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SLD Issues Clarification on “On-Premises Priority 1 Equipment”

The Schools and Libraries Division has posted what it calls a "clarification" of its position on the circumstances under which equipment located at applicant sites can be considered a part of Priority 1 services and eligible for E-rate support.

Under E-rate rules, applicants have been able to qualify for support for the use of on-premise networking equipment as a part of a telecommunications service or Internet access if it met several very specific tests. Among other things, the equipment had to be maintained and owned by the service provider, the ownership of the equipment could never transfer to the applicant, and the applicant's own local area networks had to operate independently from the service provider's equipment. These rules remain in effect.

Under the rules, Wide Area Networks that provide voice, data and/or video services within a school or library to external locations have been eligible for support only when provided by a telecommunications carrier. In the past, the SLD's treatment of on-premises Priority 1 equipment has been presumed to include equipment used in voice services. However, in its clarification, the SLD noted that the Tennessee decision involved a data network used for Internet access and "did not address funding requests for services that include charges for on-premise facilities utilized in providing traditional voice communications."

In its new posting, the SLD specifically said that PBXes cannot qualify for Priority 1 support "because they are utilized to route calls within the premises of a school or library." PBXes, the SLD said, will continue to be eligible as internal connections.

The SLD noted that it uses a 1999 Federal Communications Commission decision involving the state network of Tennessee as its basis for reviewing these kinds of funding requests. It said the Tennessee decision involved a "specific fact pattern," and that it is not able to provide Priority 1 treatment to on-premise components that "do not meet this fact pattern." It said it was possible that the FCC "might rule differently if a different pattern were presented to them." Presumably, an applicant or service provider would have to petition the FCC for a change in the policy, or appeal a funding request that was rejected.

In its latest posting, the SLD also added language that specified that to be eligible, "on-premise equipment must be essential to the provision of Priority 1 telecommunications service or Internet access service, such that the service could not be provided without the component in question."

The new policy can be reviewed at The SLD last updated its guidance on these issues in May, 2003.

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