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FCC Provides Some Information About Report and Order

The Federal Communications Commission has issued a press release providing some additional details on its decisions this week regarding changes in the E-rate program. However, the text of its report and order has still not been released and Schools and Libraries Division officials said that they had not yet seen it.

The Commission voted December 17 to limit E-rate applicants' "support for upgrading or replacing" internal connections to no more than twice every five years. The FCC said "basic maintenance services" would be exempted. However, it was unclear how the SLD would be instructed to manage this restriction or the timetable for implementation.

In her statement, Commissioner Kathleen Q. Abernathy, who chaired a May forum on the E-rate program, said these rules "will give applicants flexibility to spread expenditures over two years, but will prevent the same applicants from being funded year after year.

"Given the scarcity of Priority Two funds in recent years, the changes will result in extending discounts to schools and libraries in lower discount bands that have yet to receive any funding for internal connections," Abernathy added. "While we have effectively authorized applicants to upgrade their internal connections every three years, I want to stress that this is a minimum period of time that must elapse; in most circumstances, I would expect applicants to recognize that cables, routers and the like will have significantly longer useful lives."

Commissioner Jonathan S. Adelstein wrote, "When private companies make decisions about their telecommunications investments, particularly when it comes to investments in equipment, they generally do not expect to replace their equipment year after year. Our rules in the Schools and Libraries program have permitted schools and libraries to do just that. But today we change that."

The Commission also voted to prohibit the transfer of equipment purchased with E-rate discounts to other locations for three years after purchase, except in cases when a school or library facility had closed, either temporarily or permanently. Again, the precise effective date of this restriction was not yet known.

The FCC also said it would begin requiring the Schools and Libraries Division to provide its updated eligible services list to the commission by a particular date so that the commission could solicit public comments on the draft.

In a statement, Commissioner Michael J. Copps expressed concern about "an abrupt change in the eligible services list" this year related to dark fiber that "has left applications from rural schools and libraries in North Dakota and elsewhere high and dry." Later, SLD officials said the FCC staff was reviewing various strategies under which applicants holding multi-year contracts for dark fiber could continue to qualify for discounts. The Commission also put in place procedures for managing the roll-over of approximately $425 million in undisbursed discounts for use by applicants.

The Commission's press release said this rollover would be made available for the 2003 funding year, which is earlier than had been anticipated. The SLD is still considering whether it will be able to fund internal connections requests from applicants eligible for a discount rate of 80 to 84 percent. The rollover used for the 2004 funding year would presumably be based on the SLD's assessment next March of undisbursed funding commitments from the 2002 funding year, and whatever has not yet been re-committed from prior years.

The FCC also intends to issue a new Notice of Proposed Rule-Making to consider additional program changes. This is expected to address two recommendations of the SLD's Task Force on the Prevention of Waste, Fraud and Abuse, namely that the Commission revise the discount matrix to require the poorest applicants to pay a larger share of the cost of their internal connections projects and to consider imposing a ceiling on the amount of funding an applicant could receive in a single year. The Commission said it would also explore "strengthened requirements for technology plans" and "additional record-keeping requirements." There were also indications that the NPRM would consider revisions to the definition of rural applicants and Internet access, and changes to the rules on leased Wide Area Networks. Once the NPRM is published in the Federal Register, the Commission will solicit comments on the proposals for a period of time.

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