Schools and Libraries Universal Service Support Mechanism and A National Broadband Plan for Our Future, 75393-75416 [2010-29386]

Agencies

• FEDERAL COMMUNICATIONS COMMISSION

[Federal Register Volume 75, Number 232 (Friday, December 3, 2010)]
[Rules and Regulations]
[Pages 75393-75416]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-29386]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 54

[CC Docket No. 02-6, GN Docket No. 09-51; FCC 10-175]


Schools and Libraries Universal Service Support Mechanism and A 
National Broadband Plan for Our Future

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: In this document, the Federal Communications Commission 
(Commission) takes another step toward realizing the National Broadband 
Plan's vision of improving connectivity to schools and libraries by 
upgrading and modernizing the successful E-rate program. In particular, 
the Commission takes action on upgrades that can be implemented in 
funding year 2011 (July 1, 2011-June 30, 2012); enables schools and 
libraries to better serve students, teachers, librarians, and their 
communities by providing more flexibility to select and make available 
the most cost-effective broadband and other communications services; 
simplifies and streamlines the program; and improves safeguards against 
waste, fraud and abuse. In addition, the Commission adopts the eligible 
services list for funding year 2011.

DATES: Effective January 3, 2011.

FOR FURTHER INFORMATION CONTACT: Regina Brown, Wireline Competition

[[Page 75394]]

Bureau, Telecommunications Access Policy Division, (202) 418-0792 or 
TTY: (202) 418-0484.

SUPPLEMENTARY INFORMATION: This is a synopsis of the Commission's Sixth 
Report and Order in CC Docket No. 02-6, GN Docket No. 09-51, FCC 10-
175, adopted September 23, 2010, and released September 28, 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 https://www.bcpiweb.com. It is also available on the Commission's Web site at 
https://www.fcc.gov. People with Disabilities: To request materials in 
accessible formats for people with disabilities (braille, large print, 
electronic files, audio format), send an e-mail to fcc504@fcc.gov or 
call the Consumer & Governmental Affairs Bureau at 202-418-0530 
(voice), 202-418-0432 (tty).

I. Introduction

    1. In this order, we take another step toward realizing the 
National Broadband Plan's (NBP) vision of improving connectivity to 
schools and libraries by upgrading and modernizing the successful E-
rate program (more formally known as the schools and libraries 
universal service support mechanism). Schools and libraries can serve 
as anchor institutions for their communities, and certain areas may 
depend on these anchor institutions to achieve the NBP's goal of 
affordable access to broadband of at least 1 gigabit per second in 
every community in the country. Broadband is an essential tool to help 
educators, parents, and students meet challenges in education and life-
long learning. Through broadband, librarians can assist library patrons 
to improve skills for jobs, apply for employment, or access government 
resources. Access to broadband--at home or at anchor institutions--is a 
critical component of enabling everyone in America to develop the 
digital skills they need to prosper in the 21st century.
    2. The NBP, delivered to Congress on March 16, 2010, recommended 
that the Commission take a fresh look at the E-rate program and 
identify potential improvements to reflect changes in technology and 
evolving teaching methods used by schools. In May 2010, the Commission 
issued a Notice of Proposed Rulemaking (NPRM) seeking public comment on 
proposals to ensure that the E-rate program continues to help our 
children and communities prepare for the high-skilled jobs of the 
future and reap the full benefits of the Internet. The Commission 
received extensive comments in response to the E-rate Broadband NPRM, 
75 FR 32699, June 9, 2010, which inform the policy choices made in this 
order.
    3. We adopt a number of the proposals put forward in the E-rate 
Broadband NPRM. The revisions we adopt today fall into three conceptual 
categories: (1) Enabling schools and libraries to better serve 
students, teachers, librarians, and their communities by providing more 
flexibility to select and make available the most cost-effective 
broadband and other communications services; (2) simplifying and 
streamlining the E-rate application process; and (3) improving 
safeguards against waste, fraud, and abuse. As a result of these 
changes, schools and libraries throughout the country can make their 
limited dollars go further. The changes we adopt will increase the 
ability of students and the public to utilize broadband services for 
educational needs. In addition, the changes to simplify the E-rate 
program will help reduce the cost of participating in the program, 
thereby making the program more accessible, particularly to smaller 
school districts and libraries that are often located in more rural 
areas and may not have staff dedicated to managing E-rate applications 
and related activities.
    4. In particular, in this report and order, we:
    [cir] Enable schools and libraries to better serve students, 
teachers, librarians, and their communities by providing more 
flexibility to select and make available the most cost-effective 
broadband and other communications services by
      Allowing applicants to lease dark or lit fiber from the 
most cost-effective provider, including non-profit and for-profit 
entities, so that applicants can choose the services that best meet 
their needs from a broad set of competitive options and in the most 
cost-effective manner available in the marketplace;
      Changing our rules to permit schools to allow community 
use of E-rate funded services outside of school hours;
      Supporting eligible services to the residential portion 
of schools that serve students with special circumstances;
      Indexing E-rate's funding cap to inflation to preserve 
the purchasing power of a successful program;
    [dec221] Seeking proposals for a limited pilot program to establish 
best practices to support off-campus wireless connectivity for portable 
learning devices outside of regular school or library operating hours;
    [cir] Simplify and streamline the program by
    [dec221] Streamlining the application process to reduce the 
administrative burden on applicants;
    [dec221] Removing the technology plan requirement for priority one 
(telecommunications services and Internet access) services;
    [dec221] Facilitating the disposal and recycling of obsolete 
equipment that received E-rate support by authorizing schools and 
libraries to receive consideration for such equipment; and
    [cir] Improve safeguards against waste, fraud and abuse by
    [dec221] Codifying the requirement that competitive bidding 
processes be fair and open. In addition, the report and order adopts 
the eligible services list (ESL) for funding year 2011.

II. Upgrading E-Rate for the 21st Century

A. Improving Broadband Access for Students, Teachers, Librarians, and 
the Communities They Serve

1. Expanded Access to Low-Cost Fiber
    5. Pursuant to sections 254(c)(3), (h)(1)(B), and (h)(2) of the 
Act, we include dark fiber on the ESL and allow eligible schools and 
libraries to receive support for the lease of fiber, whether lit or 
dark, as a priority one service, from any entity, including but not 
limited to telecommunications carriers and non-telecommunications 
carriers, such as research and education networks; regional, state, and 
local government entities or networks; non-profits and for-profit 
providers; and utility companies. Accordingly, we amend Sec.  54.502 of 
our rules to allow any entity to provide supported telecommunications 
in whole or in part via fiber. Specifically, we require applicants that 
choose to lease dark (i.e., unlit) fiber to light it immediately and to 
use the lit fiber to meet their broadband needs in order to receive E-
rate support. Our decision today will not allow applicants to use E-
rate discounts to acquire unneeded capacity or warehouse dark fiber for 
future use. Because dark fiber has not been classified as either a 
telecommunications service or Internet access, we hereby include it in 
the telecommunications section of the ESL. For purposes of funding year 
2011, we

[[Page 75395]]

direct applicants to select either the telecommunications service or 
Internet access box on the FCC Form 471 for type of service requested 
when applying for funding for leased dark or lit fiber, based on the 
type of provider they select to provide the leased dark fiber service. 
We emphasize that selecting a telecommunications carrier as a service 
provider does not absolve schools and libraries of their obligation to 
adhere to the Children's Internet Protection Act (CIPA) requirements 
when they use that service to obtain Internet service or access to the 
Internet. Furthermore, we amend Sec.  54.518 of our rules to clarify 
that states acting as service providers are treated the same as 
telecommunications carriers or other non-telecommunications providers 
when applicants are leasing a wide area network (WAN).
    6. Section 254 of the Act gives the Commission authority to 
designate ``telecommunications services'' and additional services as 
eligible for support under the E-rate program. In the Universal Service 
First Report and Order, 62 FR 32862, June 17, 1997, the Commission 
designated all commercially available telecommunications services as 
services eligible for support (or discounts) under the E-rate program. 
At the same time, the Commission determined that it could provide E-
rate support for additional, non-telecommunications services, 
particularly Internet access, email, and internal connections, provided 
by both telecommunications carriers and non-telecommunications carriers 
pursuant to sections 4(i) and 254(c)(1), (c)(3), (h)(1)(B), and (h)(2). 
The Commission reasoned that such services enhance access to advanced 
telecommunications and information services for public and non-profit 
elementary and secondary school classrooms and libraries. Thus, 
pursuant to this authority, we now include on the ESL leased dark and 
lit fiber provided by both telecommunications carriers and non-
telecommunications carrier providers, as described below.
    7. Although lit fiber is already eligible for funding as either a 
telecommunications service or an Internet access service (depending 
upon how it is used by an eligible school or library and who is 
providing the service), under current implementation of section 254, an 
applicant cannot lease the lit fiber for voice telecommunications from 
a non-telecommunications carrier. State networks and other providers, 
however, may be able to provide the voice telecommunications, even if 
they are not ``offering it to the public for a fee,'' as is required of 
a telecommunications carrier. Section 254(h)(1)(B) requires 
telecommunications carriers to provide universal service to schools and 
libraries; it does not, however, stand as a bar to our authority to 
allow non-telecommunications providers to provide such services and 
participate in the E-rate program. As explained below, drawing a 
distinction between telecommunications carriers and entities other than 
telecommunications carriers in this specific context would unduly limit 
the flexibility of schools and libraries to select the most cost-
effective broadband solutions to meet their needs, which would be 
inconsistent with our schools and libraries policies. We find that 
broadening the scope of potential suppliers of broadband increases 
competitive options, which in turn enhances choice and reduces cost. 
Thus, pursuant to section 254(c)(3) and (h)(2) and section 4(i), we now 
include lit fiber provided by non-telecommunications providers on the 
ESL. We conclude that eligible schools and libraries should be free to 
meet their communications needs by leasing fiber from entities other 
than telecommunications carriers that are able to provide schools and 
libraries the same services that a traditional telecommunications 
carrier can provide a school or library over a fiber network.
    8. The Commission precedent refutes any contention that leasing 
dark fiber is not a ``service.'' Because dark fiber is a service, we do 
not have to decide whether we could otherwise fund it under section 
254(h). Moreover, like internal connections, which the Commission has 
found to be services for purposes of the E-rate program, dark fiber is 
part of the transmission path that enables the requisite functionality 
(delivery of voice, video and/or data) to be delivered to the 
classroom. Further, contrary to opponents' arguments, we find that dark 
fiber does enhance access to advanced telecommunications and 
information services consistent with section 254(h)(2)(A). As discussed 
below, allowing schools and libraries to lease fiber from any provider 
will give the institutions more flexibility to select the most cost-
effective broadband solutions. It should also increase competition 
among providers of fiber and ensures that schools and libraries can pay 
less for the same or greater bandwidth, which should increase access to 
advanced telecommunications and information services, including 
Internet access. Additionally, if schools and libraries are able to 
receive additional capacity for less money, this should free up E-rate 
funding to help other schools and libraries meet their connectivity 
goals.
    9. As instructional technology requires greater bandwidth, 
applicants will benefit from having the freedom to select from more 
options for broadband access. If more providers bid to provide services 
to schools and libraries, the resulting competition should better 
ensure that applicants--and the E-rate program--receive the best price 
for the most bandwidth. If schools and libraries are able to receive 
the same--or better--capacity for less money, the program should save 
money that can be spent on other services to help schools and libraries 
meet their connectivity goals. We thus find that allowing schools and 
libraries to lease fiber from any provider will best serve the purposes 
of the E-rate program.
    10. The designation of dark and lit fiber provided by 
telecommunications carriers and non-telecommunications carrier 
providers as services eligible for E-rate support should help schools 
and libraries save money or receive additional capacity for the same or 
fewer dollars. Commenters provided many examples of schools and 
libraries that are using fiber today because it is the most cost-
effective solution for them, even without E-rate support. For example, 
the Tri-County Educational Service Center in Wooster, Ohio, which 
serves more than 30,000 students in 19 school districts across three 
Central Ohio counties, has been able to save 50 percent over 
traditional carrier services through the use of dark fiber, along with 
a 750 percent increase in network performance. Such cost savings will 
help E-rate funds go further.
    11. Furthermore, the increased capacity available through fiber 
will enable schools and libraries to develop and deliver a wide variety 
of educational programs and services to students and library patrons. 
For example, the bandwidth used by San Francisco's public libraries has 
increased over the past five years, from 1.44 megabits per second 
(Mbps) to 50 Mbps, but even 50 Mbps is currently insufficient for San 
Francisco to deliver the bandwidth-intensive content available on the 
Internet through its libraries' online resources and databases. San 
Francisco's public library branches serve as community anchors, both as 
centers for digital literacy and as hubs for access to public 
computers. While their bandwidth needs are increasing, their local 
government and school district budgets are shrinking. Currently, San 
Francisco's public libraries must rely on commercial telecommunications 
services in order to

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take advantage of E-rate discounts. As bandwidth needs continue to 
increase, the ability to receive E-rate discounts on leased fiber will 
provide another option for schools and libraries, such as those in San 
Francisco, to access the bandwidth they need to deliver the most cost-
effective services to their students and patrons, thus enhancing access 
to advanced telecommunications and information services. Our action 
today encourages collaboration with local, state, and federal agencies 
to more effectively utilize existing facilities and resources to meet 
the broadband needs of schools and libraries across the nation.
    12. We are not persuaded by commercial service providers' arguments 
that entities other than commercial service providers cannot be trusted 
to serve applicants adequately, or that schools and libraries are 
unequipped to lease dark fiber. There are a variety of entities--from 
telecommunications carriers to non-traditional providers, including 
research and education networks; regional, state, and local government 
entities and networks; other non-profit and for-profit providers; and 
utility companies--that are successfully provisioning fiber solutions. 
For example, the City of San Francisco has provisioned dark fiber to 10 
campus sites of City College of San Francisco, one of the largest 
college systems in the country. The City College network has enabled 
the implementation of new classes, allowed expansion of computer labs, 
and facilitated deployment of new educational applications that would 
not have been possible with City College's previous networking 
environment. Additionally, in the last 13 years, non-profit national 
and state research and education networks have deployed almost 25,000 
miles of a national fiber infrastructure to more than 66,000 community 
anchor institutions.
    13. Some commercial service providers argue that school and library 
information technology (IT) professionals are unlikely to understand 
how to use leased dark fiber. We find no evidence in the record 
supporting that assertion, and note that many schools and libraries 
have expert, professional IT staff. We believe applicants are generally 
in the best position to know their needs, resources, and capabilities, 
and to procure from the full range of competitive options in the 
marketplace the most cost-effective broadband solutions for those 
needs. Nor are we persuaded by suggestions that we should not provide 
flexibility to allow schools to lease dark fiber or other spare 
capacity from a municipal network because the schools would be 
unprotected if the municipality cannot continue to operate. It is 
unclear why a municipality would be more likely to discontinue service 
than a private company, and, in any event, our rules permit schools and 
libraries to change service providers under certain circumstances when 
the service provider ceases operations or is unable to perform. 
Further, we are not convinced that schools and libraries purchasing 
services from other governmental or non-profit entities will raise 
conflict of interest issues or financial conflicts related to their 
employees. We believe our competitive bidding rules protect against any 
such waste, fraud, and abuse of the E-rate program. To the extent the 
Commission finds violations of its rules, such as sharing of inside 
information during the competitive bidding process, the Commission will 
require USAC to adjust its funding commitment or recover any disbursed 
E-rate funds through its normal processes.
    14. Commenters that opposed including leased dark fiber on the ESL 
also argue that schools and libraries will be unaware of or unable to 
bear the additional cost of installation. They also argue that leased 
fiber may include more capacity than needed by a school or library 
system for educational purposes. We are not persuaded by such 
arguments. The Commission's competitive bidding rules serve as a 
central tenet of the E-rate program. They ensure more efficient pricing 
for telecommunications and information services purchased by schools 
and libraries and help deter waste, fraud and abuse. Thus, while not 
all schools and libraries may choose to use leased fiber to meet their 
broadband needs, our rules require all applicants to select the service 
or equipment offering that will be the most cost-effective means of 
meeting their educational needs and technology goals. Our rules also 
require schools and libraries to have the necessary resources to 
support any non-discounted portion of the eligible services, in order 
to make the most effective use of E-rate funding. We believe these two 
rules will ensure that all applicants that choose to use a leased fiber 
solution are considering the full range of costs associated with 
implementing leased fiber and are not requesting funding for more 
capacity than necessary for their educational needs. We also emphasize, 
in this context, the importance of applicants making ``apples-to-apples 
comparisons when evaluating competing bids to meet their needs. 
Providing services using dark fiber may involve a number of additional 
costs beyond lease payments for fiber connectivity, and those costs 
should be factored in to a total-cost comparison across bids.
    15. In order for schools and libraries to utilize and make the most 
efficient use of dark fiber, we include as eligible certain costs 
associated with leased dark fiber. Specifically, we include as eligible 
maintenance costs and installation charges. Providing support for 
maintenance costs and installation charges will enhance access to 
advanced telecommunications and information services by helping schools 
and libraries make use of an existing or new local fiber network. At 
this time, however, we decline to extend support to cover special 
construction charges that may be incurred to build out connections from 
applicants' facilities to an off-premises fiber network, preferring to 
seek further comment in a subsequent proceeding on the potential effect 
of such changes on the fund. We also do not include as eligible the 
cost of modulating electronics needed to light dark fiber. The 
applicant is therefore responsible for covering these costs in order to 
receive E-rate funding for the lease of dark fiber. While we conclude 
that including leased dark fiber on the ESL should provide greater 
flexibility to E-rate participants to meet their bandwidth needs and 
reduce their overall cost of broadband, we nevertheless limit funding 
in this manner pending further inquiry into the potential impact on the 
E-rate fund of allowing related costs.
2. Community Use of Schools' E-Rate Funded Facilities and Services
    16. We conclude that we should revise our rules to permanently 
allow schools to open their facilities, when classes are not in 
session, to the general public to utilize services and facilities 
supported by E-rate. Specifically, we revise Sec. Sec.  54.503 and 
54.504 of our rules to require applicants to certify that ``[t]he 
services the applicant purchases at discounts will be used primarily 
for educational purposes.'' This is consistent with the standard we 
adopted in the Community Use Order, 75 FR 10199, March 24, 2010. Thus, 
schools must primarily use services funded under the E-rate program, in 
the first instance, for educational purposes. To primarily use services 
supported by E-rate, E-rate recipients must ensure that students always 
get first priority in use of the schools' resources.
    17. Our experience convinces us that our decision will expand the 
benefits of using E-rate funds. For example, after we waived the rule 
in February 2010,

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the State of West Virginia allowed community use of school Internet 
access and networks by offering evening community technology training 
lab classes and school technology nights. Most notably, during the 
April 2010 Upper Big Branch coal mining disaster, a school in West 
Virginia whose students were on spring break provided community access 
to its facilities to be used as a government and media command center 
during the rescue and eventual search and recovery efforts. We thus 
find that permitting community use of E-rate services and equipment 
during times when classes are not in session (non-operating hours) will 
promote broadband access. Moreover, this decision is consistent with 
Congress's directive to consider how anchor institutions, such as 
schools, can ensure access to broadband service. We remain focused on 
Congress's primary purpose in establishing the schools component of the 
E-rate program: to ensure that educators, students, and school 
personnel have access to advanced telecommunications and information 
services for educational purposes. At the same time, there are many 
times when schools are out of session--evenings, weekends, school 
holidays, and summer breaks, for example--and we conclude that it is in 
the public interest to allow greater use of government-supported 
services and facilities during those times, particularly because that 
enhanced access comes at no additional cost to the E-rate program. 
Moreover, we find that the revised rules are consistent with the 
overarching goals of universal service to promote access to 
telecommunications and information services, and that no provision of 
the Communications Act prohibits this use of E-rate supported services.
    18. To reduce the likelihood of waste, fraud, and abuse, and to 
guard against expanding the cost of the E-rate program, we set forth 
certain conditions for schools that choose to allow the community to 
use their E-rate funded services. First, schools participating in the 
E-rate program may not request funding for more services than are 
necessary for educational purposes to serve their current student 
population. This condition is necessary to ensure that E-rate funds 
that schools receive remain targeted to the educational needs of the 
institution and its students. This is essential to preserve limited 
funds and to carry out Congress's intent in establishing the E-rate 
program. To the extent that a school desires to augment services beyond 
that which is necessary for educational purposes, it must use other, 
non-E-rate funded resources. Any community use of the services 
purchased under the E-rate program must be incidental and not increase 
overall costs to the E-rate program.
    19. Second, any community use of E-rate funded services at a school 
facility shall be limited to non-operating hours of the school and to 
community members who access the Internet while on a school's campus. 
Thus, the public can utilize a school's facilities and services during 
times when the school is not in session, such as after school hours, 
weekends, school holidays, and summer breaks. Services supported by E-
rate funds must, in the first instance, be used for educational 
purposes, and students, educators, and other school personnel shall 
always get priority in the use of these resources. Further, the 
decision about whether to allow community access rests with the school, 
and we thus leave it to schools to establish their own policies 
regarding specific use of their services and facilities, including, for 
example, the hours of use. We decline at this time to provide guidance 
on after-hours community use policies. We find that schools are in the 
best position to establish their own individualized policies, including 
ways in which to inform the public of the hours of operation to the 
general public. While we are sensitive to placing additional 
administrative burdens on applicants, we plan to include a box on the 
FCC Form 471 when we next revise this form for applicants to check if 
they are taking advantage of this rule change. We believe checking a 
box indicating community use, without requiring additional, specific 
information, will enable the Commission to develop a better 
understanding of where such community use is occurring while at the 
same time minimizing applicants' reporting burden. In addition, we urge 
schools to make their community use policies and hours publicly 
available on their Web sites. Additionally, schools can submit their 
success stories directly to the Commission regarding the community's 
use of their E-rate funded facilities and services at the Commission's 
Web site, https://www.fcc.gov/wcb/tapd/universal_service/schoolsandlibs.html, in the section titled ``E-rate Community Use 
Success Stories.''
    20. Third, as set forth in the Act and our rules, schools' 
discounted service or network capacity may not be ``sold, resold, or 
transferred by such user in consideration for money or any other thing 
of value.'' Specifically, schools may not charge for the use of 
services and facilities purchased using E-rate funds. The Commission 
concluded, however, in the Universal Service First Report and Order, 
that section 254(h)(3) of the Act does not prohibit an eligible entity 
from charging fees for any services that schools or libraries purchase 
that are not subject to a universal service discount. Thus, the 
Commission found that an eligible school or library may assess computer 
fees to help defray the cost of computers or training fees to help 
cover the cost of training because these purchases are not subsidized 
by the universal service support mechanisms. Similarly, we agree with 
the Massachusetts Department of Telecommunications and Cable (MDTC) and 
Sprint that schools should not be prohibited from recovering costs 
reasonably associated with permitting community access, such as 
additional electricity, security, and heating costs used to facilitate 
community access.
    21. We emphasize that the revision of our rules creates an 
opportunity for schools, but not an obligation. Schools may have any 
number of reasons to decide not to open their facilities to the general 
public to utilize services and facilities supported by E-rate during 
non-operating hours. For example, some schools may find that school 
activities utilize all or almost all of the E-rate supported services, 
or that there is not a public need for use during non-operating hours 
in a particular school. We therefore stress the optional nature of 
these rule revisions, leaving this decision up to individual recipients 
of E-rate funding.
3. Expanding Access for Residential Schools That Serve Unique 
Populations
    22. We adopt our proposal to allow residential schools that serve 
unique populations--schools on Tribal lands; schools designed to serve 
students with medical needs; schools designed to serve students with 
physical, cognitive or behavioral disabilities; schools where 35 
percent or more of their students are eligible for the national school 
lunch program; or juvenile justice facilities--to receive E-rate 
funding for all supported services provided in the residential areas of 
those schools. We find that, because these schools also serve as 
residences to the students, the supported E-rate services will be used 
primarily, if not exclusively, for educational purposes, and thus 
support is consistent with our rules and with the purposes of section 
254. As the Commission stated in the Schools and Libraries Second 
Report and Order, 68 FR 36931, June 20, 2003, the technology needs of 
participants in the E-rate program are often complex and unique

[[Page 75398]]

to each participant. Based on the record before us, we find that these 
schools serve students whose educational needs may not be otherwise met 
without attending such a residential school. We therefore find it to be 
reasonable and consistent with the public interest to provide support 
for E-rate services provided to the residential areas of those schools, 
including Internet access, telecommunications, telecommunications 
services, and internal connections. Additionally, E-rate support will 
facilitate ongoing access to educational and learning materials beyond 
the normal school day and increase the ability of those students to 
complete homework assignments, such as those that require broadband 
access for research projects, after school hours. Accordingly, we find 
that such use meets the definition of educational purposes. 
Additionally, we amend Sec.  54.502 to permit discounts for internal 
connections in non-instructional buildings of a school or school 
district where the Commission has found that the use of those services 
meets the definition of educational purpose.
    23. We decline, at this time, to adopt SECA's suggestion to expand 
this proposal to any school that has a dormitory or residential 
facility on its grounds. While we recognize that there are other 
residential schools that do not fall within the categories outlined 
above, we want to proceed in a conservative fashion to focus on schools 
serving students with the most unique needs as provided above, rather 
than providing funding more broadly to all residential schools. Thus, 
we believe it is preferable to limit the potential impact of this 
revision on the E-rate program as we consider additional upgrades to 
the program. We agree with SECA, however, that we should not limit 
support to residential campuses that are state- or federal-sponsored 
institutions. For instance, there may be private schools that serve 
students with physical, cognitive, or behavioral disabilities, and 
their students face the same need to have ongoing access to technology-
based learning outside of the classroom. Therefore, we decline to limit 
support for services to residential areas only to schools partly or 
fully sponsored by state or federal funds.
    24. West Virginia Request for Waiver and Clarification. The West 
Virginia Department of Education (WVDE) filed a request for waiver and 
clarification of the Commission's rules to allow the West Virginia 
Schools for the Deaf and the Blind to receive funding for services for 
their students who reside on the school campus. Because we address the 
issues raised by WVDE in this order, we dismiss WVDE's request as moot.
4. Indexing the Annual Funding Cap to Inflation
    25. Many commenters encouraged the Commission to increase the E-
rate program funding cap significantly from its current $2.25 billion 
level before indexing the cap to inflation on a going-forward basis. 
Commenters contend that the Commission should increase the cap to 
reflect all inflationary adjustments since the program was initiated in 
1997, which would immediately add about $650 million to the E-rate 
program. Others said that indexing the E-rate cap to inflation on a 
going-forward basis would not be sufficient to meaningfully fund the 
program. We note that when the E-rate program began in 1997, basic 
Internet connectivity required a phone line and dial-up Internet 
service, which might have cost a total of less than $50 per month. 
Today, for basic Internet connectivity capable of supporting common 
applications and learning tools such as educational video content, a 
school or library needs broadband at speeds of at least several 
megabits per second, which might cost upwards of $500 per month (e.g., 
for a T-1 line), plus the costs of necessary internal connections.
    26. We find that indexing the current $2.25 billion E-rate cap to 
inflation is a sensible approach to gradually aligning the support 
provided by E-rate with the needs of schools and libraries, which the 
E-rate program is designed to serve. Using the analysis described 
below, the cap for funding year 2010 will be increased to 
$2,270,250,000. The Commission must balance its desire to ensure that 
schools and libraries have access to valuable communications 
opportunities with the need to ensure that consumer rates for 
communications services remain affordable. End users ultimately bear 
the cost of supporting universal service, through carrier charges. 
Thus, we amend Sec.  54.507 of our rules to index the E-rate program 
funding cap to the rate of inflation on a going-forward basis, 
beginning in the current funding year. Indexing the cap to inflation 
will ensure that the program maintains its current purchasing power in 
today's dollars without significantly increasing the fund and raising 
the contribution factor.
    27. It could be argued that the existence of substantial rollover 
funds demonstrates that an increase in the cap is unwarranted. The 
rollover funding is not surplus funding left over after demand has been 
met, however. To the contrary, even with an additional $600 million in 
rollover funding for funding year 2008, added to the $2.25 billion cap, 
the program still did not come close to meeting demand for priority two 
services and was forced to deny millions of dollars in applications 
because existing funding had been exhausted. The Commission uses the 
full extent of funds available, including rollover funds, to meet 
demand each year. Nevertheless, demand still exceeds available funding.
    28. We also note that additional universal service funds required 
to index the E-rate cap to inflation will be offset by the Commission's 
recent decision to use reclaimed funds surrendered from competitive 
eligible telecommunications carriers as a ``fiscally responsible down 
payment on proposed broadband universal service reforms,'' including 
indexing the E-rate funding cap to inflation. Thus, reclaimed universal 
service funds will be used to cover any increase that results from 
increases to the fund from inflation adjustments. Finally, no party 
objected to an increase in the cap and many supported the proposal. 
They noted that this step will ensure that the program continues to 
serve a key role in bringing essential communications and information 
services to thousands of schools and libraries. One commenter noted 
that an increase in the E-rate funding cap should occur only after the 
completion of comprehensive reform of the contribution methodology. We 
find, however, that the adoption of a fiscally responsible increase in 
the funding cap will not interfere with our broader efforts to reform 
the contribution methodology and acts only to give some relief to a 
capped support mechanism that is consistently oversubscribed.
    29. As proposed, the Commission will use the gross domestic product 
chain-type price index (GDP-CPI) to inflation-adjust the amount of 
funds available annually to E-rate program participants. This is the 
same index the Commission uses to inflation-adjust revenue thresholds 
used for classifying carrier categories for various accounting and 
reporting purposes and to calculate adjustments to the annual funding 
cap for the high-cost loop support mechanism. There is no index that 
specifically examines the cost of the services funded under the E-rate 
program, and no record support for a more targeted measure of inflation 
than the GDP-CPI. Moreover, the Commission has used the GDP-CPI index 
in other contexts to estimate inflation of carrier costs, and we find 
it reasonable to use the GDP-CPI to approximate the impact of inflation 
on E-rate supported services. During periods of deflation, we will 
maintain

[[Page 75399]]

the prior-year cap to maintain predictability. When the calculation of 
the yearly average GDP-CPI is determined, the Wireline Competition 
Bureau Commission will 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.
    30. Specifically, to compute the annual increase, the percentage 
increase in the GDP-CPI from the previous year will be used. The 
increase shall be rounded to the nearest 0.1 percent. The increase in 
the inflation index will then be used to calculate the amount of 
funding for the next E-rate funding year (which runs from July 1 to 
June 30). Using this computation, we find that the GDP-CPI from 2008 to 
2009 increased .9 percent. Using the analysis described below, the cap 
for funding year 2010 will be increased to $2,270,250,000.
5. Limited Trial To Investigate Offsite Access
    31. Currently, our rules presume that services used on school or 
library premises are serving an educational purpose, and the E-rate 
program supports wireless Internet access on school and library 
grounds. If a device that provides wireless Internet access service, 
such as a laptop or other mobile computing device, is taken off school 
or library premises, however, applicants are required to cost-allocate 
the dollar amount of support for wireless Internet access use for the 
time that the device is not at the school or library and remove that 
portion from its E-rate funding request. If that same device, however, 
is left on school or library grounds all of the time, the E-rate 
program would pay 100 percent of the applicant's non-discount share for 
wireless Internet access use. As such, our current rules may prevent 
full utilization of the learning opportunities that portable wireless 
devices, such as digital textbooks, can provide off campus and outside 
of regular school hours.
    32. Advances in technology have enabled students to continue to 
learn well after the school bell rings, including from their homes or 
other locations, for example, youth centers. As noted in the NBP, 
``[o]nline 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.'' In the E-rate Broadband NPRM, we sought comment on the 
NBP recommendation to provide full E-rate support for wireless Internet 
access service for portable learning devices that are used beyond 
school or library premises. In response, commenters generally agreed 
that students need to learn ``anytime/anywhere,'' which would require 
Internet access outside schools and libraries. Some schools identified 
that they are already implementing innovative programs utilizing 
portable devices that can use data applications wirelessly, such as e-
readers, tablet PCs, smartphones, and netbooks. Some of these programs 
enable students to download all of their textbooks onto one portable 
device and access them both during school and at home. Others use 
software applications to help students write essays or create 
presentations for their classmates. Initial studies indicate that--with 
the correct support and training for teachers, students, and parents--
targeted programs like these can demonstrably improve student 
achievement. Commenters noted that, in addition to the educational 
benefits, improvements and cost reductions in portable learning devices 
like e-readers, smartphones, and tablet computers make funding off-
premises wireless connectivity for these devices a cost-efficient 
supported service.
    33. We recognize the benefits of enabling innovation in learning 
outside the boundaries of the school building and the traditional 
school day, as well as of enabling libraries to innovate with new 
models of delivering service to library patrons. We note the potential 
for meaningful gains in student achievement that new devices and 
applications may deliver. We also see significant utility in devices 
that allow remote access to the Internet for library patrons. At the 
same time, however, we acknowledge the concerns of commenters who urged 
us to proceed cautiously in this area and emphasized the challenges 
that may accompany support for connectivity for portable learning 
devices used outside the physical grounds of schools and libraries. For 
example, some commenters identified possible challenges in 
administration and oversight, and in ensuring compliance with existing 
program rules, including requirements under CIPA and the program's 
definition of educational purposes. Others raised concerns about the 
potential for waste, fraud, and abuse, as well as increased costs to 
the E-rate fund, noting that if support is expanded for wireless 
Internet access outside of school or library grounds, the availability 
of funding for other equally or more important services may be reduced. 
Some commenters also were concerned about schools or students who may 
not be able to afford the equipment or devices necessary to connect to 
E-rate funded wireless Internet services. Finally, some commenters 
argued that E-rate funding for wireless access off premises is not 
technology-neutral and improperly favors wireless services over wired 
services. We believe these concerns warrant further inquiry and 
consideration before such services should be eligible for support on a 
program-wide basis.
    34. The E-rate Deployed Ubiquitously (EDU) 2011 Pilot Program. To 
assist us in our inquiry and program development, we establish a trial 
program to investigate the merits and challenges of wireless off-
premises connectivity services, and to help us determine whether they 
should ultimately be eligible for E-rate support. We plan to use this 
trial program to gather more information about the implementation 
challenges described above and to identify and disseminate best 
practices in existing projects. We ask schools and libraries that 
already are implementing or experimenting with wireless off-campus 
learning to provide us with information about their projects, as 
described below.
    35. A number of commenters have indicated that they have already 
found solutions to the challenges to successfully implementing off-
premises wireless Internet connectivity, including ensuring CIPA 
compliance and other protections against waste, fraud and abuse. 
Additionally, some commenters suggested that corporate partnerships may 
help with equipment and application costs. Through the EDU2011 Program, 
we expect to obtain more information about how wireless learning 
programs are operating today. For example, we hope to gain a better 
understanding of operational and administrative issues associated with 
off-premises use and connectivity, as well as the financial impact on 
the E-rate program overall. We also hope to learn what conditions, if 
any, should accompany off-premises access to prevent waste, fraud, and 
abuse; to ensure compliance with the statute and Commission rules, such 
as CIPA; and to enable such programs to maximize student achievement 
and utilization of library services. Additionally, we recognize that 
schools and libraries face different issues when considering off-
premises use, and we would like to gain a greater understanding about 
how libraries are using remote access to serve their communities. 
Finally, we hope to gain insight on evolving uses of mobile

[[Page 75400]]

wireless devices that will assist us in crafting effective permanent 
rules in this area should we decide to support offsite wireless access.
    36. As part of this first phase, we may decide to fund off-campus 
wireless telecommunications and Internet access for some small number 
of select programs for funding year 2011, if we find proposals that we 
believe adequately meet the factors we discuss below. We expect that 
most of these proposals will not provide broad access to the Internet, 
but instead will provide connectivity for limited purposes, for example 
downloading digital textbooks. We authorize up to $10 million for 
funding year 2011 to support innovative and interactive off-premise 
wireless device connectivity for schools and libraries. Given the 
Commission's planning and competitive bidding requirements, we 
recognize there is limited time for applicants to develop a proposal 
from scratch for this round of funding. Therefore, considering those 
practical barriers, we anticipate that any first phase EDU2011 Program 
funding will primarily, if not exclusively, be provided to already-
existing portable wireless device programs.
    37. How To Apply. We delegate implementation of this pilot program 
to the Wireline Competition Bureau (Bureau). To be considered for first 
phase EDU2011 Program funding, applicants must complete a two-step 
application process. After publication of this Order in the Federal 
Register, the Bureau will release a public notice with the due date for 
applications. First, applicants must submit the information detailed in 
the following paragraph to the Bureau. Second, applicants must apply 
for E-rate funding by following the regular E-rate program rules. 
Because potential applicants will most likely already be using portable 
wireless devices in their school or library, we understand that the 
applicants may have an established relationship with a service 
provider. Therefore, to the extent necessary, we waive the applicable 
sections of our E-rate competitive bidding rules for those first phase 
EDU2011 Program applicants that have already entered into legally 
binding agreements with a service provider for portable wireless device 
connectivity off-premises. We also delegate to the Bureau the authority 
to waive any other E-rate rules, to the extent necessary, to effectuate 
this program. Applicants for first phase EDU2011 Program funding must 
submit FCC Form 471 to USAC during the regular application window. We 
encourage applicants to submit FCC Form 471 specifically for the 
wireless Internet access services to be used off premises, and file a 
separate FCC Form 471 for any services to be used on premises. We note 
that support under this program will not be provided for the portable 
devices or equipment, but for the connectivity services.
    38. To be considered for first phase EDU2011 Program funding, E-
rate eligible applicants must have implemented or already be in the 
process of implementing a program to provide off-premise connectivity 
to students or library patrons through the use of portable wireless 
devices. The application must contain the following information:
    (1) A description of the current or planned program, how long it 
has been in operation, and a description of any improvements or other 
changes that would be made if E-rate funding were received for funding 
year 2011;
    (2) Identification of the costs associated with implementing the 
program including, for example, costs for equipment such as e-readers 
or laptops, access and connection charges, teacher training, librarian 
training, or student/parent training;
    (3) Relevant technology plans;
    (4) A description of how the program complies with CIPA and 
adequately protects against waste, fraud, and abuse;
    (5) A copy of internal policies and enforcement procedures 
governing acceptable use of the wireless device off the school's or 
library's premises;
    (6) For schools, a description of the program's curriculum 
objectives, the grade levels included, and the number of students and 
teachers involved in the program; and
    (7) For schools, any data collected on program outcomes.
    39. Selection. After applications are received, for schools, the 
Bureau should consider the extent to which applicants are providing 
innovative and interactive learning programs using portable wireless 
devices for students. For libraries, the Bureau should consider how the 
library's portable wireless device program facilitates access in the 
community to needed services, such as job applications, governmental 
services, job training, and online learning opportunities. Factors the 
Bureau should consider in selecting programs that may be eligible for 
additional funding include: The magnitude of the impact E-rate support 
for off-premise connectivity is likely to have; the number of students 
or library patrons served; the cost of the program; the poverty level 
and current discount rate of the school or library; the financial need 
of the school or library; the location and topography of the school or 
library, so that we can analyze the availability of wireless access; 
the committed school or library resources available to implement the 
entire proposal, including funding for necessary equipment, as well as 
teacher, librarian, and student training and data collection; and the 
extent of CIPA protections and other protections to guard against 
waste, fraud, and abuse.
    40. The Bureau will notify USAC of selected applicants. We expect 
that, if the Bureau decides to award funding for these programs, there 
will be only a handful of selected applicants. Selected applicants will 
receive the identified connectivity support and will not be required to 
cost-allocate the dollar amount of support for the time that portable 
devices are not at the school or library. Applicants will receive funds 
sufficient to cover the connectivity amount eligible for E-rate funding 
based on their discount; they will still be required to pay their non-
discount share. After the trial period, applicants will be required to 
submit a report to the Bureau detailing any data collected as a result 
of the program and a narrative describing lessons learned from the 
program that would assist other schools and libraries desiring to adopt 
similar programs in the future.

B. Streamlining and Simplifying Administrative Requirements

    41. We next adopt proposals to streamline and simplify the E-rate 
programs. First, we amend Sec.  54.508 of our rules to eliminate the E-
rate technology plan requirements for all priority one applications. We 
retain the technology plan requirements for applicants requesting 
priority two funding. Second, we find that applicants are not required 
to have a technology plan in place before a third-party master 
contract's FCC Form 470 is posted. Third, we also amend Sec.  54.508 to 
eliminate the requirement that applicants demonstrate they have a 
budget sufficient to acquire and support the non-discounted elements of 
the plan. Fourth, we permit the disposal of E-rate equipment for 
payment or other consideration, but no sooner than five years after the 
equipment is installed.
1. Technology Plans
    42. We amend Sec. Sec.  54.504 and 54.508 of our rules to eliminate 
the E-rate technology plan requirements for all priority one 
applications. We retain, however, the technology plan requirements for 
applicants requesting priority two funding.
    43. To avoid duplication of technology plan requirements and to 
simplify the application process in

[[Page 75401]]

general, we proposed in the NPRM to eliminate E-rate technology plan 
requirements for applicants seeking priority one services that are 
otherwise subject to state and local technology planning requirements. 
Commenters indicated, however, that determining which applicants 
seeking priority one services are subject to technology plan 
requirements outside of the E-rate program could be difficult, might 
lead to unnecessary violations of program rules, and could be 
administratively difficult to administer. Because the record 
demonstrates that applicants are required to or will likely perform 
technology planning even without the E-rate program requirements, we 
find that eliminating the technology planning requirement entirely for 
priority one funding will better serve the intent of the NPRM proposal 
to simplify the application process, while still adequately addressing 
concerns regarding waste, fraud, and abuse.
    44. Priority One. The Commission must strive to balance the need to 
ensure that E-rate funds are being used for their intended purposes 
with avoiding the imposition of unnecessarily burdensome requirements 
on applicants. Moreover, the Commission must routinely reevaluate its 
program rules to ensure that it has struck the proper balance. After 
careful consideration of our experience and comments in the record, we 
conclude that the proper balance warrants eliminating the Commission's 
technology plan requirements for applicants requesting priority one 
services.
    45. We find that it is reasonable to eliminate the technology plan 
requirement for all priority one service requests, even when the 
applicant is not subject to a state or local technology planning 
requirement, and regardless of the amount of the request. Even without 
a Commission requirement, most entities will continue to evaluate their 
needs by conducting technology planning. Applicants applying for 
Enhancing Education Through Technology (EETT) funding from the 
Department of Education must comply with a technology plan requirement 
nearly identical to the Commission's. The Elementary and Secondary 
Education Act, reauthorized in 2002 as the No Child Left Behind Act, 
also has requirements that overlap with E-Rate's technology planning 
rules. In addition, technology planning is often incorporated into the 
budget and procurement processes of schools and libraries. Thus, we 
find that applicants generally will continue to perform technology 
analyses notwithstanding elimination of the technology plan requirement 
for E-rate.
    46. Furthermore, we find that this change will simplify the current 
application process and will reduce the costs for applicants of 
complying with and administering the E-rate program. Reducing the 
burden on applicants will result in greater E-rate participation, 
particularly for the schools with the fewest resources and greatest 
need to participate in the program. Eliminating the technology plan 
requirement for priority one applications also will reduce costs 
associated with administering the E-rate program.
    47. Moreover, the Commission has other safeguards to ensure that 
priority one funding requests are based ``on the reasonable needs and 
resources of the applicant and are consistent with the goals of the 
program.'' For instance, to ensure that applicants are able to use the 
discounted services effectively, and thereby minimize waste, our rules 
require applicants to certify that they have ``secured access to all of 
the resources, including computers, training, software, maintenance, 
internal connections, and electrical connections, necessary to make 
effective use of the services.'' The Commission has additional 
protections in place to guard against waste, fraud, and abuse in the E-
rate program. Although we find that we no longer need the technology 
play requirement for priority one services in light of the other 
protections in place, we will remain vigilant to ensure that 
eliminating this requirement does not increase opportunities for waste, 
fraud, and abuse.
    48. Priority Two. We conclude that we should retain the requirement 
to have a technology plan for priority two services. We find that 
maintaining a specific technology plan requirement for E-rate 
applicants for priority two services--internal connections and basic 
maintenance of internal connections--continues to serve a valuable 
purpose and therefore outweighs any potential administrative burden. 
Many commenters support this conclusion. First, our experience reflects 
that waste, fraud, and abuse tends to be concentrated in use of 
priority two services. Past experience convinces us that we should not 
at this time eliminate the technology plan requirement for priority two 
services. Second, installing internal connections in schools and 
libraries is a complex and expensive process, with installation 
techniques that vary depending on the nature of the project. Unlike 
priority one services, which are generally recurring services, internal 
connections are one-time upgrades that are designed to produce long-
term benefits to schools and libraries. Maintaining the requirement for 
priority two services will require applicants to plan and justify these 
requests and strategically define their vision for use of these 
technologies.
    49. For the reasons stated above, we decline to adopt proposals 
suggested by commenters either (1) to completely eliminate the 
technology plan requirement for priority two applicants; or (2) to 
establish a bifurcated approach in which only priority two applicants 
not subject to other state or local requirements are required to 
develop technology plans. It would be administratively burdensome for 
USAC to determine which schools and libraries are subject to official 
state and local technology plan requirements and which are not.
    50. While we decline to eliminate the technology plan for priority 
two applicants, we adopt measures to simplify the technology planning 
process. First, we amend Sec.  54.504 of our rules to eliminate the 
requirement that technology plans covering the entire, upcoming funding 
year be in place when the FCC Form 470 is submitted. Under the current 
rule, an applicant may not rely on an approved, existing technology 
plan if it expires prior to the last date of service of the upcoming 
funding year. We believe that the three-year technology plan cycle that 
has evolved for the E-rate program does not accurately reflect how 
schools and libraries plan for their technology needs. For example, if 
a school has developed and is implementing a three-year technology 
plan, it does not make sense to require the school to develop a new 
plan in October (before filing its Form 470) just because the existing 
plan expires before the upcoming funding year ends. The school should 
be able to obtain services under that existing technology plan if it 
covers part of the upcoming funding year and then revise the plan over 
the next several months before it expires. Forcing the applicant to 
prepare another three-year plan so far in advance of the end of the 
current one is administratively burdensome. Technology plans are 
evolving documents, and we want to encourage applicants to have 
technology plans that reflect their current needs. We thus find that 
applicants with approved technology plans that cover at least part of 
the upcoming funding year in effect as of the date of their FCC Form 
470 filings will be deemed to be in compliance with our rules.
    51. We also find that applicants are not required to have a 
technology plan in place before a third-party master

[[Page 75402]]

contract's FCC Form 470 is posted. FCC Forms 470 for master contracts 
typically are filed far in advance of the filing window because of the 
more detailed solicitation process they require. Schools and libraries 
typically have no control or advance knowledge of the solicitation of 
bids for third-party master contracts, and, as such, would have no way 
of knowing when their technology plans would need to be completed. 
Therefore, we find that, if an applicant has filed its own FCC Form 
470, but later chooses to purchase a service from a state master 
contract, the applicant only needs to have a technology plan in 
existence prior to filing its own FCC Form 470. To do otherwise could 
unintentionally discourage applicants from taking service from a master 
contract.
    52. We also amend Sec.  54.508 of our rules to eliminate the 
requirement that applicants demonstrate they have a budget sufficient 
to acquire and support the non-discounted elements of the plan. The E-
rate program already has rules in place to ensure that applicants have 
sufficient resources, and thus this requirement is redundant.
    53. E-Rate Central Petition. E-rate Central filed a petition 
seeking clarification of the language defining ``basic telephone 
services'' for priority one services in the funding year 2008 ESL. The 
actions in this order address E-Rate Central's concerns. Therefore, we 
find that no further Commission action on E-Rate Central's petition is 
necessary.
2. Competitive Bidding Process
    54. FCC Form 470. We retain the competitive bidding and waiting 
period obligations for all service requests, even where applicants are 
subject to state or local procurement obligations, rather than 
subjecting priority one and priority two applications to different 
standards, as proposed in the NPRM. We find, however, that we should 
simplify the FCC Form 470 process for all program participants. Many 
applicants requested that we simplify the FCC Form 470 if we do not 
eliminate it. After consideration of the record and our programmatic 
experience, we conclude that the competitive bidding and waiting period 
requirements have provided consistency and transparency for program 
participants in their search for the most cost-effective provider of