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Funds For Learning Comments on Draft ESL

In response to the Draft Eligible Services List, or ESL, issued by USAC and the FCC, Funds For Learning has issued the following comments on the FCC's website. Parties wishing to reply to Funds For Learning's comments, or the comments of others, must submit their replies to the FCC by August 21, 2008.





These comments are filed in response to the FCC’s request regarding the FY2009 proposed Eligible Services List (ESL) for the Universal Service Funding for Schools and Libraries program, otherwise referred to as the E-rate program. Funds For Learning is a regulatory compliance firm which has specialized in the E-rate program since its inception.  Our primary responsibility to our clients is to ensure that they are remaining compliant with applicable E-rate rules and regulations as created by the Commission and enforced by USAC.

We have prepared comments for each proposed revision to the ESL.  In each case, we have attempted to interpret the FCC’s proposed language in a manner which we believe to be consistent with most E-rate applicants’ and service providers’ understanding of the pertinent terminology and technical functionality.

Ethernet as an eligible digital transmission technology

We believe that this clarification is useful for E-rate applicants and service providers seeking to determine the eligibility of digital transmission services.  We believe that the clarification of Ethernet as an eligible digital transmission technology is consistent with the existing eligibility regulations as enforced by USAC.

E-mail archiving as an ineligible component of an E-mail service

The delivery and storage of E-mail has been eligible for E-rate discounts since the inception of the program. We have concern that the proposed designation of e-mail archiving as ineligible will create undue confusion among applicants, service providers, and program administrators as they attempt to determine what functional areas of a comprehensive e-mail solution constitute ineligible “archiving” as opposed to eligible e-mail storage or the backup of eligible e-mail servers.  As a matter of administrative convenience, we urge the FCC to reconsider its proposal and include e-mail archiving as eligible for E-rate funding.

As schools and libraries become more dependent on e-mail and Internet-based communications, their technological needs become increasingly complex.  As the volume of e-mail traffic at a school or library increases (along with increasing federal and state legislation mandating administrative oversight of electronic communication), it becomes quickly apparent that schools and libraries require more than a simple e-mail server (or servers) in order to effectively implement safe, reliable, and regulatory compliant e-mail services for their end-user populations.

As the needs of organizations have changed, so has the complexity and variety of solutions available to meet those needs.  E-mail services (whether owned or procured as a service) have subsequently become much more robust, offering features which enable schools and libraries to provide e-mail service to users in a way that meets organizational (and regulatory) goals in a cost-effective manner.

As administrative recordkeeping pressures increase, e-mail archiving becomes an essential part of a larger strategy for effective delivery of e-mail services within public organizations.  As a result, many commercially available solutions include e-mail archiving as an integrated component of a comprehensive approach to service delivery. 

The FCC’s current (and proposed) Eligible Services List stipulates that e-mail servers, storage products used to store e-mail files, and tape backup of eligible e-mail servers are all eligible components when deployed in an eligible manner.  It further stipulates that spare, redundant, or failover components are not eligible for funding.  An e-mail archiving system could be considered as an “intelligent” e-mail storage system, facilitating the storage of e-mail files in an efficient, organized manner.  When properly implemented, e-mail archiving can substantially reduce the workload on primary e-mail servers (and subsequent storage systems), representing a significant cost savings in e-mail infrastructure while not providing additional redundancy to an e-mail solution. Therefore, we recommend that all forms of E-mail delivery and storage, including archiving, remain eligible for E-rate discounts.

Intranet Web Hosting

We have concern that the proposed definition of intranet web hosting may cause confusion for applicants and service providers if interpreted in a manner that reaches beyond the generally accepted definition of an intranet.

As stipulated in the introduction to the Internet access section of the proposed ESL, Internet access services “must reach the boundary of public Internet space.”  As such, our interpretation of the proposed language regarding Intranet web hosting is informed by what we believe to be the generally accepted definition of an intranet:  an intranet is a private network, website, or application which is exclusively reserved for use by the employees or members of an organization.  In many cases, intranets are only available to users with connectivity to a specific local area network (LAN) and are not publicly accessible by users of the Internet (and therefore do not reach the “boundary of public Internet space.”)  In this context, we believe the proposed language further clarifies the Commission’s historical position on the eligibility of web hosting services:  in order to qualify for E-rate funds, web hosting services must reach public Internet space, and hosting services for web sites which are only available to a school or library’s local area network users (e.g. intranet) do not qualify for funds.

As an example, the “district homepage” of many public school districts (as accessible from the boundary of public Internet space) often contains areas of content which are only accessible with specific login credentials (a username and password.)  Our interpretation of the existing eligibility regulations is that any software or applications packaged with a web hosting service which allow administrators to provision user accounts (usernames and passwords) would not be eligible for funding.  In this manner, we interpret the proposed intranet web hosting language in the following manner:

  1. Funding will not be available for web hosting services which are provisioned only to users connected to applicant’s LAN (or otherwise do not reach the boundary of public Internet space)
  2. Funding will not be available for software or applications included with a web hosting service which give users the ability to add, edit, or delete user accounts and login credentials
  3. Funding will be available for web hosting services that reach the boundary of public Internet space.  Hosted websites may include areas of content protected by login credentials, but any software or applications used to create or manage those credentials (or applications, file storage, or content editing features provided to Internet users after login) would not be eligible as a part of the web hosting service.

Video On-Demand Servers

We believe that the proposed language may cause difficulty and confusion among E-rate stakeholders when determining the eligibility of specific server-based video distribution devices.  In the current marketplace, a wide variety of video equipment from numerous manufacturers is marketed (either explicitly or implicitly) as “video on demand” equipment.  This can range from a simple streaming device (which encodes video information from an external source and distributes it to end users) to a more sophisticated device which integrates video content storage, programming and selection software, and encoding and streaming functionality.  However, many (if not most) “video on demand” devices contain a hardware or software video encoder/decoder (CODEC) responsible for encoding video information in a format appropriate for distribution to users of a network.

Existing eligibility regulations stipulate that video content storage (“end user files other than eligible e-mail files”) and equipment used to control the selection of video content (when operated by end users) are currently ineligible for E-rate funding.  However, the Eligible Services List does state that CODECs and Video over IP equipment are eligible for support when deployed and used in an eligible manner.  Based on these regulations, devices which perform both eligible and ineligible features (such as many of the devices commonly referred to in the marketplace as “video on demand” servers) are typically cost-allocated in order to establish a fair division between eligible and ineligible functionality.

Because the definition of the term “video on demand server” may differ from manufacturer to manufacturer (or even between devices produced by the same manufacturer), we propose that the FCC could better assist E-rate stakeholders in determining the eligibility of video distribution devices (and cost-allocating multi-function devices) by more clearly articulating specific areas of functionality which qualify for E-rate funds.

As an example, the proposed glossary definition of “video on demand server” states the following:

A Video On Demand server stores videos which are available for retrieval at any given time.

As stated above, we believe the term “video on demand server” is somewhat ambiguous due to the variety of usage commonly observed in the marketplace.  However, the proposed definition given for the VOD server clearly identifies an area of functionality:  the storage of video content.  In this manner, we would propose that rather than identifying “video on demand” servers as ineligible components, the ESL include “video content storage” in the list of ineligible server use and/or ineligible storage product section(s) of the final list.  We believe that this approach will be easier for E-rate stakeholders to understand:  any product (irrespective of its trade name or marketing jargon) which contains video storage capacity will not qualify for E-rate funds unless properly cost-allocated.  We believe the existing ESL guidance regarding “equipment that controls the programming, distribution, and selection of video content,” “CODECs / Video Encoders,” and “Voice/Video over IP Components” describe areas of functionality in a manner that is helpful for E-rate stakeholders when determining which types of video devices (or which functional areas of a multifunction device) qualify for E-rate funds.


We believe that the inclusion of softphones as ineligible end-user software is consistent with the eligibility regulations as enforced by USAC.  This clarification should be helpful to applicants and service providers determining the eligibility of voice-over-IP telephone systems.

VoIP Software User Licenses

We believe that the addition of software licenses as eligible components in the Internal Connections funding category is consistent with the eligibility regulations as enforced by USAC, and this clarification should be helpful to applicants and service providers determining the eligibility of voice-over-IP telephone systems.

iVoIP Service Provider Universal Service Fund Contribution

While informative, the proposed language does not specifically address the eligibility of any functional aspects of an iVoIP service.  As such, we express concern that the Eligible Services List may not be the appropriate venue for the dissemination of this requirement.  Because applicants and service providers primarily use the Eligible Services List to determine the types of products and services which qualify for E-rate funding from a technical functionality standpoint, we feel that guidance which is more regulatory in nature is better codified in official documentation existing outside the Eligible Services List.

Having so said, FFL continues to observe substantial confusion among E-rate applicants, service providers, and consultants regarding the eligibility of services as Priority 1 iVoIP.  In most cases, E-rate stakeholders are having difficulty determining which (if any) types of “managed VoIP services” qualify for E-rate discounts as iVoIP.  In our experience, the use of the term “managed service” varies from vendor to vendor, but in general, managed services (particularly VoIP) consist of at least some hardware and software components combined with configuration and maintenance services provided by the vendor for a recurring fee.

We feel that additional clarification by the FCC as to what specific types of iVoIP functionality and equipment qualify for E-rate support as Priority 1 iVoIP would be of great benefit to all E-rate stakeholders.  Specifically, we ask the FCC to consider clarifying its inclusion of iVoIP services as eligible for Priority 1 funding with respect to the provisions of the Tennessee Order, which dictates the amount type(s), and configuration of hardware and software components whose lease qualifies for E-rate funding as a part of an eligible service.

We have received reports that numerous vendors offer some manner of “managed VoIP service” which consists of a substantial amount of equipment (call processing, routing/switching, cabling, and handsets) deployed at an applicant’s location, which is owned and managed by the vendor for a fee.  We continue to receive mixed reports regarding applicants’ and vendors’ interpretations of the eligibility of such a service.  We believe that by offering clarification as to what types (and configurations) of hardware and software components qualify for E-rate funding as Priority 1 iVoIP, the FCC can eliminate a good deal of confusion for all E-rate stakeholders as well as reduce the likelihood of funding denial and/or fraud.


We commend the FCC for its recent decisions related to the administration of the E-rate program. We encourage the Commission to consider Funds For Learning’s recommendations related to the Eligible Services List because we believe these recommendations will further the Commission’s efforts to inject more common sense and transparency into the administration of the E-rate program.



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