The four E-rate eligible services categories are divided into what the FCC calls “Priority 1” and “Priority 2” services (“P1” and “P2”). USAC approves funding for P1 services (Telecommunications and Internet Access) first. Afterwards, if there is money remaining in the queue, USAC will begin issuing funding commitments for discounts on P2 (internal connections and basic maintenance) requests. P2 discounts are applied to the applicants with the highest discount percentage and fund down to the lower discount levels until the funds are depleted.

The discount rate that the SLD will be able to fund for P2 services is known as the discount rate threshold level. The below chart reflects the final discount threshold for each Funding Year.

Priority 2 Funding Discount Threshold by Funding Year

Funding Year

Final Discount Threshold
1998 70%
1999 All Funded
2000 82%
2001 86%
2002 81%
2003 70%
2004 81%
2005 80%
2006 86%
2007 83%
2008 87%
2009 77%
2010 All Funded
2011 88%
2012 90%