The Schools and Libraries Division has posted new instructions to E-rate applicants on how they are expected to allocate the costs of file servers between eligible and ineligible functions.

Currently, the SLD's eligible services list provides the eligibility status for 13 different server functions. DHCP servers, domain name servers, e-mail servers and terminal servers are considered eligible servers. Servers used for archiving or data warehousing, application servers, database servers, caching servers, firewall servers, print servers and proxy servers are considered ineligible servers. Web servers are eligible if used "to provide information to users of the Internet." A Web server that is used to provide substantial software applications, database functions or storage of end user files is considered ineligible because of those ineligible uses. Remote access servers are conditionally eligible, and require an additional certification on how they are used.

When a file server is used for a combination of functions, a cost allocation must be submitted to exclude the ineligible functions. The SLD noted that it may be difficult to determine this before a server is installed and utilized. However, it said that the chosen method must be "based on objective criteria, and provide a realistic result." It suggested that a breakdown based on comparative retail prices, a breakdown of the storage capacity utilized, manufacturing costs of component parts and other factors might be used as a basis.

Alternatively, the SLD suggests that an applicant could list which functions the server would provide and then allocate out the share that would be ineligible. For instance, if two out of the five functions that a server will perform were considered ineligible (40 percent of the total number of functions), the applicant could explain that it was treating only 60 percent of the cost of the server as eligible.

If servers provide caching, firewall, print or proxy server capability coincidentally as part of the software of their core network operating system software, those functions do not have to be subtracted from a funding request. However, if, for instance, separate firewall software is installed on the server, that cost would have to be allocated out as ineligible.

In addition, in the case of a product like an Uninterruptible Power Supply that is only eligible when used with an eligible product, or maintenance of a server with a mix of eligible and ineligible functionalities, the cost allocation on the server would also have to be applied to the UPS or maintenance contract, as well as to the installation costs, sales taxes and shipping costs associated with the base product.

Applicants who fail to make this determination could jeopardize their funding requests if it turns out that more than 30 percent of their requests is found to be ineligible.

The new guidance is available on USAC's website. It builds on the latest version of the SLD's eligible services list posted on the SLD web site.