preserved. 

• Congress has imposed no statutory 

barrier to recovery beyond five years. 

Indeed, the Debt Collection 

Improvement Act (DCIA), 31 U.S.C. 

3701 et seq., generally directs agencies 

to ‘‘try to collect a claim of the [U.S.] 

Government for money or property 

arising out of the activities of, or 

referred to, the agency.’’ 

140. Other rationales (also unrelated 

to the FCA) reinforce our belief that a 

10-year document retention period will 

help ensure the integrity of the E-rate 

program and will assist Commission 

investigations into waste, fraud, and 

abuse, which may extend beyond a fiveyear period. For instance, Governmentwide regulations known as the Federal 

Claims Collection Standards require 

agencies to ‘‘aggressively collect all 

debts.’’ Extending the retention period 

to ten years will assist the agency in 

carrying out this objective. Because the 

new document retention period is 

amply supported by these reasons, we 

need not reach USTelecom’s arguments 

regarding the FCA. 

141. We also reject USTelecom’s 

remaining arguments regarding the new 

retention period. For instance, the fact 

that some other federal programs may 

have shorter retention periods does not 

require a contrary outcome, particularly 

since, as noted above, a 10-year 

document retention rule aligns the Erate program with the document 

retention requirements of other 

universal service programs. Also 

unavailing is USTelecom’s argument 

that a 10-year document retention 

requirement is unnecessary, will impose 

significant costs on applicants and 

vendors, and is not supported by the 

record. We previously considered and 

rejected these arguments in this 

proceeding. USTelecom cites several 

commenters opposed to a longer 

document retention period. However, 

those commenters either failed to 

provide any substantive support for 

their opposition to a 10-year 

requirement or offered general 

arguments about school staff turnover or 

shorter state and federal retention 

requirements without providing 

persuasive support as to why a 10-year 

requirement for the E-rate program 

would be overly burdensome. In the Erate Modernization Order, we 

acknowledged stakeholder concerns 

about the potential costs and 

administrative burden of a 10-year 

retention requirement, but concluded 

that those costs and burdens can be 

mitigated with electronic storage 

capabilities and concluded that any 

such costs would be outweighed by the 

benefits to the integrity of the program. 

We reaffirm that conclusion here. 

D. Telephone Service Components, 

Voicemail, and Email 

142. We deny those portions of the 

Verizon and WVDE petitions requesting 

us to (i) reconsider our treatment of 

telephone service components, 

including directory assistance charges, 

text messaging, custom calling services, 

direct inward dialing (DID), 900/976 call 

blocking, and inside wire maintenance, 

as part of voice services; and (ii) phase 

out support for those services on the 

same five-year schedule as voice 

services rather than eliminating support 

beginning in funding year 2015. We 

therefore also deny SECA’s request that 

we remove DID numbers from the list of 

eliminated telephone components and 

instead phase out support for DID 

numbers on the same schedule as voice 

services. We also deny Verizon’s 

requests that voicemail be phased out 

on the same schedule as voice service 

and that the E-rate program support 

email offered as part of an Internet 

access service. 

143. In the E-rate Modernization 

Order we initiated a five-year phase 

down of E-rate support for voice 

services and eliminated support for 

other legacy and non-broadband 

services effective for funding year 2015. 

We explained that reductions in funding 

for voice services and eliminating 

funding for telephone components and 

non-broadband services was necessary 

in order to focus E-rate program 

spending on the high-speed broadband 

needed by schools to enable digital 

learning and by libraries to meet 

patrons’ broadband needs. 

144. Verizon and WVDE argue that 

cost allocating telephone service 

components and voicemail from a 

typical applicant phone bill will place 

a substantial burden on applicants, 

service providers, and USAC reviewers 

that is not justified by the corresponding 

savings to the E-rate program. SECA 

argues that DID numbers, unlike the 

other telephone service components no 

longer eligible for E-rate support, are an 

essential feature of voice service and 

should therefore be placed on the same 

phase down schedule as voice services. 

145. The arguments and facts 

presented in the Verizon, WVDE, and 

SECA petitions were previously 

considered in this rulemaking and do 

not merit reconsideration of our 

conclusions. In the E-rate 

Modernization NPRM, we indicated our 

intention to refocus E-rate funding on 

high-speed broadband services and, as 

part of that effort, proposed to eliminate 

E-rate support for telephone service 


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components, voicemail, and email. With 

respect to the components of telephone 

service, in the E-rate Modernization 

Order, we acknowledged that 

eliminating support for these services 

would require cost allocation but 

concluded that it would not be overly 

burdensome for applicants to seek 

funding for only the voice service 

component of their telephone service. 

We concluded that the benefits of 

streamlining voice service support by 

removing these services outweighed the 

additional burden on applicants of cost 

allocation for the next few funding 

years. We also noted that commenters 

that recommended a longer phase down 

period for voice services did not 

recommend a commensurate phase 

down for telephone service components 

or argue that those services required a 

phase down. Similarly, eliminating 

support for email services will require 

cost allocation for email offered as part 

of an Internet access service but we 

believe that the benefits of focusing 

funding on high-speed broadband 

justify the minimal cost allocation 

burden on applicants. Consistent with 

the third goal that we adopted in the Erate Modernization Order, making E-rate 

processes fast, simple, and efficient, and 

in order to reduce the administrative 

burden on applicants, we expect that 

USAC will, working with the Bureau, 

establish guidelines for how applicants 

can proportion the cost of services on 

telephone bills in order to cost-allocate 

ineligible telephone service components 

and voicemail. 

E. Conditional or Multi-Year 

Commitments 

146. We deny the petitions filed by 

SECA, Verizon, and WVDE to the extent 

they request that the Commission 

reconsider the approach to category two 

funding adopted in the E-rate 

Modernization Order. SECA, Verizon, 

and WVDE do not raise new facts or 

arguments that warrant Commission 

review of the E-rate program’s 

prohibition on multi-year funding 

commitments. 

147. In the E-rate Modernization 

Order, we created a mechanism for 

focusing funding on internal 

connections, including Wi-Fi, to allow 

schools and libraries to have affordable 

access to high-speed broadband 

connections needed for digital learning. 

To provide broader and more equitable 

support for category two services, the Erate Modernization Order created fiveyear budgets for applicants that seek 

and receive category two funding in 

funding years 2015 and 2016. In the 

Second E-rate Modernization Order, we 

extend the five-year applicant budgets 

for category two services for three 

additional years. While we allow 

category two applicants to enter into 

multi-year agreements, we declined to 

make multi-year commitments 

available. 

148. We deny the Verizon Petition 

with respect to its proposal to allow 

multi-year commitments for managed 

Wi-Fi services as a way to remove 

uncertainty about whether funding will 

be available in the later years of a fiveyear category two budget cycle. In the Erate Modernization Order we considered 

and rejected arguments in favor of 

multi-year commitments in the E-rate 

program. As we explained in that order, 

obligating funds in advance of their 

availability would be detrimental to the 

administration of the program. We also 

explained that the multi-year 

application process we created in that 

order should allow applicants to 

achieve many of the efficiencies of a 

multi-year funding commitment. 

Furthermore, petitioners’ concerns 

about the uncertainty of funding for 

category two services should be 

alleviated by the actions we have taken 

in the Second E-rate Modernization 

Order to raise the cap, and to extend the 

category two budget approach to cover 

five funding years. Therefore, we find it 

is in the best interest of the Fund to 

continue to have the Administrator 

obligate funds one funding year at a 

time. 

149. We also deny SECA and WVDE’s 

proposal that we provide conditional 

funding commitments to all valid 

applications for category two funding. 

Under this proposal, if funding is 

unavailable in the year in which it is 

sought, rather than being denied 

support, an applicant would receive a 

commitment of future support for those 

services. We find that this approach is 

not necessary because uncertainty about 

funding for category two services should 

be alleviated by the actions we have 

taken to raise the annual E-rate cap and 

extend the category two budget 

framework for the next three years. 

Further, if there comes a time that we 

are unable to meet the demand for 

category two support, instead of 

providing predictability for applicants, 

SECA’s and WVDE’s proposals would 

lead to greater uncertainty, and 

administrative complexity because 

applicants would not know when they 

would receive reimbursement or how 

much reimbursement they would 

entitled to receive. Under WVDE’s 

proposal, applicants would use the 

discount rate in effect at the time the 

funds become available, meaning 

applicants would have to account for 

changes in student demographics and 

the urban/rural classification that affect 

the discount level. Thus, it would be 

very difficult for applicants to predict 

the level of expected reimbursement 

and could lead to budget shortfalls for 

applicants expecting a larger 

disbursement from the Fund. 

F. Clarifications 

150. Cost-Effectiveness for Wireless 

Data Plans and Air Cards. In response 

to Verizon’s request for clarification, we 

offer additional guidance on the proper 

cost-effectiveness test for data plans and 

air cards for mobile devices. When 

purchasing any E-rate eligible service, 

applicants are required to carefully 

consider all bids and select the most 

cost-effective service offering, and must 

consider price to be the primary factor. 

In the E-rate Modernization Order, we 

took the opportunity to discuss the 

limited circumstances under which we 

would find data plans or air cards for 

mobile devices to be cost-effective. We 

explained that it is generally more costeffective for schools and libraries to 

purchase a fixed broadband connection 

to the building and a WLAN capable of 

providing connectivity to multiple 

devices throughout the building. 

However, we recognized that there are 

circumstances, such as library 

bookmobiles or very small schools and 

libraries with high connectivity costs, 

where individual data plans or air cards 

for mobile devices may be the most costeffective solution. We then provided an 

example of how applicants could 

demonstrate the cost-effectiveness of 

data plans or air cards for mobile 

devices through comparison of the costs 

for a WLAN deployment. 

151. Verizon requests clarification 

that applicants should compare the cost 

of data plans or air cards for mobile 

devices to the cost of all components 

necessary to deliver connectivity to the 

end user device. Verizon also requests 

clarification as to whether applicants 

may take into account the potential 

limited availability of category two 

funding when evaluating the cost 

effectiveness of individual data plans 

and air cards for mobile devices. 

152. We agree with the points raised 

by Verizon’s first request and clarify 

that applicants that seek funding for 

data plans or air cards for mobile 

devices should compare the cost of all 

components necessary to deliver 

connectivity to the end user device, 

including the costs of Internet access 

and connectivity to the school or 

library, to the total cost of data plans or 

air cards when selecting the most costeffective service option. Schools with 

existing fixed broadband connections 

should limit this comparison to the 


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recurring cost of their current 

broadband connection plus the added 

cost of any upgrades to their broadband 

connections and any additional or 

updated internal connections needed to 

deploy a sufficiently robust WLAN with 

all capital investments amortized over 

their expected lifespan. We also caution 

applicants that seeking support for data 

plans or air cards for mobile devices for 

use in a school or library with an 

existing fixed broadband connection 

and WLAN implicates our prohibition 

on requests for duplicative services. In 

circumstances where an applicant 

successfully demonstrates that mobile 

data plans or air cards are the most costeffective offering, such as a bookmobile 

or very small school or library facility, 

the impracticality or unusually high 

cost of purchasing a fixed broadband 

connection to the location should be a 

factor in the applicant’s costeffectiveness analysis. 

153. We also clarify that an applicant 

may not consider whether it is likely to 

receive category two E-rate support 

when analyzing the cost-effectiveness of 

data plans or air cards for mobile 

devices. While our rules allow 

applicants to consider relevant factors 

other than cost as part of the costeffectiveness determination, price must 

be the primary factor in an applicant’s 

cost-effectiveness determination 

regardless of whether the applicant 

anticipates receiving category two E-rate 

support. Indeed our rules require that 

entities use the actual, i.e. pre-discount, 

cost of the service offered as a baseline 

for comparison, not the cost after the Erate discount is applied. 

154. Circuit Capacity Dedicated to 

Voice Services. Verizon also requests 

that we clarify how the reduced 

discount rates for voice services apply 

to costs incurred for circuit capacity 

dedicated to providing voice services. 

We clarify that applicants must cost 

allocate charges attributable to voice 

services from the cost of all circuits 

used for dedicated voice and data 

services and that those voice service 

charges will be subject to the five-year 

voice service phase down. In the E-rate 

Modernization Order, we specified that 

the five-year phase down of support for 

voice services will apply to all 

applicants and all costs incurred for the 

provision of telephone services and 

circuit capacity dedicated to providing 

voice services. Verizon seeks general 

clarification of the term ‘‘circuit 

capacity dedicated to providing voice 

services.’’ Verizon also requests specific 

clarification of the proper cost 

allocation method for voice services on 

three types of circuits: (1) A circuit 

leased for a district-operated private 

voice network, (2) a leased WAN circuit 

that carries both voice and broadband 

traffic, and (3) a circuit that carries both 

voice and broadband services. As 

discussed below, Commission rules 

require applicants to cost allocate 

charges attributable to voice services 

from the circuit cost in all 

circumstances described by Verizon. 

155. Under the Commission’s rules, if 

a product or service contains both 

eligible and ineligible components, 

costs should be allocated to the extent 

that a clear delineation can be made 

between the eligible and ineligible 

components. The clear delineation must 

have a tangible basis and the price for 

the eligible portion must be the most 

cost-effective means of receiving the 

eligible service. We understand that 

application of our cost allocation rules 

to circuits used for both voice and data 

services may require some additional 

effort from applicants and service 

providers; however, the requirement 

does not impose a substantial burden 

and provides an important benefit to the 

program. 

156. We provide the following 

clarifications regarding application of 

our cost allocation rules to circuits 

carrying both voice and data services. 

• For a bundled voice and data 

service provided over a single circuit, 

(e.g., a cable voice/data bundle) the 

voice service portion must be cost 

allocated and subject to the voice 

services phase down. As with telephone 

service components, one proper method 

for cost allocating the voice service 

portion of a bundled voice/data circuit 

may be for the applicant to seek an 

appropriate cost allocation from its 

service provider. 

• For circuits dedicated solely to 

voice service, including PRIs, SIP 

trunks, and VoIP provider circuits, the 

full cost of the dedicated circuit is 

subject to the voice services phase 

down. Verizon’s description of a circuit 

leased for a district-operated private 

voice network would be considered a 

circuit dedicated to voice service. 

• For services that dedicate a portion 

of a data circuit to voice service, (e.g., 

voice channels on a T–1 circuit or 

dedicated bandwidth for VoIP traffic 

using a virtual local area network) the 

cost of the dedicated portion of the 

circuit must be cost allocated and 

subject to the voice services phase 

down. 

• For voice applications that run over 

a data circuit but do not require any 

dedicated circuit capacity, the applicant 

is not required to cost allocate any 

portion of the data circuit cost for voice 

services. 

157. Funding for Budgets. Verizon 

asks the Commission to clarify that it 

expects full funding to be available up 

to the budgeted amount in each of the 

five years of an applicant’s category two 

budget and that priority be given in later 

years of a budget cycle to applicants that 

receive category two support in the first 

funding years 2015 and 2016. Based on 

historic demand and the changes we 

made to the E-rate program in both Erate Modernization Orders, we expect 

funding will be sufficient to meet 

demand but we cannot guarantee that 

category two funding will be available 

to any particular applicant in any 

particular year. 

VII. Delegation To Revise Rules 

158. Given the complexities 

associated with modernizing the E-rate 

program, modifying our rules, and the 

other programmatic changes we adopt 

in this Report and Order, we delegate 

authority to the Bureau to make any 

further rule revisions as necessary to 

ensure the changes to the program 

adopted in this Report and Order are 

reflected in our rules. This includes 

correcting any conflicts between new 

and/or revised rules and existing rules 

as well as addressing any omissions or 

oversights. If any such rule changes are 

warranted the Bureau shall be 

responsible for such change. We note 

that any entity that disagrees with a rule 

change made on delegated authority 

will have the opportunity to file an 

Application for Review by the full 

Commission. We expect the Bureau and 

USAC to monitor the program for waste, 

fraud and abuse and we delegate 

authority to the Bureau and OMD to 

specify additional administrative 

requirements in connection with the 

program changes we adopt today and 

authority to provide guidance to USAC 

in its implementation of these changes. 

The purpose of this delegation is to 

protect against potential waste, fraud, 

and abuse in the E-rate program. 

VIII. Procedural Matters 

A. Final Regulatory Flexibility Analysis 

159. As required by the Regulatory 

Flexibility Act of 1980, as amended 

(RFA), the Federal Communications 

Commission (Commission) included 

Initial Regulatory Flexibility Analyses 

(IRFAs) of the possible significant 

economic impact on a substantial 

number of small entities by the policies 

and rules proposed in the E-rate 

Modernization NPRM and E-rate 

Modernization FNPRM in WC Docket 

No. 13–184. The Commission sought 

written public comment on the 

proposals in the E-rate Modernization 


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NPRM and E-rate Modernization 

FNPRM, including comment on the 

IRFAs. This Final Regulatory Flexibility 

Analysis (FRFA) conforms to the RFA. 

B. Need for, and Objectives of, the 

Proposed Rule 

160. The Commission is required by 

section 254 of the Communications Act 

of 1934, as amended, 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. 

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. 

161. In July 2013, the Commission 

issued a Notice of Proposed Rulemaking 

seeking public comment on proposals to 

update the E-rate program to focus on 

21st Century broadband needs of 

schools and libraries. Later, in February 

2014, the Wireline Competition Bureau 

(Bureau) issued a Public Notice seeking 

focused comment on issues raised in the 

E-rate Modernization NPRM. Then, in 

July 2014, we adopted a number of 

proposals in the E-rate Modernization 

NPRM and issued a Further Notice of 

Proposed Rulemaking seeking public 

comment on additional proposals to 

update the E-rate program. In this 

Report and Order, we adopt a number 

of the proposals put forward in the Erate Modernization NPRM and E-rate 

Modernization FNPRM. 

162. This Report and Order continues 

the Commission’s efforts to promote 

broadband access for schools and 

libraries and support the goals that we 

adopted in the E-rate Modernization 

Order. In it, we lower the barrier to 

obtaining high-speed connections and 

increase the E-rate funding cap to meet 

the needs of the program. To lower 

barriers to obtaining high-speed 

connections, we (1) provide greater 

flexibility for applicants with respect to 

payment options for large non-recurring 

capital costs for high-speed broadband; 

(2) equalize the treatment of lit and dark 

fiber to offer applicants an additional 

cost-effective option for deploying highspeed broadband; (3) allow selfconstruction of high-speed broadband 

facilities by schools and libraries when 

self-construction is the most costeffective option; (4) provide up to an 

additional 10 percent in category one 

funding to match state funding for 

special construction charges for lastmile facilities to support high-speed 

broadband; and (5) obligating recipients 

of high-cost Universal Service Fund 

support to offer high-speed broadband 

to schools and libraries located in the 

geographic area where the carrier 

receives high-cost support at rates 

reasonably comparable to similar 

services in urban areas. To meet the 

needs of the program, we raise the E-rate 

funding cap to $3.9 billion. 

C. Summary of Significant Issues Raised 

by Public Comments to the IRFA 

163. No comments specifically 

addressed the IRFA. 

D. Description and Estimate of the 

Number of Small Entities to Which the 

Proposed Rules May Apply 

164. 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. The RFA 

generally defines the term ‘‘small 

entity’’ as having the same meaning as 

the terms ‘‘small business,’’ ‘‘small 

organization,’’ and ‘‘small governmental 

jurisdiction.’’ In addition, the term 

‘‘small business’’ has the same meaning 

as the term ‘‘small business concern’’ 

under the Small Business Act. 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 Small Business 

Administration (SBA). Nationwide, 

there are a total of approximately 28.2 

million small businesses, according to 

the SBA. A ‘‘small organization’’ is 

generally ‘‘any not-for-profit enterprise 

which is independently owned and 

operated and is not dominant in its 

field.’’ 

165. Nationwide, as of 2002, there 

were approximately 1.6 million small 

organizations. The term ‘‘small 

governmental jurisdiction’’ is defined 

generally as ‘‘governments of cities, 

towns, townships, villages, school 

districts, or special districts, with a 

population of less than fifty thousand.’’ 

Census Bureau data for 2002 indicate 

that there were 87,525 local 

governmental jurisdictions in the 

United States. We estimate that, of this 

total, 84,377 entities were ‘‘small 

governmental jurisdictions.’’ Thus, we 

estimate that most governmental 

jurisdictions are small. 

166. Small entities potentially 

affected by the proposals herein include 

eligible schools and libraries and the 

eligible service providers offering them 

discounted services. 

167. Schools and Libraries. As noted, 

‘‘small entity’’ includes non-profit and 

small government entities. Under the 

schools and libraries universal service 

support mechanism, which provides 

support for elementary and secondary 

schools and libraries, an elementary 

school is generally ‘‘a non-profit 

institutional day or residential school 

that provides elementary education, as 

determined under state law.’’ A 

secondary school is generally 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. For-profit 

schools and libraries, and schools and 

libraries with endowments in excess of 

$50,000,000, are not eligible to receive 

discounts under the program, nor are 

libraries whose budgets are not 

completely separate from any schools. 

Certain other statutory definitions apply 

as well. The SBA has defined 

elementary and secondary schools and 

libraries having $6 million or less in 

annual receipts as small entities. In 

funding year 2007, approximately 

105,500 schools and 10,950 libraries 

received funding under the schools and 

libraries universal service mechanism. 

Although we are unable to estimate with 

precision the number of these entities 

that would qualify as small entities 

under SBA’s size standard, we estimate 

that fewer than 105,500 schools and 

10,950 libraries might be affected 

annually by our action, under current 

operation of the program. 

168. Telecommunications Service 

Providers. First, 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. 

According to Commission data, 1,307 

incumbent carriers reported that they 

were engaged in the provision of local 

exchange services. Of these 1,307 

carriers, an estimated 1,006 have 1,500 

or fewer employees and 301 have more 

than 1,500 employees. Thus, under this 

category and associated small business 

size standard, we estimate that the 

majority of entities are small. 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.’’ The SBA’s Office of 


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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. 

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. 

169. Second, 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. This 

provides that a wired 

telecommunications carrier is a small 

entity if it employs no more than 1,500 

employees. According to the 

Commission’s 2010 Trends Report, 359 

companies reported that they were 

engaged in the provision of 

interexchange services. Of these 300 

IXCs, an estimated 317 have 1,500 or 

few employees and 42 have more than 

1,500 employees. Consequently, the 

Commission estimates that most 

providers of interexchange services are 

small businesses. 

170. Third, 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. This 

provides that a wired 

telecommunications carrier is a small 

entity if it employs no more than 1,500 

employees. According to the 2010 

Trends Report, 1,442 CAPs and 

competitive local exchange carriers 

(competitive LECs) reported that they 

were engaged in the provision of 

competitive local exchange services. Of 

these 1,442 CAPs and competitive LECs, 

an estimated 1,256 have 1,500 or fewer 

employees and 186 have more than 

1,500 employees. Consequently, the 

Commission estimates that most 

providers of competitive exchange 

services are small businesses. 

171. Wireless Telecommunications 

Carriers (except Satellite). Since 2007, 

the Census Bureau has placed wireless 

firms within this new, broad, economic 

census category. Prior to that time, such 

firms were within the now-superseded 

categories of ‘‘Paging’’ and ‘‘Cellular and 

Other Wireless Telecommunications.’’ 

Under the present and prior categories, 

the SBA has deemed a wireless business 

to be small if it has 1,500 or fewer 

employees. Because Census Bureau data 

are not yet available for the new 

category, we will estimate small 

business prevalence using the prior 

categories and associated data. For the 

category of Paging, data for 2002 show 

that there were 807 firms that operated 

for the entire year. Of this total, 804 

firms had employment of 999 or fewer 

employees, and three firms had 

employment of 1,000 employees or 

more. For the category of Cellular and 

Other Wireless Telecommunications, 

data for 2002 show that there were 1,397 

firms that operated for the entire year. 

Of this total, 1,378 firms had 

employment of 999 or fewer employees, 

and 19 firms had employment of 1,000 

employees or more. Thus, we estimate 

that the majority of wireless firms are 

small. 

172. Wireless telephony includes 

cellular, personal communications 

services, and specialized mobile radio 

telephony carriers. As noted, the SBA 

has developed a small business size 

standard for Wireless 

Telecommunications Carriers (except 

Satellite). Under the SBA small business 

size standard, a business is small if it 

has 1,500 or fewer employees. 

According to the 2010 Trends Report, 

413 carriers reported that they were 

engaged in wireless telephony. Of these, 

an estimated 261 have 1,500 or fewer 

employees and 152 have more than 

1,500 employees. We have estimated 

that 261 of these are small under the 

SBA small business size standard. 

173. Common Carrier Paging. As 

noted, since 2007 the Census Bureau 

has placed paging providers within the 

broad economic census category of 

Wireless Telecommunications Carriers 

(except Satellite). Prior to that time, 

such firms were within the nowsuperseded category of ‘‘Paging.’’ Under 

the present and prior categories, the 

SBA has deemed a wireless business to 

be small if it has 1,500 or fewer 

employees. Because Census Bureau data 

are not yet available for the new 

category, we will estimate small 

business prevalence using the prior 

category and associated data. The data 

for 2002 show that there were 807 firms 

that operated for the entire year. Of this 

total, 804 firms had employment of 999 

or fewer employees, and three firms had 

employment of 1,000 employees or 

more. Thus, we estimate that the 

majority of paging firms are small. 

174. In addition, in the Paging Second 

Report and Order, 64 FR 33762, June 24, 

1999, the Commission adopted a size 

standard for ‘‘small businesses’’ for 

purposes of determining their eligibility 

for special provisions such as bidding 

credits and installment payments. 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. The SBA has 

approved this definition. An initial 

auction of Metropolitan Economic Area 

(‘‘MEA’’) licenses was conducted in the 

year 2000. Of the 2,499 licenses 

auctioned, 985 were sold. Fifty-seven 

companies claiming small business 

status won 440 licenses. A subsequent 

auction of MEA and Economic Area 

(‘‘EA’’) licenses was held in the year 

2001. Of the 15,514 licenses auctioned, 

5,323 were sold. One hundred thirtytwo companies claiming small business 

status purchased 3,724 licenses. A third 

auction, consisting of 8,874 licenses in 

each of 175 EAs and 1,328 licenses in 

all but three of the 51 MEAs, was held 

in 2003. Seventy-seven bidders claiming 

small or very small business status won 

2,093 licenses. 

175. Currently, there are 

approximately 74,000 Common Carrier 

Paging licenses. According to the most 

recent Trends in Telephone Service, 291 

carriers reported that they were engaged 

in the provision of ‘‘paging and 

messaging’’ services. Of these, an 

estimated 289 have 1,500 or fewer 

employees and two have more than 

1,500 employees. We estimate that the 

majority of common carrier paging 

providers would qualify as small 

entities under the SBA definition. 

176. Internet Service Providers. The 

2007 Economic Census places these 

firms, whose services might include 

voice over Internet protocol (VoIP), in 

either of two categories, depending on 

whether the service is provided over the 

provider’s own telecommunications 

facilities (e.g., cable and DSL ISPs), or 

over client-supplied 

telecommunications connections (e.g., 

dial-up ISPs). The former are within the 

category of Wired Telecommunications 

Carriers, which has an SBA small 

business size standard of 1,500 or fewer 

employees. The latter are within the 

category of All Other 

Telecommunications, which has a size 

standard of annual receipts of $25 

million or less. The most current Census 

Bureau data for all such firms, however, 

are the 2002 data for the previous 

census category called Internet Service 

Providers. That category had a small 

business size standard of $21 million or 

less in annual receipts, which was 

revised in late 2005 to $23 million. The 

2002 data show that there were 2,529 

such firms that operated for the entire 

year. Of those, 2,437 firms had annual 

receipts of under $10 million, and an 

additional 47 firms had receipts of 

between $10 million and $24,999,999. 

Consequently, we estimate that the 

majority of ISP firms are small entities. 


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177. Vendors of Internal Connections: 

Telephone Apparatus Manufacturing. 

The Census Bureau defines this category 

as follows: ‘‘This industry comprises 

establishments primarily engaged in 

manufacturing wire telephone and data 

communications equipment. These 

products may be standalone or boardlevel components of a larger system. 

Examples of products made by these 

establishments are central office 

switching equipment, cordless 

telephones (except cellular), PBX 

equipment, telephones, telephone 

answering machines, LAN modems, 

multi-user modems, and other data 

communications equipment, such as 

bridges, routers, and gateways.’’ The 

SBA has developed a small business 

size standard for Telephone Apparatus 

Manufacturing, which is: all such firms 

having 1,000 or fewer employees. 

According to Census Bureau data for 

2002, there were a total of 518 

establishments in this category that 

operated for the entire year. Of this 

total, 511 had employment of under 

1,000, and an additional seven had 

employment of 1,000 to 2,499. Thus, 

under this size standard, the majority of 

firms can be considered small. 

178. Vendors of Internal Connections: 

Radio and Television Broadcasting and 

Wireless Communications Equipment 

Manufacturing. The Census Bureau 

defines this category as follows: ‘‘This 

industry comprises establishments 

primarily engaged in manufacturing 

radio and television broadcast and 

wireless communications equipment. 

Examples of products made by these 

establishments are: transmitting and 

receiving antennas, cable television 

equipment, GPS equipment, pagers, 

cellular phones, mobile 

communications equipment, and radio 

and television studio and broadcasting 

equipment.’’ The SBA has developed a 

small business size standard for firms in 

this category, which is: all such firms 

having 750 or fewer employees. 

According to Census Bureau data for 

2002, there were a total of 1,041 

establishments in this category that 

operated for the entire year. Of this 

total, 1,010 had employment of under 

500, and an additional 13 had 

employment of 500 to 999. Thus, under 

this size standard, the majority of firms 

can be considered small. 

179. Vendors of Internal Connections: 

Other Communications Equipment 

Manufacturing. The Census Bureau 

defines this category as follows: ‘‘This 

industry comprises establishments 

primarily engaged in manufacturing 

communications equipment (except 

telephone apparatus, and radio and 

television broadcast, and wireless 

communications equipment).’’ The SBA 

has developed a small business size 

standard for Other Communications 

Equipment Manufacturing, which is 

having 750 or fewer employees. 

According to Census Bureau data for 

2002, there were a total of 503 

establishments in this category that 

operated for the entire year. Of this 

total, 493 had employment of under 

500, and an additional 7 had 

employment of 500 to 999. Thus, under 

this size standard, the majority of firms 

can be considered small. 

E. Description of Projected Reporting, 

Recordkeeping, and Other Compliance 

Requirements for Small Entities 

180. Some of our rule changes will 

result in additional recordkeeping 

requirements for small entities. For all 

of those rule changes, we have 

determined that the benefit the rule 

change will bring for the program 

outweighs the burden of the increased 

recordkeeping requirement. 

1. Increase in Projected Reporting, 

Recordkeeping and Other Compliance 

Requirements 

181. Compliance burdens. All of the 

rules we implement impose some 

burden on small entities by requiring 

them to become familiar with the new 

rule to comply with it. For many new 

rules, the burden of becoming familiar 

with the new rule in order to comply 

with it is the only burden the rule 

imposes. 

182. Extending pre-discount budgets 

for category two services for three 

additional years. This rule change will 

increase recordkeeping burdens by 

requiring applicants to calculate their 

budgets and keep track of the amount 

that they have spent in a five-year 

period. The benefit of making category 

two funding available to applicants 

outweighs this burden. 

183. Permitting self-construction 

option. Our permitting applicants to 

receive E-rate funding for selfconstruction networks creates the minor 

additional burden of requiring 

applicants to seek bids for both selfconstruction and services-only. The cost 

savings applicants and the Fund will 

realize from this rule change justifies 

these burdens. 

184. Additional discounts when states 

match funds for fiber construction. 

Providing additional discounts when 

states match funds for fiber construction 

will impose the additional minimal 

burden of requiring applicants to 

produce documentation verifying states’ 

matched funds. The additional USF 

funding for fiber construction that this 

rule change makes available to 

applicants outweighs this burden. 

185. High-cost providers. The 

requirement that recipients of high-cost 

support offer broadband service to 

eligible schools and libraries at rates 

reasonably comparable to rates charged 

in urban areas will increase 

recordkeeping burdens for some service 

providers and some E-rate applicants. 

Specifically, E-rate service providers 

who receive high-cost support will have 

the additional burden of bidding for, 

and possibly providing, services to 

schools and libraries in areas they 

receive high-cost support. Schools and 

libraries in those areas will have the 

additional burden of evaluating bids 

from these service providers. 

2. Decrease in Projected Reporting, 

Recordkeeping and Other Compliance 

Requirements 

186. Suspending USAC’s multi-year 

amortization policy for non-recurring 

construction costs. Our suspension of 

USAC’s multi-year amortization policy 

for non-recurring construction costs will 

decrease recordkeeping requirements by 

eliminating the burdens associated with 

amortization for the duration of the 

suspension. 

3. Steps Taken To Minimize the 

Significant Economic Impact on Small 

Entities, and Significant Alternatives 

Considered 

187. The RFA requires an agency to 

describe any significant, specifically 

small business, 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 or reporting 

requirements or timetables that take into 

account the resources available to small 

entities; (2) the clarification, 

consolidation, or simplification of 

compliance and reporting requirements 

under the rule for such small entities; 

(3) the use of performance rather than 

design standards; and (4) an exemption 

from coverage of the rule, or any part 

thereof, for such small entities.’’ 

188. This rulemaking could impose 

minimal additional burdens on small 

entities. We considered alternatives to 

the rulemaking changes that increase 

projected reporting, recordkeeping and 

other compliance requirements for small 

entities. 

189. Report to Congress. 

190. The Commission will send a 

copy of this Report and Order, including 

this FRFA, in a report to be sent to 

Congress pursuant to the SBREFA. In 

addition, the Commission will send a 

copy of the Report and Order, including 


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the FRFA, to the Chief Counsel for 

Advocacy of the SBA. A copy of the 

Report and Order and the FRFA (or 

summaries thereof) will also be 

published in the Federal Register. 

F. Paperwork Reduction Act Analysis 

191. This Report and Order and Order 

or Reconsideration contains new 

information collection requirements 

subject to the Paperwork Reduction Act 

of 1995 (PRA), Public Law 104–13. It 

will be submitted to the Office of 

Management and Budget (OMB) for 

review under section 3507(d) of the 

PRA. OMB, the general public, and 

other Federal agencies are invited to 

comment on the revised information 

collection requirements contained in 

this proceeding. In addition, we note 

that pursuant to the Small Business 

Paperwork Relief Act of 2002, Public 

Law 107–198, the Commission 

previously sought specific comment on 

how it might further reduce the 

information collection burden on small 

business concerns with fewer than 25 

employees. 

G. Congressional Review Act 

192. The Commission will include a 

copy of this Report and Order and Order 

on Reconsideration in a report to be sent 

to Congress and the Government 

Accountability Office pursuant to the 

Congressional Review Act. 

IX. Ordering Clauses 

193. Accordingly, it is Ordered, that 

pursuant to the authority contained in 

sections 1 through 4, 201 through 205, 

254, 303(r), 403, and 405 of the 

Communications Act of 1934, as 

amended, 47 U.S.C. 151–154, 201–205, 

254, 303(r), 403, and 405, and section 

706 of the Telecommunications Act of 

1996, 47 U.S.C. 1302, this Report and 

Order and Order on Reconsideration is 

Adopted effective March 6, 2015, except 

to the extent expressly addressed below. 

194. It is further ordered, that 

pursuant to the authority contained in 

sections 1 through 4, 201 through 205, 

254, 303(r), 403, and 405 of the 

Communications Act of 1934, as 

amended, 47 U.S.C. 151–154, 201–205, 

254, 303(r), 403, and 405 and section 

706 of the Telecommunications Act of 

1996, 47 U.S.C. 1302, part 54 of the 

Commission’s rules, 47 CFR part 54, is 

Amended as set forth below, and such 

rule amendments shall be effective 

March 6, 2015, except for amendments 

in §§ 54.313(e)(2) and (f)(1), 54.503(c)(1) 

and 54.504(a)(1)(iii), which are subject 

to the PRA and will become effective 

upon announcement in the Federal 

Register of OMB approval of the subject 

information collection requirements and 

of the effective date; and except for 

amendments in §§ 54.308(b), 54.309(b), 

54.505(b)(3) and (b)(3)(i), and 54.507(a) 

and (c), which shall become effective on 

July 1, 2015; and amendments in 

§ 54.518 and paragraphs (b), (c) and (f) 

of § 54.505, which shall become 

effective on July 1, 2016. 

195. It is further ordered that, 

pursuant to the authority contained in 

section 405 of the Communications Act 

of 1934, as amended, 47 U.S.C. 405, and 

§ 1.429 of the Commission’s rules, 47 

CFR 1.429, the Petition for Clarification 

and/or Reconsideration filed by NTCAThe Rural Broadband Association and 

the Utah Rural Telecom Association on 

September 18, 2014, is Granted in Part 

and Denied in Part to the extent 

described herein. 

196. It is further ordered that, 

pursuant to the authority contained in 

section 405 of the Communications Act 

of 1934, as amended, 47 U.S.C. 405, and 

§ 1.429 of the Commission’s rules, 47 

CFR 1.429, the Petition for 

Reconsideration or Clarification filed by 

the State E-rate Coordinators’ Alliance 

on September 18, 2014, is Granted in 

Part and Denied in Part to the extent 

described herein. 

197. It is further ordered that, 

pursuant to the authority contained in 

section 405 of the Communications Act 

of 1934, as amended, 47 U.S.C. 405, and 

§ 1.429 of the Commission’s rules, 47 

CFR 1.429, the Petition for 

Reconsideration filed by the Utah 

Education Network on September 18, 

2014, is Granted in Part and Denied in 

Part to the extent described herein. 

198. It is further ordered that, 

pursuant to the authority contained in 

section 405 of the Communications Act 

of 1934, as amended, 47 U.S.C. 405, and 

§ 1.429 of the Commission’s rules, 47 

CFR 1.429, the Petition for 

Reconsideration or Clarification filed by 

the West Virginia Department of 

Education on September 18, 2014, is 

Granted in Part and Denied in Part to 

the extent described herein. 

199. It is further ordered that, 

pursuant to the authority contained in 

section 405 of the Communications Act 

of 1934, as amended, 47 U.S.C. 405, and 

§ 1.429 of the Commission’s rules, 47 

CFR 1.429, the Petition for 

Reconsideration filed by the United 

States Telecom Association on 

September 18, 2014, is Denied. 

200. It is further ordered that, 

pursuant to the authority contained in 

section 405 of the Communications Act 

of 1934, as amended, 47 U.S.C. 405, and 

§ 1.429 of the Commission’s rules, 47 

CFR 1.429, the Petition for 

Reconsideration and/or Clarification 

filed by Verizon on September 18, 2014, 

is Granted in Part and Denied in Part to 

the extent described herein. 

201. It is further ordered that the 

Commission shall send a copy of this 

Report and Order and Order on 

Reconsideration to Congress and the 

Government Accountability Office 

pursuant to the Congressional Review 

Act, see 5 U.S.C. 801(a)(1)(A). 

202. It is furthered ordered that the 

Commission’s Consumer and 

Governmental Affairs Bureau, Reference 

Information Center, shall send a copy of 

the Report and Order, including the 

Final Regulatory Flexibility Analysis 

and Initial Regulatory Flexibility Act 

Analysis, to the Chief Counsel for 

Advocacy of the Small Business 

Administration. 

Federal Communications Commission. 

Marlene H. Dortch, 

Secretary. 

For the reasons discussed in the 

preamble, the Federal Communications 

Commission amends 47 CFR part 54 as 

follows: 

PART 54—UNIVERSAL SERVICE 

■ 1. The authority citation for part 54 

continues to read as follows: 

Authority: Sections 1, 4(i), 5, 201, 205, 214, 

219, 220, 254, 303(r), and 403 of the 

Communications Act of 1934, as amended, 

and section 706 of the Telecommunications 

Act of 1996, as amended; 47 U.S.C. 151, 

154(i), 155, 201, 205, 214, 219, 220, 254, 

303(r), 403, and 1302 unless otherwise noted. 

Subpart A—General Information 

§ 54.5 [Amended]. 

■ 2. Section 54.5 is amended by 

removing the definition of ‘‘Rural area.’’ 

■ 3. Section 54.308 is amended by 

adding paragraph (b) to read as follows: 

§ 54.308 Broadband Public Interest 

Obligations for Recipients of High-Cost 

Support. 

* * * * * 

(b) Rate-of-return carrier recipients of 

high-cost support are required upon 

reasonable request to bid on category 

one telecommunications and Internet 

access services in response to a posted 

FCC Form 470 seeking broadband 

service that meets the connectivity 

targets for the schools and libraries 

universal service support program for 

eligible schools and libraries (as 

described in § 54.501) within that 

carrier’s service area. Such bids must be 

at rates reasonably comparable to rates 

charged to eligible schools and libraries 

in urban areas for comparable offerings. 

■ 4. Section 54.309 is amended by 

revising paragraph (b) to read as follows: 


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§ 54.309 Connect America Fund Phase II 

Public Interest Obligations. 

* * * * * 

(b) Recipients of Connect America 

Phase II model-based support, recipients 

of Phase II Connect America support 

awarded through a competitive bidding 

process, and non-contiguous price cap 

carriers receiving Phase II frozen 

support in lieu of model-based support 

are required to bid on category one 

telecommunications and Internet access 

services in response to a posted FCC 

Form 470 seeking broadband service 

that meets the connectivity targets for 

the schools and libraries universal 

service support program for eligible 

schools and libraries (as described in 

§ 54.501) located within any area in a 

census block where the carrier is 

receiving Phase II model-based support. 

Such bids must be at rates reasonably 

comparable to rates charged to eligible 

schools and libraries in urban areas for 

comparable offerings. 

■ 5. Section 54.313 is amended by 

revising paragraphs (e)(2)(iii) and (iv), 

adding paragraph (e)(2)(v), revising 

paragraphs (f)(1)(i) and (ii), and revising 

paragraph (f)(1)(iii) to read as follows: 

§ 54.313 Annual reporting requirements 

for high-cost recipients. 

* * * * * 

(e) * * * 

(2) * * * 

(iii) A list of the geocoded locations 

to which the eligible 

telecommunications carrier newly 

deployed facilities capable of delivering 

broadband meeting the § 54.309 public 

interest obligations with Connect 

America support in the prior year. The 

final progress report filed on July 1, 

2021 must include the total number and 

geocodes of all the supported locations 

that a price cap carrier has built out to 

with service meeting the § 54.309 public 

interest obligations; 

(iv) The total amount of Phase II 

support, if any, the price cap carrier 

used for capital expenditures in the 

previous calendar year; and 

(v) A certification that it bid on 

category one telecommunications and 

Internet access services in response to 

all FCC Form 470 postings seeking 

broadband service that meets the 

connectivity targets for the schools and 

libraries universal service support 

program for eligible schools and 

libraries (as described in § 54.501) 

located within any area in a census 

block where the carrier is receiving 

Phase II model-based support, and that 

such bids were at rates reasonably 

comparable to rates charged to eligible 

schools and libraries in urban areas for 

comparable offerings. 

* * * * * 

(f) * * * 

(1) * * * 

(i) A letter certifying that it is taking 

reasonable steps to provide upon 

reasonable request broadband service at 

actual speeds of at least 4 Mbps 

downstream/1 Mbps upstream, with 

latency suitable for real-time 

applications, including Voice over 

Internet Protocol, and usage capacity 

that is reasonably comparable to 

comparable offerings in urban areas as 

determined in an annual survey, and 

that requests for such service are met 

within a reasonable amount of time; 

(ii) The number, names, and 

addresses of community anchor 

institutions to which the ETC newly 

began providing access to broadband 

service in the preceding calendar year; 

and 

(iii) For rate-of-return carrier 

recipients of high-cost support, a 

certification that it bid on category one 

telecommunications and Internet access 

services in response to all reasonable 

requests in posted FCC Form 470s 

seeking broadband service that meets 

the connectivity targets for the schools 

and libraries universal service support 

program for eligible schools and 

libraries (as described in § 54.501) 

within its service area, and that such 

bids were at rates reasonably 

comparable to rates charged to eligible 

schools and libraries in urban areas for 

comparable offerings. 

Subpart F—Universal Service Support 

for Schools and Libraries 

■ 6. Section 54.502 is amended by 

revising paragraph (a) introductory text, 

paragraph (b) introductory text, 

paragraphs (b)(1) through (3), paragraph 

(b)(5), and paragraph (c) to read as 

follows: 

§ 54.502 Eligible Services. 

(a) Supported services. All supported 

services are listed in the Eligible 

Services List as updated annually in 

accordance with paragraph (d) of this 

section. The services in this subpart will 

be supported in addition to all 

reasonable charges that are incurred by 

taking such services, such as state and 

federal taxes. Charges for termination 

liability, penalty surcharges, and other 

charges not included in the cost of 

taking such service shall not be covered 

by the universal service support 

mechanisms. The supported services 

fall within the following general 

categories: 

* * * * * 

(b) Funding years 2015–2019. 

Libraries, schools, or school districts 

with schools that receive funding for 

category two services in any of the 

funding years between 2015 and 2019 

shall be eligible for support for category 

two services pursuant to paragraphs 

(b)(1) through (6) of this section. 

(1) Five-year budget. Each eligible 

school or library shall be eligible for a 

budgeted amount of support for category 

two services over a five-year funding 

cycle beginning the first funding year 

support is received. Excluding support 

for internal connections received prior 

to funding year 2015, each school or 

library shall be eligible for the total 

available budget less any support 

received for category two services in the 

prior funding years of that school’s or 

library’s five-year funding cycle. The 

budgeted amounts and the funding floor 

shall be adjusted for inflation annually 

in accordance with § 54.507(a)(2). 

(2) School budget. Each eligible 

school shall be eligible for support for 

category two services up to a prediscount price of $150 per student over 

a five-year funding cycle. Applicants 

shall calculate the student count per 

school at the time the discount is 

calculated each funding year. New 

schools may estimate the number of 

students, but must repay any support 

provided in excess of the maximum 

budget based on student enrollment the 

following funding year. 

(3) Library budget. Each eligible 

library located within the Institute of 

Museum and Library Services locale 

codes of ‘‘11—City, Large,’’ defined as a 

territory inside an urbanized area and 

inside a principal city with a population 

of 250,000 or more, ‘‘12—City, 

Midsize,’’ defined as a territory inside 

an urbanized area and inside a principal 

city with a population less than 250,000 

and greater than or equal to 100,000, or 

‘‘21—Suburb, Large,’’ defined as a 

territory outside a principal city and 

inside an urbanized area with 

population of 250,000 or more, shall be 

eligible for support for category two 

services, up to a pre-discount price of 

$5.00 per square foot over a five-year 

funding cycle. All other eligible libraries 

shall be eligible for support for category 

two services, up to a pre-discount price 

of $2.30 per square foot over a five-year 

funding cycle. Applicants shall provide 

the total area for all floors, in square 

feet, of each library outlet separately, 

including all areas enclosed by the outer 

walls of the library outlet and occupied 

by the library, including those areas offlimits to the public. 

* * * * * 


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(5) Requests. Applicants shall request 

support for category two services for 

each school or library based on the 

number of students per school building 

or square footage per library building. 

Category two funding for a school or 

library may not be used for another 

school or library. If an applicant 

requests less than the maximum 

budgeted category two support available 

for a school or library, the applicant 

may request the remaining balance in a 

school’s or library’s category two budget 

in subsequent funding years of the fiveyear funding cycle. The costs for 

category two services shared by 

multiple eligible entities shall be 

divided reasonably between each of the 

entities for which support is sought in 

that funding year. 

* * * * * 

(c) Funding year 2020 and beyond. 

Absent further action from the 

Commission, each eligible library or 

school in a school district that either did 

not receive funding for category two 

services in funding years 2015 through 

2019 or has completed its five-year 

funding cycle, shall be eligible for 

support for category two services, 

except basic maintenance services, no 

more than twice every five funding 

years. For the purpose of determining 

eligibility, the five-year period begins in 

any funding year in which the school or 

library receives discounted category two 

services other than basic maintenance 

services. If a school or library receives 

category two services other than basic 

maintenance services that are shared 

with other schools or libraries (for 

example, as part of a consortium), the 

shared services will be attributed to the 

school or library in determining 

whether it is eligible for support. 

Support is not available for category two 

services provided to or within noninstructional school buildings or 

separate library administrative buildings 

unless those category two services are 

essential for the effective transport of 

information to or within one or more 

instructional buildings of a school or 

non-administrative library buildings, or 

the Commission has found that the use 

of those services meets the definition of 

educational purpose, as defined in 

§ 54.500. 

* * * * * 

■ 7. Section 54.503 is amended by 

revising paragraph (c)(1) to read as 

follows: 

§ 54.503 Competitive bidding 

requirements. 

* * * * * 

(c) Posting of FCC Form 470. (1) An 

eligible school, library, or consortium 

that includes an eligible school or 

library seeking bids for eligible services 

under this subpart shall submit a 

completed FCC Form 470 to the 

Administrator to initiate the competitive 

bidding process. The FCC Form 470 and 

any request for proposal cited in the 

FCC Form 470 shall include, at a 

minimum, the following information: 

(i) A list of specified services for 

which the school, library, or consortium 

requests bids; 

(ii) Sufficient information to enable 

bidders to reasonably determine the 

needs of the applicant; 

(iii) To the extent an applicant seeks 

the following services or arrangements, 

an indication of the applicant’s intent to 

seek: 

(A) Construction of network facilities 

that the applicant will own; 

(B) A dark-fiber lease, indefeasible 

right of use, or other dark-fiber service 

agreement or the modulating electronics 

necessary to light dark fiber; or 

(C) A multi-year installment payment 

agreement with the service provider for 

the non-discounted share of special 

construction costs; 

(iv) To the extent an applicant seeks 

construction of a network that the 

applicant will own, the applicant must 

also solicit bids for both the services 

provided over third-party networks and 

construction of applicant-owned 

network facilities, in the same request 

for proposals; 

(v) To the extent an applicant seeks 

bids for special construction associated 

with dark fiber or bids to lease and light 

dark fiber, the applicant must also 

solicit bids to provide the needed 

services over lit fiber; and 

(vi) To the extent an applicant seeks 

bids for equipment and maintenance 

costs associated with lighting dark fiber, 

the applicant must include these 

elements in the same FCC Form 470 as 

the dark fiber. 

* * * * * 

■ 8. Section 54.504 is amended by 

revising paragraph (a)(1)(iii) to read as 

follows: 

§ 54.504 Requests for services. 

(a) * * * 

(1) * * * 

(iii) The entities listed on the FCC 

Form 471 application have secured 

access to all of the resources, including 

computers, training, software, 

maintenance, internal connections, and 

electrical connections, necessary to 

make effective use of the services 

purchased. The entities listed on the 

FCC Form 471 will pay the discounted 

charges for eligible services from funds 

to which access has been secured in the 

current funding year or, for entities that 

will make installment payments, they 

will ensure that they are able to make 

all required installment payments. The 

billed entity will pay the non-discount 

portion of the cost of the goods and 

services to the service provider(s). 

* * * * * 

■ 9. Section 54.505 is amended by 

revising paragraph (b) introductory text, 

paragraph (b)(3) introductory text, 

paragraph (b)(3)(i), and paragraphs (c) 

and (f) to read as follows: 

§ 54.505 Discounts. 

* * * * * 

(b) Discount percentages. Except as 

provided in paragraph (f), the discounts 

available to eligible schools and 

libraries shall range from 20 percent to 

90 percent of the pre-discount price for 

all eligible services provided by eligible 

providers, as defined in this subpart. 

The discounts available to a particular 

school, library, or consortium of only 

such entities shall be determined by 

indicators of poverty and high cost. 

* * * * * 

(3) The Administrator shall classify 

schools and libraries as ‘‘urban’’ or 

‘‘rural’’ according to the following 

designations. 

(i) The Administrator shall designate 

a school or library as ‘‘urban’’ if the 

school or library is located in an 

urbanized area or urban cluster area 

with a population equal to or greater 

than 25,000, as determined by the most 

recent rural-urban classification by the 

Bureau of the Census. The 

Administrator shall designate all other 

schools and libraries as ‘‘rural.’’ 

* * * * * 

(c) Matrices. Except as provided in 

paragraphs (d) and (f) of this section, the 

Administrator shall use the following 

matrices to set discount rates to be 

applied to eligible category one and 

category two services purchased by 

eligible schools, school districts, 

libraries, or consortia based on the 

institution’s level of poverty and 

location in an ‘‘urban’’ or ‘‘rural’’ area. 


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Category one schools and 

libraries discount matrix 

Category two schools and 

libraries discount matrix 

Discount level Discount level 

% of students eligible for national school lunch program Urban 

discount 

Rural 

discount 

Urban 

discount 

Rural 

discount 

< 1 .................................................................................................................................... 20 25 20 25 

1–19 ................................................................................................................................. 40 50 40 50 

20–34 ............................................................................................................................... 50 60 50 60 

35–49 ............................................................................................................................... 60 70 60 70 

50–74 ............................................................................................................................... 80 80 80 80 

75–100 ............................................................................................................................. 90 90 85 85 

* * * * * 

(f) Additional discounts for State 

matching funds for special construction. 

Federal universal service discounts 

shall be based on the price of a service 

prior to the application of any stateprovided support for schools or 

libraries. When a governmental entity 

described below provides funding for 

special construction charges for 

networks that meet the long-term 

connectivity targets for the schools and 

libraries universal service support 

program, the Administrator shall match 

the governmental entity’s contribution 

as provided for below: 

(1) All E-rate applicants. When a State 

government provides funding for special 

construction charges for a broadband 

connection to a school or library the 

Administrator shall match the State’s 

contribution on a one-dollar-to-onedollar basis up to an additional 10 

percent discount, provided however 

that the total support from federal 

universal service and the State may not 

exceed 100 percent. 

(2) Tribal schools. When a State 

government, Tribal government, or 

federal agency provides funding for 

special construction charges for a 

broadband connection to a school 

operated by the Bureau of Indian 

Education or by a Tribal government, 

the Administrator shall match the 

governmental entity’s contribution on a 

one-dollar-to-one-dollar basis up to an 

additional 10 percent discount, 

provided however that the total support 

from federal universal service and the 

governmental entity may not exceed 100 

percent. 

(3) Tribal libraries. When a State 

government, Tribal government, or 

federal agency provides funding for 

special construction charges for a 

broadband connection to a library 

operated by Tribal governments, the 

Administrator shall match the 

governmental entity’s contribution on a 

one-dollar-to-one-dollar basis up to an 

additional 10 percent discount, 

provided however that the total support 

from federal universal service and the 

governmental entity may not exceed 100 

percent. 

■ 10. Section 54.507 is amended by 

revising paragraphs (a) introductory 

text, (a)(1) and (3), (c), and (d) to read 

as follows: 

§ 54.507 Cap. 

(a) Amount of the annual cap. The 

aggregate annual cap on federal 

universal service support for schools 

and libraries shall be $3.9 billion per 

funding year, of which $1 billion per 

funding year will be available for 

category two services, as described in 

§ 54.502(a)(2), unless demand for 

category one services is higher than 

available funding. 

(1) Inflation increase. In funding year 

2016 and subsequent funding years, the 

$3.9 billion funding cap on federal 

universal service support for schools 

and libraries shall be automatically 

increased annually to take into account 

increases in the rate of inflation as 

calculated in paragraph (a)(2) of this 

section. 

* * * * * 

(3) Public notice. When the 

calculation of the yearly average GDP– 

CPI is determined, the Wireline 

Competition Bureau shall publish a 

public notice in the Federal Register 

within 60 days announcing any increase 

of the annual funding cap including any 

increase to the $1 billion funding level 

available for category two services based 

on the rate of inflation. 

* * * * * 

(c) Requests. The Administrator shall 

implement an initial filing period that 

treats all schools and libraries filing an 

application within that period as if their 

applications were simultaneously 

received. The initial filing period shall 

begin and conclude on dates to be 

determined by the Administrator with 

the approval of the Chief of the Wireline 

Competition Bureau. The Administrator 

shall maintain on the Administrator’s 

Web site a running tally of the funds 

already committed for the existing 

funding year. The Administrator may 

implement such additional filing 

periods as it deems necessary. 

(d) Annual filing requirement. 

(1) Schools and libraries, and consortia 

of such eligible entities shall file new 

funding requests for each funding year 

no sooner than the July 1 prior to the 

start of that funding year. Schools, 

libraries, and eligible consortia must use 

recurring services for which discounts 

have been committed by the 

Administrator within the funding year 

for which the discounts were sought. 

(2) Installation of category one nonrecurring services may begin on January 

1 prior to the July 1 start of the funding 

year, provided the following conditions 

are met: 

(i) Construction begins after selection 

of the service provider pursuant to a 

posted FCC Form 470, 

(ii) A category one recurring service 

must depend on the installation of the 

infrastructure, and 

(iii) The actual service start date for 

that recurring service is on or after the 

start of the funding year (July 1). 

(3) Installation of category two nonrecurring services may begin on April 1 

prior to the July 1 start of the funding 

year. 

(4) The deadline for implementation 

of all non-recurring services will be 

September 30 following the close of the 

funding year. An applicant may request 

and receive from the Administrator an 

extension of the implementation 

deadline for non-recurring services if it 

satisfies one of the following criteria: 

(i) The applicant’s funding 

commitment decision letter is issued by 

the Administrator on or after March 1 of 

the funding year for which discounts are 

authorized; 

(ii) The applicant receives a service 

provider change authorization or service 

substitution authorization from the 

Administrator on or after March 1 of the 

funding year for which discounts are 

authorized; 

(iii) The applicant’s service provider 

is unable to complete implementation 

for reasons beyond the service 

provider’s control; or 


tkelley on DSK3SPTVN1PROD with RULES
Federal Register / Vol. 80, No. 23 / Wednesday, February 4, 2015 / Rules and Regulations 5991 

(iv) The applicant’s service provider 

is unwilling to complete installation 

because funding disbursements are 

delayed while the Administrator 

investigates the application for program 

compliance. 

* * * * * 

§ 54.509 [Removed and Reserved] 

■ 11. Remove and reserve § 54.509. 

§ 54.518 [Removed and Reserved] 

■ 12. Remove and reserve § 54.518. 

Subpart I—Administration 

■ 13. Revise § 54.720 to read as follows: 

§ 54.720 Filing deadlines. 

(a) An affected party requesting 

review or waiver of an Administrator 

decision by the Commission pursuant to 

§ 54.719, shall file such a request within 

sixty (60) days from the date the 

Administrator issues a decision. 

(b) An affected party requesting 

review of an Administrator decision by 

the Administrator pursuant to 

§ 54.719(a), shall file such a request 

within sixty (60) days from the date the 

Administrator issues a decision. 

(c) In all cases of requests for review 

filed under § 54.719(a) through (c), the 

request for review shall be deemed filed 

on the postmark date. If the postmark 

date cannot be determined, the 

applicant must file a sworn affidavit 

stating the date that the request for 

review was mailed. 

(d) Parties shall adhere to the time 

periods for filing oppositions and 

replies set forth in 47 CFR 1.45. 

[FR Doc. 2015–01414 Filed 2–3–15; 8:45 am] 

BILLING CODE 6712–01–P 

DEPARTMENT OF COMMERCE 

National Oceanic and Atmospheric 

Administration 

50 CFR Part 635 

[Docket No. 120328229–5064–03] 

RIN 0648–BC09 

Atlantic Highly Migratory Species; 

2006 Consolidated Atlantic Highly 

Migratory Species (HMS) Fishery 

Management Plan; Amendment 7; 

Correction 

AGENCY: National Marine Fisheries 

Service (NMFS), National Oceanic and 

Atmospheric Administration (NOAA), 

Commerce. 

ACTION: Final rule; correcting 

amendment. 

SUMMARY: This action corrects a 

typographical error that appeared in the 

final rule implementing Amendment 7 

to the 2006 Consolidated Atlantic 

Highly Migratory Species Fishery 

Management Plan (2006 Consolidated 

HMS FMP) that published in the 

Federal Register on December 2, 2014 

(79 FR 71510). Specifically, this rule 

corrects one of the coordinates in the 

definition of the Cape Hatteras Gear 

Restricted Area (GRA) to make the 

geographic area in the definition match 

the geographic area analyzed and 

identified in all of the Amendment 7 

documents. 

DATES: This rule is effective February 4, 

2015. 

FOR FURTHER INFORMATION CONTACT: 

Thomas Warren or Brad McHale at 978– 

281–9260. 

SUPPLEMENTARY INFORMATION: NMFS 

implemented Amendment 7 to the 2006 

Consolidated HMS FMP through a final 

rule that published on December 2, 2014 

(79 FR 71510) and that was effective 

January 1, 2015, except for 

§ 635.9(b)(2)(ii) and (e)(1), which are 

effective June 1, 2015; and 

§ 635.15(b)(3), (4)(ii), and (5)(i), which 

are effective January 1, 2016. The 

December 2 final rule added regulatory 

text at § 635.2 to define, among other 

things, ‘‘Cape Hatteras gear restricted 

area.’’ In that definition at § 635.2, 

however, the sixth point of the 

geographic boundaries of the restricted 

area was incorrectly listed as ‘‘34°30′ N. 

lat., 74°20′ W. long.’’ Instead, it should 

be ‘‘35°30′ N. lat., 74°20′ W. long.′′ Thus, 

NMFS corrects the Cape Hatteras GRA 

definition at § 635.2. 

This correction does not make any 

substantive change to the specific area 

presented and analyzed by NMFS in the 

Amendment 7 Final Environmental 

Impact Statement (FEIS) issued in 

August 2014 and included in permit 

holder letters and other outreach 

materials issued in December 2014, 

which contained the details and/or 

images of the correct area (i.e., the 

coordinates used in those materials 

were correct). It only corrects an error in 

one of the coordinates published in the 

regulatory text of the definitions section 

of the final rule (79 FR 71510, December 

2, 2014). 

This correction is necessary so that 

pelagic longline fishermen are allowed 

to fish as intended by NMFS in 

preparing the FEIS and the final rule, in 

the area outside the eastern and 

southern boundaries of the Cape 

Hatteras GRA, as corrected, without 

being subject to the regulations that 

would apply within the GRA. 

Classification 

The Assistant Administrator (AA) for 

Fisheries, NOAA, finds that pursuant to 

5 U.S.C. 553(b)(B), there is good cause 

to waive prior notice and an 

opportunity for public comment on this 

action, as notice and comment would be 

impracticable and contrary to the public 

interest. This document corrects the 

definition of the Cape Hatteras GRA by 

specifically correcting one of the 

coordinates that was incorrect in the 

December 2, 2014 final rule. The 

regulations regarding fishing in the Cape 

Hatteras GRA were effective January 1, 

2015. This correction must be 

implemented in a timely manner so that 

pelagic longline fishermen are allowed 

to fish as intended by NMFS in 

preparing the FEIS and final rule, in the 

area outside the eastern and southern 

boundaries of the Cape Hatteras GRA, as 

corrected, without being subject to the 

regulations that would apply within the 

GRA. Implementation as defined in the 

current version of the regulations could 

result in unnecessarily restricting 

fishing in areas not intended to be gear 

restricted. 

The correct coordinates in the final 

rule have previously been subject to 

notice and comment procedures through 

their inclusion in all of the relevant 

rulemaking documents and related 

analytical documents. The correction in 

this action does not make any 

substantive change to the requirements 

in the final rule. It only corrects the 

error in the implementing regulatory 

text. In addition, NMFS believes it is 

important for the public to have the 

correct information as soon as possible 

and finds no reason to delay its 

dissemination. Further delay would be 

contrary to the public interest, since the 

intended restrictions are not properly 

defined and, as a result, fishing could be 

unnecessarily restricted. This could 

have unintended economic 

consequences and unintended effects on 

fishing behavior. 

For the reasons stated above, NMFS 

finds both notice and comment and the 

30-day delay in effectiveness to be 

unnecessary pursuant to 5 U.S.C. 

553(b)(B) and 5 U.S.C. 553(d), 

respectively. Therefore, NMFS finds 

good cause to waive notice and 

comment procedures and the 30-day 

delay in effective date for this correcting 

amendment. 

List of Subjects in 50 CFR Part 635 

Fisheries, Fishing, Fishing vessels, 

Foreign relations, Imports, Penalties, 


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