Federal Register / Vol. 75, No. 110 / Wednesday, June 9, 2010 / Proposed Rules 32699 

Federal Communications Commission. 

Marlene H. Dortch, 

Secretary. 

Proposed Rules 

For the reasons discussed in the 

preamble, the Federal Communications 

Commission proposes to amend 47 CFR 

part 54 to read as follows: 

PART 54—UNIVERSAL SERVICE 

1. The authority citation continues to 

read as follows: 

Authority: 47 U.S.C. 151, 154(i), 201, 205, 

214, and 254 unless otherwise noted. 

Subpart F—Universal Service Support 

for Schools and Libraries 

2. Section 54.502 is revised to read as 

follows: 

§ 54.502 Supported services. 

(a) Telecommunications services. For 

purposes of this subpart, supported 

telecommunications services provided 

by telecommunications carriers include 

all commercially available 

telecommunications services 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. 

All supported telecommunications 

services are defined and listed in the 

Eligible Services List as updated 

annually in accordance with § 54.503 of 

the Commission’s rules. 

(b) Internet access and information 

services. For purposes of this subpart, 

supported Internet access and 

information services include basic 

conduit access to the Internet and all the 

services defined in § 54.5 of the 

Commission’s rules as Internet access. 

All supported Internet access and 

information services are defined and 

listed in the Eligible Services List as 

updated annually in accordance with 

§ 54.503 of the Commission’s rules. 

(c) Internal connections. 

(1) For purposes of this subpart, a 

service is eligible for support as a 

component of an institution’s internal 

connections if such service is necessary 

to transport information within one or 

more instructional buildings of a single 

school campus or within one or more 

non-administrative buildings that 

comprise a single library branch. 

Discounts are not available for internal 

connections in non-instructional 

buildings of a school or school district, 

or in administrative buildings of a 

library, to the extent that a library 

system has separate administrative 

buildings, unless those internal 

connections are essential for the 

effective transport of information to an 

instructional building of a school or to 

a non-administrative building of a 

library. Internal connections do not 

include connections that extend beyond 

a single school campus or single library 

branch. There is a rebuttable 

presumption that a connection does not 

constitute an internal connection if it 

crosses a public right-of-way. All 

supported internal connections are 

defined and listed in the Eligible 

Services List as updated annually in 

accordance with § 54.503 of the 

Commission’s rules. 

(2) Basic maintenance services. For 

purposes of this subpart, basic 

maintenance services shall be eligible as 

an internal connections service if, but 

for the maintenance at issue, the 

internal connection would not function 

and serve its intended purpose with the 

degree of reliability ordinarily provided 

in the marketplace to entities receiving 

such services. Basic maintenance 

services do not include services that 

maintain equipment that is not 

supported or that enhance the utility of 

equipment beyond the transport of 

information, or diagnostic services in 

excess of those necessary to maintain 

the equipment’s ability to transport 

information. All supported basic 

maintenance is defined and listed in the 

Eligible Services List as updated 

annually in accordance with § 54.503 of 

the Commission’s rules. 

(3) Frequency of discounts for internal 

connections services. Each eligible 

school or library shall be eligible for 

support for internal connections 

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 internal connections 

services other than basic maintenance 

services. If a school or library receives 

internal connections 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. 

(d) Non-telecommunications carriers 

shall be eligible for universal service 

support under this subpart for providing 

the supported services described in 

paragraph (b) and (c) of this section for 

eligible schools, libraries, and consortia 

including those entities. Such services 

provided by non-telecommunications 

carriers shall be subject to all the 

provisions of this subpart, except 

§§ 54.501(a), 54.502(a), and 54.515. 

3. Section 54.503 is revised to read as 

follows: 

§ 54.503 Eligible services list. 

(a) The Administrator shall submit by 

March 30 of each year a draft list of 

services eligible for support, based on 

the Commission’s rules, in the following 

funding year. The Wireline Competition 

Bureau will issue a Public Notice 

seeking comment on the Administrator’s 

proposed eligible services list. At least 

60 days prior to the opening of the 

window for the following funding year, 

the final list of services eligible for 

support will be released. 

(b) All supported services are defined 

and listed in the Eligible Services List 

as updated annually in accordance with 

paragraph (a) of this section. 

§ 54.506 [Removed and Reserved] 

4. Remove and reserve § 54.506. 

§§ 54.517 and 54.518 [Removed and 

Reserved] 

5. Remove and reserve §§ 54.517 and 

54.518. 

§ 54.522 [Removed and Reserved] 

6. Remove and reserve § 54.522. 

[FR Doc. 2010–12931 Filed 6–8–10; 8:45 am] 

BILLING CODE 6712–01–P 

FEDERAL COMMUNICATIONS 

COMMISSION 

47 CFR Part 54 

[CC Docket No. 02–6; GN Docket No. 09– 

51; FCC 10–83] 

Schools and Libraries Universal 

Service Support Mechanism, A 

National Broadband Plan for Our 

Future 

AGENCY: Federal Communications 

Commission. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: In this document, the Federal 

Communications Commission 

(Commission) seeks comment on several 

potential reforms that would cut red 

tape by eliminating rules that have not 

effectively served their intended 

purpose, while continuing to protect 

against waste, fraud, and abuse. In 

addition, the Commission seeks 

comment on how to provide stability 

and certainty for the funding of internal 

connections that are necessary to deliver 

higher bandwidth services to the 

classroom and how to expand access to 

funding for internal connections for 

schools and libraries serving 

impoverished populations. Finally, the 


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32700 Federal Register / Vol. 75, No. 110 / Wednesday, June 9, 2010 / Proposed Rules 

Commission seeks comment on 

indexing the funding cap to inflation, 

which would make additional funding 

available to support current and new 

services to deliver the full benefits of 

the Internet to all. 

DATES: Comments on the proposed rules 

are due on or before July 9, 2010 and 

reply comments are due on or before 

July 26, 2010. Written comments on the 

Paperwork Reduction Act proposed 

information collection requirements 

must be submitted by the public, Office 

of Management and Budget (OMB), and 

other interested parties on or before 

August 9, 2010. If you anticipate that 

you will be submitting comments, but 

find it difficult to do so within the 

period of time allowed by this notice, 

you should advise the contact listed 

below as soon as possible. 

ADDRESSES: You may submit comments, 

identified by CC Docket No. 02–6 and 

GN Docket No. 09–51, by any of the 

following methods: 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• Federal Communications 

Commission’s Web Site: http:// 

fjallfoss.fcc.gov/ecfs2/. Follow the 

instructions for submitting comments. 

• People with Disabilities: Contact the 

FCC to request reasonable 

accommodations (accessible format 

documents, sign language interpreters, 

CART, etc.) by e-mail: FCC504@fcc.gov 

or phone: (202) 418–0530 or TTY: (202) 

418–0432. 

• In addition to filing comments with 

the Secretary, a copy of any comments 

on the Paperwork Reduction Act 

information collection requirements 

contained herein should be submitted to 

the Federal Communications 

Commission via e-mail to PRA@fcc.gov 

and to Nicholas A. Fraser, Office of 

Management and Budget, via e-mail to 

Nicholas_A._Fraser@omb.eop.gov or via 

fax at 202–395–5167. 

For detailed instructions for submitting 

comments and additional information 

on the rulemaking process, see the 

SUPPLEMENTARY INFORMATION section of 

this document. 

FOR FURTHER INFORMATION CONTACT: 

Regina Brown at (202) 418–0792 or 

James Bachtell at (202) 418–2694, 

Wireline Competition Bureau, 

Telecommunications Access Policy 

Division or TTY: (202) 418–0484. For 

additional information concerning the 

Paperwork Reduction Act information 

collection requirements contained in 

this document, send an e-mail to 

PRA@fcc.gov and to Nicholas A. Fraser, 

Office of Management and Budget, via 

e-mail to 

Nicholas_A._Fraser@omb.eop.gov or via 

fax at 202–395–5167. 

SUPPLEMENTARY INFORMATION: This is a 

synopsis of the Commission’s Notice of 

Proposed Rulemaking in CC Docket No. 

02–6, GN Docket No. 09–51, FCC 10–83, 

adopted May 20, 2010, and released 

May 20, 2010. The complete text of this 

document is available for inspection 

and copying during normal business 

hours in the FCC Reference Information 

Center, Portals II, 445 12th Street, SW., 

Room CY–A257, Washington, DC 20554. 

The document may also be purchased 

from the Commission’s duplicating 

contractor, Best Copy and Printing, Inc., 

445 12th Street, SW., Room CY–B402, 

Washington, DC 20554, telephone (800) 

378–3160 or (202) 863–2893, facsimile 

(202) 863–2898, or via the Internet at 

http://www.bcpiweb.com. It is also 

available on the Commission’s Web site 

at http://www.fcc.gov. 

Pursuant to §§ 1.415 and 1.419 of the 

Commission’s rules, 47 CFR 1.415, 

1.419, interested parties may file 

comments and reply comments on or 

before the dates indicated on the first 

page of this document. Comments may 

be filed using: (1) The Commission’s 

Electronic Comment Filing System 

(ECFS), (2) the Federal Government’s 

eRulemaking Portal, or (3) by filing 

paper copies. See Electronic Filing of 

Documents in Rulemaking Proceedings, 

63 FR 24121, May 1, 1998. 

• Electronic Filers: Comments may be 

filed electronically using the Internet by 

accessing the ECFS: http://www.fcc.gov/ 

cgb/ecfs/ or the Federal eRulemaking 

Portal: http://www.regulations.gov. 

Filers should follow the instructions 

provided on the Web site for submitting 

comments. 

• For ECFS filers, if multiple docket 

or rulemaking numbers appear in the 

caption of this proceeding, filers must 

transmit one electronic copy of the 

comments for each docket or 

rulemaking number referenced in the 

caption. In completing the transmittal 

screen, filers should include their full 

name, U.S. Postal Service mailing 

address, and the applicable docket or 

rulemaking number. Parties may also 

submit an electronic comment by 

Internet e-mail. To get filing 

instructions, filers should send an email to ecfs@fcc.gov, and include the 

following words in the body of the 

message, ‘‘get form.’’ A sample form and 

directions will be sent in response. 

• Paper Filers: Parties who choose to 

file by paper must file an original and 

four copies of each filing. If more than 

one docket or rulemaking number 

appears in the caption of this 

proceeding, filers must submit two 

additional copies for each additional 

docket or rulemaking number. 

Filings can be sent by hand or 

messenger delivery, by commercial 

overnight courier, or by first-class or 

overnight U.S. Postal Service mail 

(although we continue to experience 

delays in receiving U.S. Postal Service 

mail). All filings must be addressed to 

the Commission’s Secretary, Office of 

the Secretary, Federal Communications 

Commission. 

• The Commission’s contractor will 

receive hand-delivered or messengerdelivered paper filings for the 

Commission’s Secretary at 236 

Massachusetts Avenue, NE., Suite 110, 

Washington, DC 20002. The filing hours 

at this location are 8 a.m. to 7 p.m. All 

hand deliveries must be held together 

with rubber bands or fasteners. Any 

envelopes must be disposed of before 

entering the building. 

• Commercial overnight mail (other 

than U.S. Postal Service Express Mail 

and Priority Mail) must be sent to 9300 

East Hampton Drive, Capitol Heights, 

MD 20743. 

• U.S. Postal Service first-class, 

Express, and Priority mail should be 

addressed to 445 12th Street, SW., 

Washington, DC 20554. 

People with Disabilities: To request 

materials in accessible formats for 

people with disabilities (Braille, large 

print, electronic files, audio format), 

send an e-mail to fcc504@fcc.gov or call 

the Consumer & Governmental Affairs 

Bureau at (202) 418–0530 (voice) or 

(202) 418–0432 (TTY). Contact the FCC 

to request reasonable accommodations 

for filing comments (accessible format 

documents, sign language interpreters, 

CART, etc.) by e-mail: fcc504@fcc.gov; 

phone: (202) 418–0530 or (202) 418– 

0432 (TTY). 

In addition, one copy of each 

pleading must be sent to each of the 

following: 

• The Commission’s duplicating 

contractor, Best Copy and Printing, Inc., 

445 12th Street, SW., Room CY–B402, 

Washington, DC 20554; Web site: http:// 

www.bcpiweb.com; phone: 1–800–378– 

3160; and 

• Charles Tyler, Telecommunications 

Access Policy Division, Wireline 

Competition Bureau, 445 12th Street, 

SW., Room 5–A452, Washington, DC 

20554; e-mail: Charles.Tyler@fcc.gov or 

telephone number (202) 418–7400. 

Filings and comments are also available 

for public inspection and copying 

during regular business hours at the 

FCC Reference Information Center, 

Portals II, 445 12th Street, SW., Room 

CY–A257, Washington, DC 20554. 

Copies may also be purchased from the 


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Commission’s duplicating contractor, 

BCPI, 445 12th Street, SW., Room CY– 

B402, Washington, DC 20554. 

Customers may contact BCPI through its 

Web site: http://www.bcpiweb.com, by 

e-mail at fcc@bcpiweb.com, by 

telephone at (202) 488–5300 or (800) 

378–3160 (voice), (202) 488–5562 

(TTY), or by facsimile at (202) 488– 

5563. 

Comments and reply comments must 

include a short and concise summary of 

the substantive arguments raised in the 

pleading. Comments and reply 

comments must also comply with § 1.49 

and all other applicable sections of the 

Commission’s rules. We direct all 

interested parties to include the name of 

the filing party and the date of the filing 

on each page of their comments and 

reply comments. All parties are 

encouraged to utilize a table of contents, 

regardless of the length of their 

submission. We also strongly encourage 

parties to track the organization set forth 

in the NPRM in order to facilitate our 

internal review process. 

Initial Paperwork Reduction Act of 

1995 Analysis: This document contains 

proposed information collection 

requirements. The Commission, as part 

of its continuing effort to reduce 

paperwork burdens, invites the general 

public and the Office of Management 

and Budget (OMB) to comment on the 

information collection requirements 

contained in this document, as required 

by the Paperwork Reduction Act of 

1995, Public Law 104–13. Public and 

agency comments are due August 9, 

2010. 

Comments on the proposed 

information collection requirements 

should address: (a) Whether the 

proposed collection of information is 

necessary for the proper performance of 

the functions of the Commission, 

including whether the information shall 

have practical utility; (b) the accuracy of 

the Commission’s burden estimates; (c) 

ways to enhance the quality, utility, and 

clarity of the information collected; and 

(d) ways to minimize the burden of the 

collection of information on the 

respondents, including the use of 

automated collection techniques or 

other forms of information technology. 

In addition, pursuant to the Small 

Business Paperwork Relief Act of 2002, 

Public Law 107–198, see 44 U.S.C. 

3506(c)(4), we seek specific comment on 

how we might further reduce the 

information collection burden for small 

business concerns with fewer than 25 

employees. 

OMB Control Number: 3060–0853. 

Title: FCC Form 479, Certification by 

Administrative Authority to Billed 

Entity of Compliance with Children’s 

Internet Protection Act; FCC Form 486, 

Receipt of Service Confirmation Form, 

FCC Form 500, Funding Commitment 

Change Request Form. 

Form Number(s): FCC Forms 479, 486, 

500. 

Type of Review: Revision of a 

currently approved collection. 

Respondents: Business or other forprofit and not-for-profit institutions. 

Number of Respondents and 

responses: 45,300 respondents and 

45,300 responses. 

Estimated Time per Response: .25–1.5 

hours (average time per response). 

Obligation to Respond: Required to 

obtain or retain benefits. 

Frequency of Response: Annual and 

on occasion reporting requirements, 

recordkeeping and third party 

disclosure requirements. 

Total Annual Burden: 63,720 hours. 

Total Annual Cost: N/A. 

Privacy Act Impact Assessment: No 

impact. 

Nature of Extent of Confidentiality: 

The Commission is not requesting that 

the respondents submit confidential 

information to the FCC. Respondents 

may, however, request confidential 

treatment for information they believe to 

be confidential under 47 CFR 0.459 of 

the Commission’s rules. 

Needs and Uses: The existing 

information collection requires schools 

and libraries to report on the FCC Form 

500 to the Universal Service 

Administrative Company (USAC) the 

disposal of equipment purchased with 

an E-rate discount for payment or other 

consideration. This revision has no 

effect on FCC Forms 479 and 486 (and 

Internet policy statement), which are 

also part of this information collection. 

This revision specifically pertains to the 

FCC Form 500. This revision also adds 

or corrects the burden for the provision 

of Internet safety policy to the FCC. The 

Internet safety policy requirement was 

proposed in a Notice of Proposed 

Rulemaking, FCC 09–96, CC Docket 02– 

6 (75 FR 2826, dated January 19, 2010 

and approved by OMB on March 25, 

2010). At this time of submission to the 

OMB, it is uncertain which proposed 

rule will be finalized to account for the 

Internet safety policy burden. Therefore, 

we have included it in this submission. 

Specifically, the revised FCC Form 

500 would require a school or library 

disposing of equipment to report the 

following information to USAC: (1) The 

applicant’s name, entity number, 

address, and telephone number; (2) the 

name, address, telephone number, and 

e-mail address of the applicant’s 

authorized point of contact; (3) the date 

of the disposal of obsolete equipment; 

(4) the name of each piece of equipment 

disposed of, including the date of 

purchase and the funding request 

number(s) associated with the disposed 

equipment; (5) any payment, trade-in 

value, or other consideration received 

for such disposal of equipment; (6) the 

name of the entity that paid or 

otherwise gave the applicant valuable 

consideration for the equipment; (7) 

formal declaration by the school board 

or other authorized body or individual 

that the equipment subject to disposal is 

surplus; and (8) certification that the 

information provided on the form is true 

and accurate to the best of the 

applicant’s knowledge, evidenced by 

the signature of someone authorized to 

so certify by the applicant and the date. 

Requiring schools and libraries to 

submit this information as part of the 

FCC Form 500 could facilitate our 

ongoing efforts to mitigate waste, fraud 

and abuse. Additionally, it would allow 

USAC and the Commission to better 

assess how long program participants 

are using equipment purchased with Erate discounts prior to disposal of any 

obsolete equipment, and to track what 

E-rate program participants do with 

equipment they no longer use. 

Moreover, such revision would require 

limited information, all of which is easy 

to obtain whenever a school or library 

seeks to dispose of obsolete equipment. 

I. Introduction 

1. In sum, this NPRM seeks comment 

on a package of potential reforms to the 

E-rate program that could be 

implemented in funding year 2011 (July 

1, 2011–June 30, 2012). These proposed 

reforms include: 

• Streamlining the application and 

competitive bidding processes for 

telecommunications and Internet access 

in an effort to further reduce the 

administrative burden on applicants, 

while at the same time maintaining 

appropriate safeguards to mitigate 

potential waste, fraud, and abuse; 

• Codifying the requirement 

developed in Commission precedent 

that competitive bidding processes be 

‘‘fair and open’’ to enhance the 

Commission’s ability to enforce its rules 

in cases involving waste, fraud and 

abuse; 

• Simplifying the way schools 

calculate their discounts and 

conforming the E-rate definition of 

‘‘rural’’ to the Department of Education’s 

definition; 

• Supporting 24/7 online learning by 

eliminating the current rule that 

requires schools to allocate the cost of 

wireless Internet access service between 

funded, in-school use and non-funded 

uses away from school premises; 


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• Providing greater flexibility to 

recipients to choose the most costeffective bandwidth solutions for their 

connectivity needs by allowing the 

leasing of low-cost fiber from 

municipalities and other entities that 

are not telecommunications carriers; 

• Expanding the reach of broadband 

in residential schools that serve 

populations facing unique challenges, 

such as Tribal schools or schools for 

children with physical, cognitive, or 

behavioral disabilities; 

• Creating a new, predictable funding 

mechanism for internal connections so 

that more schools and libraries have the 

ability to use the most technologically 

advanced applications, including video 

streaming to the classroom, to provide 

superior learning opportunities; 

• Indexing the current $2.25 billion 

cap on E-rate disbursements to inflation 

to maintain the purchasing power of the 

current program and enable continued 

support for high speed broadband and 

internal connections in the future; and 

• Creating a process for schools and 

libraries to dispose of obsolete 

equipment without running afoul of the 

prohibition on reselling equipment and 

services purchased using E-rate funds. 

II. Streamlining the Application 

Process 

2. In this section, we discuss several 

proposals designed to improve and 

simplify the current E-rate application 

process. It is the intent that the adoption 

of these proposals will result in greater 

E-rate participation and will reduce the 

costs associated with administering the 

E-rate program. To the extent we can 

minimize the potential for inadvertent 

errors that do not fundamentally 

threaten program integrity, we should 

reduce the number of appeals of funding 

decisions that consume resources at 

both USAC and the Commission, 

resulting in faster decisions on funding 

and greater certainty for both applicants 

and service providers. About 15 percent 

of appeals to the Commission involve 

issues relating to alleged noncompliance with technology plan and 

competitive bidding requirements. 

3. Specifically, we propose to 

eliminate technology plan requirements 

for priority one applicants that 

otherwise are subject to State and local 

technology planning requirements. We 

also propose to eliminate the FCC Form 

470 posting and the 28-day waiting 

period before applicants can enter into 

contracts for those priority one 

applicants that are subject to public 

procurement requirements. We propose 

to retain our current technology 

planning and competitive bidding 

requirements for applicants seeking 

priority two services. In order to provide 

greater clarity regarding our competitive 

bidding requirements for priority one 

and priority two services, we propose to 

codify a rule requiring all applicants to 

conduct competitive bidding processes 

that are fair and open. We also seek 

comment on other proposals that 

streamline the application process. For 

instance, we propose to significantly 

streamline the FCC Form 470 and 471 

online application process and require 

that those forms be completed and 

submitted electronically. We also 

propose to revise our discount rules so 

that schools will calculate discounts on 

supported services by using the average 

discount rate for the entire school 

district rather than the weighted average 

for each school building. Finally, we 

propose to adopt a new definition of 

‘‘rural area’’ for the purpose of 

determining whether an E-rate applicant 

qualifies for the rural discount. 

1. Technology Plans 

4. We propose to amend § 54.508 of 

our rules to eliminate E-rate technology 

plan requirements for priority one 

applicants that otherwise are subject to 

State and local technology planning 

requirements. We seek comment on this 

proposal. The provision of priority one 

services (i.e., telecommunications 

services and Internet access) is fairly 

straightforward for many applicants 

and, therefore, a technology plan for 

these services may represent an 

unnecessarily complex and burdensome 

program requirement. According to one 

commenter, the U.S. Department of 

Education and most, if not all, States 

already require technology planning, 

and therefore our requirement is largely 

duplicative. 

5. We recognize, however, that the 

selection of the optimal package of 

telecommunications and Internet access 

solutions can be more complicated for 

larger school districts that typically 

have a greater array of competitive 

options for their broadband 

connectivity. We seek comment on 

whether a separate E-rate mandated 

technology plan requirement remains 

useful for larger telecommunications 

and Internet access service priority one 

funding requests, even for those 

applicants that are subject to other State 

or local requirements. For example, 

should we retain the E-rate technology 

plan requirement for applicants that 

request more than a specified amount of 

funding for priority one services, such 

as $1 million. 

6. We propose to retain the FCC 

technology plan requirement for all 

priority two service requests and seek 

comment on this proposal. Priority two 

services and equipment are specifically 

tailored to the needs and requirements 

of the individual applicant. The FCC 

requirement for a detailed technology 

plan for internal connections therefore 

may continue to serve valuable 

purposes. They can help the school, 

school district, or library ensure that (i) 

it is requesting the appropriate amount 

of equipment necessary to satisfy 

network demands, (ii) it has taken into 

account any unique installation 

requirements, appropriate placement of 

facilities, and time demands, including 

possible disruption to the classroom or 

library services during installation, and 

(iii) it has considered and selected the 

most cost-effective implementation 

methods. We also seek comment on 

whether the current third-party 

approval process should be retained to 

the extent that we continue to require 

technology plans. 

2. Competitive Bidding Process 

7. FCC Form 470. We propose to 

simplify significantly the application 

process for priority one services, e.g., 

telecommunications services and 

Internet access services by adding 

§ 54.510 to our rules. Specifically, we 

propose to eliminate the requirement 

that applicants for priority one services 

file an FCC Form 470 and wait 28 days 

before signing a contract with their 

selected service provider, as long as 

those applicants are subject to public 

procurement requirements. That is, for 

priority one services, an applicant that 

is subject to public procurement 

requirements would no longer be 

required to comply with § 54.504(b) of 

the Commission’s rules. Instead, the 

applicant would initiate the application 

process for priority one services by 

filing an FCC Form 471. Applicants for 

priority one funding would still comply 

with their State and local procurement 

laws and processes when entering into 

E-rate eligible service contracts and with 

the Commission’s requirement that the 

competitive bidding process be fair and 

open. We emphasize that compliance 

with local and State procurement 

requirements would remain a condition 

of receiving E-rate funding. 

8. The elimination of the FCC Form 

470 process and the 28-day waiting 

period for most priority one applicants 

could streamline the application process 

and make it easier for eligible 

institutions to receive support for 

essential priority one services such as 

telecommunications and Internet access 

services. The complexity of the FCC 

Form 470 and its associated deadlines, 

category selections, multi-year contract 

and contract extension requirements, in 

and of themselves, have been the basis 


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for a multitude of funding request 

denials by USAC. Eliminating these 

requirements for priority one services 

could reduce the number of unnecessary 

application funding denials and reduce 

the administrative burden on program 

participants and USAC during the 

application process. Fewer unnecessary 

reviews should also result in faster 

processing of applications for priority 

one services. 

9. Eliminating the FCC Form 470 and 

28-day waiting period for priority one 

applications should not jeopardize the 

integrity of the fund in those situations 

where State and local governments 

already have prescribed procurement 

regulations in place that public schools 

and libraries must follow before 

entering into a contract for goods or 

services. Purchasing thresholds also are 

set by State and local policymakers to 

ensure that bidding occurs for desired 

products and services and the most costeffective bids are selected. In addition, 

public schools and libraries are held 

accountable by State and local 

authorities for violating State and local 

procurement regulations. Further, 

priority one services such as 

telecommunications and Internet access 

are more likely to be purchased as 

commodities based on volume and 

distance, as opposed to being priced by 

project. Commenters note there have 

been relatively few instances of alleged 

waste, fraud, or abuse associated with 

priority one requests. Eliminating these 

requirements could free up USAC 

program resources now spent applying 

these rules to priority one service 

applications, and allow more resources 

for reviewing other areas in which there 

is a greater chance of waste, fraud, and 

abuse. Nevertheless, we invite comment 

as to whether this proposed change 

would inadvertently increase instances 

of waste, fraud, and abuse. 

10. We propose that priority one 

applicants not subject to State or local 

bidding requirements—for example, 

private schools or some charter 

schools—continue to be required to 

follow the current E-rate competitive 

bidding process by posting an FCC Form 

470 and waiting 28 days to select a 

service provider. We believe that this 

would be less burdensome than 

requiring those applicants to learn and 

follow State or local procurement 

requirements that do not actually apply 

to them. We also propose that an 

applicant located in a State that does 

not have procurement rules in place 

would still need to follow the 

Commission’s existing Form 470 

process to satisfy the E-rate competitive 

bidding requirement. We seek comment 

on these proposals. 

11. We propose to retain, for the 

present time, the Commission’s existing 

competitive bidding requirements as set 

forth in § 54.504 of the Commission’s 

rules for applications requesting support 

for priority two services. We can reevaluate the need for these requirements 

after gaining practical experience from 

the outcome of the rule changes 

proposed here. Unlike most priority one 

services, priority two services are 

specifically tailored to the needs and 

requirements of the individual 

applicant. Configurations and prices can 

vary widely. In addition, on average, 

priority two requests generally involve 

greater amounts of money, per 

applicant, than priority one requests. 

We seek comment on these proposals. 

12. Fair and Open Competitive 

Bidding Rule. The Commission 

previously has addressed specific 

situations in which the fairness of an 

applicant’s competitive bidding process 

has been compromised because of 

improper conduct by the applicant, 

service provider, or both. Although the 

Commission has held in numerous 

orders that the competitive bidding 

process must be fair and open, there is 

currently no codified Commission rule 

specifically requiring that the 

competitive bidding process be 

conducted by an E-rate applicant in a 

fair and open manner. 

13. We therefore propose to amend 

§ 54.510 of our rules to codify the 

requirement that an applicant must 

conduct a fair and open bidding process 

when seeking bids for services eligible 

for E-rate support. This rule will apply 

to all applicants for both priority one 

and priority two services—including 

applicants not filing FCC Forms 470— 

and will apply in addition to State and 

local procurement requirements. In 

addition, all applicants for both priority 

one and priority two must still comply 

with the Commission’s rule requiring 

the careful consideration of all bids 

submitted, the selection of the most 

cost-effective bid for services or 

equipment, with price as the primary 

factor considered, and the selection of 

the service that is the most cost-effective 

means of meeting educational needs and 

technology plan goals. Because we are 

proposing merely to codify an existing 

requirement, this should not increase 

the burden on E-rate applicants that are 

already following our competitive 

bidding rules. We propose to codify this 

requirement to emphasize that, even 

without a Commission-established 

competitive bidding process in some 

instances, the Commission still requires 

any and all competitive bidding 

processes in which E-rate applicants 

participate to be conducted in a fair and 

open manner. We seek comment on this 

proposal. 

14. We are deeply concerned about 

practices that thwart Commission and 

other public competitive bidding 

policies and create conditions for waste 

of funds intended to promote access to 

telecommunications and information 

services. As the Commission has 

observed, competitive bidding is vital to 

limiting waste and assisting schools and 

libraries in receiving the best value for 

their limited funds. Codifying the 

requirement for a fair and open bidding 

process will assist in our continuing 

effort to ensure that the fund is being 

utilized by applicants as Congress 

intended, without waste, fraud, or 

abuse, by deterring program participants 

from engaging in any conduct that 

undermines the Commission’s 

competitive bidding process as well as 

any State or local procurement 

processes. We do not believe that the 

Commission’s fair and open process 

requirement will conflict with State and 

local procurement laws. 

15. If we codify this rule, we propose 

to provide illustrative guidance of the 

types of conduct that would satisfy or 

violate the rule, which could be updated 

periodically based on experience gained 

through investigations involving waste, 

fraud and abuse. Generally speaking, all 

potential bidders and service providers 

should have access to the same 

information, they should be treated in 

the same manner throughout the 

procurement process, and they should 

not have additional information beyond 

the contents of an applicant’s FCC Form 

470 or RFP, if the applicant uses these 

documents to initiate bidding. While the 

lists set forth below are not exhaustive, 

we propose that the following behaviors 

constitute inappropriate conduct during 

the competitive bidding process. 

Moreover, we believe that any party 

with a potential financial interest in the 

E-rate program (for example, a 

subcontractor to a service provider) also 

could not engage in the prohibited 

activities described below: 

• An applicant may not have a 

relationship with a service provider that 

would unfairly influence the outcome of 

a competition or would furnish the 

service provider with ‘‘inside’’ 

information; 

• An applicant may not turn over its 

responsibility for ensuring a fair and 

open competitive bidding process to a 

service provider. 

• Applicant employees or board 

members may not serve on any board of 

any type of telecommunications, 

Internet access, or internal connections 

service provider that participates in the 

E-rate program in the same State; 


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• Service providers may not offer or 

provide gifts, including meals, to 

employees or board members of the 

applicant; 

• Applicant employees with any role 

in the selection of vendors may not have 

an ownership interest in a vendor that 

is seeking to provide products or 

services. 

• Once a contract for products or 

services is signed by the applicant and 

service provider, a different service 

provider may not circumvent the 

bidding process and offer a new, lower 

price for the same products and 

services. 

16. In addition, we seek comment on 

a proposal that applicants using the FCC 

Form 470 bidding process should also 

comply with the following 

requirements. 

• An applicant using the FCC Form 

470 bidding process must describe the 

desired products and services with 

sufficient specificity to enable interested 

parties to submit responsive bids; 

• An applicant must identify the 

correct category of service on the FCC 

Form 470, e.g., telecommunications, 

Internet access, or internal connections 

so that it can receive bidders for the 

services it seeks; 

• Only an applicant or an authorized 

representative of the applicant can 

prepare, sign, and submit the FCC Form 

470 and certification; 

• An applicant cannot list a service 

provider representative as the FCC Form 

470 contact person and allow that 

service provider to participate in the 

competitive bidding process; 

• A service provider may not help an 

applicant prepare the FCC Form 470 or 

participate in the bid evaluation or 

vendor selection process in any way; 

• A service provider may provide 

information to an applicant about 

products or services—including 

demonstrations—before the applicant 

posts the FCC Form 470, but not during 

the bid selection process. 

17. We reiterate that these lists do not 

include every possible scenario in 

which we would find an applicant in 

violation of our competitive bidding 

rules. We seek comment on whether 

these proposed requirements and 

examples are appropriate and whether 

there are others we should specifically 

adopt as part of a codified rule to 

provide guidance to program 

participants. 

3. Application Process Streamlining 

18. We note that the Commission is 

currently seeking comment on 

significantly streamlined FCC Forms 

470 and 471 for funding year 2011. 

Additionally, we are working with 

USAC in developing an improved 

online system that provides applicants 

with the tools and access to data 

necessary to participate more effectively 

and efficiently in the program. All forms 

should be available for online 

submission, and applicants should be 

able to upload requested information 

electronically. Applicants also should 

be able to save, retrieve, and edit 

previously filed applications and use 

these forms as the basis for future 

funding requests, thereby improving the 

efficiency of submission and processing 

of applications. We seek feedback from 

all interested parties on these planned 

user enhancements. 

19. Because these forms and systems 

upgrades will dramatically improve the 

online experience for applicants, we 

propose to require all applicants to file 

their FCC Forms 470 and 471 

electronically. We believe that the 

electronic submission of these forms 

will improve the efficiency of 

submitting and processing applications. 

It will also save administrative costs as 

USAC will not have to enter data into 

its electronic system from paper 

submissions, which will free up 

additional funding for supported 

services. Electronic completion and 

submission also would likely result in 

fewer errors on the form. We seek 

comment on this proposal. 

4. Discount Matrix Streamlining 

20. Discount calculation. We propose 

to revise our discount rules so that 

schools will calculate discounts on 

supported services by using the average 

discount rate for the entire school 

district rather than the weighted average 

for each school building. Currently, 

school districts, library systems, or other 

billed entities are required to calculate 

discounts for services that are shared by 

two or more of their schools, libraries, 

or consortia members by calculating an 

average based on the discounts of all 

member schools and libraries. School 

districts, library systems, or other billed 

entities are required to ensure that, for 

each year in which an eligible school or 

library is included for purposes of 

calculating the aggregate discount rate, 

that eligible school or library receives a 

proportionate share of the shared 

services for which support is sought. 

For schools, the average discount is the 

weighted average of the applicable 

discount of all schools sharing a portion 

of the shared services, with the 

weighting based on the number of 

students in each school. For libraries, 

the average discount is a simple average 

of the applicable discounts to which the 

libraries sharing a portion of the shared 

services are entitled. 

21. We agree with E-rate Provider 

Services (EPS) that calculating 

discounts by individual school adds a 

significant level of complexity to the 

application process, as the discounts 

must be calculated separately by school 

and checked individually by USAC. 

Accordingly, we propose to revise 

§ 54.505(b)(4) of our rules to require 

applicants to: (1) Calculate a single 

discount percentage rate for the entire 

school district by dividing the total 

number of students eligible for the 

National School Lunch Program by the 

total number of students in the district; 

and (2) then compare that single figure 

against the discount matrix to determine 

the school district’s discount for priority 

one and priority two services. All 

schools and libraries within that school 

district would then receive the same 

discount rate. We seek comment on our 

proposal. We also seek comment on 

whether there should be a similar 

requirement for library systems and how 

this proposed rule would affect 

consortium applications. 

22. This proposed discount 

percentage rate calculation could 

streamline the application process by 

simplifying the way in which schools 

compute their discount percentage rate 

and reduce the administrative burden 

on USAC by no longer requiring USAC 

to verify each individual school’s 

discount percentage rate. Additionally, 

it could significantly reduce the amount 

of information necessary for block 4 of 

the FCC Form 471 application. This 

proposal could also eliminate 

applicants’ submission of multiple FCC 

Form 471 applications at different 

discount levels. Moreover, it could 

reduce the incentive for districts to 

purchase priority two equipment at a 90 

percent discount rate and transfer it 

after three years to a school with a lower 

discount rate. We also seek comment on 

other ways to accomplish these goals. 

We also seek comment on how to 

determine if a school district can receive 

the additional discount available for 

some applicants located in rural areas. 

Currently, the urban/rural designation is 

based on the physical address of each 

individual school or library. Some 

applicants have a mixture of urban and 

rural entities on the same application. 

Should these districts be considered 

urban? Should their urban/rural status 

depend on the number of entities within 

the district that fall within each 

category? 

23. Rural Definition. We propose to 

adopt a new definition of ‘‘rural area’’ for 

the purpose of determining whether an 

E-rate applicant qualifies for the rural 

discount. A school’s E-rate discount 

level is determined in part by whether 


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it is classified as urban or rural. In some 

discount bands, schools and libraries in 

rural areas receive 5 percent to 10 

percent more in discounts than those 

schools and libraries in urban areas. We 

look at this proposed change with the 

recognition that the reason certain 

discounts are provided to schools and 

libraries located in rural areas is because 

those schools and libraries sometimes 

face significant challenges due to their 

remote location. As we seek comment 

on this proposed change in definition, it 

is not with the intent to reduce 

discounts to certain rural schools but 

rather to ensure that the funds are 

targeted appropriately. 

24. In 1997, the Commission adopted 

for the E-rate program the definition of 

‘‘rural area’’ used by the U.S. Department 

of Health and Human Service’s Office of 

Rural Health Care Policy (ORHP). Under 

ORHP’s definition, an area is rural if it 

is not located in a county within a 

Metropolitan Statistical Area (MSA) as 

defined by the Office of Management 

and Budget (OMB), or if it is specifically 

identified as ‘‘rural’’ in the Goldsmith 

Modification to Census data. In the 2003 

Schools and Libraries Third Report and 

Order, the Commission sought comment 

on a new definition of ‘‘rural area.’’ At 

that time, the Commission commented 

that a new definition was necessary 

because ORHP was no longer using the 

definition adopted by the Commission 

and had not updated the Goldsmith 

Modification to the 2000 Census data. 

25. We now propose that, for E-rate 

purposes, an area will be considered 

rural based on the methodology and 

locale codes used by the U.S. 

Department of Education’s National 

Center for Education Statistics (NCES), 

also known as urban-centric locale 

codes. We propose that any school or 

library that is within a territory that is 

classified as ‘‘town-distant,’’ ‘‘townremote,’’ ‘‘rural-distant,’’ or ‘‘ruralremote’’ by an NCES urban-centric 

locale code will be considered rural for 

purposes of calculating its E-rate 

discount level. We propose revising 

§§ 54.505(b)(3) and 54.5 of our rules to 

reflect this approach. 

26. First, it is reasonable for the E-rate 

program, which benefits schools and 

libraries, to use the Department of 

Education’s definition because it is 

specifically targeted to schools. By 

contrast, the current ORHP definition 

defines rural areas for rural health grant 

purposes only. Second, commenters 

have noted that the urban-centric locale 

codes pinpoint more precisely whether 

a school is located in a rural area. Rather 

than determining whether the school’s 

county or census tract is located in a 

rural area under the ORHP definition, 

the urban-centric locale codes 

determine whether a particular address 

is rural based on its proximity to 

metropolitan areas and on population 

size and density. The locale codes can 

be more specific because they are based 

solely on settlement patterns and are not 

constrained by political or geographic 

boundaries such as census tracts. Third, 

one of the reasons proffered by the 

Commission for selecting its original 

definition of ‘‘rural area’’—that it was 

less burdensome to schools and libraries 

and that the information was readily 

available to the public—applies to the 

new definition as well. In particular, it 

should be administratively 

straightforward for a school to discover 

its categorization, because the 

Department of Education’s Web site has 

the coding system broken down by 

State, and the information is readily 

available. We seek comment on this 

proposal. 

III. Providing Greater Flexibility To 

Select Broadband Services 

27. We propose to support wireless 

Internet access service even when the 

portable device is used off school 

property, provide greater flexibility to 

use low-cost fiber for broadband 

connectivity, and expand access to 

broadband for students who live at their 

schools due to geographic challenges or 

in order to receive specialized 

instruction. Each of these proposals is 

described in further detail below. We 

also seek comment on additional ways 

in which the Commission can better 

allocate E-rate funding to support 

educational purposes more directly and 

to more effectively target our funding to 

broadband services. 

1. Wireless Services Outside of School 

28. We propose to adopt the National 

Broadband Plan recommendation to 

provide full E-rate support for wireless 

Internet access service used with a 

portable learning devices that are used 

off premises. We seek comment on this 

proposal. Currently, the E-rate program 

supports wireless Internet access on 

school grounds. If a device that provides 

wireless Internet access service, such as 

a laptop, is taken off school grounds, 

however, applicants are required to 

cost-allocate the dollar amount of 

support for the time that the device is 

not at school. If that same device is left 

at school all of the time, the program 

would pay 100 percent of the 

applicant’s non-discount share. As such, 

our rules prevent students from fully 

utilizing learning opportunities that the 

devices can provide in the home. 

29. Advances in technology have 

enabled students to continue to learn 

well after the school bell rings and from 

virtually anywhere. As noted in the 

NBP, ‘‘Online educational systems are 

rapidly taking learning outside the 

classroom, creating a potential situation 

where students with access to 

broadband at home will have an even 

greater advantage over those students 

who can only access these resources at 

their public schools and libraries.’’ We 

propose to modify our rules so that we 

can lessen the digital divide between 

those who are fortunate enough to 

subscribe to broadband at home and 

those who do not. 

30. Recent data demonstrates that the 

widespread availability of wireless 

laptop computing for students is linked 

to improved educational outcomes. For 

example, the Maine Learning and 

Technology Initiative (MLTI) provided a 

laptop to every seventh- and eighthgrade student in the State as part of its 

mission to transform teaching and 

learning in Maine’s public schools. A 

study of the MLTI conducted by the 

Maine Education Policy Research 

Institute at the University of Southern 

Maine found that eighth-grade student 

writing, as measured by the Maine 

Educational Assessment (MEA), the 

State’s standardized assessment, 

improved significantly after laptop 

implementation in middle schools. 

Laptop initiatives have been deployed at 

the regional and district level as well. In 

Henrico County in Richmond, Virginia, 

a three-year study released in 2008, 

revealed that 1-to-1 laptop use was 

associated with higher test scores in 

biology, history, chemistry, reading and 

Earth science. Both of these laptop 

programs have incorporated student 

connectivity to the Internet in home and 

school environments. 

31. We emphasize that this proposal 

only relates to support for Internet 

access monthly service, and not the 

purchase of devices or equipment, such 

as mobile broadband cards, 

smartphones, or e-books. This proposal, 

therefore, would allow E-rate funding 

for Internet access services, which are 

already eligible, to be used to facilitate 

learning both on and off premises. It 

also would permit funding for 

connectivity that schools may 

increasingly utilize in the future to 

provide customized educational content 

to students. 

32. We note that that the requirements 

of the Children’s Internet Protection Act 

and the Protecting Children in the 21st 

Century Act still would apply to 

services being used off-premises. In 

addition, consistent with the Act, the 

Commission requires schools and 

libraries to certify, among other things, 

that services obtained through discounts 


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from the E-rate program will be used 

solely for educational purposes. We 

recognize that usage in the school or 

library typically occurs under the 

supervision of school or library 

personnel. We seek comment on what 

other safeguards, if any, we should 

consider imposing to mitigate against 

the risk of non-educational use at home 

that is not directly supervised by the 

recipient of funding. 

33. We seek comment on whether 

recipients of funding should be required 

to have policies and procedures in place 

to mitigate the risk that E-rate funded 

wireless connectivity is not used for 

educational uses off-premises. For 

instance, should recipients be required 

to have policies relating to acceptable 

use off-premises? We seek comment on 

whether the residents of the households 

of students may use E-rate funded 

connectivity (so long as it is for 

educational purposes) because, for 

example, such use may be fundamental 

to promoting digital literacy skills for 

both the students and the other 

household members who support the 

child’s educational experience, and 

whether such use is consistent with the 

educational purposes requirement of the 

statute. In our recent decision to permit 

schools to make E-rate funded 

connections available to the community, 

in order to reduce the likelihood of 

waste, fraud, and abuse, and to guard 

against potential additional costs being 

imposed on the E-rate program, we set 

forth certain conditions regarding other 

uses of school facilities that choose to 

allow the community to use their E-rate 

funded services. Among other things, 

the Commission required that: (1) 

Schools participating in the E-rate 

program not be permitted to request 

funding for more services than are 

necessary for educational purposes; and 

(2) consistent with the Act, a school’s 

discounted services or network capacity 

may not be ‘‘sold, resold, or transferred 

by such user in consideration for money 

or any other thing of value.’’ Should 

similar or other requirements be 

imposed if we expand support for 

wireless connectivity off-premises to 

guard against waste, fraud, and abuse? 

34. We seek comment on whether 

providing E-rate funds for wireless 

Internet access to portable devices in 

offsite locations would result in 

increased demand for wireless 

connectivity in the E-rate program, and 

if so, how that would affect other 

requests for E-rate funding, given the 

overall annual funding cap. According 

to one 2008 survey, more than 27 

percent of school districts were 

implementing in at least one grade or on 

pilot basis some form of one-on-one 

computing program with Internet 

connected wireless devices for use in 

the classroom and at home. We seek 

comment on how funding for wireless 

connectivity might increase over the 

next several years if we were to adopt 

this rule. If commenters believe that this 

rule change would limit the ability of 

eligible users to obtain other services, 

we seek comment on whether the 

Commission should limit wireless 

Internet access for mobile devices on a 

trial basis by, for example, capping the 

number of monthly service contracts per 

school district or some other method of 

allocating funding. We seek comment 

on whether we should implement this 

proposal on an interim basis for funding 

year 2011 and subsequently evaluate 

how to implement a permanent rule 

based on that experience. 

2. Expanded Access to Low-Cost Fiber 

35. We seek comment on permitting 

recipients to receive support for the 

lease of fiber, even if unlit, from third 

parties that are not telecommunications 

carriers, such as municipalities and 

other community or anchor institutions, 

to allow schools and libraries more 

flexibility to select the most costeffective broadband solutions. Dark fiber 

was conditionally eligible for E-rate 

discounts prior to Funding Year 2004. 

In the Schools and Libraries Third 

Report and Order, released in 2003, 

however, the Commission found that, 

pending resolution of the regulatory 

status of dark fiber, it would not be 

eligible for E-rate discounts. 

36. Fiber networks are used by both 

the public sector and governmental 

agencies for broadband Internet access 

today. A number of commenters in the 

record of the National Broadband Plan 

asserted that dark fiber may be a more 

cost-effective option for applicants—and 

therefore the program—in many 

instances. Several commenters 

expressed support for giving recipients 

more flexibility to use dark fiber as part 

of their broadband solutions. In order to 

provide greater flexibility to E-rate 

participants to reduce their overall cost 

of broadband and increase their 

bandwidth, we now propose to make 

leased dark fiber from any source 

eligible for funding as a priority one 

service. 

37. We propose to add leased dark 

fiber to the ESL, pursuant to section 

254(h)(2)(A) of the Act. We propose to 

add leased fiber with the same 

conditions as when it was on the ESL 

previously. That is, applicants would be 

able to lease fiber capacity that does not 

include modulating electronics, as long 

as they provide the electronics. In 

addition, the leased fiber must be used 

immediately. Under such an approach, 

applicants would, for instance, be able 

to lease dark fiber that may be owned 

by State, regional or local governmental 

entities, when that is the most costeffective solution to their connectivity 

needs. We also seek comment on any 

other operational issues that may arise 

with the addition of leased fiber, such 

as dark fiber, to the ESL. 

3. Expanding Access for Residential 

Schools That Serve Unique Populations 

38. We seek comment on whether we 

should allow schools that serve unique 

populations to receive E-rate funding for 

priority one and priority two services 

delivered to residential areas. In the 

Schools and Libraries Second Report 

and Order, recognizing that the 

technology needs of participants in the 

E-rate program are complex and unique 

to each participant, the Commission 

clarified the scope of educational 

purposes. Specifically, the Commission 

defined educational purposes as 

‘‘[A]ctivities that are integral, 

immediate, and proximate to the 

education of students, or in the case of 

libraries, integral, immediate, and 

proximate to the provision of library 

services to library patrons, qualify as 

‘‘educational purposes.’’ The 

Commission concluded that activities 

that occur on library or school property 

are presumed to be integral, immediate, 

and proximate to the education of 

students or the provision of library 

services to library patrons. The 

Commission thus concluded that in 

certain limited instances, the use of 

telecommunications services offsite 

would be considered integral, 

immediate, and proximate to the 

education of students or the provision of 

library services to library patrons, and 

thus, would be considered to be an 

educational purpose. 

39. In the Universal Service First 

Report and Order, the Commission 

limited the eligibility of internal 

connections by limiting support for a 

service ‘‘only if it is necessary to 

transport information all the way to 

individual classrooms.’’ The 

Commission subsequently elaborated on 

this policy in the Universal Service 

Fourth Order on Reconsideration, 

explaining that E-rate support is ‘‘not 

available for internal connections in 

non-instructional buildings used by a 

school district unless those internal 

connections are essential for the 

effective transport of information within 

instructional buildings.’’ Consistent with 

these orders, funding for internal 

connections to dormitory rooms, study 

centers within dormitories, teachers’ 

centers, and residential programs have 


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been found to be ineligible for support 

under the E-rate program. 

40. We recognize, however, that this 

rule does not take into account the 

special circumstances of institutions 

that provide residential living 

arrangements to meet the unique 

challenges of certain student 

populations. We propose to revise our 

rules to allow schools with residential 

areas on their grounds to receive E-rate 

funding for priority one and priority two 

services in those residential areas in 

circumstances where the students do 

not have access to comparable schooling 

or training if they were to reside at 

home. Specifically, we seek comment 

on whether the use of priority one and 

priority two services at a dormitory on 

a school campus could be considered 

integral, immediate, and proximate to 

the education of students, and thus, 

considered to be used for educational 

purposes, when the school is serving 

students with medical needs, cognitive, 

or behavioral disabilities, or who have 

no option but to live at school due to 

challenging terrain or their home’s 

distance from a school. For example, in 

West Virginia, students at the West 

Virginia School for the Deaf and Blind 

reside in dormitories on the same 

campus as the school, away from their 

parents, to receive schooling. These 

students are unable to go home or to a 

public library to access the Internet after 

school hours. The West Virginia School 

for the Deaf and Blind, however, 

pursuant to our rules, is unable to 

receive funding for services provided to 

these residential facilities, thus, 

requiring the school to cost-allocate 

between the eligible and ineligible uses 

of its services on the school’s campus. 

Currently, our rules state that service is 

eligible for support as a component of 

the institution’s internal connections 

only if it is necessary to transport 

information all the way to individual 

classrooms. We invite comment on 

whether we should amend our 

eligibility limitation imposed on 

internal connections, and if so, how we 

should amend that limitation with 

regard to schools described above. In 

addition, should we require that support 

for services to dormitories be limited to 

only to those schools whose operating 

expenses are funded, in whole or in 

part, with State or Federal funds? We 

seek comment on any other possible 

conditions or limitations to extending 

support to schools for services provided 

to dormitories located on a school’s 

campus to target finite funding to those 

schools for which funding may be truly 

necessary to access advanced 

telecommunications and information 

services and to minimize the potential 

for waste, fraud, and abuse. 

4. Targeting Support for Broadband 

Services 

41. Finally, we seek comment on 

other ways to reallocate funding so that 

finite amounts of E-rate dollars can be 

better targeted to satisfy the educational 

needs of students and library patrons. 

We recognize that schools and libraries 

face significant challenges in obtaining 

higher bandwidth necessary to support 

emerging needs at a time when budgets 

are stagnant or declining. According to 

one report, more than half of school 

districts surveyed faced problems in 

obtaining funding for higher bandwidth 

services, and two-thirds of those 

surveyed reported conserving 

bandwidth by restricting certain online 

applications such as streaming video. At 

the same time, more advanced 

applications such as media streaming 

and video conferencing, distance or 

online learning, multimedia 

applications that make learning more 

engaging and relevant, and one-to-one 

programs that enable students to engage 

in continuous learning hold great 

promise for educating the next 

generation. We therefore seek comment 

on specific proposals to re-prioritize Erate funding to support higher 

bandwidth connectivity that will enable 

such applications to be delivered to 

students and libraries across the 

country. 

42. In the short-term, the demand for 

wireless services and increased 

bandwidth for broadband will likely 

increase. We seek comment on whether 

there are specific telecommunications 

services, Internet access services, or 

priority two services on the current ESL 

that should receive a lower priority in 

E-rate funding so that we can target 

funding toward higher bandwidth 

connectivity. For example, should dialup Internet access continue to be funded 

as a priority one service or instead, 

should greater priority be given to 

applicants seeking support for 

broadband services? Similarly, should 

we give a higher priority to advanced 

telecommunications and broadband 

services, rather than voice 

telecommunications services? We 

recognize that budgets are challenged 

for State and local authorities around 

the country, but also emphasize that our 

objective in managing this finite 

program is to achieve the maximum 

benefits of access to the full range of 

content and applications that the 

Internet can deliver, not to fund voice 

telephone service that schools and 

libraries across the country were paying 

for in full before the inception of the Erate program. We seek comment on 

these and any other proposals 

commenters might suggest to meet the 

goal of generating the most return for 

each E-rate dollar. 

IV. Expanding the Reach of Broadband 

to the Classroom 

43. Internal connections, such as 

routers or hubs, are essential to the 

effective use of broadband within 

schools and libraries because they 

enable students and library patrons to 

utilize higher bandwidth applications in 

multiple locations within a school or 

library. As schools and libraries are 

increasingly utilizing higher bandwidth 

services to meet educational and 

community needs, they need to upgrade 

and replace their existing internal 

connections as well in order to fully 

utilize the broadband services they are 

purchasing. Without upgraded Internet 

access and the internal connections 

necessary to bring the connection all the 

way to the classroom or library patron, 

many users simply will be unable to 

utilize the many applications available 

in today’s marketplace, such as highdefinition video streaming, that support 

online learning. Demand for priority one 

services has grown from $800 million in 

1998 to approximately $2 billion in 

2009. As noted above, only schools and 

libraries with the highest discount 

levels are receiving priority two 

subsidies, and the availability of priority 

two funding gets smaller as applicants 

apply for more funding for priority one 

services. The net result is the E-rate 

program is funding high-capacity pipes 

to a single point of entry at the school 

(or library) but not providing any 

support for the equipment that enables 

the computer terminals or laptops 

across the school or library to access 

that high-capacity pipe. Further, 

without changes to the way in which we 

allocate funding for internal 

connections, it is quite possible that in 

funding year 2011, E-rate support for 

telecommunications services and 

Internet access could eliminate the 

availability of any funding for internal 

connections. 

44. In this NPRM, we seek comment 

on how to ensure that schools and 

libraries receive funding for internal 

connections (priority two services). We 

have two important goals in mind: (1) 

Providing funding for internal 

connections to more schools and 

libraries than in the past; and (2) 

ensuring a predictable amount of 

funding available to schools and 

libraries for internal connections each 

year. 


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1. Predictable Internal Connections 

Funding for More Schools and Libraries 

45. One option would be to allocate 

funding for internal connections based 

on a per student cap per school district, 

to which the applicant’s discount rate 

would be applied. Under this option, 

libraries would be eligible to receive the 

same amount of funding as the public 

school districts within which they are 

located. To ensure that a predictable 

amount of funding is available for 

internal connections, we could set aside 

a defined amount of funding before 

funding is allocated to 

telecommunications and Internet access, 

current priority one services. If we 

choose this option, we also could 

eliminate the 2-in-5 rule. Another 

option would be to eliminate support 

for basic maintenance for internal 

connections, or, in the alternative, to 

cap the amount available for basic 

maintenance. We seek comment on 

whether and, if so, how we could phase 

in any of these proposals on a trial basis 

to examine the distributional impacts of 

such rule changes. In what funding year 

should any of these options be 

implemented? Commenters should 

provide specific proposals on the timing 

and staging of specific reforms. We 

further describe these options below 

and seek comment. 

46. We believe that these options for 

reforming how we fund internal 

connections could have several 

advantages over our current rules. First, 

the current discount matrix and rules of 

priority have the effect of providing 

funding to a limited number of school 

districts that have the very highest 

percentage of students eligible for free 

or reduced price school lunch, while 

providing nothing to other districts that 

are significantly impoverished. Second, 

many stakeholders have expressed a 

desire for a more predictable funding 

mechanism whereby schools and 

libraries would know on a yearly basis 

how much funding they will receive for 

internal connections. This predictability 

is essential so that schools and libraries 

can better plan for their future 

technological needs. If, for instance, a 

certain amount of total funding would 

be designated for internal connections, 

USAC would be able to issue funding 

commitment decision letters earlier for 

priority two projects, enabling schools 

and libraries to begin projects more 

quickly. 

47. Capped Amount. To create a more 

predictable funding mechanism for 

priority two services, we seek comment 

on establishing a flat per student cap per 

school district for each funding year, 

with the applicant’s discount rate 

applied after the cap is determined. For 

example, if the cap were set at $15 per 

student, a school district that has 

100,000 students would have a cap of 

$1.5 million in internal connections 

funding. If the district were eligible for 

an 75 percent discount (that is, a school 

with 50 percent to 74 percent of its 

students eligible for free or reduced 

price lunch), it would be eligible to 

receive up to $1.125 million for internal 

connections each year. If that same 

school district was eligible for a 30 

percent discount (that is, a school with 

20 percent to 34 percent of its students 

eligible for free or reduced price lunch), 

it could receive up to $450,000. Under 

this option, libraries would receive the 

same discount as the public school 

districts in which they are located. We 

seek comment on this option and any 

alternatives that would increase 

predictability of priority two funding 

while meeting the goal of ensuring 

internal connections funding to more 

schools and libraries. 

48. We also seek comment on whether 

there should be a minimum amount for 

which a school, library, or school 

district is eligible, not tied to the 

number of students. For instance, 

should we establish a baseline amount 

of support that would be provided to an 

eligible facility, and then a variable 

amount of support depending on the 

number of students? If a minimum 

amount is established, what should it 

be? We note that smaller applicants 

might receive less funding because of 

their smaller number of students; 

however, some types of equipment are 

not necessarily usage-sensitive. Should 

there be additional funding provided to 

rural applicants, either by establishing a 

higher dollar amount for rural 

applicants or a higher discount level? 

49. We recognize that schools and 

libraries at the highest discount levels 

could receive significantly less funding 

if we were to establish a capped amount 

than they receive under the current 

rules. However, in the near future, as 

demand for priority one services grows, 

it is likely that, absent changes to the 

current funding structure, there will be 

no funding available for internal 

connections for even the highestdiscount applicants. In addition, those 

same schools and libraries may be able 

to realize savings on their purchase of 

priority one services if they have greater 

freedom to use lower-cost fiber, as 

proposed above, which could free up 

additional money in their budget to pay 

for internal connections. And in any 

event, we are concerned that the same 

few schools continue to receive all of 

the available funding, year after year, 

while many schools that have nearly as 

many students in poverty receive no 

funding for internal connections. 

50. Set Aside for Internal 

Connections. We seek comment on 

revising § 54.507 of our rules to set aside 

a defined amount of funding from the 

$2.25 billion fund for internal 

connections before priority one funding 

is allocated. We seek comment on an 

appropriate amount to set aside for 

internal connections. For instance, 

would $500 million be an appropriate 

amount to set aside for internal 

connections? Depending on the amount 

set aside, it is possible that all of the 

requests for priority one would not be 

funded. If so, our rules of priority would 

operate to fund requests from the 

highest-discount schools first, and it is 

possible that recipients with the lowest 

discounts (namely, schools that serve 

very few students eligible for free or 

reduced price school lunch) would no 

longer receive any funding from the Erate program. We seek comment on 

whether we should change our rules of 

priority to effectuate an alternative 

result. 

51. Threshold for Priority Two 

Funding. We seek comment on the 

appropriate threshold for any revised 

methodology for internal connections 

funding. Today, the money effectively is 

channeled to school districts that have 

75 percent or more students eligible for 

free or reduced-price school lunch. We 

seek comment on how to focus funding 

on improving internal connections to a 

broader group of needy schools, school 

districts, and libraries. For instance, 

should we adopt rule changes that 

would enable school districts where 35 

percent or 50 percent of students are 

eligible for NSLP to obtain predictable 

funding for internal connections. We 

encourage parties to submit factual 

analyses of the distributional impact of 

alternative thresholds into the record. 

52. Revised Discount Matrix. Many 

commenters have suggested that the 

Commission should revise the priority 

two discount matrix to enable more 

school districts to obtain funding for 

internal connections. SECA and other 

commenters argue that altering the 

discount rate is an effective way to 

increase the availability of priority two 

funds and more evenly distribute 

priority funds to a greater number of 

entities. Additionally, we note that 

other governmental programs that award 

funding for similar purposes require 

recipients to pay 15 or 20 percent of the 

total cost. An approach that strengthens 

incentives for applicants to find the 

most cost-effective services to meet their 

needs is an important tool to maximize 

the public benefits of a finite amount of 

governmental funding, and could 


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further our efforts to curb waste, fraud, 

and abuse by applicants and service 

providers. We seek comment on a 

revised discount matrix for internal 

connections and ask whether we should 

adjust the current level of additional 

discount provided to rural schools and 

libraries. Commenters should set forth 

with specificity an alternative proposed 

discount matrix. 

53. Eliminate the 2-in-5 Rule. We seek 

comment, in conjunction with the 

options detailed above, on eliminating 

§ 54.506(c), the 2-in-5 rule, which limits 

an eligible entity’s receipt of discounts 

on internal connections to twice every 

five funding years. In the Schools and 

Libraries Third Report and Order, the 

Commission sought to make funds for 

internal connections available to more 

eligible schools and libraries on a 

regular basis by limiting the frequency 

with which applicants may receive 

priority two discounts. Further, the 

Commission concluded that, by 

precluding a particular entity from 

receiving support for priority two 

discounts every year, the rule would 

strengthen incentives for applicants not 

to waste program resources by replacing 

or upgrading equipment on an annual 

basis but rather to fully use equipment 

purchased with universal service funds. 

54. However, the 2-in-5 rule has not 

served its intended purposes. Today, 

funding for maintenance represents 

roughly 15 percent of all priority two 

funding, with the very largest school 

districts receiving most of that funding. 

The rule has not increased the 

availability of priority two funding to 

more eligible schools and libraries on a 

regular basis. In addition, because the 

availability of funding is dependent, in 

part, on the amount of funding sought 

by higher-discount eligible entities, the 

2-in-5 rule actually has increased the 

unpredictability of priority two funding. 

Additionally, commenters argue that, 

instead of increasing the incentive for 

applicants to not waste program 

resources, the rule has encouraged 

schools to undertake large projects that 

might not be necessary and 

discriminates against schools that 

undertake smaller, more long-term 

projects. We seek comment on any 

potential implications the elimination of 

the 2-in-5 rule may have upon current 

recipients of funding for maintenance 

and how to address such implications. 

55. Application by School District. We 

seek comment on requiring schools and 

libraries to submit applications for 

internal connections by school district, 

not by individual school. Schools that 

operate independently from a school 

district, however, such as private 

schools and some charter schools, 

should still apply for discounts 

individually. We propose, therefore, 

that any school that is part of an 

organized school district must apply as 

part of that district, with libraries 

receiving the same discount as the 

public school districts in which they are 

located. Requiring schools to apply by 

school district could help streamline the 

process and will simplify the discount 

calculation for schools. Additionally, it 

would ensure that libraries receive 

funding for internal connections and at 

the same discount level as schools 

located within their school district. 

56. Eliminate Funding for Basic 

Maintenance for Internal Connections. 

We seek comment on options for 

modifying the funding of basic 

maintenance of internal connections. 

Currently, the ESL lists basic 

maintenance as a supported priority two 

service. In the Universal Service First 

Report and Order, the Commission 

determined that support for internal 

connections includes ‘‘basic 

maintenance services’’ that are 

‘‘necessary to the operation of the 

internal connections network.’’ 

Subsequently, in the Schools and 

Libraries Third Report and Order, the 

Commission provided further detail on 

which maintenance services are 

‘‘necessary’’ under the terms of the 

Universal Service First Report and 

Order. The Commission found that basic 

maintenance services are eligible for 

universal service support as an internal 

connections service if, but for the 

maintenance at issue, the internal 

connection would not function and 

serve its intended purpose with the 

degree of reliability ordinarily provided 

in the marketplace to entities receiving 

such services. At that time, the 

Commission sought to identify 

maintenance as a separate category for 

priority two funding in part to provide 

greater transparency regarding the use of 

internal connections funding. It appears, 

however, some recipients of funding for 

maintenance may be using such funding 

to pay for ongoing information 

technology support functions, which 

siphons funding away from other 

critical uses. 

57. One option would be to eliminate 

E-rate funding for basic maintenance of 

internal connections. We seek comment 

on whether funding of basic 

maintenance for internal connections 

should remain on the ESL. First, given 

that funding for the E-rate program is 

finite and there is a consistent level of 

unmet demand, we have concerns that 

our current rules inadvertently result in 

basic maintenance effectively taking 

precedence over funding the internal 

connections that are necessary to deliver 

higher bandwidth applications like high 

definition video streaming to schools 

and libraries. We believe it may be 

preferable to spread funding more 

broadly across needy schools and 

libraries for internal connections than to 

provide funding for maintenance of 

networks for a limited number of school 

districts. Second, it may be the case that 

funding for basic maintenance is used to 

pay for ‘‘warranties’’ on equipment or to 

support significant information 

technology departments. Given the 

limited funding available for internal 

connections, we question whether the Erate should be supporting ongoing tech 

support to address potential problems 

when there is such unmet demand for 

actual equipment that will enable 

services definitely to be used. We 

recognize that maintenance in some 

form is important for services to be 

available, but are concerned that our 

current rules fail to impose appropriate 

limitations. Third, under our current 

allocation method, the same schools and 

school districts receive large amounts of 

funding year after year for basic 

maintenance, while others receive 

nothing. In order to achieve our 

inclusion objectives, the limited funding 

available could be better utilized to pay 

for facilities for schools and libraries 

serving high poverty populations that 

have never received funding for internal 

connections. At least until priority two 

funding has been distributed more 

broadly, we ask whether the funding 

should be used to support initial 

installation of internal connections 

rather than pay for maintenance for 

entities that have already had their 

internal connections funded through the 

E-rate program. Finally, eliminating 

funding for basic maintenance could 

provide additional incentives for 

schools and libraries to evaluate 

carefully the reliability of different 

solutions from various providers and 

think seriously about maintenance costs 

when constructing their internal 

networks. 

58. Another option would be to cap 

basic maintenance payments and 

reimburse requests that are based on 

actual repair and maintenance costs 

only. Specifically, consistent with the 

internal connections approach, we seek 

comment on establishing a per student 

cap per school district for each funding 

year, with the applicant’s discount rate 

applied after the cap is determined. For 

example, if the per student cap were $2, 

a school district with 100,000 students 

would have a total of up to $200,000 in 

E-rate funding for basic maintenance for 

internal connections. If the district were 

eligible for a 75 percent discount, it 


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could be eligible to receive up to 

$150,000 for maintenance each year. 

Under this option, libraries would be 

eligible for up to the same discount as 

the public school district in which they 

are located. We believe that this 

approach would help to ensure that 

funding for basic maintenance for 

internal connections is allocated more 

equitably among the schools and 

libraries that most need funding support 

for maintenance. To address the 

potential waste that occurs by funding 

maintenance based on estimated costs, 

we also propose to limit funding for 

maintenance to actual expenses for 

repair and maintenance. In order to 

make this change, we propose to change 

E-rate program rules to allow applicants 

to seek E-rate funds for basic 

maintenance for internal connections in 

the funding year following the funding 

year in which they sought and received 

repairs on internal connections. We seek 

comment, therefore, on revising 

§ 54.507(d) of the Commission’s rules to 

allow applicants to request funding for 

basic maintenance that was received in 

the prior funding year. 

59. For either option (eliminating 

funding for basic maintenance of 

internal connections or capping such 

funding), we seek comment on whether 

such a change should be phased in over 

some number of funding years, and, if 

so, how. In either case, the requirement 

that applicants seek funding for only 

basic maintenance would remain 

unchanged. Specifically, we would 

continue to find ineligible any services 

that include maintenance of equipment 

that is not supported by E-rate or that 

enhances the utility of equipment 

beyond the transport of information, as 

well as diagnostic services in excess of 

those necessary to maintain the 

equipment’s ability to transport 

information. Additionally, we seek 

comment on any other methods we 

could use to ensure support for basic 

maintenance is distributed equitably 

and in a way that is based on actual 

repair costs. For example, one 

alternative method could be that 

funding for basic maintenance could be 

distributed in the next funding year 

after the costs were incurred based on 

the actual amount for labor and parts or 

equipment. 

2. Indexing the Annual Funding Cap to 

Inflation 

60. We propose to amend § 54.507 of 

our rules to index the E-rate program 

funding cap to the rate of inflation, on 

a prospective basis, so that the program 

maintains its current purchasing power 

in 2010 dollars. Many commenters 

responding to the NBP Public Notice 

#15 support adjusting the annual E-rate 

funding cap to take into account 

inflation, suggesting that increasing the 

cap will allow schools and libraries to 

continue to benefit from upgraded 

connections that deliver faster and more 

efficient broadband service as demand 

for greater capacity increases. In order to 

maintain predictability, however, we 

propose that during periods of deflation, 

the funding cap will remain at the level 

from the previous funding year. We seek 

comment on these proposals. 

61. We propose using the gross 

domestic product chain-type price 

index (GDP–CPI), which is released 

quarterly. This is the same index used 

by the Commission to inflation-adjust 

revenue thresholds used for classifying 

carrier categories for various accounting 

and reporting purposes. It also is used 

to calculate adjustments to the annual 

funding cap for the high cost loop 

support mechanism, which subsidizes 

service provided by rural telephone 

companies. The Commission has noted 

that the Bureau of Economic Analysis of 

the Department of Commerce, which 

produces the index, considers the GDP– 

CPI a more accurate measure of price 

changes than other indices for the 

Commission’s purposes. The GDP–CPI 

is used by the Commission since it 

reflects price changes in all sectors of 

the economy. While inflation is 

currently very low, implementation of 

such a proposal could result in the Erate cap growing from $2.25 billion to 

approximately $2.55 billion over the 

next five years if inflation were to occur 

similar to the historical rate for the last 

five years. We seek comment on this 

proposal and on whether there are better 

ways to index the E-rate funding cap to 

inflation. 

V. Creating a Process for Disposal of 

Obsolete Equipment 

62. We propose to amend § 54.513 of 

our rules establishing how participants 

in the E-rate program may dispose of 

obsolete equipment purchased with Erate discounts. We also propose revising 

an FCC form to report such equipment 

disposals to USAC. The changes we 

propose seek to balance the competing 

concerns of providing schools and 

libraries the flexibility to dispose of 

obsolete equipment and the need to 

guard against waste, fraud, and abuse 

within the E-rate program. We seek 

comment on our proposed changes 

provided below. 

63. Process for Disposal of Obsolete 

Equipment. We seek comment on 

permitting the disposal of E-rate 

equipment for payment or other 

consideration, subject to four of E-Rate 

Central’s proposed five principles. We 

propose to revise § 54.513 of our rules 

to provide for the disposal of equipment 

for payment or other consideration 

where such equipment has exhausted its 

useful life. We clarify that, to the extent 

a school or library chooses to dispose of 

equipment purchased using E-rate funds 

and does not receive monetary payment 

or other consideration, it may do so 

without complying with these proposed 

rules. As BellSouth suggests, the 

Commission encourages schools and 

libraries to recycle the equipment when 

feasible. We do not believe, however, 

that it is necessary to adopt a 

requirement that applicants return any 

non-de minimis value, as discussed 

below. Specifically, we believe that the 

Act’s prohibition on the sale, resale, or 

transfer of telecommunications services 

and network capacity was intended to 

prevent applicants from profiting from 

supported services during the time that 

the applicant is supposed to be using 

them. We do not believe this prohibition 

extends to when the applicant is no 

longer utilizing equipment purchased 

with the assistance of E-rate funds 

because the equipment is past its useful 

life. Thus, we propose to allow schools 

and libraries to dispose of equipment for 

payment or other consideration under 

the following conditions: (1) The 

equipment has exhausted its useful life 

but no sooner than five years after the 

equipment is installed; (2) the 

equipment is formally declared to be 

surplus by the school board, 

information technology officer, or other 

authorized body or individual; (3) the 

school or library notifies USAC within 

90 days of disposal and keeps a record 

of the disposal for a period of five years 

following the disposal; and (4) the 

disposal process fully complies with 

State and local laws, where applicable. 

We discuss these conditions separately 

below. 

64. First, we propose that schools and 

libraries be permitted to sell or trade in 

equipment after the equipment has 

exhausted its useful life. We agree with 

commenters that there should be a 

rebuttable presumption of no less than 

five years from the installation date for 

the useful life of any equipment 

purchased using E-rate funds. 

Commenters note that the absence of 

rules specifically addressing the 

disposal of equipment purchased under 

the E-rate program when it has reached 

the end of its useful life has led some 

schools and libraries to place obsolete, 

out-of-service equipment in school 

basements or other on-campus storage 

locations. Such indefinite storage 

imposes additional needless costs on 

schools and libraries. Additionally, our 


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silence may have encouraged some 

schools or libraries to simply throw 

away unused equipment, even though 

that same equipment could be put to use 

by others. We seek comment on 

permitting the disposal of E-rate 

equipment for payment or other 

consideration, subject to certain 

conditions. Specifically, we seek 

comment on whether five years is a 

reasonable minimum time period for 

retaining equipment components 

purchased using an E-rate discount. 

Further, this proposal would count five 

years from the date of installation. We 

seek comment on whether that is the 

appropriate date from which to count 

five years or whether some other date, 

such as purchase date, is more 

appropriate. We note that our proposal 

would not require schools and libraries 

to continue using the equipment for five 

years, but they could not resell or trade 

it in before five years had passed. 

65. Second, we seek comment on the 

proposal suggested by commenters to 

require applicants to formally declare 

that the equipment is surplus. We 

propose to require that the school board 

or other authorized body make the 

formal declaration. We note that E-rate 

Central proposed that an internal 

auditor may make the formal 

declaration. While we do not believe 

that is typically the function of an 

internal auditor, we do not preclude 

schools or libraries from having such a 

person make the declaration at their 

discretion. We believe this formal 

process will prevent applicants from 

disposing of equipment prematurely. 

We also propose that the formal 

declaration be subject to the 

Commission’s document retention rules, 

as detailed in § 54.516. 

66. Third, we propose that schools 

and libraries notify USAC of the resale 

or trade of equipment funded via the Erate program within 90 days of its 

disposal. We also propose that 

applicants be required to keep a record 

of the disposal for a period of five years 

following the disposal. To implement 

this requirement, we propose to revise 

the FCC Form 500 (Adjustment to 

Funding Commitment and Modification 

to Receipt of Service Confirmation), as 

discussed below, to require applicants 

to submit certain information to USAC 

documenting the resale or trade of their 

equipment. We seek comment on these 

proposals. 

67. In setting forth these proposed 

conditions, we do not propose to require 

the return of any funds that are related 

to the resale or trade of E-rate 

equipment. Thus, we do not propose the 

adoption of E-Rate Central’s suggestion 

that program participants must refund 

any non-de minimis consideration 

received due to the disposal of any 

obsolete equipment to the E-rate 

program. The value of equipment after 

five years of purchase in all likelihood 

would be so small that it would not 

justify requiring schools to return a 

portion of the proceeds to USAC. As 

SECA notes, the administrative and 

financial burden on USAC and 

applicants of documenting and 

processing any such refunds would far 

outweigh the value of the funds being 

returned since such refunds would be 

minimal. Further, requiring applicants 

to return any funds related to the 

disposal of E-rate equipment could deter 

them from disposing unneeded 

equipment. We seek comment on these 

proposals. 

68. Revised FCC Form 500. Currently, 

to help the Commission track the use of 

equipment components purchased with 

E-rate discounts, schools and libraries 

are required to ‘‘maintain asset and 

inventory records of equipment 

purchased as components of supported 

internal connections services sufficient 

to verify the actual location of such 

equipment for a period of five years 

after purchase.’’ Similarly, if a school or 

library closes and transfers services or 

equipment components thereof to 

another school or library, the transferor 

‘‘must notify [USAC] of the transfer, and 

both the transferor and recipient must 

maintain detailed records documenting 

the transfer and the reason for the 

transfer for a period of five years.’’ 

Consistent with the Commission’s 

recordkeeping and reporting 

requirements, we propose to revise the 

FCC Form 500 to require schools and 

libraries to report to USAC the disposal 

of equipment purchased with an E-rate 

discount for payment or other 

consideration. Specifically, the revised 

FCC Form 500 would require a school 

or library disposing of equipment to 

report the following information to 

USAC: 

(A) The applicant’s name, entity 

number, address, and telephone 

number; 

(B) The name, address, telephone 

number, and e-mail address of the 

applicant’s authorized point of contact; 

(C) The date of the disposal of 

obsolete equipment; 

(D) The name of each piece of 

equipment disposed of, including the 

date of purchase and the funding 

request number(s) associated with the 

disposed equipment; 

(E) Any payment, trade-in value, or 

other consideration received for such 

disposal of equipment; 

(F) The name of the entity that paid 

or otherwise gave the applicant valuable 

consideration for the equipment; 

(G) Formal declaration by the school 

board or other authorized body or 

individual that the equipment subject to 

disposal is surplus; and 

(H) Certification that the information 

provided on the form is true and 

accurate to the best of the applicant’s 

knowledge, evidenced by the signature 

of someone authorized to so certify by 

the applicant and the date. 

69. Requiring schools and libraries to 

submit this information as part of the 

FCC Form 500 could facilitate our 

ongoing efforts to mitigate waste, fraud 

and abuse. Collecting this information 

would allow USAC and the Commission 

to better assess how long program 

participants are using equipment 

purchased with E-rate discounts prior to 

disposal of any obsolete equipment, and 

to track what E-rate program 

participants do with equipment they no 

longer use. Moreover, such revision 

would require limited information, all 

of which is easy to obtain whenever a 

school or library seeks to dispose of 

obsolete equipment. We seek comment 

on revising the FCC Form 500 and ways 

in which to further minimize any 

potential burdens on applicants while 

guarding against waste, fraud, and abuse 

in the E-rate program. We also seek 

comment on the information that we 

propose to obtain from applicants and 

whether less or more information would 

be appropriate. 

VI. Procedural Matters 

A. Initial Regulatory Flexibility Analysis 

70. As required by the Regulatory 

Flexibility Act (‘‘RFA’’), see 5 U.S.C. 

603, the Commission prepared this 

Initial Regulatory Flexibility Analysis 

(‘‘IRFA’’) of the possible significant 

economic impact on small entities by 

the policies and rules proposed in this 

Notice of Proposed Rulemaking 

(NPRM). Written public comments are 

requested on this IRFA. Comments must 

be identified as responses to the IRFA 

and must be filed on or before the dates 

indicated on the first page of this 

NPRM. The Commission will send a 

copy of the NPRM, including the IRFA, 

to the Chief Counsel for Advocacy of the 

Small Business Administration. In 

addition, the Notice and IRFA (or 

summaries thereof) will be published in 

the Federal Register. 

1. Need for, and Objectives of, the 

Proposed Rules 

71. The Commission is required by 

section 254 of the Communications Act 

of 1934, as amended, to promulgate 


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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. 

72. This NPRM is one in a series of 

rulemaking proceedings designed to 

implement the National Broadband 

Plan’s (NBP) vision of improving and 

modernizing the universal service 

programs. The Joint Statement on 

Broadband, released with the National 

Broadband Plan, identifies 

comprehensive universal service fund 

(USF) reform as an essential goal for the 

Federal Communications Commission 

(Commission). In meeting the objectives 

set forth in these documents, this NPRM 

seeks comment on reforms to focus 

spending on more productive uses that 

will better serve the current educational 

needs of schools and libraries, while 

maintaining the overall size of the E-rate 

program in relation to the rate of 

inflation. This NPRM also seeks 

comment on potential reforms that 

would eliminate rules that have not 

effectively served their intended 

purpose, while continuing to protect 

against waste, fraud, and abuse. 

2. Legal Basis 

73. The legal basis for the NPRM is 

contained in sections 1 through 4, 201– 

205, 254, 303(r), and 403 of the 

Communications Act of 1934, as 

amended by the Telecommunications 

Act of 1996, 47 U.S.C. 151 through 154, 

201 through 205, 254, 303(r), and 403. 

3. Description and Estimate of the 

Number of Small Entities to Which 

Rules Will Apply 

74. 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 

SBA. Nationwide, there are a total of 

approximately 29.6 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.’’ 

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. 

75. Small entities potentially affected 

by the proposals herein include eligible 

schools and libraries and the eligible 

service providers offering them 

discounted services, including 

telecommunications service providers, 

Internet Service Providers (ISPs), and 

vendors of the services and equipment 

used for internal connections. 

a. Schools 

76. As noted, ‘‘small entity’’ includes 

non-profit and small governmental 

entities. Under the schools and libraries 

universal service support mechanism, 

which provides support for elementary 

and secondary schools, 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 schools and libraries with 

endowments in excess of $50,000,000, 

are not eligible to receive discounts 

under the program. Certain other 

restrictive definitions apply as well. The 

SBA has also defined for-profit, 

elementary and secondary schools 

having $7 million or less in annual 

receipts as small entities. In funding 

year 2007, approximately 105,500 

schools received funding under the 

schools and libraries universal service 

mechanism. Although we are unable to 

estimate with precision the number of 

these additional entities that would 

qualify as small entities under SBA’s 

size standard, we estimate that fewer 

than 105,500 such schools might be 

affected annually by our action, under 

current operation of the program. 

b. Telecommunications Service 

Providers 

77. Incumbent Local Exchange 

Carriers (LECs). Neither the Commission 

nor the SBA has developed a size 

standard for small incumbent local 

exchange services. The closest size 

standard under SBA rules is for Wired 

Telecommunications Carriers. Under 

that size standard, such a business is 

small if it has 1,500 or fewer employees. 

According to Commission data, 1,311 

incumbent carriers reported that they 

were engaged in the provision of local 

exchange services. Of these 1,311 

carriers, an estimated 1,024 have 1,500 

or fewer employees and 287 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. 

78. 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 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. 

79. Interexchange Carriers. Neither 

the Commission nor the SBA has 

developed a definition of small entities 

specifically applicable to providers of 

interexchange services (IXCs). The 

closest applicable definition under the 

SBA rules is for wired 

telecommunications carriers. 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 2008 Trends Report, 300 

companies reported that they were 

engaged in the provision of 

interexchange services. Of these 300 

IXCs, an estimated 268 have 1,500 or 

fewer employees and 32 have more than 

1,500 employees. Consequently, the 

Commission estimates that most 

providers of interexchange services are 

small businesses. 


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80. Competitive Access Providers. 

Neither the Commission nor the SBA 

has developed a definition of small 

entities specifically applicable to 

competitive access services providers 

(CAPs). The closest applicable 

definition under the SBA rules is for 

wired telecommunications carriers. This 

provides that a wired 

telecommunications carrier is a small 

entity if it employs no more than 1,500 

employees. According to the 2008 

Trends Report, 1,005 CAPs and 

competitive local exchange carriers 

(competitive LECs) reported that they 

were engaged in the provision of 

competitive local exchange services. Of 

these 1,005 CAPs and competitive LECs, 

an estimated 918 have 1,500 or fewer 

employees and 87 have more than 1,500 

employees. Consequently, the 

Commission estimates that most 

providers of competitive exchange 

services are small businesses. 

81. 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. 

82. Wireless Telephony. 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 2008 Trends Report, 

434 carriers reported that they were 

engaged in wireless telephony. Of these, 

an estimated 222 have 1,500 or fewer 

employees and 212 have more than 

1,500 employees. We have estimated 

that 222 of these are small under the 

SBA small business size standard. 

83. 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. 

84. In addition, in the Paging Second 

Report and Order, 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. 

85. Currently, there are approximately 

74,000 Common Carrier Paging licenses. 

According to the most recent Trends in 

Telephone Service, 281 carriers reported 

that they were engaged in the provision 

of ‘‘paging and messaging’’ services. Of 

these, an estimated 279 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. 

c. Internet Service Providers 

86. 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. 

d. Vendors of Internal Connections 

87. 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 7 had 

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


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under this size standard, the majority of 

firms can be considered small. 

88. 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. 

89. 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: all 

such firms 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. 

4. Description of Projected Reporting, 

Recordkeeping, and Other Compliance 

Requirements 

90. The specific proposals under 

consideration in the NPRM would not, 

if adopted, result in additional 

recordkeeping requirements for small 

businesses. 

5. Steps Taken To Minimize Significant 

Economic Impact on Small Entities, and 

Significant Alternatives Considered 

91. The RFA requires an agency to 

describe any significant alternatives that 

it has considered in reaching its 

proposed approach, which may include 

the following four alternatives (among 

others): (1) The establishment of 

differing compliance and reporting 

requirements or timetables that take into 

account the resources available to small 

entities; (2) the clarification, 

consolidation, or simplification of 

compliance or reporting requirements 

under the rule for small entities; (3) the 

use of performance, rather than design, 

standards; and (4) an exemption from 

coverage of the rule, or part thereof, for 

small entities. 

92. In this NPRM, we seek comment 

on a package of potential reforms to the 

E-rate program that can be implemented 

in funding year 2011 (July 1, 2011–June 

30, 2012). We seek to improve and 

modernize the program by streamlining 

the E-rate application process, providing 

greater flexibility to choose the most 

cost-effective and educationally useful 

broadband services, and expanding the 

reach of broadband to the classroom. 

More particularly, these proposed 

reforms include: improving and 

simplifying the current E-rate 

application process; codifying the 

requirement that competitive bidding 

processes be ‘‘fair and open’’; 

simplifying the way schools calculate 

their discounts; conforming the E-rate 

definition of ‘‘rural’’ to the Department 

of Education’s definition; allowing 

greater flexibility in the use of wireless 

Internet access for educational purposes 

away from school grounds; allowing 

recipients the option of leasing low-cost 

fiber; expanding the reach of broadband 

in residential schools that serve 

populations facing unique challenges; 

creating a predictable funding 

mechanism that would provide a per 

student amount for internal connections 

each year, while eliminating support for 

basic maintenance of internal 

connections; indexing the current $2.25 

billion cap on E-rate disbursements to 

inflation; and creating a process for 

schools and libraries to dispose of 

obsolete equipment. 

93. As note, we believe the proposals 

and options being put out for comment 

will not have a significant economic 

impact on small entities under the Erate program. Indeed the proposals and 

options will benefit small entities by 

simplifying the application process, 

eliminating burdensome restrictions on 

the purchase of certain broadband 

technologies, creating a more stable and 

predictable funding pool, and allowing 

more applicants to receive program 

funding, while ensuring that the amount 

of funding available keeps pace with the 

rate of inflation. Because this NPRM 

does not propose additional regulation 

for service providers and equipment 

vendors, these small entities will 

experience no significant additional 

burden. We nonetheless invite 

commenters, in responding to the 

questions posed and tentative 

conclusions in the NPRM, to discuss 

any economic impact that such changes 

may have on small entities, and possible 

alternatives. 

6. Federal Rules That May Duplicate, 

Overlap, or Conflict With the Proposed 

Rules 

94. None. 

B. Paperwork Reduction Act Analysis 

95. This document contains proposed 

modified information collection 

requirements. The Commission, as part 

of its continuing effort to reduce 

paperwork burdens, invites the general 

public and the Office of Management 

and Budget (OMB) to comment on the 

information collection requirements 

contained in this document, as required 

by the Paperwork Reduction Act of 

1995, Public Law 104–13. In addition, 

pursuant to the Small Business 

Paperwork Relief Act of 2002, Public 

Law 107–198, see 44 U.S.C. 3506(c)(4), 

we seek specific comment on how we 

might further reduce the ‘‘information 

collection burden for small business 

concerns with fewer than 25 

employees.’’ 

C. Ex Parte Presentations 

96. These matters shall be treated as 

a ‘‘permit-but-disclose’’ proceeding in 

accordance with the Commission’s ex 

parte rules. Persons making oral ex 

parte presentations are reminded that 

memoranda summarizing the 

presentations must contain summaries 

of the substance of the presentations 

and not merely a listing of the subjects 

discussed. More than a one or two 

sentence description of the views and 

arguments presented is generally 

required. Other requirements pertaining 

to oral and written presentations are set 

forth in § 1.1206(b) of the Commission’s 

rules. 

List of Subjects in 47 CFR Part 54 

Communications common carriers, 

Health facilities, Infants and children, 

Libraries, Reporting and recordkeeping 

requirements, Schools, 

Telecommunications, Telephone. 

Federal Communications Commission. 

Marlene H. Dortch, 

Secretary. 

Proposed Rules 

For the reasons discussed in the 

preamble, the Federal Communications 


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Commission proposes to amend 47 CFR 

part 54 as follows: 

PART 54—UNIVERSAL SERVICE 

1. The authority citation continues to 

read as follows: 

Authority: 47 U.S.C. 151, 154(i), 201, 205, 

214, and 254 unless otherwise noted. 

2. Section 54.5 is amended by revising 

the definition for ‘‘Rural area’’ to read as 

follows: 

§ 54.5 Terms and definitions. 

* * * * * 

Rural area. For purposes of the rural 

health care universal service support 

mechanism, a ‘‘rural area’’ is an area that 

is entirely outside of a Core Based 

Statistical Area; is within a Core Based 

Statistical Area that does not have any 

Urban Area with a population of 25,000 

or greater; or is in a Core Based 

Statistical Area that contains an Urban 

Area with a population of 25,000 or 

greater, but is within a specific census 

tract that itself does not contain any part 

of a Place or Urban Area with a 

population of greater than 25,000. ‘‘Core 

Based Statistical Area’’ and ‘‘Urban 

Area’’ are as defined by the Census 

Bureau and ‘‘Place’’ is as identified by 

the Census Bureau. 

* * * * * 

3. Section 54.500 is revised to read as 

follows: 

§ 54.500 Terms and definitions. 

(a) Applicant. For purposes of this 

subpart, an ‘‘applicant’’ is an eligible 

school or library, or a consortium that 

includes an eligible school or library. 

(b) Billed entity. A ‘‘billed entity’’ is 

the entity that remits payment to service 

providers for services rendered to 

eligible schools and libraries. 

(c) Educational purposes. For 

purposes of this subpart, activities that 

are integral, immediate, and proximate 

to the education of students, or in the 

case of libraries, integral, immediate and 

proximate to the provision of library 

services to library patrons, qualify as 

‘‘educational purposes.’’ Activities that 

occur on library or school property are 

presumed to be integral, immediate, and 

proximate to the education of students 

or the provision of library services to 

library patrons. 

(d) Elementary school. An 

‘‘elementary school’’ is a non-profit 

institutional day or residential school, 

including a public elementary charter 

school, that provides elementary 

education, as determined under State 

law. 

(e) Internal connections. For purposes 

of this subpart, a service is eligible for 

support as a component of an 

institution’s ‘‘internal connections’’ if 

such service is necessary to transport 

information within one or more 

instructional buildings of a single 

school campus or within one or more 

non-administrative buildings that 

comprise a single library branch. 

(f) Library. A ‘‘library’’ includes: 

(1) A public library; 

(2) A public elementary school or 

secondary school library; 

(3) An academic library; 

(4) A research library, which for the 

purpose of this section means a library 

that: 

(i) Makes publicly available library 

services and materials suitable for 

scholarly research and not otherwise 

available to the public; and 

(ii) Is not an integral part of an 

institution of higher education; and 

(5) A private library, but only if the 

State in which such private library is 

located determines that the library 

should be considered a library for the 

purposes of this definition. 

(g) Library consortium. A ‘‘library 

consortium’’ is any local, statewide, 

regional, or interstate cooperative 

association of libraries that provides for 

the systematic and effective 

coordination of the resources of schools, 

public, academic, and special libraries 

and information centers, for improving 

services to the clientele of such 

libraries. For the purposes of these 

rules, references to library will also refer 

to library consortium. 

(h) Lowest corresponding price. 

‘‘Lowest corresponding price’’ is the 

lowest price that a service provider 

charges to non-residential customers 

who are similarly situated to a 

particular school, library, or library 

consortium for similar services. 

(i) Master contract. A ‘‘master 

contract’’ is a contract negotiated with a 

service provider by a third party, the 

terms and conditions of which are then 

made available to an eligible school, 

library, rural health care provider, or 

consortium that purchases directly from 

the service provider. 

(j) Minor contract modification. A 

‘‘minor contract modification’’ is a 

change to a universal service contract 

that is within the scope of the original 

contract and has no effect or merely a 

negligible effect on price, quantity, 

quality, or delivery under the original 

contract. 

(k) National school lunch program. 

The ‘‘national school lunch program’’ is 

a program administered by the U.S. 

Department of Agriculture and State 

agencies that provides free or reduced 

price lunches to economically 

disadvantaged children. A child whose 

family income is between 130 percent 

and 185 percent of applicable family 

size income levels contained in the 

nonfarm poverty guidelines prescribed 

by the Office of Management and 

Budget is eligible for a reduced price 

lunch. A child whose family income is 

130 percent or less of applicable family 

size income levels contained in the 

nonfarm income poverty guidelines 

prescribed by the Office of Management 

and Budget is eligible for a free lunch. 

(l) Pre-discount price. The ‘‘prediscount price’’ means, in this subpart, 

the price the service provider agrees to 

accept as total payment for its 

telecommunications or information 

services. This amount is the sum of the 

amount the service provider expects to 

receive from the eligible school or 

library and the amount it expects to 

receive as reimbursement from the 

universal service support mechanisms 

for the discounts provided under this 

subpart. 

(m) Priority one services. For purposes 

of this subpart, ‘‘priority one services’’ 

are telecommunications services, 

Internet access, and information 

services as designated annually by the 

Commission in the Eligible Services 

List. 

(n) Priority two services. For purposes 

of this subpart, ‘‘priority two services’’ 

are internal connections, as designated 

annually by the Commission in the 

Eligible Services List. 

(o) Rural area. For purposes of this 

subpart, a ‘‘rural area’’ is within a 

territory whose locale code is classified 

as either rural-fringe, rural-distant, or 

rural-remote by the U.S. Department of 

Education’s National Center for 

Education Statistics. 

(p) Secondary school. A ‘‘secondary 

school’’ is a non-profit institutional day 

or residential school that provides 

secondary education, as determined 

under State law. A secondary school 

does not offer education beyond grade 

12. 

(q) State telecommunications 

network. A ‘‘State telecommunications 

network’’ is a State government entity 

that procures, among other things, 

telecommunications offerings from 

multiple service providers and bundles 

such offerings into packages available to 

schools, libraries, or rural health care 

providers that are eligible for universal 

service support, or a State government 

entity that provides, using its own 

facilities, such telecommunications 

offerings to such schools, libraries, and 

rural health care providers. 

4. Section 54.501 is amended by 

revising paragraph (a) to read as follows: 


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§ 54.501 Eligibility for service provided by 

telecommunications carriers. 

(a) Telecommunications carriers shall 

be eligible for universal service support 

under this subpart for providing 

supported services to eligible 

applicants. 

* * * * * 

5. Revise § 54.502 is to read as 

follows: 

§ 54.502 Supported services. 

(a) Telecommunications services. For 

purposes of this subpart, supported 

telecommunications services provided 

by telecommunications carriers include 

all commercially available 

telecommunications services 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. 

Supported telecommunications services 

are designated annually in the Eligible 

Services List by the Commission in 

accordance with § 54.503 of the 

Commission’s rules. 

(b) Internet access and information 

services. For purposes of this subpart, 

supported Internet access and 

information services include basic 

conduit access to the Internet and the 

services defined in § 54.5 of the 

Commission’s rules as Internet access. 

Supported Internet access and 

information services are designated 

annually by the Commission in the 

Eligible Services List in accordance with 

§ 54.503 of the Commission’s rules. 

(c) Internal connections. For purposes 

of this subpart, supported internal 

connections are defined in § 54.500(e) as 

eligible services. Discounts are not 

available for internal connections in 

non-instructional buildings of a school 

or school district, or in administrative 

buildings of a library, to the extent that 

a library system has separate 

administrative buildings, unless those 

internal connections are essential for the 

effective transport of information to an 

instructional building of a school or to 

a non-administrative building of a 

library. Internal connections do not 

include connections that extend beyond 

a single school campus or single library 

branch. There is a rebuttable 

presumption that a connection does not 

constitute an internal connection if it 

crosses a public right-of-way. Supported 

internal connections are defined and 

listed in the Eligible Services List as 

updated annually in accordance with 

§ 54.503 of the Commission’s rules. 

(d) Non-telecommunications carriers 

shall be eligible for universal service 

support under this subpart for providing 

the supported services described in 

paragraph (b) and (c) of this section for 

eligible schools, libraries, and consortia 

including those entities. Such services 

provided by non-telecommunications 

carriers shall be subject to all the 

provisions of this subpart, except 

§§ 54.501(a), 54.502(a), and 54.515. 

6. § 54.504 [Amended] 

a. Remove paragraphs (a) and (b); 

b. Redesignate paragraph (c) as 

paragraph (a); 

c. Redesignate paragraphs (d), (e), (f), 

(g), and (h) as paragraphs (b), (c), (d), (e), 

and (f); 

d. Revise newly designated 

paragraphs (a) introductory text, (a)(1) 

introductory text, (a)(1)(iv), (a)(1)(v), 

(a)(1)(vii), (a)(1)(xi), (e) introductory 

text, (e)(1), and (e)(2). 

The revisions read as follows: 

§ 54.504 Requests for services. 

(a) Filing of FCC Form 471. An 

applicant seeking to receive discounts 

for eligible services as designated by the 

Commission on the eligible services list 

under this subpart shall, upon signing a 

contract for eligible services, submit a 

completed FCC Form 471 to the 

Administrator. A commitment of 

support is contingent upon the filing of 

FCC Form 471. 

(1) The FCC Form 471 shall be signed 

by the person authorized to order 

telecommunications services for the 

applicant and shall include that 

person’s certification under oath that: 

* * * * * 

(iv) All of the schools and libraries 

listed on the FCC Form 471 application 

are: 

(A) Covered by an individual or 

higher-level technology plan for using 

the services requested in the application 

that meets the requirements of § 54.508 

of the Commission’s rules; 

(B) Are not covered by a technology 

plan because the application requests 

only eligible priority one services as 

defined in § 54.500(1) and the applicant 

is subject to State or local technology 

planning requirements; or 

(C) Are not covered by a technology 

plan because the application requests 

only basic telecommunications services. 

(v) The applicant’s technology plan(s) 

has/have been/will be approved by a 

State or other authorized body 

consistent with § 54.508 of this subpart. 

* * * * * 

(vii) The services the applicant 

purchases at discounts will be used 

solely for educational purposes and will 

not be sold, resold, or transferred in 

consideration for money or any other 

thing of value. Services that the 

applicant purchases at discounts are not 

deemed sold, resold, or transferred in 

consideration for money or any other 

thing of value if disposed pursuant to 

§ 54.513. 

* * * * * 

(xi) All bids submitted to an applicant 

seeking eligible services were carefully 

considered and the most cost-effective 

bid was selected in accordance with 

§ 54.510 of this subpart, with price 

being the primary factor considered, and 

is the most cost-effective means of 

meeting educational needs and 

technology plan goals. 

* * * * * 

(e) Rate disputes. If they reasonably 

believe that the lowest corresponding 

price is unfairly high or low, applicants 

may have recourse to the Commission, 

regarding interstate rates, and to State 

commissions, regarding intrastate rates. 

(1) Applicants may request lower 

rates if the rate offered by the carrier 

does not represent the lowest 

corresponding price. 

(2) Service providers may request 

higher rates if they can show that the 

lowest corresponding price is not 

compensatory, because the relevant 

applicant is not similarly situated to and 

subscribing to a similar set of services 

to the customer paying the lowest 

corresponding price. 

* * * * * 

7. Section 54.505 is amended by 

revising paragraph (b) introductory text, 

(b)(3)(i), (b)(3)(ii), and (b)(4) to read as 

follows: 

§ 54.505 Discounts. 

* * * * * 

(b) Discount percentages. The 

discounts available to eligible schools 

and libraries shall range from 20 percent 

to 90 percent of the pre-discount price 

for eligible services as designated by the 

Commission. The discounts available to 

a particular applicant shall be 

determined by indicators of poverty and 

high cost. 

* * * * * 

(3) * * * 

(i) Schools and libraries whose locale 

code is city, suburb, town-fringe, or 

rural-fringe, as measured by the U.S. 

Department of Education’s National 

Center for Education Statistics, shall be 

designated as urban. 

(ii) Schools and libraries whose locale 

code is town-distant, town-remote, 

rural-distant, or rural-remote, as 

measured by the U.S. Department of 

Education’s National Center for 

Education Statistics, shall be designated 

as rural. 


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(4) Applicants shall calculate 

discounts on supported services 

described in § 54.502 or other supported 

special services described in § 54.503 by 

first calculating a single discount 

percentage rate for the entire school 

district by dividing the total number of 

students eligible for the National School 

Lunch Program or other alternative 

eligible mechanism by the total number 

of students in the district. Applicants 

shall then compare that single figure 

against the discount matrix to determine 

the school district’s discount for priority 

one and priority two services. All 

schools and libraries within that school 

district shall receive the same discount 

rate. 

* * * * * 

8. Section 54.507 is amended by 

revising paragraphs (a), (c), and (d) 

introductory text, to read as follows: 

§ 54.507 Cap. 

(a) Amount of the annual cap. The 

annual funding cap on Federal universal 

service support for schools and libraries 

shall be $2.25 billion in funding year 

2010. In funding year 2011 and 

subsequent funding years, the funding 

cap shall be automatically increased 

annually to take into account increases 

in the rate of inflation as calculated in 

(a)(1) of this section. All funds collected 

that are unused shall be carried forward 

into subsequent funding years for use in 

the schools and libraries support 

mechanism in accordance with the 

public interest and notwithstanding the 

annual cap. 

(1) Increase Calculation. To measure 

increases in the rate of inflation for 

annual automatic increase purposes, the 

Commission shall use the Gross 

Domestic Product Chain-type Price 

Index (GDP–CPI). To compute the 

annual increase, the average of the 

GDP–CPI for four quarters shall be 

calculated by adding the four GDP–CPI 

quarters and dividing the sum by 4. The 

increase shall be rounded to the nearest 

0.1 percent by rounding 0.05 percent 

and above to the next higher 0.1 percent 

and otherwise rounding to the next 

lower 0.1 percent. This percentage 

increase shall be applied to the amount 

of the annual funding cap from the 

previous funding year. If the yearly 

average GDP–CPI decreases or stays the 

same, the annual funding cap shall 

remain the same as the previous year. 

(2) Public Notice. When the 

calculation of the yearly average GDP– 

CPI is determined, the Commission 

shall publish a Public Notice in the 

Federal Register within 60 days 

announcing any increase of the annual 

funding cap based on the rate of 

inflation. 

* * * * * 

(c) Requests. Funds shall be available 

to fund discounts for applicants on a 

first-come-first-served basis, with 

requests accepted beginning on the first 

of July prior to each funding year. 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 shall implement an 

initial filing period that treats all 

applicants filing within that period as if 

their applications were simultaneously 

received. The initial filing period shall 

begin on the date that the Administrator 

begins to receive applications for 

support, and shall conclude on a date to 

be determined by the Administrator. 

The Administrator may implement such 

additional filing periods as it deems 

necessary. 

(d) Annual filing requirement. 

Applicants shall file new funding 

requests for each funding year no sooner 

than the July 1 prior to the start of that 

funding year. Applicants must use 

recurring services for which discounts 

have been committed by the 

Administrator within the funding year 

for which the discounts were sought. 

The deadline for implementation of 

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: 

* * * * * 

9. Revise § 54.508 to read as follows: 

§ 54.508 Technology plans. 

(a) When plan is necessary and 

content. Applicants seeking only basic 

telecommunications services do not 

need to develop a technology plan when 

requesting schools and libraries 

universal service support. Applicants 

must develop a technology plan when 

requesting schools and libraries 

universal service support; 

(1) For eligible priority one services if 

they are not subject to State or local 

technology planning requirements and; 

(2) For eligible priority two services. 

Applicants must document the date on 

which the technology plan was created. 

The technology plan must comply with 

State and local technology planning 

requirements or meet the standards 

established by the U.S. Department of 

Education’s Enhancing Education 

through Technology, 20 U.S.C. 6764, or 

the U.S. Institute for Museum and 

Library Services. The technology plan 

must include the following elements: 

(b) Approval. Applicants required to 

prepare technology plans under this 

subpart must have such plan(s) 

approved. An applicant that has 

developed a technology plan approved 

by the State, the U.S. Department of 

Education’s Enhancing Education 

through Technology, or the U.S. 

Institute for Museum and Library 

Services has an approved plan for 

purposes of the universal service 

program. Other applicants must obtain 

approval from either the Administrator 

or an independent entity approved by 

the Commission or certified by the 

Administrator as qualified to provide 

such approval. All parties who will 

provide such approval must apply the 

standards set forth in paragraph (a) of 

this section. 

(c) Timing of certification. Applicants 

must certify on the FCC Form 471 that 

they have prepared a technology plan, if 

required. Applicants must also confirm 

in FCC Form 486 that their technology 

plan was approved before they began 

receiving services pursuant to it. 

10. Add § 54.510 to read as follows: 

§ 54.510 Competitive bidding 

requirements. 

(a) All entities participating in the 

schools and libraries universal service 

support program must conduct a fair 

and open competitive bidding process, 

consistent with all requirements set 

forth in this subpart. 

(b) Competitive bid requirements. An 

applicant shall: 

(1) Seek competitive bids for all 

eligible priority one services in 

accordance with State or local 

procurement requirements. If requested 

by the Administrator, each applicant 

bears the burden of demonstrating 

compliance with State or local 

procurement requirements. Unless there 

is an existing contract signed on or 

before July 10, 1997, pursuant to 

§ 54.511(c), an applicant that is not 

subject to State or local procurement 

requirements shall follow the FCC Form 

470 posting requirements as set forth in 

paragraph (c) of this section to meet the 

competitive bidding requirements. 

(2) Seek competitive bids for all 

eligible priority two services pursuant to 

the requirements established in this 

subpart, except as provided in 

§ 54.511(c). These competitive bid 

requirements apply in addition to State 

and local competitive bid requirements 

and are not intended to preempt such 

State and local requirements. 

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

applicant seeking to receive discounts 

for eligible internal connections 

products and services under this 

subpart shall post an FCC Form 470 to 


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initiate the competitive bidding process. 

An eligible applicant that is not subject 

to State or local procurement 

requirements and that is seeking to 

receive for eligible priority one service 

shall post an FCC Form 470 to initiate 

the competitive bidding process. The 

FCC Form 470 and any request for 

proposal cited in the FCC Form 470 

should include: 

(i) A list of specified services for 

which the applicant anticipates they are 

likely to seek discounts; and 

(ii) Sufficient information to enable 

bidders to reasonably determine the 

needs of the applicant. 

(2) The FCC Form 470 shall be signed 

by the person authorized to order 

eligible services for the eligible 

applicant and shall include that 

person’s certification under oath that: 

(i) The schools meet the statutory 

definition of elementary and secondary 

schools found under section 254(h) of 

the Act, as amended in the No Child 

Left Behind Act of 2001, 20 U.S.C. 

7801(18) and (38), do not operate as forprofit businesses, and do not have 

endowments exceeding $50 million; 

(ii) The libraries or library consortia 

eligible for assistance from a State 

library administrative agency under the 

Library Services and Technology Act of 

1996 do not operate as for-profit 

businesses and whose budgets are 

completely separate from any school 

(including, but not limited to, 

elementary and secondary schools, 

colleges, and universities). 

(iii) All of the individual schools, 

libraries, and library consortia receiving 

eligible services are covered by: 

(A) Individual technology plans for 

using the internal connections products 

or services requested in the application 

that meets the requirements of § 54.508; 

or 

(B) No technology plan is required by 

the Commission’s rules. 

(iv) The technology plan(s) has/have 

been/will be approved consistent with 

§ 54.508 or no technology plan is 

required. 

(v) The services the applicant 

purchases at discounts will be used 

solely for educational purposes and will 

not be sold, resold, or transferred in 

consideration for money or any other 

thing of value except as allowed by 

§ 54.513. 

(vi) Support under this support 

mechanism is conditional upon the 

school(s) and library(ies) securing 

access to all of the resources, including 

computers, training, software, 

maintenance, internal connections, and 

electrical connections necessary to use 

the services purchased effectively. 

(vii) All bids submitted for eligible 

priority one and priority two products 

and services will be carefully 

considered, with price being the 

primary factor, and the bid selected will 

be for the most cost-effective offering 

consistent with § 54.511. 

(3) The Administrator shall post each 

FCC Form 470 that it receives from an 

eligible school, library, or consortium 

that includes an eligible school or 

library on its Web site designated for 

this purpose. 

(4) After posting on the 

Administrator’s Web site an applicant’s 

FCC Form 470, the Administrator shall 

send confirmation of the posting to the 

entity requesting service. That entity 

shall then wait at least four weeks from 

the date on which its description of 

services is posted on the 

Administrator’s Web site before making 

commitments with the selected 

providers of services. The confirmation 

from the Administrator shall include the 

date after which the requestor may sign 

a contract with its chosen provider(s). 

11. Section 54.511 is amended by 

revising paragraphs (a), (b), (c)(1) 

introductory text, (c)(1)(ii), (c)(2), (d)(1), 

removing paragraph (c)(3), and adding 

paragraph (e) to read as follows: 

§ 54.511 Ordering services. 

(a) Selecting a provider of eligible 

services. In selecting a provider of 

eligible services, applicants shall 

carefully consider all bids submitted 

and must select the most cost-effective 

service offering. In determining which 

service offering is the most costeffective, entities may consider relevant 

factors other than the pre-discount 

prices submitted by providers but price 

should be the primary factor considered. 

(b) Lowest corresponding price. 

Providers of eligible services shall not 

charge applicants a price above the 

lowest corresponding price for 

supported services, unless the 

Commission, with respect to interstate 

services or the State commission with 

respect to intrastate services, finds that 

the lowest corresponding price is not 

compensatory. Promotional rates offered 

by a service provider for a period of 

more than 90 days must be included 

among the comparable rates upon which 

the lowest corresponding price is 

determined. 

(c) Existing contracts. (1) A signed 

contract for services eligible for 

discounts pursuant to this subpart 

between an eligible school or library as 

defined under § 54.501 or consortium 

that includes an eligible school or 

library and a service provider shall be 

exempt from the requirements set forth 

in § 54.510(b), (c)(3), and (c)(4) as 

follows: 

* * * * * 

(ii) A contract signed after July 10, 

1997, but before the date on which the 

universal service competitive bid 

system described in § 54.510 is 

operational, is exempt from the 

competitive bid requirements only with 

respect to services that are provided 

under such contract between January 1, 

1998 and December 31, 1998. 

(2) For an applicant that takes service 

under or pursuant to a master contract, 

the date of execution of that master 

contract represents the applicable date 

for purposes of determining whether 

and to what extent the applicant is 

exempt from the competitive bid 

requirements. 

(d)(1) The exemption from the 

competitive bid requirements set forth 

in paragraph (c) of this section shall not 

apply to voluntary extensions or 

renewals of existing contracts. 

* * * * * 

(e) Contract requirements. All 

contracts for eligible products and 

services must comply with State and 

local contract laws. Applicants must 

have a contract or legally binding 

agreement in place when filing the FCC 

Form 486. Applicants bear the burden of 

demonstrating compliance with State 

and local contract laws and should be 

prepared to provide the necessary 

documentation of such compliance at 

any time during the application review 

process. 

12. Section 54.513 is amended by 

revising the section heading and adding 

paragraph (d) to read as follows: 

§ 54.513 Resale and transfer of services 

and disposal of surplus equipment. 

* * * * * 

(d) Disposal of Surplus Equipment 

That Has Exhausted Its Useful Life. At 

least five years after its installation date, 

surplus equipment may be resold for 

payment or other consideration if: 

(1) The equipment has exhausted its 

useful life; 

(2) The school board or other 

authorized body formally declares the 

equipment to be surplus; 

(3) The school or library notifies 

USAC within 90 days of reselling or 

trading the equipment using FCC Form 

500 and keeps a record of such disposal 

for a period of five years following the 

disposal; and 

(4) The disposal process substantially 

complies with State and local laws, 

where applicable. 

13. Section 54.519 is amended by 

revising paragraphs (a), (a)(6), and (b) to 

read as follows: 


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§ 54.519 State telecommunications 

networks. 

(a) Telecommunications services. 

State telecommunications networks may 

secure discounts under the universal 

service support mechanisms on 

supported telecommunications services 

(as described in § 54.502) on behalf of 

applicants. Such State 

telecommunications networks shall pass 

on such discounts to applicants and 

shall: 

* * * * * 

(6) Comply with the competitive bid 

requirements set forth in § 54.510(b). 

(b) Internet access and installation 

and maintenance of internal 

connections. State telecommunications 

networks either may secure discounts 

on Internet access and installation and 

maintenance of internal connections in 

the manner described in paragraph (a) of 

this section with regard to 

telecommunications, or shall be eligible, 

consistent with § 54.502(d), to receive 

universal service support for providing 

such services to applicants. 

[FR Doc. 2010–12930 Filed 6–8–10; 8:45 am] 

BILLING CODE 6712–01–P 

DEPARTMENT OF ENERGY 

48 CFR Part 970 

RIN 1991–AB91 

Acquisition Regulation: Agency 

Supplementary Regulations 

AGENCY: Department of Energy. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: The Department of Energy 

(DOE) is proposing to amend the 

Department of Energy Acquisition 

Regulation (DEAR) on DOE Management 

and Operating Contracts to make 

changes to conform to the Federal 

Acquisition Regulation (FAR), remove 

out-of-date coverage, and update 

references. Today’s proposed rule does 

not alter substantive rights or 

obligations under current law. 

DATES: Written comments on the 

proposed rulemaking must be received 

on or before close of business July 9, 

2010. 

ADDRESSES: You may submit comments, 

identified by DEAR: Subchapter I and 

RIN 1991–AB91, by any of the following 

methods: 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• E-mail to: 

DEARrulemaking@hq.doe.gov. Include 

DEAR: Subchapter I and RIN 1991– 

AB91 in the subject line of the message. 

• Mail to: U.S. Department of Energy, 

Office of Procurement and Assistance 

Management, MA–611, 1000 

Independence Avenue, SW., 

Washington, DC 20585. Comments by email are encouraged. 

FOR FURTHER INFORMATION CONTACT: 

Barbara Binney at (202) 287–1340 or by 

e-mail barbara.binney@hq.doe.gov. 

SUPPLEMENTARY INFORMATION: 

I. Background 

II. Section-by-Section Analysis 

III. Procedural Requirements 

A. Review Under Executive Order 12866 

B. Review Under Executive Order 12988 

C. Review Under the Regulatory Flexibility 

Act 

D. Review Under the Paperwork Reduction 

Act 

E. Review Under the National 

Environmental Policy Act 

F. Review Under Executive Order 13132 

G. Review Under the Unfunded Mandates 

Reform Act of 1995 

H. Review Under the Treasury and General 

Government Appropriations Act, 1999 

I. Review Under Executive Order 13211 

J. Review Under the Treasury and General 

Government Appropriations Act, 2001 

K. Approval by the Office of the Secretary 

of Energy 

I. Background 

The Department of Energy 

Acquisition Regulation (DEAR) 

Subchapter I has sections that need to 

be updated to conform with the FAR. 

The objective of this action is to update 

the existing DEAR Subchapter I— 

Agency Supplementary Regulations, 

Part 970—DOE Management and 

Operating Contracts to conform it to the 

FAR. None of these changes are 

substantive or of a nature to cause any 

significant expense for DOE or its 

contractors. 

II. Section-by-Section Analysis 

DOE proposes to amend the DEAR as 

follows: 

1. Section 970.0100 is amended to 

add the references for the Code of 

Federal Regulation (CFR) chapters 1 and 

9. 

2. Section 970.103 is revised to 

remove ‘‘DEAR’’ before 970.0309 and 

remove ‘‘FAR’’ before 3.9 and add in its 

place ‘‘48 CFR subpart’’ in paragraph 

(a)(3). 

3. Section 970.0404–2 is amended to 

update the DOE Order to 475.1, 

Counterintelligence Program. 

4. Section 970.19 is amended to revise 

the subpart heading and the 970.1907 

section heading to conform to the FAR. 

5. Section 970.1907–1 is redesignated 

as 970.1907–4 to conform to the FAR. 

6. Part 970 is revised by adding a new 

subpart ‘‘970.25 Foreign Acquisition’’ 

and section ‘‘970.2570 Contract clauses’’ 

which provides instructions on when to 

insert and how to modify the clauses at 

FAR 52.225–1, Buy American Act— 

Supplies, and FAR 52.225–9, Buy 

American Act—Construction Materials, 

in management and operating contracts. 

7. Section 970.3102–05–6 paragraphs 

(a)(7)(i) and (ii) are amended to clarify 

that the contract will set forth the 

reimbursable costs for compensation for 

personal services, it removes the 

reference to the personnel appendix. 

Paragraph (p)(1) revises the reference to 

the FAR from the ‘‘Federal Acquisition 

Regulation’’ to ‘‘48 CFR.’’ 

8. Subpart 970.34 is amended by 

redesignating 970.3400 as 970.3405 and 

970.3400–1 as 970.3405–2 to conform 

with the FAR. 

9. Subpart 970.37 is revised to add the 

new section ‘‘970.3706 Performancebased acquisition’’ and ‘‘970.3706–1 

General’’ which references 970.1100 for 

policy and guidance on performancebased contracting for management and 

operating (M&O) contracts. 

10. Section 970.3770–1 is amended by 

adding that the use of DOE directives is 

prescribed in 970.0470. 

11. Section 970.5204–1 is amended by 

revising the date of the clause and 

removing ‘‘DOE Order 5670.3, 

Counterintelligence Program’’ in 

paragraph (a) of the clause and adding 

in its place ‘‘DOE Order 475.1, 

Counterintelligence Program, or its 

successor’’. 

12. Section 970.5223–3 is amended by 

revising the date of the provision and 

adding that DOE may grant an extension 

to the notification or implementation 

period if necessary as per 10 CFR 707.5 

(g) in paragraph (b). This change will 

provide the contracting officer the 

authority to extend the time needed for 

the contractor to submit the workplace 

substance abuse program plan. 

13. Section 970.5223–4 is amended by 

revising the date of the clause and 

revising the clause to permit the 

contracting officer to agree to different 

date beyond the 30-day notice by the 

contractor for the submission of the 

workplace substance abuse program 

plan. This change will provide the 

Contracting Officer the authority to 

extend the time needed for the 

Contractor to submit the workplace 

substance abuse program plan. 

14. Section 970.5226–1 is amended by 

revising the punctuation in the last 

sentence of the clause. 

15. Section 970.5232–3 is amended at 

paragraph (h)(1) to add ‘‘or 

subcontractor’s’’ after ‘‘contractor’s’’ and 

to add ‘‘and to interview any current 

employee regarding such transactions’’ 

after ‘‘hereunder.’’ Section 871 of the 

Duncan Hunter National Defense 


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