Frequently Asked Questions About Section 254(h) of the Telecommunications Act of 1996

A: The Commission concluded that, to be eligible for universal service discounts, a school must meet the statutory definition of an elementary or secondary school found in the Elementary and Secondary Education Act of 1965, must not operate as a for-profit business, and must not have an endowment exceeding $50 million. Both public and non-public elementary and secondary schools that meet these criteria will be eligible to receive discounts on eligible services.

A: The Commission concluded that, to be eligible for universal service discounts, a library must operate as a not-for-profit business and must be eligible for assistance from a state library administrative agency under the Library Services and Technology Act (LSTA). In addition, while the definition of library in the LSTA includes public libraries, public elementary or secondary school libraries, academic libraries, research libraries that are not affiliated with an institution of higher education, and private libraries subject to state determination, the Commission concluded that a library's eligibility for universal service discounts funding will depend on its funding as an independent entity. "Independent" means that the budget of the library must be completely separate from that of any institution of learning. For example, because institutions of higher education are not eligible for universal service discounts, an academic library will only be eligible if its funding is completely separate from the funding of any institution of higher education. On the other hand, a library within an eligible school will be entitled to receive discounted services as part of the school.

A: Yes. The Commission encourages eligible schools and libraries to aggregate their demand with others to create a consortium with sufficient demand to attract competitors and negotiate lower rates. It is important to note that entities not eligible for universal service discounts will benefit from lower pre-discount prices from such aggregation, but they will not be permitted to gain eligibility for discounts by participating in consortia with those who are eligible. Clearly, this will place responsibility on consortia to keep careful records of their expenses so that only the eligible entities receive the discounts.

A: Eligible schools and libraries may aggregate demand with other eligible schools and libraries, rural health care providers, public sector (governmental) entities, and/or private sector entities. Schools and libraries that join consortia composed only of other schools and libraries, rural health care providers, and public sector (governmental) entities may, under the Communications Act, receive below tariff rates on any eligible tariffed services they order. Eligible schools and libraries participating in consortia that include private sector entities may receive a universal service discount only if any interstate services that such consortia receive from incumbent local exchange carriers are provided at generally tariffed rates.

A: Eligible schools and libraries will be able to purchase all commercially available telecommunications services, Internet access, and internal connections at discounted rates.

A: Because the Commission wanted to ensure that schools and libraries have maximum flexibility to purchase different packages of services at a discount, the Commission did not recommend a standard telecommunications package, but concluded that it would be more efficient to let schools and libraries determine what services they need and want. The Order allows schools and libraries to choose from a wide array of telecommunications services and technologies, including, for example, basic telephone service, a T-1 line, and wireless telecommunications services.

A: The Commission concluded that eligible schools and libraries should receive discounts on non-content Internet access, which includes electronic mail (e- mail). Discounts will not apply to the "content" that some information service providers bundle in a package with Internet access, unless such a bundled service would be the most cost-effective conduit to the Internet. For example, eligible schools and libraries will not receive discounted access to an Internet subscription service unless the Internet gateway it provides is the most cost-effective way for them to access the Internet.

A: The Commission concluded that both installation and maintenance of internal connections should be eligible for discounts. Eligible schools and libraries may select both the technology and provider that best meet their needs. For example, eligible schools and libraries may select wireline, wireless, or cable technology provided by either a telecommunications carrier or a non-telecommunications carrier. The Commission specifically noted that equipment needed to transport information within a school or library should be eligible for discounts, including routers, hubs, network file servers (including the necessary software), and wireless local area networks (LANs).

A: Equipment such as computers (with the exception of network file servers) and other hardware, software (with the exception of the software required for the operation of network file servers), fax machines, modems, teacher training, upgrades to the electrical system, and asbestos removal will not be eligible for discounts.

A: The Commission established a matrix that will provide discounts ranging from 20% to 90% on all commercially available telecommunications services, Internet access, and internal connections. The level of discount will be based on a school's or library's level of economic disadvantage and its location in an urban or rural area. Here is the Commission's discount matrix:

A: A school's level of economic disadvantage will be defined by the percentage of its students eligible for either a free or reduced price lunch under the national school lunch program. That is, a school will determine the percentage of its students whose family income falls within 185% of the poverty line. It is important to note that schools need not participate in the national school lunch program in order to compute their level of economic disadvantage for purposes of applying for universal service discounts. A school that either does not participate in the national school lunch program or that experiences a problem with undercounting eligible students may use federally approved alternative mechanisms to determine the percentage of their students eligible for the school lunch program. A description of federally approved alternative mechanisms can be found at 34 C.F.R. . 200.28(a)(2)(i)(B). For example, a school may choose to conduct a survey or use eligibility for a tuition scholarship program to determine the percentage of its students eligible for the national school lunch program for purposes of applying for universal service discounts.

A: A library's level of economic disadvantage will be based on the percentage of students eligible for the national school lunch program in the school district in which the library is located.

A: No. If a state, group of schools or libraries, or a school district applies for discounted services on behalf of its schools, the procurement officer must certify to the universal service administrator the percentage of students in each of its schools that is eligible for the national school lunch program. The school district or the state may decide to compute the discounts on an individual school basis or it may decide to compute an average discount. (See question 14.) In either case, the state or the district should strive to ensure that each school receives the full benefit of the discount to which it is entitled. Similarly, libraries ordering discounted services at the library system level must certify to the percentage of students eligible for the national school lunch program in each of the school districts in which its branches are located. The library system may compute discounts on either an individual branch basis or based on an average of all branches within the system, but should strive to ensure that each branch receives the discount to which it is entitled.

A: The school district or state will determine the number of students eligible for the school lunch program and will divide that number by the total number of students in the school district or state. This calculation will yield the district- wide or state-wide level of poverty. The school district or the state will then consult the discount matrix to determine the level of discount to which it is entitled.

A: The library system will determine the discount to which each of the school districts in which its branches are located is entitled. The library system will then add the discount percentages and divide by the number of branches, which will yield the system-wide discount percentage.

A: The Commission concluded that, for purposes of the schools and libraries discount program, rural areas should be defined in accordance with the definition adopted by the Department of Health and Human Services' Office of Rural Health Policy (ORHP/HHS). ORHP/HHS uses the Office of Management and Budget's Metropolitan Statistical Area (MSA) designation of metropolitan and non-metropolitan counties, adjusted by the most recent Goldsmith Modification, which identifies rural areas within large metropolitan counties. Both the list of MSAs and the Goldsmith Modification will be posted on the Common Carrier Bureau's homepage ( www.fcc.gov/ccb) and on the FCC's education webpage ( www.fcc.gov/learnnet).

A: Schools and libraries will only be required to pay the portion of their bill remaining after the discount has been applied. For example, a school that is eligible to receive a 60% discount will be required to pay only 40% of the bill. It will be up to the service providers providing discounted services to apply for reimbursement of the remaining 60% of the bill from the universal service administrator.

A: The Commission concluded that there should be an annual cap of $2.25 billion on universal service expenditures for eligible schools and libraries.

A: The funding year will be the calendar year.

A: All telecommunications carriers that provide interstate telecommunications services are required to contribute to universal service support mechanisms. Telecommunications carriers required to contribute will receive bills from the universal service administrator; their assessments for the schools and libraries discount program will be based on their interstate and intrastate end-user telecommunications revenues.

A: Because the schools and libraries program is new and demand cannot be predicted with certainty, the Commission concluded that collection should be based on demand as that demand becomes known.

A: The Commission concluded that collection and spending for the period through June 1998 should be limited, in light of both the need to implement the necessary administrative processes and the need to make the fund sufficiently flexible to respond to demand. That is, the Commission directed the universal service administrator to collect $100 million per month during the first quarter of 1998 and up to $700 million in the second quarter. The Commission also stated that the universal service administrator could collect up to $1.25 billion in the last half of 1998.

A: Collection and spending for the universal service discount program will continue to depend upon demand for amounts under the $2.25 billion annual cap. The Commission directed the universal service administrator to report on a quarterly basis to the Commission on two aspects of universal service: (1) the total amount of payments made to service providers providing eligible services to schools and libraries at a discount; and (2) the administrator's determination of funding requirements necessary to meet projected demand for the next quarter. Both of these reporting requirements will help the administrator and the Commission gauge the level of demand for schools and libraries universal service funding.

A: The Commission stated that, if less than $2.25 billion is spent in calendar year 1998, no more than half of the unused portion can be spent in calendar year 1999. If the amount allocated in calendar years 1998 and 1999 is not spent, no more than half of the unused portion for those two years can be spent in calendar year 2000.

A: If during any given year only $250 million remains available for funding discounts, a priority system will go into effect under which the most disadvantaged schools and libraries that have not yet requested universal service funding will have first priority for remaining funds. If the $250 million trigger is reached, the universal service administrator will ensure that a message is posted on the administrator's website, notify the Commission, and take reasonable steps to notify the educational and library communities that commitments for allocating the remaining $250 million will be made only to the most disadvantaged schools and libraries for the next 30 days (or the remainder of the funding year, whichever is shorter). That is, during the 30-day period, applications from schools and libraries will continue to be accepted and processed, but the administrator will only commit funds to support discount requests from schools and libraries that are in the two most-disadvantaged categories of the discount matrix and that did not receive universal service discounts in the previous or current funding years. To avoid discouraging schools and libraries from applying for discounts on basic telephone service, however, schools and libraries that are in the two most-disadvantaged categories will not forfeit their priority status if they have previously applied only for discounted basic telephone service.

A: If uncommitted funds still remain after the initial 30-day period, pending requests from schools and libraries in the two most disadvantaged categories that have previously received universal service discounts will be honored. If funds still remain, the administrator will allocate the remaining available funds to schools and libraries in the order that their requests were received until the $250 million is exhausted or the funding year ends.

A: No. The Act bars schools and libraries from reselling services purchased pursuant to a universal service discount, and the Commission concluded that the Act should be interpreted to restrict any resale of services purchased under the universal service discount program to entities that are not eligible for support. The Commission also concluded that this prohibition on resale does not prohibit an eligible school or library from charging fees for any services that schools or libraries purchase for which they receive no universal service discounts. For example, an eligible school or library may assess computer lab fees to help defray the cost of computers or training fees to cover the cost of training teachers or library personnel because neither of these purchases are subject to universal service discounts.

A: Schools and libraries must prepare technology plans covering both the near term and the future. Technology plans should specify how schools and libraries plan to integrate the use of these technologies into their curriculum. The Commission concluded that, to ensure that these technology plans are based on the reasonable needs and resources of the applicant and are consistent with the goals of the program, the plans must receive independent approval, ideally by a state agency that oversees schools or libraries. In addition, the Commission is working with the U.S. Department of Education to develop alternative approval procedures.

A: No. Plans that have been approved for other purposes, e.g., for participation in federal or state programs such as "Goals 2000" or the Technology Literacy Challenge, will be accepted without need for further independent approval.

A: Before their schools and libraries are eligible to apply for discounted services, states must adopt a discount matrix for intrastate services with entries at least equal to those in the discount matrix for interstate services adopted by the Commission. It is important to note, however, that the federal universal service support mechanism will pay for schools' and libraries' discounts on both intrastate and interstate services.

A: Schools and libraries will be required to participate in a competitive bidding process in order to apply for discounted services. Schools and libraries will be required to complete an application which will include a description of the services requested, self-certification of the percentage of students eligible for the national school lunch program, and self-certification that the school or library is eligible to participate in the universal service discount program and that it will not resell any discounted services. The completed application will be submitted to the universal service administrator, who will post it on a website dedicated exclusively to this purpose. Competing providers will then have the opportunity to bid on the schools' and libraries' descriptions of services. Schools and libraries will be required to wait four weeks after their applications are posted on the website before they may sign contracts with their chosen service providers.

A: Yes. The Commission called the amount that service providers charge to schools and libraries prior to the application of a discount the "pre-discount price." The Commission concluded that the pre-discount price cannot exceed the lowest price charged to similarly situated non-residential customers ("lowest corresponding price"). Carriers may not be selected to be a school's or library's provider of discounted services if the carriers submit bids higher than the lowest corresponding price. In areas in which there is no competition (i.e., only one provider), this lowest corresponding price would be the pre-discount price.

A: The Commission concluded that schools or libraries should be allowed to seek recourse from the Commission if a complaint involves interstate rates, and from a state commission if a complaint involves intrastate rates.

A: No. The submission of a description of services for posting on the administrator's website is in no way intended as a substitute for state, local, or other procurement processes.

A: The Commission will require schools and libraries to submit descriptions of services that are detailed enough to allow providers to evaluate reasonably the requests and submit bids. This approach is consistent with the Commission's efforts to ensure that all eligible schools and libraries have the opportunity to participate in the universal service discount program. Schools and libraries may, however, submit formal and more detailed requests for proposals (RFPs), if that is required or is most consistent with their own state or local procurement requirements.

A: The Commission is working with the U.S. Department of Education and the states to design the schools and libraries applications.

A: Yes. In order to ensure that the greatest number of schools and libraries is able to participate in the universal service discount program, the Commission concluded that schools and libraries should be required to apply each year to participate in the program.

A: For this first year of the program, applications for discounted services will be accepted as soon as the schools and libraries website is open and the applications are available.

A: Yes. The Commission stated that, generally, schools and libraries will not be able to apply before July 1st for funding that will become available on the following January 1st. This requirement was designed to ensure that the first come, first served process proceeds smoothly from year to year. For this first year of the program, however, administrative structures must be put in place before applications can be accepted. In addition, the Commission is currently working with the U.S. Department of Education to design the schools and libraries applications. The date on which applications will become available is still undetermined, but the Commission will ensure that when that date is determined, the information is widely disseminated to schools and libraries. The Commission is committed to ensuring that an efficient and reliable administrative structure is established at the outset of this program so that the application process will proceed smoothly for schools and libraries.

A: Schools and libraries may consult two Commission websites to keep informed about the schools and libraries program: www.fcc.gov/ccb/ and www.fcc.gov/learnnet.